I=prt and Credit Cards.

[Jim Nickerson]

There are a couple of current threads here that prompt me to place some thoughts on credit cards and banking; stuff that has been bouncing around in my brain for a while

Bank Of America Credit Cards To Illegal Immigrants
http://www.itulip.com/forums/showthread.php?t=945 and

Are American's really the most stupid?
http://www.itulip.com/forums/showthread.php?t=938

I've tried to remember when in school I was exposed to I=prt. I think it might have been the 8th grade or in the 9th in algebra I. I've forgotten most formulas I learned in science classes, but for whatever reason I=prt has stuck with me.

I believe I was a junior in dental school age 23-24, when I learned that a department store in downtown Birmingham (didn't have malls then) would allow me to open a "charge account." I could buy stuff (basically clothing) and "charge it" and then pay something on the account each month and the "carrying charge" was 1.5%. I thought that was a great deal, and I remember buying a bunch (5 or 6) of Gant shirts, whether all at once or over time I don't recall. About nine months later, I went to a banker in my hometown and got a loan to buy my first car, a new 1966 Pontiac Tempest. Loan was about $3K and the rate was 6% as I recall. I am rather sure the thing that attracted me to the department store "charge account" was that in making the required monthly the payments were within my abilities as was making the car payment as I would be in the Navy within a few months drawing a steady paycheck. I am rather sure, my banker allowed me to defer my first car payment until I was on active duty.

Shortly after going on active duty in the summer 1966, I remember a classmate from dental school, who was stationed at the same place I was, coming up one day and showing me the "latest thing," a Bank Americard. He explained to me how it worked, and I believe I probably went by a Bank of America branch and got and filled out an application that day or soon after. Now I cannot recall the exact cause of my enthusiasm to obtain that card. Except for the charge account at the department store in Birmingham and my bank loan for my new car, everything I had ever bought until then had been either with cash or a good check.

It sticks in my mind that I never appreciated 1.5% interest per month equated to 18% per annum interest until someone else told me about that. I think that happened soon after I got my first Bank Americard. I write this to document my own ignorance and the temporary lapse in brain function pertinent to I=prt.

I have a sense that I never ran up more charges on my credit card than I could pay off on the next bill's presentation, but I am not positive about that. Several things I wish I had had back in 1966 (looking back from today) are a computer and a program like Quicken or Microsoft Money and the compulsion to have kept up with every cent that passed through my hands--it would truly be interesting to see now where my money went and exactly how I managed it. I can tell you based on memory, ICRS (I can't remember shit) about such from 40 years back.

At any rate, it struck me fairly early in my life that paying 18% more for something in order to have it immediately using a credit card was not worth the 18%. I don't know today if early on I charged things on my credit card and paid less than the balance for some month or not. I do know that I never had any balances that caused me distress, and I don't know when "balance transfers" came into vogue, but I know I never utilized that "feature" of credit cards.

Probably for 40 years I have been what I read somewhere recently the credit card industry calls a "freeloader." That term is apparently used in the credit card industry to denote those customers who pay off their balances each month. Generally I have never thought of myself as a "freeloader," but after thinking about this derogatory designation as it applies to myself I really must admit it is a correct, appropriate designation. I guess for many years I have been somewhat proud to be able to use the credit card companies' monies to pay for things I needed or wanted and to advantage myself with whatever small interest I made holding my money sometimes up to 50 days or so before turning it over to the credit card company. I think most times when I check out at a store and pay with a credit card, the thought crosses my mind that the credit card company is really not doing me a personal favor because it is collecting something from the merchant to process my transaction. I haven't always considered though that part of what I am paying for an item is due to the merchant choosing to accept credit cards.

