'There Are Two Kinds of Credit Cards' (theatlantic.com) 244
The credit-card market has quietly split in two, Atlantic argues in a new story: one offering generous benefits to wealthy Americans, the other offering expensive debt to the poor. Credit-card balances have reached an all-time high of $1.2 trillion, with serious delinquency rates climbing to their highest point since the Great Recession.
"Transactors" pay off balances monthly and earn valuable rewards worth up to $3,000 annually in taxable income equivalent, while "revolvers" carry balances at a brutal 21.5% average APR. The poor subsidize the rich through two mechanisms: swipe fees that drive up retail prices by $1,700 annually for the average family, and late fees and interest charges that finance rewards programs. Interest revenue for credit-card companies has ballooned from $76 billion in 2020 to $170 billion in 2024.
The economy now appears to be slowing down. High-income families are increasingly resembling working-class families in credit data, with three in five households earning over $80,000 annually carrying balances for more than a year. Card companies are now offering fewer cards to subprime borrowers, creating a troubling dilemma - while expensive credit cards are harmful, having no credit access might be worse. Bipartisan legislation now aims to cap interest rates and lower swipe fees.
"Transactors" pay off balances monthly and earn valuable rewards worth up to $3,000 annually in taxable income equivalent, while "revolvers" carry balances at a brutal 21.5% average APR. The poor subsidize the rich through two mechanisms: swipe fees that drive up retail prices by $1,700 annually for the average family, and late fees and interest charges that finance rewards programs. Interest revenue for credit-card companies has ballooned from $76 billion in 2020 to $170 billion in 2024.
The economy now appears to be slowing down. High-income families are increasingly resembling working-class families in credit data, with three in five households earning over $80,000 annually carrying balances for more than a year. Card companies are now offering fewer cards to subprime borrowers, creating a troubling dilemma - while expensive credit cards are harmful, having no credit access might be worse. Bipartisan legislation now aims to cap interest rates and lower swipe fees.
Two kinds (Score:5, Insightful)
"the world can be divided into two sorts of people, those who carry The Card, and those who don't"
-- (Michael Parkinson, in an AMEX ad)
No, there are 10 kinds (Score:4, Funny)
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Re:No, there are 10 kinds (Score:5, Funny)
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Re: Not quite true "Accepting cash costs the retai (Score:4, Insightful)
Re: Not quite true "Accepting cash costs the reta (Score:2)
Goes well beyond counterfeiting
Re: Not quite true "Accepting cash costs the reta (Score:2)
What do you think is more common in brick and mortar: credit card fraud or petty cash theft?
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If you follow the rules, you generally win chargebacks. But you do have to follow the rules.
Re: Not quite true "Accepting cash costs the retai (Score:4, Informative)
My friend that managed a hotel said she never beat a charge back from amex.
They eventually stopped accepting it (there's a shocking amount of credit card fraud at hotels, she would consistently beat the chargebacks from other companies).
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Thank you! I will now dust off my AmEx and use that for anything remotely risky. Having bought something shipped from China that came as an empty package, I first tried PayPal (boy was that stupid of me!) and then Discover Card. Both said that since there was a tracking number, my claim was denied. I pushed harder on the latter (their card says that I have been a cardholder since 1989), and they ended up crediting me the charge as an act of "loyalty", meaning the fraudster in China still got away with i
Re:Not quite true "Accepting cash costs the retail (Score:4, Informative)
Cash is somewhat expensive for retailers. No one ever stole the credit card receipts. With cash you need to pay for a transfer company, do register accounting and train employees.
While there are costs associated with cash handling, they are typically quite lower than for credit cards. Credit cards include interchange and processing fees that are often 2-3% and as high as 6% for some cards like high reward cards. Cash overheads are more on the order of 1%. This is sort of obvious because we sometimes see stores that prefer cash or even offer discounts for cash, but the reverse never happens.
And with credit (or debit) cards there is almost no risk of fraud. You know the customer is good for the payment and the cashier isnt pocketing the cash.
Except for the risk of chargebacks, which are extremely expensive.
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For a small business cash could also be a way of them avoiding the taxes on it.
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I have to somewhat disagree. It all comes down to how good a deal the retailer can manage. A small mom and pop like a lot of gas stations definitely find cash cheaper, they have some of the highest fees going.
On the other hand, places like Walmart are the proverbial 800 pound gorillas, and have argued fees down low enough that credit is cheaper for them.
