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bookworm
Social climber
Falls Church, VA
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Topic Author's Original Post - May 19, 2009 - 12:14pm PT
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this SUCKS!
"Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”…
The industry says that the proposals will force banks to issue fewer credit cards at greater cost to the current cardholders."
here's the whole story:
http://www.nytimes.com/2009/05/19/business/19credit.html?_r=1&ref=business
i charge everything i can and payoff my balance every month to avoid interest...looks like it will be back to writing checks
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rectorsquid
climber
Lake Tahoe
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May 19, 2009 - 12:24pm PT
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Keep in mind that people who make a single minor mistake with their credit are already subsidizing other people who habitually have credit problems. For instance, I am late with one payment, say by 10 days, and now, for ever, I pay at least 5% higher interest on that account... and on every other credit card I have because they can all raise your rates because of any late payment on any account, even if it is with another bank in another country or even on another planet.
Your car insurance subsidizes other people getting in car crashes. Your taxes subsidize other peoples medical bills and even some peoples drug habits. You pay for other people to drive on the highway with studded tires and destroy the pavement in the fall. Crap, most of everything you pay to anyone subsidizes someone else's lazy ass.
Dave
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apogee
climber
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May 19, 2009 - 12:33pm PT
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^^^^^^Yeah, that's called living in a society. For all of the bad things that others do that can backwash onto us, the benefits of living in a society where resources are pooled for the benefit of the country as a whole are far greater.
bookworm, do you really believe that the way the credit system has been working has not created similar (or worse) impacts to you or the system as a whole? What is your investment portfolio looking like these days, or your home value?
Don't like living in a society with all the goods and bads that it offers? Go live somewhere else.
edit: BTW- the loss of some of those CC benefits (if it actually happens) really would suck.
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bookworm
Social climber
Falls Church, VA
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Topic Author's Reply - May 19, 2009 - 12:59pm PT
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apogee, that was an idiotic remark
congress wants to protect irresponsible people for one reason only: to win votes
pull your head out of your ass and see the consequences... people like me who payoff their monthly balances allow irresponsible people to have credit cards because the card companies are guaranteed a steady flow of cash...besides a good credit rating, my incentives include air miles and cash back...however, if i have to pay interest no matter what and my incentives are taken away, i'll stop using my credit cards...the card companies lose that cash, and, now, are more reluctant to extend credit to others and the credit crunch gets WORSE
and whom does this affect most? poor people! credit cards allow responsible poor people to buy necessities despite not having the cash on hand...if fewer people use credit cards, poor people will have a harder time getting credit
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adventurous one
Trad climber
reno nev.
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May 19, 2009 - 01:03pm PT
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They should go one step further and ban card credit cards altogether or pass a law requiring merchants to give a discount to those not using a credit card.
Credit card companies charge merchants a typical 1.5% to 2.5% fee for every transaction.(think about how many billons of dollars that is annually) Who pays for that? We do. The merchant just raises the prices to cover that cost and you just pay 2% more for everthing to earn those "free" credits. The merchant can not afford to lose business, so he has to take credit cards and charge everyone, including cash custumors, more for the product/service to cover his cost.
The credit card companies entice us with all these "free" credits for using their cards, when actually we are paying for them every time we use a credit card, which causes the merchants to raise their prices.
And I won't even begin on how the credit card companies prey on the two thirds of consumers who do not pay off their balance monthly.(If you can't afford it, don't buy it)
Write a check or pay cash. The credit card companies have been "blackmailing" merchants and fooling the public for far too long.
Edit: Sorry Chris Mac, my one and only Ot post ever.
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Pennsylenvy
Social climber
A dingy corner in your refrigerator
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May 19, 2009 - 01:48pm PT
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bookworm,
you have to admit that credit card companies thrive on bait and switch tactics. I received a notice that my interest rates were going to go up on such and such a date.....I wasn't even late on a payment. Who else can do this but those crooks. Paid it off and am not using my credit card for anything in the future. Their tactics are too circuitous for many folks. I'm done. If you have good credit you shouldn't need a credit card right, so quit yer republican uber free market whining....