But when I have stopped and and thought about the whole situation, the people who are truly supporting the entire credit card system are those who don't pay off their total bills when presented and due. Were it not for that segment of the population, I could not float what I may charge each month on my credit card. So in perhaps a deeper sense, I am a parasite, perhaps like a maggot, to some degree profitting a bit from that segment of the population who don't understand I=prt (and I was at least 25 years old with what would pass as 19 years of formal education before it dawned on me to what 1.5%/mo. equated). Of course, there are other rationalizations for why people don't pay off their balances each month, but I think I can guarantee one thing: if credit cards didn't exist, then the mountain of credit card debt would not either. (How is that for clarity in thinking?)

Richard Russell wrote something about a week or so ago regarding how bad it could be for the stock market and GDP if Americans really were to stop spending and begin savings. What he wrote struck me as sort of a dis-connect, paradox, contradiction (I cannot decide on the right word or think of the best word). On one hand people are pulling for the American economy to continue to bustle along, but on the other hand there is a lot of concern about people being so deeply in debt that it is going to lead or has already led to their ruination. If the market is to continue up the American spender cannot fade away. So do you want to see your investments grow at the expense of those who are spending themselves into ruination?

It is similar perhaps to the time of apartheid in South Africa. A lot of people in the world saw the immorality of segregation, but it took a long time for seriousness to develop about dis-investing themselves in South African companies. Similarly a person thinks cigarette smoking is bad for humans, yet invests in Altria; considers that health care expenses cannot continue as they are, but invests in HCA, Pfizer, Medtronic, etc.; thinks the financial industry is gaining more wealth as the expense of the ignorant, stupid, greedy population and investors, but invests in BAC, GS, C. All in all there is something crazy about all of this.

For a long time, probably decades, I have thought that 18% (and I know it can get higher) interest rates on credit card were usury, i.e. "an unconscionable or exorbitant rate or amount of interest." I guess I have been glad that I could "freeload" off the system and not have to pay 18% interest--a very self-centered perspective as I look upon it right now.

The problem as I see it is not fully the ignorance or stupidity of that portion of the credit-card-debtor-population that produces the big earnings in the credit card industry or of any company that extends its own credit, but the problem is that our elected officials have for as far back as I can recall, which would be 1966 at least, allowed companies to get away with charging such rates. 18% or 21% interest is not usury if the law allows it. Who has benefitted over the long run from this system that allows easy credit to everyone almost, including dogs, and looming on the horizon illegal aliens? Consumers, yes, probably to a large degree in achieving so-called instant gratification, but the large beneficiaries have been those who have been granted the legal ability to loan money at what truly are usurious rates. No one should interpret what I am attempting to put forth here as an attempt to remove people from accepting personal responsibilty for their actions.

Fortunately in retrospect, I grew up in a very middle-class home, where we did not get anything for which my father did not earn enough to pay for when we bought it. It was simple, we bought things we needed if we had the money. Was I deprived? No, I never felt that. Was I ever ashamed? No, I never felt that. Were we better off? I didn't realize it at the time, but definitely we were.

What is the answer now? My cynical answer is that there is but one real answer and that will only occur if the American economy for whatever the reasons implodes, and those who aren't moved to suicide are given the chance to start over with my hope that the next time around more things will be done better.

In the mean while, what can I do? I am not there yet, but for the last 7-10 days I have begun to contemplate how I can give up my credit cards and remove myself from the list of "freeloaders." It is a helluva lot easier to consider continuation of the freeloading than it is to consider doing without credit cards, but how mentally rewarding it is to do business with someone with whom you disagree about the manner in which they operate their business. It me is makes me a hypocrite, and I don't like that.

You know I believe we, at least me, have really been sucked into this whole scheme that supports the money lenders. I have some of the best, if not the best, insurance in America, USAA. A company with whom I have carried all my insurance except health, since I went into the Navy, and with whom I have never been short-changed in the few claims I have suffered. It has its own bank for some years now, and it stuck as peculiar me a couple of years back when USAA began allowing one to pay his premiums on a credit card, not just the bank's, but any bank's at no additional fee. Previously all my premiums were paid by debits in equal amounts over the period of the policy without any increase in the total premium, or reduction if you paid it at the beginning of a premium period. I switched to the credit card payment for the float and the air-miles, and I expect USAA Savings Bank has some who pay using its credit cards, but who don't pay off the balances each month. Last night I ordered a blood pressure cuff through Amazon using a credit card. I am not sure if I could have done the deal without a credit card--I didn't even look to see other means of payment. I pay my electricity bill using my credit card, no extra charge that I see. I pay my satellite bill with credit card. I got a "deal" from Charter Communication today in the mail for cable, Internet, and long-distance good for one year, but requiring a credit card. The credit card industry has thown out the net and landed millions of suckers--actually I do think that is a type of fish, a carp.

