I=prt and Credit Cards.

[Jim Nickerson]

Re: I=prt and Credit Cards.

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.

You are making me feel badly for belaboring a point, Sean, perhaps I could write better sentences

Unless there is some reason not to put it up in a post: what is the lowest percentage rate that your data sheet shows a merchant is charged by the bank for the cheapest type of credit card transaction that might show up at a merchants, and what is the highest percentage rate charged to the merchant by the bank for a transaction that your data sheet shows for a card that offers the most benefits to the card owner.

I am looking for some exact numbers here.

Hope you can share them.

[SeanO]

Re: I=prt and Credit Cards.

You are making me feel badly for belaboring a point, Sean, perhaps I could write better sentences

Unless there is some reason not to put it up in a post: what is the lowest percentage rate that your data sheet shows a merchant is charged by the bank for the cheapest type of credit card transaction that might show up at a merchants, and what is the highest percentage rate charged to the merchant by the bank for a transaction that your data sheet shows for a card that offers the most benefits to the card owner.

I am looking for some exact numbers here.

Hope you can share them.

Sorry, cheapest has no surcharge over the rates I mentioned above. Highest adds a bit over 1%. Note that is Visa and MC only. Amex, Diners, etc. I'm told are higher.

[Jim Nickerson]

Re: I=prt and Credit Cards.

Sorry, cheapest has no surcharge over the rates I mentioned above. Highest adds a bit over 1%. Note that is Visa and MC only. Amex, Diners, etc. I'm told are higher.

Thank you, Sean.

Those are surprisingly low. The few non-specific rates just thrown around here have been 2-3% that the bank would charge the merchant for processing a credit card charge. Your numbers almost make me think banks are not the crooks I generally give them credit for being.

If the rates for most merchants are generally as low as you quote, then it seems that the absolute target of the credit card companies are those who don't pay their balances. Seemingly the banks might just break even on what they charge merchants, and places like Wal-Mart must pay miniscule charges for accepting credit cards. It is difficult for me to believe banks do anything on a break-even basis.

[SeanO]

Re: I=prt and Credit Cards.

Thank you, Sean.

Those are surprisingly low. The few non-specific rates just thrown around here have been 2-3% that the bank would charge the merchant for processing a credit card charge. Your numbers almost make me think banks are not the crooks I generally give them credit for being.

If the rates for most merchants are generally as low as you quote, then it seems that the absolute target of the credit card companies are those who don't pay their balances. Seemingly the banks might just break even on what they charge merchants, and places like Wal-Mart must pay miniscule charges for accepting credit cards. It is difficult for me to believe banks do anything on a break-even basis.

Really? Merchants don't pay anything to the bank for taking a check, yet the banks cost to process and store the check is higher then for a card transaction. As I see it the conversion from checks to cards has been a financial windfall for the banks on the backs of consumers and merchants.

That said, I personally like the convenience of plastic. All my transactions are automagically downloaded and organized helping me stay on budget and ready for tax time.

[Jim Nickerson]

Re: I=prt and Credit Cards.

Sean,

After walking my dog, thinking, and re-reading all this from your first comment, I still have not grasped what a non-Walmart merchant such as yourself may have to fork over to the bank for choosing to allow customers to pay using MC and VISA,

Can you tell me from your schedule of rates, what percentage a merchant gives to the bank for a sale when a customer uses a basic, no-frills, credit card? I think I have it correct that such a transaction would have no surcharge (which initially I failed to grasp as a surcharge), but it would carry some basic charge to the merchant by the bank--this is what I have yet to grasp: the basic charge to the merchant.

I assume there must be some sliding scale of fees charged by bank to merchant based on the individual amount of the charge, e.g. if charged amount was $20, the bank might take 2%, but if the charged amount was $1,000, the bank might just take 1.75% or is that totally off base as a concept of what happens in the real world.

