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The seller gives a portion of every credit card sale to the credit card company for the convenience of collecting payment via customers' cards. The credit card company is, in effect, giving the money to the vendor in advance - and thereby assumes the collection risk from the buyer. Fees can be complex and based on transaction, dollar volume, sliding scales - or some combination. For simplicity, let's say the credit card company takes 3% from the seller. Then it gives 1% back to the customer (long after the customer has paid). Companies estimate what percentage will pay cash and what will pay by credit. Some mark up their products to cover the average credit card transaction costs. But I think most factor in CC fees for every transaction - and those who pay cash are, in effect, failing to claim their discount.The credit card industry philosophy is essentially this: To make transactions convenient, we'll advance the money, take net 2% of every sale for ourselves, and if any borrower doesn't pay us on time, we'll make money on that too.In my own business I look at the amount we pay annually for the privilege of taking credit cards and it is enough to put several new motorcycles in my garage every year... but... when a customer pays with credit, the business gets cash immediately and doesn't have to spend any time/money on collections or facilitating other types of transactions. Whether it's a necessary evil or a cost of doing business depends on one's point of view. I see it as a cost of doing business - and I take advantage of airline miles, cash rewards, etc. as a consumer (and never pay interest).Credit limits also provide a nice safety net in case of emergency - and the ability to take advantage of an opportunity (new guzzi content).As to the original question re rates - if you have a good history and they've raised the rates, just call and ask to be put on a lower-rate program - you can threaten to cancel and apply for a new, low-rate card if asking nicely doesn't work.
What is a credit card? I do have a debit/credit card with Chase. 36.?? something rate. I have never used it. Unbelievable that a bank can make such excessive profits. Paying less than 1/2% interest on their capital and then selling at 72 times cost? What other business can get away with this? The overhead on the capital is very small. Not like manufacturing or retail.
The sophisticated can apply for lines of credit or home interest loans. Those are scrutinized a little more closely now than they were a few years ago, and I'll bet a majority of us on this forum would qualify. But would you take one to buy a mint T-3? It's tempting at 2.9% for the first year. Almost free money, for a while.
Just a related note. I've had equity lines of credit in the past, but the landscape has changed significantly since the housing crash.The amount of hoops necessary for a regular mortgage these days is incredible compared to pre-07, and I suspect there have been similar complications to the home equity market.Our own bank turned us down for one last year, with over $100k in equity, credit ratings north of 800, and not insignificant income. The stated reason for rejection was "insufficient equity" which was shocking to us.
Best rule of thumb for ANY credit card / credit card rates.............. ...just PAY THEM OFF each month - then you have 0% interest!! "Debt is the modern form of slavery..." JJC
Why even use them then? Do you like being tracked on every purchase? Why not just carry a few huns instead?
The tracking thing cracks me up! Sure, use cash if you worry about that. Don't carry a cell phone if you don't like being tracked..The convenience of a CREDIT card is safety in the purchase. If my wallet is lost or stolen, only a small amount of cash is lost-if any.However, a debit card, not so much. Avoid using those for purchases.
Want to beat the system? Over pay your account and carry a positive balance. Since saving accounts do not pay any interest to brag about and what is paid is taxable income and credit card interest is not deductible for most people. When I had over draft protection on my debit card, I would pay the bank back within a day or less and add a couple of extra dollars onto the payment. The bank would send me a statement monthly for a $0.29 balance and then after 3 months, mail a refund check. If you are not regular user of your credit card and plan on using it, go on line to your bank, make a payment to the credit card account in the amount you expect to spend while on vacation or car rental or airplane tickets or where ever. Then you will not be charged any interest for the using the credit card.
If my wallet is lost or stolen, only a small amount of cash is lost-if any.However, a debit card, not so much. Avoid using those for purchases.
To me it seems that people who constantly discuss money actually have none....Without being disrespectful, some of you ,based on the things you say and what you purchase, are in deep debt...That's ok, it's good for the merchants...
So (upon reading your impression) I went back and read every post on this thread. Only ONE person (CoolRunnings) currently says he's running a $3500 line of credit (not a credit card, probably a 3% equity or unsecured personal line). Not unreasonable in an era of low to zero interest.Every other person that posted said that they are NOT running a balance on their credit card, that they pay it off every day, every week, or every month, and don't pay a cent of interest; many have said they are taking advantage of the "cash back" feature of their card and getting back 1% of the 2.5% interest that the MERCHANT pays the CC company.Sure, the "world at large" is running in debt, buying stuff they can't afford, defaulting on their payments and letting the other interest-payers cover their cheating .... but it doesn't sound like this WG bunch is doing anything like that. All I've heard here is good ideas of how to take advantage of the convenience of a card, and letting other people pay the cost ... ?When it comes to retirement planning, investing, or using credit wisely, it's a big advantage having a bunch of tightwad nickel-squeezing old toots to get advice from ...Lannis
The ones with high CC debt ain't sayin' so. Human nature, only say good things regarding ones self.
Neither a borrower nor a lender be . Do not forget , stay out of debt . Think twice and take this good advise from me , guard that old solvency .
Last week when the local internet went down, the whole local world stopped. I tell everyone to put some good hard cash back for an emergency. Not just some change, but several thousand dollars. Reach in your pocket and see how far you can go. If not far, you will be one of the first ones in the government assistance line. My plan, be the money changer when the time comes.
Do the guys who have posted saying they have no credit card balances have OTHER debt, on houses, cars, businesses, motorcycles? I'm sure they do; but ....Lannis
Mr. Down , I give you exhibit A . The Penn Square Bank , Oklahoma City Oklahoma . Dusty
No but, debt is debt... And yes I know the tread is about CC debt............... .........
Well, just to be a little picky, and maybe telling you something you already know ....... but debts are not necessarily equal. If I borrow $50,000 on 84 payments at 4% interest to buy a Dodge Ram 3500 Crew Cab Dually pickup truck with all the gadgets so I can drive it to the store and show it off to my boys and go hunting in it ... that isn't the same as borrowing $50,000 to help buy a used Peterbilt so that I can haul loads and produce income and pay the truck off and still have an asset that is worth something and is still making me money.Or if I open a car repair garage and borrow $90,000 to buy a full set of Snap-On tools and cabinets, and I use those tools to make money, and $15 of my $90 shop rate is paying off those tools, then in 3 years I will have paid off those tools, made a living, and I still have the tools! If I hadn't borrowed the money, I couldn't have made a living during that time. But if I borrowed $90,000 for a Winnebago, and drive it around the country getting 6 MPG and paying $60 a night to park up, in a few years it's worth almost nothing; "enjoyment-wise" it might have been worth it, but I have no money at the end, unlike the Snap-On set.Same for a house. Borrowing money in order to be able to make MORE money is how the world works. Borrowing money for junk you don't need and can't make the payments on is the bane of the financially dim .....Lannis