Does anyone reading this find survival easy without a credit card?

If yes, tell us how you do it. How bad is life without a credit card?

Personally I think I am going to give my card up, despite losing the accumulation of air-miles. I don't wish to be a freeloader or a sucker for the rest of my life.

Someone should call my hand in a couple of months and see if my word is any good.

[DemonD]

Re: I=prt and Credit Cards.

Jim, the hardest thing about not using a CC is that it is very dangerous to order things through the internet, book travel, or otherwise purchase goods, services, or tickets from any distance.

The reason for this is if your credit card numbers are stolen and used for stuff you didn't buy (ie identity theft), then you are not on the hook to pay for that stuff. A debit card, on the other hand, they drain your bank account and it's a hassle to get the money back.

You can give up credit cards and use other forms of online currency (there are all sorts of credits you can buy, gift cards, traveler's cheques type stuff), but it's much more of a hassle.

I personally keep one credit card, and I use it as much as possible, pay off my balance every month on time. It's all about the 1% cash back baby.

I would basically say if you want to give up the convenience of easily purchasing goods and services from a distance, going credit-cardless would be easy. I couldn't do it, but more power to ya if you want to do that.

[goldy675]

Re: I=prt and Credit Cards.

Hi Jim,

Your post has definitely made me think a bit about why I should or shouldn't use a credit card. As a frequent credit card user myself, I enjoy the convenience of being able to charge almost any amount at anytime, without the need to carry large amounts of cash or visit the bank on a regular basis. It is incredibly convenient to make purchases and pay bills online, without having to step foot outside my home on a rainy afternoon. These conveniences and time-saving features of credit card use alone are worth a substantial amount to me. I haven't done the math on how much time I'm saving, but if I save an hour a month, 12 month a year, well I'd probably be willing to pay a couple hundred dollars a year for that time saved. Luckily, I don't have to pay for that convenience, since I also carry no monthly balance. Not only do I not have to pay them, I actually *get paid* to enjoy this convenience, as I average roughly 1.5% cash back. For these reasons, it would be very hard for me to give up my card.

I believe it is definitely not fair to yourself to think of yourself as a freeloader or a sucker. For every purchase you make on your card, the retailer gets charged approximately 3%. Is this fair to the retailer? Yes it certainly is, if it wasn't beneficial to the retailer to have this symbiotic relationship with the credit card company, they wouldn't allow credit cards. When the retailer gets charged for the credit card purchase, that generally covers the vast majority of any rewards a credit card company offers you for the use of their card. The credit card company is still very happy to have you as a customer even if you pay your balance every month. You are not freeloading, you are partaking in a useful and valuable service that the retailer is even happier than you are to be a part of. And of course you are definitely not a sucker for partaking in a service in which you benefit.

On the discussion of the ursurious interest rate charge that applies to many/most users of credit cards, well that is a more difficult issue to address. Do credit card companies take advantage of less attentive and thorough thinking individuals? Absolutely. Would many people in this country be better off if credit card companies didn't exist? Probably yes, but it is likely that many more have benefitted substantially from the existance of credit cards, at least up to this point in time. And as a libertarian idealist, I have to resist my own temptation of trying to inject my own rules and beliefs on what may or may not be a fair deal between two consenting parties, even if I want to scream in many people's ear on a daily basis that they are retarded for purchasing that designer outfit or 50 inch plasma television on credit while they have no money saved.