Cash is also more expensive at that level, because they need to hire armored truck services for moving it, rather than having a family member drop off the
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Most retail establishments have to do that anyway. Show me a grocery store that doesn't accept cash.
A worthwhile question is whether cash costs more than swipe fees. My guess is that it does not: the costs associated with handling cash are largely fixed - a register needs to be counted once per shift, for instance, whether you've used it once or 100 times - whereas swipe fees mostly scale with total sales v
Re:Not quite true "Accepting cash costs the retail (Score:4, Informative)
Amazon Fresh?
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sometime prepandemic, california passed a law requiring that cash be a mandatory form of payment. a lot of food trucks were card only because even with the cc fees they made more money because they could add a third cook and effectively get rid of the cashier. they could serve 50% more customers in the lunch rush. if your line is too long, customers just keep walking by
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>>No one ever stole the credit card receipts.
Ha, I take it you are too young to ever had to deal with the "knuckle buster" and carbon paper credit card receipts...
Re:Chargbacks cost merchants.Fraud happen digital (Score:5, Informative)
"lost transactions due to a server failure. So in essence they digitally lost their credit card receipts before the daily batch processing overnight took place."
I call bs - This is not how it works.
The card is 'presented' by the customer, data read, request sent to the acquirer. Authentication succeeds, the issuer approves (hopefully) the request, and the results delivered to the merchant. They permit the delivery of goods or services, when successful one of two things happens: 0) the merchant sends the request for payment, sometimes called a 'submission', which the acquirer saves and will process through their systems, either near-real-time, or batched whenever they do so.
'Server failure' is both unusual, and for competent acquirers, resolvable 99.99% of the time. And any competent acquirer will do all necessary to recover data, including recovering authorization data from the issuer. Despite our distrust of the process, there is no advantage to any of the parties to cheat purchaser or merchant, to cheat the purchaser is to lose discount or interest revenue, to cheat the merchant is to lose fees and acceptance, though none of the current issuers fear loss of acceptance, they are too important and ubiquitous for merchants to abandon, with very few exceptions. Indeed, acquirers generally want you to just accept all.
The way you might easily 'lose' transactions is if you are a convenience store partnered with a flaky/suspect partner or franchiser, and they might force you through their own POS with batching and self-hosted or worse systems. These outfits are sometimes awful and verge on corrupt. A merchant's recourse here is limited, they have no direct relationship with the real acquirer or issuers, left out in the cold. For these flakes, it's not the system. It's incompetence by the interposing party.
Card fraud does often get charged back to the merchant, too often because merchants do not understand or follow the process required. I dealt with merchants for many years, and educating them how to dispute these chargebacks was important. The worst cases involved both merchants in high-risk businesses, and merchants that missed obvious markers of fraud. But as an example of how it can work, my debit card was used fraudulently at a grocery store a few years ago. When I asked about the details, the store would not discuss it. I worked my way up the chain, and found out that it was perpetrated by a keyed entry - card-not-present, which is against their stated and allegedly inviolate policy. Asking why, I got nothing. Not only did my numbers get out most likely get out due to employee fraud at a restaurant, which I told the manager about, but also somehow this grocery has a way to permit card-not-present, which they are not going to admit to. I'm still miffed, but the same incident and same card was tried at an Aldi in Italy. Woot. Easy fraud detection, nothing got through.
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I formerly worked for an issuer/acquirer. Servicing merchants was really rewarding.
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Uh, US cards have had a similar amount of fraud protection for decades. All we have to do is notify the company within 30 days of the statement for any bogus charges, assuming they don't catch it first.
I've also read stories where the card companies refused to acknowledge fraud in Europe because they believed the chip was unbreakable.
I and my family have actually been notified of suspected fraud more times than we've caught it.
For example, about 15 years ago I was called and asked it I was trying to buy ga
You know how (Score:5, Informative)
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Your fridge-freezer breaks, as well as a new fridge freezer, you also lose a bunch of frozen food.
It's always been a problem for the poor, one of these unexpected costs. Needing to attend a funeral is another that can send people into debt.
But more and more people are ending up in the same position. The middle classes might still have some discretionary spending, but sods law says that their fridge breaks the day after they've booked a holiday, not the day before and suddenly they can't afford to pay their
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Your fridge-freezer breaks, as well as a new fridge freezer, you also lose a bunch of frozen food.
How often does that happen? A fridge lasts for years. OK, so maybe not the fridge, but a car or whatever. Still how often do the emegencies happen?