You mentioned in post #13, that your "rates have 29 variations for MasterCard alone." I've not grasped which rates have 29 variations. Are those different rates related to the variations in surcharges, the riskiness of the business, the amount of the individual charge, the amount of a batch of charges, or all of the above?

I hope I am not making you lose interest in this.

[goldy675]

Re: I=prt and Credit Cards.

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 primarily use a Citi dividends Mastercard with nearly the same rebates as your discover card. 5% cash back on gas and groceries, 1% on everything else. For me, this averages out to about 1.5% cash back a month, give or take.

There is a good summary of credit card info on wikipedia:
http://en.wikipedia.org/wiki/Credit_card

According to them, larger merchants pay a negotiated rate, 1-3%, and smaller merchants often pay 3-6% on purchases. I agree, that the credit card companies are a middle man, and result in slightly higher prices to the consumer, but i don't have a problem with this.

According to this article:
http://money.cnn.com/2005/06/14/comm...hadi/index.htm

"According to an article in American Banker this month, card issuers took in $136.3 billion in revenue last year. Of that, 37 percent came from fees and the rest from interest. What's more, the fee income in 2004 rose 2.5 times faster than interest income."

So they're making about twice as much money from interest than from fees. That's still a lot of dough from fees.

I can't find an article that i'm thinking of, but i remember reading that over fifty percent of credit card holders pay off their balance every month. I believe it was 53%.

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.

I am also mostly pissed off at all politicians most of the time, and i can completely agree that as society becomes more technologically advanced and more overpopulated, then new laws and regulations are required if your goal is to make as many people as possible as happy/secure as possible at this point in time. I'm going to throw out an argument that is not completely thought out, and i don't have time to really think it through, but... one thing that these many of these consumer protection laws and regulations could be doing is over-sheltering the population. The consumer never learns properly to look out for number one, assuming someone else is doing it for them. This is always a dangerous scenario. On the other had, some laws, such as the new bankrupty regulations that took effect last year, are over-sheltering the corporations. It should be a risk for the credit card company to hand you a credit card, and they definitely should be much more discriminate with whom they give their cards. But this is a large topic that could be discussed to no end.

[SeanO]

Re: I=prt and Credit Cards.

Sean,

After walking my dog, thinking, and re-reading all this from your first comment, I still have not grasped what a non-Walmart merchant such as yourself may have to fork over to the bank for choosing to allow customers to pay using MC and VISA,

Can you tell me from your schedule of rates, what percentage a merchant gives to the bank for a sale when a customer uses a basic, no-frills, credit card? I think I have it correct that such a transaction would have no surcharge (which initially I failed to grasp as a surcharge), but it would carry some basic charge to the merchant by the bank--this is what I have yet to grasp: the basic charge to the merchant.

I assume there must be some sliding scale of fees charged by bank to merchant based on the individual amount of the charge, e.g. if charged amount was $20, the bank might take 2%, but if the charged amount was $1,000, the bank might just take 1.75% or is that totally off base as a concept of what happens in the real world.

You mentioned in post #13, that your "rates have 29 variations for MasterCard alone." I've not grasped which rates have 29 variations. Are those different rates related to the variations in surcharges, the riskiness of the business, the amount of the individual charge, the amount of a batch of charges, or all of the above?

I hope I am not making you lose interest in this.

Hi Jim,

There is a base rate, the 2.x% that I mentioned in my first post. I'm told it is based on my type of business, my credit, average transaction size and other factors. Low 2's is supposed to be very good. On top of that there are fees to just have the account. Then there are fees for things like charge backs (customer disputed charges). I also have to pay for access to the network, either with terminal equipment, or an internet gateway (setup and transaction costs).

The surcharges increase the % due on the transaction and appear to based on two things: 1) the type of credit card presented (basic vs. T&E as discussed above), and how the credit card is processed (in person, vs. mail order or internet for example).

I think it is safe to assume the issuing bank and processor (ie visa or mc) are getting at least 2-3%. I'm told the merchant bank gets little or nothing.