If I thought that the only reason that credit card companies were in business was because they were able to take advantage of other people's vices (like tobacco companies and illegal drug dealers), then I would agree 100% with you, and would join you in a "cut-up the credit cards" party and encourage others to boycott the industry. While I agree that the credit card companies probably make much of their money from people's vices (short sightedness and greed), I believe they would still be around and doing very good business even if all of America were as responible as you and I and carried no balance. Therefore, I will continue using their services, but thanks for making me think about it and consider all angles!

[Jim Nickerson]

Re: I=prt and Credit Cards.

Jim, the hardest thing about not using a CC is that it is very dangerous to order things through the internet, book travel, or otherwise purchase goods, services, or tickets from any distance.

The reason for this is if your credit card numbers are stolen and used for stuff you didn't buy (ie identity theft), then you are not on the hook to pay for that stuff. A debit card, on the other hand, they drain your bank account and it's a hassle to get the money back.

You can give up credit cards and use other forms of online currency (there are all sorts of credits you can buy, gift cards, traveler's cheques type stuff), but it's much more of a hassle.

I personally keep one credit card, and I use it as much as possible, pay off my balance every month on time. It's all about the 1% cash back baby.

I would basically say if you want to give up the convenience of easily purchasing goods and services from a distance, going credit-cardless would be easy. I couldn't do it, but more power to ya if you want to do that.

Demon,

You make some good points regarding the consideration for buying something on line, sending a check, and not having any recourse if the deal goes South as I took it you wrote, but it was a poor sentence you wrote, so perhaps I misunderstood.

I've had 3 experiences over many years where someone fraudulently used my CC number to purchase items or services, and I was covered by the CC company not to have to pay the charges.

I don't think I have ever used my debit card to make a purchase, only for cash withdrawals. Has anyone had an experience with someone fraudulently using your debit card to "drain your bank account"? I would have to investigate my own company to see if there is any protection for me against someone gaining control of my debit card.

You are correct, there are tons of convenience associated with using CC's, it is part of the net that has caught so many of us. I was thinking last night after posting that at Sam's Club I can't buy gasoline without a card of some type; I don't even know if Sam's takes debit cards--I'll have to find that out. And when traveling by car I've had the experience of coming upon a gas station that was closed, but one could use the pumps if one had a credit card--I don't even know if most gas pumps will accept a debit card.

One percent is something, but an noted in the post after yours the companies that accept cards pay a 3% fee (and I am not sure it is that high across the board say at Home Depot, Walmart, Walgreens, ad infinitum). Have you ever seen a major store that would give you a reduced price if you paid cash? They should, otherwise they are penalizing those who pay cash, considering that their prices in all likelihood are marked up to cover the companies's payments for CC transactions.

If we aren't freeloaders, reckon why someone in the CC industry would use that term for those who pay the balances each month?

[Jim Nickerson]

Re: I=prt and Credit Cards.

Hi Jim,

Your post has definitely made me think a bit about why I should or shouldn't use a credit card. As a frequent credit card user myself, I enjoy the convenience of being able to charge almost any amount at anytime, without the need to carry large amounts of cash or visit the bank on a regular basis. It is incredibly convenient to make purchases and pay bills online, without having to step foot outside my home on a rainy afternoon. These conveniences and time-saving features of credit card use alone are worth a substantial amount to me. I haven't done the math on how much time I'm saving, but if I save an hour a month, 12 month a year, well I'd probably be willing to pay a couple hundred dollars a year for that time saved. Luckily, I don't have to pay for that convenience, since I also carry no monthly balance. Not only do I not have to pay them, I actually *get paid* to enjoy this convenience, as I average roughly 1.5% cash back. For these reasons, it would be very hard for me to give up my card.

goldy, there is little you wrote with which I disagree, actually nothing. What card do you use that reimburses you 1.5%, and do you pay an annual fee for such a card? I use a Discover Card, that gives back 5% on gasoline and auto maintenance, and 1% on anything else is the way of goods or services. It has no annual fee.