Here's the thing, what if you did not have a credit card, just a debit card? The ridge breaks, so now you either have to borrow money from friends or only eat cup noodles or whatever else that does not require a fridge until you save enough money for a new fridge.
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Your fridge-freezer breaks, as well as a new fridge freezer, you also lose a bunch of frozen food.
It's always been a problem for the poor, one of these unexpected costs. Needing to attend a funeral is another that can send people into debt.
But more and more people are ending up in the same position. The middle classes might still have some discretionary spending, but sods law says that their fridge breaks the day after they've booked a holiday, not the day before and suddenly they can't afford to pay their credit card bill that month.
If they were spending responsibly, they'd have six months of income saved up and be easily able to replace the freezer and the food. And if they didn't have six months of income saved up, they shouldn't have been booking a holiday. The holiday booking should be delayed until it can be paid for out of savings without depleting savings below the six month level.
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And that's a failure in education and basic planning. Nothing can be expected to last forever. This is why emergency funds exist, for emergencies like this. It's not unexpected. Same with a funeral. Dave Ramsey has been preaching this very basic concept for decades.
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Sure, but the ability to do that can depend on what kind of terms you have - and "don't go into debt if you don't have to" is a vast oversimplification of the dynamics involved. If you have access to credit - even super shitty credit - you will probably use that to say, pay for medical stuff, or food, or you know .. stuff that directly implicates survival.
The idea that there is always a simple choice is a fallacy for those who are not faced with those types of decisions. And people can be extremely inconsis
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Yeah, I just live within my means, and pay it off every month. I'm not rich, but I do get the reward benefits.
I think too many people are trying to live outside their means. And no I don't mean people who can't afford the basics for some bleeding heart runs in.
Like, I may want to live wherever I want, and even if the place isn't a luxury place, but it's in a location that's expensive, I go 'I can't afford to live there.' and live somewhere else.
I see a bit of entitlement at times where people refuse to acce
Re:You know how (Score:5, Insightful)
Re: You know how (Score:5, Insightful)
When I got my first credit card at 18, I knew better than to carry a balance. I averaged less than full time minimum wage for at least ten years of my adult life without paying a cent in interest (that includes the fact that I never took out student loans, but didn't have a mortgage either.)
Credit card interest is really just a stupid tax. Why do I say that? About a year ago I accidentally forgot to pay off a balance on one of them and spent $8 on interest. Stupid. But oh well, the cash back I've gotten over the years far exceeded that.
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I'm not sure they actually hate that though. From the point of view of credit providers, the reason they can (and do) provide all these incentives to responsible credit card users is that they are making money on these transactions. They want card users who are responsible. From the credit providers' point, the reason they are charging irresponsible users high interests is that this group has a high risk of defaulting. Generally, credit card companies want users to pay of there debt, because they make most
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It's a mixed bag. Their main source of income is fees to merchants, but credit card companies make billions in interest every year, and billions more in late fees.
Which is to say, you're right they don't much care, but they really don't prefer you pay it off every month, or that you don't do so.
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I'm not sure they actually hate that though. From the point of view of credit providers, the reason they can (and do) provide all these incentives to responsible credit card users is that they are making money on these transactions.
That is accepting high volume low margin while ignoring low volume high margin. Yes they do hate it. Ideally you have a customer that simply pays off their credit card a month late. You get all the fees, you get to charge interest, and you have a customer who is dependent on credit. They don't want responsible customers. They want slightly reckless customers, those who pay off the minimum amount while racking up interest charges.
Re: You know how (Score:4, Insightful)
Re: You know how (Score:2)
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When, I was growing up, we actually did eat saltine crackers, with a melted government cheese sauce my mom made that had some tomato in it.
Because it was all we could afford at the time.
So yeah, people do that.
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Any given person may wind up as an unwise adult for a multitude of reasons. But when it is a widespread trend, we probably have a failing in public education.
Of course, we already know we have a failing in public education, in the USA at least. We have a very bad system in place that hands out diplomas to utter idiots, largely in response to political pressure that is intended to produce smarter students but instead just causes grade inflation.
So, we usher young-adults into life with no idea how to manage
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Any given person may wind up as an unwise adult for a multitude of reasons. But when it is a widespread trend, we probably have a failing in public education.
More so a failure of parenting. Kids see their parents spending more than they have, and grow up to be just like them. Schools certainly don't help, but the main responsibility is the role model of the parents.