I'm quite certain the banks are not losing money on this deal. Even if you freeload. :-)

SeanO

[Jim Nickerson]

Re: I=prt and Credit Cards.

Hi Jim,

There is a base rate, the 2.x% that I mentioned in my first post. I'm told it is based on my type of business, my credit, average transaction size and other factors. Low 2's is supposed to be very good. On top of that there are fees to just have the account. Then there are fees for things like charge backs (customer disputed charges). I also have to pay for access to the network, either with terminal equipment, or an internet gateway (setup and transaction costs).

The surcharges increase the % due on the transaction and appear to based on two things: 1) the type of credit card presented (basic vs. T&E as discussed above), and how the credit card is processed (in person, vs. mail order or internet for example).

I think it is safe to assume the issuing bank and processor (ie visa or mc) are getting at least 2-3%. I'm told the merchant bank gets little or nothing.

I'm quite certain the banks are not losing money on this deal. Even if you freeload. :-)

SeanO

All right! Sean, I think you have succeeded in getting all this over to me, and I appreciate your patience and your putting forth some non-speculative information at least as it applies to one man's business.

[Jim Nickerson]

Re: I=prt and Credit Cards.

Bank of America awards CEO Lewis $11.07 mln stock. 2/16/07

http://news.yahoo.com/s/nm/20070216/...ica_lewis_dc_1

Bank of America Corp. on Friday said it awarded Chief Executive Kenneth Lewis $11.07 million of restricted stock as part of his compensation for 2006, when the No. 2 U.S. bank's profit rose 28 percent to a record.

The restricted stock award is 5 percent less than the $11.7 million that Lewis was awarded the previous year, when his overall compensation was $22 million.

Bank of America last month said 2006 profit totaled $21.13 billion, or $4.59 per share, helped by capital markets and investment banking, investment gains and a 148 percent jump in card income following the $34.2 billion purchase of MBNA Corp.

In January, Citigroup Inc. the largest U.S. bank, awarded Chief Executive Charles Prince $10.69 million of restricted stock for 2006. JPMorgan Chase & Co. the No. 3 bank, awarded Chief Executive Jamie Dimon $13 million

Wonder why the smaller the bank, the bigger the "award"?

It is said that Willie Sutton when asked why he robbed banks replied, "That's where the money is." Who do you suppose Lewis, Prince, and Dimon's childhood hero may have been? I bet on Sutton.

Perhaps if Lewis has his way and the illegal immigrants get credit cards, that will likely stem some of the flow of funds back to the home countries of the illegal immigrants once the 28% interest rates kick in.
Bank Of America Credit Cards To Illegal Immigrants http://www.itulip.com/forums/showthread.php?t=945

Shoot, what BAC is setting about with trying to get illegal immigrants into the CC game might work out to be good business for some in America. Reckon?

[Jim Nickerson]

Re: I=prt and Credit Cards.

There is a good summary of credit card info on wikipedia:
http://en.wikipedia.org/wiki/Credit_card

Thanks, goldy, that is an excellent reference.

I can't find an article that i'm thinking of, but i remember reading that over fifty percent of credit card holders pay off their balance every month. I believe it was 53%.

If what you wrote is true, then that 47% who carry balances are truly being soaked in providing two thirds of the profit to CC companies. It strikes me as odd that more than half of CC holders are responsible citizens--I may have to rethink my opinion of the "average American."

this[/i] point in time. I'm going to throw out an argument that is not completely thought out, and i don't have time to really think it through, but... one thing that these many of these consumer protection laws and regulations could be doing is over-sheltering the population. The consumer never learns properly to look out for number one, assuming someone else is doing it for them. This is always a dangerous scenario. On the other had, some laws, such as the new bankrupty regulations that took effect last year, are over-sheltering the corporations. It should be a risk for the credit card company to hand you a credit card, and they definitely should be much more discriminate with whom they give their cards. But this is a large topic that could be discussed to no end.