I believe it is definitely not fair to yourself to think of yourself as a freeloader or a sucker. For every purchase you make on your card, the retailer gets charged approximately 3%. Is this fair to the retailer? Yes it certainly is, if it wasn't beneficial to the retailer to have this symbiotic relationship with the credit card company, they wouldn't allow credit cards. When the retailer gets charged for the credit card purchase, that generally covers the vast majority of any rewards a credit card company offers you for the use of their card. The credit card company is still very happy to have you as a customer even if you pay your balance every month. You are not freeloading, you are partaking in a useful and valuable service that the retailer is even happier than you are to be a part of. And of course you are definitely not a sucker for partaking in a service in which you benefit.

The CC industry (at least MC and VISA) has hooked almost everyone sellers and buyers. Even Sam's recently went from accepting only its own card and Discover Card to also accepting MC. A small retailer or service provider is faced with people who at least look askance at them if they don't accept credit cards, so it makes for happier customers I presume for them to divy up whatever the processing fee is, but nevertheless things would cost a bit less if credit cards didn't exist, all other things being equal. Probably retailers signed up with the big card companies MC and VISA are contractually forbidden to offer reduced costs to purchasers who would offer to pay in cash for a 2% or 1.5% reduction in a cost.

Just to try to make everyone who pays off his/her balance each month feel badly, I still think we are "freeloading." I think if everyone paid off his/her balance each month, credit cards would not exist to the extent they do--it is those who carry balances that support the system. I had an American Express card for years, and always paid off the balance as was the contractual agreement to do so. I don't know what happens with AE if one doesn't pay the balance in full. Does anyone? Will AE let you carry balances? I know a lot of selling companies don't accept AE because I presume the transaction fees the seller pays to AE is higher than for MC and VISA. It would have to be if everyone using AE pays balances when due. Perhaps AE is a better card in that it might not be as onerous on those who use it assuming they meet the obligation of paying balances on time, but then AE is not nearly as widely accepted as MC and VISA.

On the discussion of the ursurious interest rate charge that applies to many/most users of credit cards, well that is a more difficult issue to address. Do credit card companies take advantage of less attentive and thorough thinking individuals? Absolutely. Would many people in this country be better off if credit card companies didn't exist? Probably yes, but it is likely that many more have benefitted substantially from the existance of credit cards, at least up to this point in time. And as a libertarian idealist, I have to resist my own temptation of trying to inject my own rules and beliefs on what may or may not be a fair deal between two consenting parties, even if I want to scream in many people's ear on a daily basis that they are retarded for purchasing that designer outfit or 50 inch plasma television on credit while they have no money saved.

I am not a libertarian or anything politically except a dissenter who stays mostly pissed off at all politicians. I don't disagree with your sentiments regarding consenting individuals from an idealistic perspective, but as society becomes more complex, there is no way for it to evolve except for more and more laws to curb the disregard some people have for themselves and others or the taking of unfair advantage some people keep finding new ways to exhibit toward others. Why speeding limits, why seat belt laws? Why vaccination laws? Why the bans on smoking?

Like it or not from some perspective that may have been correct in earlier history, i.e. libertarian, government should protect its people at times from themselves and probably always from others who tend toward predation. With regard to credit card rates that can go up to 28%, there should be stricter regulations about who can get credit cards and what are allowable rates and penalties.

CC companies could survive at twice the interest rate charged for home loans if they chose carefuly to whom they issued credit cards, but lobbying I assume got them rates at 18% or more, so if you can buy politicians and soak the poor Joe for 18% or more, why not do it? Politicians are happy, stockholders are happy, the CEO at bonus time is happy. Joe is wallowing in debt because often he is ignorant, and it was made too easy for him to get himself into such straits.

If I thought that the only reason that credit card companies were in business was because they were able to take advantage of other people's vices (like tobacco companies and illegal drug dealers), then I would agree 100% with you, and would join you in a "cut-up the credit cards" party and encourage others to boycott the industry.