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Also frequently I think kids see their parents at or close to peak earnings and expect to live like that at age 20.
It was a long time before I was able to have the disposable income my parents had when I was in my late teens.
Re: You know how (Score:4, Insightful)
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I have made lots of money thanks to my philosophy degree.
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If you teach people how to avoid one set of pratfalls, the credit card companies will find some new model that tricks people instead. There's also probably some percentage of people who can't be e
Re: You know how (Score:4, Informative)
Anyone CAN pay off their credit card with any type of income. But people who make poor decisions whether they have low or high income, always end up paying interest and going into debt. If you make under 80k and have credit card debt you probably would still have that bad habit well over 120k. Pay off your darn cards and stop buying what you cannot afford. If your poor eat crackers not $70 door dash lunches.
While overspending is common you also have situations where there is less of a choice - medical emergencies (in the US. For the rest of the world, much less of an issue), something critical that breaks etc.
Re:You know how (Score:4, Insightful)
Re:You know how (Score:5, Insightful)
Which works great for a person earning $60k/year until the first ["medical emergency"|"inflation cycle where they don't get a raise"|"gentrification raises rent"|"other economic force well beyond individual control"].
$60k is the average for US citizen as of 2023 data. Half the population earns less than that.
Minimum wage is $15k/year, less than the federal poverty line for a single person. Well over a quarter of US citizens fall into that category.
Charging the credit card isn't gratuitous overspending for the bottom quarter of the populace -- it's a prayer that necessary spending to survive can be done now and a miracle will save them in the future.
Re:You know how (Score:5, Insightful)
How dare you bringing data to this "blame the poor" tirade?
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Charging the credit card isn't gratuitous overspending for the bottom quarter of the populace
It is the wrong way to think about it.
A credit card is not some big source of money. It is a one-time loan of whatever the limit is, just that you do not have to pay interest if you do not use that money. If you spend on average more than you earn you will have big problems.
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If you spend on average more than you earn you will have big problems.
Sometimes you will have big problems if you do not. I am thinking of the oft-quoted 40 percent of bankruptcies due to medical costs. Every dentist office also has a display hawking some kind of medical credit card or another. Then again, that pain you feel is gods way of telling you to brush better. You should not be able to cop out with a root canal.
Other times, you can handle the debt, then you lose your job. Suddenly your average in
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As I said, on average.
If you earn $2000/month (after taxes) and spend $2100/month and do that every month, you will end up in massive debt, there is no other outcome.
Yes, there can be some emergencies that require more spending in one month, that has to be compensated by spending less the next months to be able to pay the debt back as soon as possible.
Alternatively, just do not get a credit card. In my country, you need to have a stable job for the last 6 months, get 450EUR/month (after tax) income (minimal
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What percentage of outstanding credit card debt is due to medical emergencies?
Re:You know how (Score:5, Insightful)
Which works great for a person earning $60k/year until ...
Unless they're also wise enough to have savings.
Charging the credit card isn't gratuitous overspending for the bottom quarter of the populace -- it's a prayer that necessary spending to survive can be done now and a miracle will save them in the future.
In some cases, this is true, but in the vast majority of cases it means that they're living beyond their means -- which includes living exactly at their means, meaning no savings. Regardless of your income level, if you don't have at least several months of income saved up, you're not spending responsibly.
Looking at my own extended family, two examples spring to mind. One couple makes a combined income of six figures and lives rent-free in a condo that was purchased by the wife's inheritance, but is drowning in credit card debt, and never has any cash available for things. When asked if they'd like to go with us on a sibling trip to Curacao (cost: about $3k per person, including travel, lodgings and food), they were unable to go. Another couple makes a combined income of $70k and has a monthly mortgage payment, but always maintains a buffer of nine months of savings, minimum. When asked about the trip, their response was that they needed a year to build up their savings so that the $6k cost wouldn't put their savings below the nine month level. We scheduled accordingly and they went. Then when we got back, their son and his family became unable to pay their rent and this couple was able to cover it for them for a few months (if it goes on much longer, they've agreed to let me help).
Being financially responsible means living below your means, whatever that is, and whatever that requires.
Obviously, if your income is below a region-dependent threshold even keeping a roof over your head and food on your table becomes extremely difficult. But once you make enough to achieve basic stability -- which probably includes having a much older and smaller dwelling than you'd like, perhaps shared with more people than you'd like, and eating and dressing less expensively than you'd like -- from that point your exposure to financial risk is largely under your control. Not because there aren't economic forces beyond your control, but because you have enough buffer to enable you to make the necessary adjustments. There are some exceptions, especially with medical problems that make you unable to work and cut off your income, but they aren't the explanation for most people's credit card debts.