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apogee
climber
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May 19, 2009 - 01:52pm PT
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bookworm, I have 3 credit cards myself that I use for business and personal purchases, and take advantage of the same benefits that you do. Further, I have a merchant account for my business where I process my customer's credit cards. I very well understand the way the credit card industry works (partly described by adventurous 1), and it is just slightly short of loan sharking.
The changes that are coming to the CC industry are long overdue, in my book. Your view that the primary impact of these changes will be on your FF miles or cashback is incredibly short-sighted and self-oriented...exactly what we've come to expect from conservative GOP'sters.
edit: dirt's comment below is right on. The cc company's are running around screaming using fear and worst-case scenarios right now...we'll see what actually happens.
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dirtbag
climber
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May 19, 2009 - 01:58pm PT
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Of course the CC companies are going to claim the sky will fall.
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Euroford
Trad climber
chicago
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May 19, 2009 - 02:18pm PT
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overall, getting rid of my credit cards has been a serious upgrade in overall quality of life.
i just seriously think the damn things are the bane of all existence.
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BCD
Trad climber
Mammoth Lakes, CA
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May 19, 2009 - 02:26pm PT
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”people like me who payoff their monthly balances allow irresponsible people to have credit cards”
I think you have that a little backwards. The irresponsible people allow YOU to get air miles and cash back. The credit card companies are actually losing money off of people like you.
It’s strange to think that their “good, responsible” customers are actually the worst kind. Sure, they make 2-3% on transaction fees, but that’s not nearly enough to cover airline miles or any of the other rewards they offer.
I don’t mean this to sound derogatory, (since I’m in the same boat as you): From the perspective of the credit card companies (and their other customers) you’ve been leeching off the system for years. You’ve been getting something for free, and it’s being paid for by those who are probably less fortunate than you. Many of them have run into hard times. And now in addition to those hard times, they are funding your vacations.
I’m right there with you. I’ve enjoyed the rewards of being a responsible credit card owner. It’ll suck to see it change, but I can’t really complain about losing something that I wasn’t paying for. Especially knowing that it was being funded by those who probably can’t afford it in the first place.
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TradIsGood
Chalkless climber
the Gunks end of the country
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May 19, 2009 - 02:52pm PT
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Well you also will be allowed to carry a concealed weapon into a national park if the Senate version passes the house!
:-)
And those who will "pay by check"... I suspect have forgotten that it is nearly impossible to do so most places without a credit card for identification!
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apogee
climber
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May 19, 2009 - 02:58pm PT
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Rox, I don't think your idea was stupid, and I love the idea of not having cc's, but it just ain't gonna happen. This country's economy (if not the world) is built on easily-accessible consumer credit- it drives the entire economic engine. Like many of the dysfunctional things in our country (politics, military, etc.) it is what it is, and changes will only be incremental at best.
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ontheedgeandscaredtodeath
Trad climber
San Francisco, Ca
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May 19, 2009 - 02:58pm PT
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Poor people should not have credit. It always results in oppression. See, e.g., history.
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TradIsGood
Chalkless climber
the Gunks end of the country
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May 19, 2009 - 03:16pm PT
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apogee makes a solid point.
Credit makes the world work. It is behind every transfer of goods from one country to another.
It also facilitates not getting ripped off spending money in a foreign country by paying retail levels for local currency.
Even a check amounts to credit if you think about it!
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graniteclimber
Trad climber
Nowhere
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May 19, 2009 - 03:32pm PT
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"charging interest immediately on a purchase instead of allowing a grace period of weeks"
Credit card companies charge a 3% fee on all purchases. This is charged to the merchant but is passed on, in the form of higher prices, to the consumer.
If you are one of the soc-called free loaders who pays off your balance every month and charges on your credit card remain outstanding for an average of 2 weeks, the 3% fee works out to the equivalent of interest at an annualized rate of 78%.
If credit card companies weren't making money off people who paid off their balances every month, they wouldn't let you do that without paying more.