At 18% or more interest rates, I cannot think of any other reason CC companies are in business. They know well that the American culture is rather much about owning stuff, and the easier it is for people to walk out of stores with stuff the better off is the GDP, the retailer, and the CC company. Sure, at times people can fall back on CC's in emergencies for real needs on unforeseen events, but overall all I suspect it is the relentless shopper who carries balances that makes me and probably you receive 4-5 offerings a week to open another credit card account and accounts for the thriving CC business.

While I agree that the credit card companies probably make much of their money from people's vices (short sightedness and greed), I believe they would still be around and doing very good business even if all of America were as responible as you and I and carried no balance.

goldy, I am not sure they would, in fact, I think they wouldn't exist.

Therefore, I will continue using their services, but thanks for making me think about it and consider all angles!

You're welcome. Right now I am not sure I will give up my MC that gathers airmiles or my Discover which saves me 5% on gasoline, but I am not done considering the situation.

[jk]

Re: I=prt and Credit Cards.

my partner and i decided to accept credit cards very soon after forming our practice. it was a way to get paid. if people asked to be billed the cost of collection quickly exceeded the amount to be collected. we pay the few percent gladly - it's a lot cheaper than hiring more people to make calls, send out letters, etc.

i think credit cards are essential to the disbursed, widely distributed network of our economic life today. i buy things on the internet, i travel to places around the world and i can use the same card. i can't remember the last time i used travelers' checks, and i bet there are many participants in this board who aren't sure what travelers' checks are.

jim, remember trying to pay with personal checks and having to provide all kinds of identification or just having your check refused? solution: credit cards. debit cards and smart cards are just variations on the theme: an intermediary entity or an electronic network that guarantees payment and provides some protection to both buyer and seller in the absence of any relationship or knowledge between buyer and seller.

[Jim Nickerson]

Re: I=prt and Credit Cards.

my partner and i decided to accept credit cards very soon after forming our practice. it was a way to get paid. if people asked to be billed the cost of collection quickly exceeded the amount to be collected. we pay the few percent gladly - it's a lot cheaper than hiring more people to make calls, send out letters, etc.

Come on, jk, either you guys didn't charge much as fees for doctoring (which by far is not generally the situation relative to what other possble necessities in life cost), or you had some super expensive method of collection, i.e. you hired hit-men to track down those who owed you.

You are the only "merchant" I can identify here who allows people to pay your business with credit cards. Do you mind telling us what are the fees you pay the bank for processing the various levels of charges? I once knew many years ago what my office paid, but I have nothing close to accurate recollection of what they may have been.

i think credit cards are essential to the disbursed, widely distributed network of our economic life today. i buy things on the internet, i travel to places around the world and i can use the same card. i can't remember the last time i used travelers' checks, and i bet there are many participants in this board who aren't sure what travelers' checks are.

jim, remember trying to pay with personal checks and having to provide all kinds of identification or just having your check refused? solution: credit cards. debit cards and smart cards are just variations on the theme: an intermediary entity or an electronic network that guarantees payment and provides some protection to both buyer and seller in the absence of any relationship or knowledge between buyer and seller.

I remember doing that. And factually now I rarely write checks and mail them. These days if I am in a checkout line and someone ahead of me writes a check, it pisses me off, but I think I shall start being patient and consider that perhaps the check-writers are not playing the "game."

All of your arguments are cogent, in fact, all put forth so far by others here have been. If one considers the success of the CC card penetration into the acts of everyday life, one would have to call the campaign one of extraordinary success. For whom would it not seem to be a success?

[jk]

Re: I=prt and Credit Cards.