Re:You know how (Score:5, Insightful)
Wow!! Have you told anyone else about this? And anyone can do it, no matter what their income. Genius!!
Yep, don't buy anything you can't afford with your paycheck. Interest rates just steal from your future income.
This works great, at least up until the point where what someone can't afford is daily necessities like food and gas.
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... rent/mortgage, medicine, clothing...
and increasingly, that necessity includes a monthly cell phone because who can get a job without being online to submit resumes, or sign up for services... even unemployment registration requires a web connection somewhere.
$15k/year is surprisingly little for just one person... and that's the legal minimum wage for a 40hr/week job in this country.
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rent/mortgage
If you need to borrow money to pay rent every month, you have big problems and soon will end up deep in debt.
Think of a credit card as a one-time loan, just that you do not need to pay interest if you do not spend that money. It can be used in case of some one-time emergency, but not as a everyday thing.
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And THAT is the problem we have right now, inflation has increased the cost of living while wages are stagnant, unless you live in a place that has raised the minimum wage. Then, if you were making more than the minimum wage previously, you may now be making the minimum wage, or you aren't as far above the minimum as you were. Either way, many people are having greater difficulties paying for what they currently have. If something breaks, you may need to use credit to buy a replacement.
Those who are d
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I do not have a credit card, only debit. Yeah, the biggest problem is if your average expenses are higher than your average earnings. In that case you have to figure out how to reduce the expenses, otherwise you will never climb out of debt and it will be worse than if you cut some expenses now.
The credit would be good for some one-off emergency where you can quickly pay it back (I need to pay $x to repair my car, but my paycheck is 4 days away), otherwise it will be worse than not taking the credit.
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Funny how so many people have mortgages.
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This works great, at least up until the point where what someone can't afford is daily necessities like food and gas.
If someone is in this position they should be getting some form of assistance, not a predatory loan in the form of a credit card.
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If you're poorly educated by a system which was deliberately compromised to create malleable, low-information voters, then you're gonna make poor decisions.
I have prepaid cellular from VZ. It's $35/mo with about 10-11GB of internet. Somehow the deal I got with no credit score (I'd had a bad one, which was about 50% my own fault and 50% someone buying a car in my name and a court in Nevada City CA granting a judgement against me when the evidence of identity was my SSN written in pen on a check cashing card
There's usury and there's free market (Score:2)
A state has the right to propose an interest cap to protect vulnerable citizens from usury. However, interest rates are clearly stated in contracts, and the simplest way to avoid them is to spend only what you can afford without going into debt.
Re:There's usury and there's free market (Score:5, Insightful)
I agree with both of you.
I grew up below the poverty line. My brother and I were raised by a single mother who collected welfare as often, if not more, than she held low paying jobs. It's cliche to say "we stole ketchup packets from fast food restaurants and ate ketchup on crackers" but I literally have memories of that. I remember when my mother put utility bills in my brother's name because she had been delinquent on bills and owed them money and we had gotten shut off.
This poverty led to teenage "rebellion" and delinquency. I conceived my first daughter when I was 16 years-old. I married her mother, so I feel very fortunate to have found my soul mate in high school and we are still going strong almost 30 years later. But those early years when we were teenage and young adult parents was more poverty to a level that I doubt most people who are struggling today would be able to comprehend unless they are also young parents without great employment prospects.
It wasn't easy, and I would never dismiss the real struggles that people are facing. But I did manage to pull myself and my family out of poverty through intelligent decision making and hard work. "Pull yourself up by your bootstraps" might sound cold and callous, and gets used as a straw-man by people who think it is intended as being dismissive. But my own personal lived experiences serve as a proof of concept. Chance is a factor, but it is not one that you can control so I've always chosen to focus on what I CAN control. And it's not like I had rich parents or family. My entire family was below the poverty line and my father was absent.
I came out of those struggles not believing, but having observed empirically, that even when you are screwed six ways to Sunday, there ARE choices you can make. Some of those decisions can leave you slightly better off, and if you consistently make those you can gradually climb yourself out. It takes time and it's hard, but you can do it. Other decisions, like reaching for a credit card out of desperation, will leave you worse off. I would argue that a decision that leaves you worse off is worse than just doing nothing. Worse than not reaching for it as a last resort. I think that's where a lot of people fall into the trap. They have bills, their utilities are about to get shut off, they're going to get evicted (I've been in ALL of those positions with kids to think about!) ... and so they reach for a credit card not knowing what else to do and they justify it as "this was for emergencies anyway".