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TradIsGood
Chalkless climber
the Gunks end of the country
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May 19, 2009 - 03:55pm PT
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khanom, if you really believe what you just posted, you are really uninformed.
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JEleazarian
Trad climber
Fresno CA
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May 19, 2009 - 04:57pm PT
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I'm a big believer in freedom of contract, but what constitutes a contract was always circumscribed by the law. One element of a contract must be a legal object. In other words, we may call an agreement to kill someone for money a "contract," but technically, its object -- murder -- isn't legal, so it's not really a contract.
There have also been common law limits on contractual remedies for centuries. Contractual remedies must be good faith attempts to compensate for actual loss, not penalties to motivate compliance. A pound of flesh is not a legal remedy. A reasonable rise in interest rates for defaulting on performance is.
Even though my practice primarily consisted of business cases, I have been involved in literally thousands of consumer cases in the last 30 years. I believe that many of the provisions in current consumer credit agreements would not pass muster in a commercial context.
Several of my consumer clients were paying default interest in excess of 40% per annum. The non-default rate was 18% (still terribly high, but probably a fair reflection of the credit risk). I've never seen a court enforce a commercial credit agreement that increases interest by 22% on default. Frankly, when I first started practicing (in the Carter Inflation days), lenders who charged in excess of 40% didn't resort to the law to enforce their obligations.
Many of the post-default actions of credit card issuers simply drive people to bankruptcy. After viewing tens of thousands of credit card statements, I don't feel particularly sorry for the lenders that do so.
Unfortunately, I can't trust this congress not to throw out the baby with the bath water. If it takes acts of congress to give consumer borrowers the same rights the common law gave all borrowers, so be it. My fear is that they'll make it illegal to enforce the sorts of contractual remedies that are commonplace in commercial transactions. Reasonable late charges (usually a one-time charge of 5% of the late installment) or increases in interest rates while the loan is in default (again, usually limited to an increase of 5% per annum, and often less), simply compensate for the consequences of default to the lender. Huge fee increases, unreasonable charges, opressively inconvenient venue provisions, etc. are unreasonable, and should be unenforceable.
I, too, read the NYT article. I find it nonsense. Lenders loan money to no one out of charity. They make money from loans to their best borrowers, and they expect to make money on every credit extension (except, perhaps, those that powerful politicians extort from them). Sub prime borrowers don't "subsidize" credit to good borrowers. They're separate markets.
Quite simply, a lender doesn't have to loan money to everyone. While it needs to watch out to make sure it cannot be accused of illegal discrimination, there is nothing illegal about making credit decisions based on the creditworthiness of the borrower.
My bottom line: if the credit card issuers are being less generous to their best borrowers, it's because they can't make enough money lending to them under current terms to make the lending worthwhile. What they get from other borrowers has no relevance to this.
John
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blahblah
Gym climber
Boulder
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May 19, 2009 - 06:39pm PT
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JEL wrote: "I'm a big believer in freedom of contract, but what constitutes a contract was always circumscribed by the law. One element of a contract must be a legal object. In other words, we may call an agreement to kill someone for money a "contract," but technically, its object -- murder -- isn't legal, so it's not really a contract."
Not to quibble too much and I don't think this changes the point of your post, but:
a "contract" for murder is in fact a contract according to that words usage in American law, it is just an unenforceable contract. At least that's my recollection and understanding. Not all contracts are enforceable, but that is a separate issue from contract formation. If you or anyone else disagrees, no big deal; I'm just throwing this out there for people who are interested in precise terminology (really jargon). I appreciate your posts.
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JEleazarian
Trad climber
Fresno CA
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May 19, 2009 - 07:13pm PT
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I guess it depends on your contracts instructor. Mine, a very pleasant southern gentleman until we got the final grades, whereupon my classmates started calling him "Jaws," taught that a contract was a legally enforceable agreement. His hypotheticals would always end with the question "Contract or no contract?"
In any case, I agree with your point -- it's a question of terminology.
John
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