Come on, jk, either you guys didn't charge much as fees for doctoring (which by far is not generally the situation relative to what other possble necessities in life cost), or you had some super expensive method of collection, i.e. you hired hit-men to track down those who owed you.

jim, i'm talking about copays - $10-$25 mostly. i've forgotten what we pay and my office manager is on vacation. i think 2-3% meanwhile the cost of sending out a collection letter has to include the time of the staff person involved, plus postage and stationary, printing supplies. just the postage is 2/3 of 3% of $20. the staff time has to be over $1 per letter, and the letter doesn't always work. now of course, there are also extra charges for the freeloaders who might have paid by cash or check but use their credit cards for air miles. freeloaders like YOU!;)

[Jim Nickerson]

Re: I=prt and Credit Cards.

jim, i'm talking about copays - $10-$25 mostly. i've forgotten what we pay and my office manager is on vacation. i think 2-3% meanwhile the cost of sending out a collection letter has to include the time of the staff person involved, plus postage and stationary, printing supplies. just the postage is 2/3 of 3% of $20. the staff time has to be over $1 per letter, and the letter doesn't always work. now of course, there are also extra charges for the freeloaders who might have paid by cash or check but use their credit cards for air miles. freeloaders like YOU!;)

jk, is it asking too much of you for you to ask you office manager exactly what your office pays the bank for processing fees. Everybody says 2-3%, but I expect there is some scale to it based on amount of the individual charges or based on the number of charges that are processed in a batch.

Perhaps it is too personal to ask whether or not you guys see any patients who don't have insurance? I know CT is one of the weathier states, if not the wealthiest, so perhaps all have insurance or lots of cash.

Do you think Wa-Mart and Home Depot get better rates than you?

[jk]

Re: I=prt and Credit Cards.

jk, is it asking too much of you for you to ask you office manager exactly what your office pays the bank for processing fees. Everybody says 2-3%, but I expect there is some scale to it based on amount of the individual charges or based on the number of charges that are processed in a batch.

Perhaps it is too personal to ask whether or not you guys see any patients who don't have insurance? I know CT is one of the weathier states, if not the wealthiest, so perhaps all have insurance or lots of cash.

Do you think Wa-Mart and Home Depot get better rates than you?

1. i'll ask.
2. i wish we had more self-pay patients - less hassle. but ct is also the nation's insurance capital and has higher hmo penetration than any other state. btw i'm not in fairfield county - " the gold coast."
3. i'd be willing to bet long odds that walmart gets a better deal.

[SeanO]

Re: I=prt and Credit Cards.

Probably for 40 years I have been what I read somewhere recently the credit card industry calls a "freeloader." That term is apparently used in the credit card industry to denote those customers who pay off their balances each month....

I think most times when I check out at a store and pay with a credit card, the thought crosses my mind that the credit card company is really not doing me a personal favor because it is collecting something from the merchant to process my transaction. I haven't always considered though that part of what I am paying for an item is due to the merchant choosing to accept credit cards.

But when I have stopped and and thought about the whole situation, the people who are truly supporting the entire credit card system are those who don't pay off their total bills when presented and due....

To be clear you are not freeloading... the cost of your business is built into the merchant fee, and therefore the price you pay.

I'm signing up for merchant services now, and it seems the best rates are in the low 2% area. High risk merchants can pay as much as 12%. In both cases it is actually more as that does not include monthly fees, charge back charges, etc. Oh, and those cash back and travel & rewards benefits? Yes, merchants pay for those too with surcharges on those cards.

Thus, I'd argue that the only people getting what they pay for are those with cash back or travel and reward cards, as the price has those benefits baked in.

When I'm buying something direclty from a small business owner and they have given me good service... I give them a 'tip' by paying cash. If I'm feeling a little ripped off I pull out the fully loaded T&E business card... the most expensive of the bunch.

[Jim Nickerson]

Re: I=prt and Credit Cards.

To be clear you are not freeloading... the cost of your business is built into the merchant fee, and therefore the price you pay.

I'm signing up for merchant services now, and it seems the best rates are in the low 2% area. High risk merchants can pay as much as 12%. In both cases it is actually more as that does not include monthly fees, charge back charges, etc. Oh, and those cash back and travel & rewards benefits? Yes, merchants pay for those too with surcharges on those cards.

Thus, I'd argue that the only people getting what they pay for are those with cash back or travel and reward cards, as the price has those benefits baked in.