And it only makes things worse.
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One of the real tragedies of life is that some people (and to be clear I'm not saying it's you, it does not appear to be) for whom life was so hard are so utterly disinterested in - sometimes to the point of being against - making life easier for others.
Re:There's usury and there's free market (Score:5, Insightful)
Important use of "can". Making good choices is necessary, but not sufficient. There are plenty of people who consistently make responsible choices and still end up screwed. And deservedly pissed about it, too.
Conversely, if you're handed a better starting position, you automatically have greater margin for the occasional poor decision or unlucky break. And then there are those who start at such an advanced position that it's nigh impossible for them to fall, regardless of their terrible choices.
Truly groundbreaking stuff. (Score:5, Funny)
Atlantic journalists discover the concept of responsible credit use! Film at 11!
Credit Cards (Score:2, Insightful)
Credit card companies work in a way that - for some reason - people just don't understand.
They WANT everyone to have a long-term, low-level, interest-accruing debt. It's the best way to make a stable, long-term amount of money. They will literally lend to people that you, personally, wouldn't lend a coin to because they know they can pretty much always recoup that money over time.
They make NO money from people who have a credit card and just pay it off. The transaction fees are covered by merchants, etc.
Re:Credit Cards (Score:4, Insightful)
I stopped here;
They make NO money from people who have a credit card and just pay it off. The transaction fees are covered by merchants, etc. but they basically make nothing off those people. They just hope that, one day, something will happen and those people will become one of the above people, however temporarily.
When everything was manual and they had to pay people to manually enter each transaction into the system, merchant fees were less than 1.5%. Now that all the work is done by the card holder due to automation we have an increase in cost of over 3% instead of a drop that is pennies to a transaction. Don't forget banks make a profit even when they charge $.05 on debit. That is a better return than a personal loan.
Not to mention that in their terms of service they can market and sell your information.
Re:Credit Cards (Score:4, Insightful)
You're wrong, re: "They make NO money from people who have a credit card and just pay it off."
They absolutely do make money off of the rich folks who pay off their cards. This is the entire point of the article. Except for rare situations, the interchange fees for a credit card transaction on a high-end credit card are, these days, around 4% on any given transaction. Because American merchants rarely charge a lower cash price than for those using a credit card, the rich can make back most (but not all) of the interchange fee with rewards, while those with poorer credit who don't quality for the better cards with higher levels of rewards pay more.
"I have a 0% interest on a card that I used to pay the legal fees to buy my house. Say I used it to pay 1000 whatevers. I only pay 1000 whatevers back. But several years later and in small increments. I transfer it whenever the 0% deal runs out and often pay a tiny one-off fee. "
The credit card company, despite offering you 0% interest, has charged a 2-4% interchange fee to the merchant for every transaction you make. They have made their money. That "tiny one-off fee" is only more money in the bank.
Not to mention, most car dealers, government agencies or, yes, lawyers will charge you a surcharge to use a credit card to recover the interchange fees. It's often more beneficial to pay them by check, as archaic as that sounds (and is).
Please read the article. The article explains the economics involved.
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"Stability" --- is a key word. There is less and less "stable" work from everything I have read. (If the research is contrary to that, please provide links to trustworthy sources"). I want to know the facts, especially if I'm mistaken.
I've also read that future American workers will need to be able to change and adapt quickly to succeed i.e. Hustle, Gig work. If someone earns enough money through, stable employment and don't have any unexpected huge bills e.g. medical then it's a great deal, but as soon as
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They make NO money from people who have a credit card and just pay it off. The transaction fees are covered by merchants, etc. but they basically make nothing off those people. They just hope that, one day, something will happen and those people will become one of the above people, however temporarily.
What?
Let's examine that - let's say I spend $1,000 in a store and use my credit card. The credit card company charges a small transaction fee (less than a dollar) and a percentage of the sale (call it 2 1/2 percent), so the store that gave me $1,000 worth of goods gets $1,000 less the transaction fee $1 and 2.5%, or $25, so $974 to the retailer.
When the bill arrives, the consumer pays the credit card company $1,000.
The credit card company has made $26 off that single, no risk, transaction. Yes, they make mo
Monopoly (Score:3, Insightful)
The credit card market is basically owned by Mastercard and Visa. While theoretically competitors, they are in actual fact "colluders". They both charge near-identical fees, and neither is interested in actually competing.
What happens with monopolies? They rake in as much money as possible, reigned on only by regulation. For example, there used to be limits on usurious interest rates, but somewhere along the line those have been lost. Probably due to lobbying by...well, guess who. Hence, as TFA says, people can easily be caught up in a debt spiral where they can never pay off their credit cards.
If you are actually responsible? You aren't making out like a bandit, instead, you are robbing the merchants. The credit card companies are not the ones giving you that "1% cash back" or whatever - they're taking it from the businesses you buy from. You are paying the merchant's credit card fees, in the form of higher prices.
With the advent of mobile payment services, there is some hope for competition. Of course, the danger is that any independent service that looks like it might be successful, will just be bought up.
I borrow from the bank... (Score:2)
How DARE they ? Why, I've half a mind to stop using their services.
But first I need to whine about it and get journalists to write about how bad we have it.
Yeah, right. Pull the other one. (Score:5, Insightful)
Bipartisan legislation now aims to cap interest rates and lower swipe fees.
Bullshit. This shit gets bandied about during almost every administration. What this actually is is our politicians poking the credit masters for campaign contributions and lobbying money. There will be no interest rate caps, and there will be now lowering of swipe fees. In fact, go ahead and bookmark this post, because I'm calling it now. By the end of Trump's current term in office, swipe fees will climb from 3 to 5%, and interest rates will climb to an average of 30% on credit debt from the current ~21%. There is no fucking way our current legislature will ever dream of actually implementing legal restraint on credit companies. There's too much money to be made on the backs of the average folks who have to tap credit every time an emergency crops up because their wages barely keep them in necessities.
Re: (Score:3)
Bipartisan legislation now aims to cap interest rates and lower swipe fees.
Bullshit. This shit gets bandied about during almost every administration. What this actually is is our politicians poking the credit masters for campaign contributions and lobbying money. There will be no interest rate caps, and there will be now lowering of swipe fees. In fact, go ahead and bookmark this post, because I'm calling it now. By the end of Trump's current term in office, swipe fees will climb from 3 to 5%, and interest rates will climb to an average of 30% on credit debt from the current ~21%. There is no fucking way our current legislature will ever dream of actually implementing legal restraint on credit companies. There's too much money to be made on the backs of the average folks who have to tap credit every time an emergency crops up because their wages barely keep them in necessities.
Gee, if ONLY we had a non-partisan government organization that wrote rules within congressionally delegated powers that looked out for the lowly consumer. We could call it the Consumer Finance Protection thingamajib.
I do agree with you, gutting the CFPB isn't a strong signal the politicians in charge right now are interested in protecting consumers from predatory financial products and services. Roll out the payday loans everybody, make sure papa Trump gets a cut and you'll be fine.
CC APR (Score:2)
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my CC's hate me because I dont carry a balance...
They are very happy to reliably bank 2.5-4% of your purchases paid within 30 days.
Its what we call "easy money".
Well no shit... (Score:3)
....That's how they got rich to begin with. Don't forget that the only thing that grants value to our monetary system is debt. Without debt, there is no value at all. In fact, it's built on the fact that the debt cannot ever be paid off in full.
So when you talk about rich people, you're not talking about a people that have lots of money, you're talking about a people that own a bunch of debt.
Re: (Score:2)
What is new here? (Score:2)
In the US, by end of the 70s, revolving credit was sufficiently automated to start becoming widely available - before that it was only for rich people. That's when the punish-the-poor-to-feed-the-rich model began. Since then changes have mostly been responses to regulatory changes and cross promotional stuff enabled by more automation.
At root, the main da
Swipe Fees Out of Hand (Score:2)
The root of the evil is swipe fees that are totally out of hand. It should not cost a retailer 2% or more to take your credit card payment. Perhaps that made sense 30 years ago when the back end administrative work couldn't be automated, but the marginal cost of a swipe to the credit card company is almost nothing in 2025. Without those fees, there would be no credit card "rewards" but almost everything that is commonly purchased at retail could fall in price.
The interest rates on credit cards are always g
Re: Swipe Fees Out of Hand (Score:2)
> Without those fees, there would be no credit card "rewards" but almost everything that is commonly purchased at retail could fall in price.
Prices will not fall if processing fees are lowered.