When I'm buying something direclty from a small business owner and they have given me good service... I give them a 'tip' by paying cash. If I'm feeling a little ripped off I pull out the fully loaded T&E business card... the most expensive of the bunch.

Sean,

I've been waiting for a post from you, but not on this topic, gimme some CA housing data.

What might be an example of a "high-risk" merchant? I can't believe one would pay a 12% fee to banks for being able to allow customers to use their credit cards in one's place of businsess. The markup in such places must be gargantuan.

It seems you are telling me, that if I use my air-miles Citi MC at Wal-Mart, then Wal-Mart pays the bank more in fees on my specific transaction because I used a card that has a pay-back feature. Have I got that correct?

I compliment you on your thoughtful manner of paying small business owners cash who give good service. To me that is a worthwhile idea and a nice act, but requires knowledge for how merchants' fees are structured when it comes to their paying the banks.

If you have the time to reply, why do Travel and Entertainment business cards carry a rate that cost the merchant more to process?

I've gained some insights from your comment, Sean, Thanks.

[SeanO]

Re: I=prt and Credit Cards.

Sean,

I've been waiting for a post from you, but not on this topic, gimme some CA housing data.

What might be an example of a "high-risk" merchant? I can't believe one would pay a 12% fee to banks for being able to allow customers to use their credit cards in one's place of businsess. The markup in such places must be gargantuan.

It seems you are telling me, that if I use my air-miles Citi MC at Wal-Mart, then Wal-Mart pays the bank more in fees on my specific transaction because I used a card that has a pay-back feature. Have I got that correct?

I compliment you on your thoughtful manner of paying small business owners cash who give good service. To me that is a worthwhile idea and a nice act, but requires knowledge for how merchants' fees are structured when it comes to their paying the banks.

If you have the time to reply, why do Travel and Entertainment business cards carry a rate that cost the merchant more to process?

I've gained some insights from your comment, Sean, Thanks.

Hi Jim,

Sorry I've been absent, expect something very soon on the housing front.

Good examples of high risk merchants would be internet gambling and porn.

Yes, I have a rate sheet in front of me, and while I can't speak for the deal Wal-Mart gets, rates are certainly based on card type. My rates have 29 variations for MasterCard alone.

Having a business T&E card myself it appears directly related to the features of the card: extended warranties, rental car insurance, etc. I have found business T&E cards to offer some of the best benefits.

Hope that helps. Thanks for an interesting post. It's not clear to me that kids even learn I=prt anymore. I'm a huge believer that to fix this thing we will need to start in the schools.

[Jim Nickerson]

Re: I=prt and Credit Cards.

Hi Jim,

Sorry I've been absent, expect something very soon on the housing front.

Good examples of high risk merchants would be internet gambling and porn.

Yes, I have a rate sheet in front of me, and while I can't speak for the deal Wal-Mart gets, rates are certainly based on card type. My rates have 29 variations for MasterCard alone.

Having a business T&E card myself it appears directly related to the features of the card: extended warranties, rental car insurance, etc. I have found business T&E cards to offer some of the best benefits.

Hope that helps. Thanks for an interesting post. It's not clear to me that kids even learn I=prt anymore. I'm a huge believer that to fix this thing we will need to start in the schools.

Sean,

If you don't mind, can you give an example of what sort of credit card has the least cost to the merchant vs. what T&E card's cost to the merchant might be, even though your data would not be representative of Wal-Mart.

Personally, I am learning a lot of shit here I had no idea about when I began this thread.

Thanks,

[SeanO]

Re: I=prt and Credit Cards.

Sean,

If you don't mind, can you give an example of what sort of credit card has the least cost to the merchant vs. what T&E card's cost to the merchant might be, even though your data would not be representative of Wal-Mart.

Personally, I am learning a lot of shit here I had no idea about when I began this thread.

Thanks,

Check or Debit cards are the cheapest, from there "Consumer Traditional Card", which I take to mean cards that are not: cash back, T&E, business or foreign cards.