Re: (Score:2)
Probably not in nominal terms, but the retailers would see a decline in costs of ~2%. No, it wouldn't all go to consumers, but some would because retail is a very cutthroat industry on price.
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And 100% of businesses would pocket the difference without adjusting prices at all.
The problem isn't the credit cards (Score:5, Insightful)
The problem is people living beyond their means. They need to plan, prioritize and live on a budget.
Stop eating out.
Stop going on expensive vacations.
Stop buying a new iphone or car or cloths every year. Treat your phone and car as the appliances they are.
Stop the $200/month cable bill. Get a basic plan
Treat the card as a means to transact business and not as a loan.
Dave Ramsey tells to NOT to have a credit card (Score:2)
No one is forcing you to have a credit card.
Having said that, I DO advocate to have credit cards.
Even if you get a credit card, no one is stoping you to treat your credit card like a Debit Card and pay your balance weekly (that's what I do).
No one is forcing you to have every credit card under the sun.
People who advocate credit card usage (including me) advice to put your limited wood behind fewer arrows, i.e. having a few high-value-high-benefits-low-interest credit cards, instead of a plethora of low-valu
"The poor subsidize the rich" (Score:2)
So now being responsible and actually paying my balance every month is somehow being subsidized by people that overspend their means?
What kind of logical backflip is that?
Re: (Score:2)
It's the Atlantic...
Misleading attitudes, misleading advertising (Score:3)
I'm seeing lots of misleading advertising these days. Get our credit card and you too can be a high-roller. The world is your oyster, as one campaign puts it.
WRONG
Credit cards aren't free money. They're a short-term loan. They give you convenience and financial leverage, but do not automatically make you wealthy. The money you spend on your card must be paid back. And then some.
FWIW I have two credit cards, Visa and (Platinum) American Express. Visa is handy for online shopping. I use my Amex almost exclusively for travel. I must have done something right, they've invited me over the years to upgrade from Green to Gold to Platinum.
...laura
Republicans did this (Score:2)
Serious untruth here (Score:2)
This is not a complete truth, and it's a false conclusion to say the poor subsidize the rich. These high interest rates and fees are meant to discourage bad spending habits; and yes unfortunately many poor people have these challenges. But I'm going to paraphrase Dave Chappelle here: being poor is a mind
It's not the _____, it's the people carrying them. (Score:2)
"Transactors" and "revolvers" are descriptions of how people are using their cards, not the cards themselves.
Credit is a tool. Some people know how to use it.
Most people shouldn't have credit cards (Score:2)
Our society needs to get off this credit addiction. For most households it does not make sense to include a credit card in the mix. But electronic transactions and a consumer culture and the rising inaffordability of our country make it nearly impossible to cut up those cards.
Re: (Score:2)
Credit cards guarantee the merchant is paid right then. If there is credit card fraud, in general the credit card companie
My creditors have been scamming me! (Score:2)
Now that I'm reading this article. I whipped my phone out and looked at all cards. To my horrifying discovery, all of them are 25-27% APR. I have never been informed of the rate increase. This is not affecting in any way financially actually. I only use them to pay
The power of the poor (Score:2)
Does this mean low income people can stick it to the cc companies by not using their low end cards?
solution (Score:2)
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Meh, I've never felt the need to chase rewards. As soon as you go beyond just getting rewards for doing or buying exactly what you would have done anyway, it gets very hard to tell how much you're actually up overall. Then again, I don't even have a credit card, just a couple of debit cards. My Revolut card does offer points, but I pretty much ignore them, very low value.
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It's ok, the current administration is gutting the Consumer Financial Protection Bureau that only exists to make the banks play fair and return literally billions of dollars to consumers. I'm sure that will fix it.
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Are you going to actually discuss credit cards? Maybe?
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I remember Chris Dodd, Senator from CT, demanding bank executives to explain why low-income people pay their debt lions share of insufficient funds fees... He seemingly didn't understand why rich people didn't pay insufficient funds fees at the same rate as poor people. I remember just laughing when he said that.
Re: (Score:2)
Take it because now you can pay for the 20k used car next year with the card. Even if you only get 1% cash back on that - it will put gas in for a few weeks; and because it not your *only* card you just make your purchases with the others until the statement comes due.
What car dealer accepts credit cards as payment for a card without a credit card surcharge? The car dealer doesn't eat the credit card transaction fee, they either refuse CC payment OR charge a processing/transaction fee.