Your points are interesting. I think back over my life, and I have signed four mortgages and probably 20-25 gas card or credit card applications and I think I can guarantee that I never read all the documentation on any of them (nor that which seems to be sent in the mail updating the agreements fairly often), and fortunately nothing from this ever came back to haunt me--so far. We currently have four credit cards, two of which are in a lock box, to use in case we should lose our main two cards--our thinking is we could not get along without credit cards--Man! are we hooked or are we hooked?

I still hold the opinion that the rates charged are usurious. The wiki-article pointed out that interest rates are set by individual states, so that explains why CC companies do business out of South Dakota, and I think Delaware may be similar, though it was not mentioned in Wikipedia.

I personally am for a cash-less society and perhaps the infrastructure of the CC industry will support that happening in decades or centuries to come.

[Jim Nickerson]

Re: I=prt and Credit Cards.

Here's a link I got from SeanO that gives bit more insight into how CC charges affect the merchant. If nothing else, it adds to the validity of Sean's choosing to pay cash as a method of "tipping" the small business owner for good service.

http://www.workz.com/content/view_co...ontent_id=5651

[Jim Nickerson]

Re: I=prt and Credit Cards.

The Low Life and Identity Theft
by Andrea Coombes
Wednesday, February 14, 2007

http://finance.yahoo.com/family-home...Identity_Theft

Still, credit-card fraud is the main identity-fraud crime, and consumers are relatively well protected in that credit-card issuers usually pay for the fraud charges. "Year in and year out, the No. 1 category of fraud is credit cards," said James Van Dyke, founder and president of Javelin Strategy & Research, a consulting firm in Pleasanton, Calif.

The Javelin survey found a decline in the number of victims, with 500,000 fewer Americans falling prey to the crime in 2006. That still leaves 8.4 million victims.

But others find a much higher rate: 14 million victims in 2006, up from 9.9 million reported by the Federal Trade Commission in 2003, said Avivah Litan, an analyst with Gartner Research, the Stamford, Conn.-based firm.

Tips for protecting yourself
There's no way for consumers to protect their identities completely, experts say.

But there's much you can do to better your chances of avoiding the crime.

• Monitor accounts closely. "The most you can do as an individual is take better control of your personal records, from paper to electronic, and then monitor your accounts as close as you can," Van Dyke said. Also, Javelin recommends consumers turn off paper statements, keep all computer antivirus, antispyware and firewall protection up-to-date, and keep an eye on credit reports by going to http://www.annualcreditreport.com/index.html.

• Posting your resume online? Don't include your date of birth or Social Security number. Note that even without that information, "scammers will contact you," Hudson said. They'll say "we're thinking of hiring you, but we need to know your Social Security number and date of birth," he said. "Until you actually know it's a real company and not just someone you're talking to by phone or e-mail, don't give them any of that stuff."

• Understand product limits. No product available today will completely prevent identity theft. Credit-monitoring services usually alert you when some unusual information appears on your credit report. You can mimic such services by checking your credit report regularly, but these services might be good if you're likely to neglect that chore. Credit-freeze tools help prevent thieves from opening new accounts in your name. Meanwhile, identity-monitoring services scan the databases of data aggregators to look for signs that your identity is being misused. Litan says credit-freeze products such as the one offered by TrustedID and identity-monitoring services such as MyPublicInfo are useful, but far from perfect. Identity-monitoring tools, for instance, "work better than nothing, but the only way they're going to work really well is if they have every single public record," Litan said. "Probably in a year or two they'll really be much better."

• Store personal information in a locked drawer and avoid leaving information in your car. Crime rings, Hudson said, break into cars to find information. "People leave all kinds of stuff about themselves in their cars. One guy, they took his medical records."

• Shred with a cross-cut or diamond-cut shredder. "We've had instances where the people on drugs will take the time to tape shredded information back together," Baclagan said. Using a cross-cut or diamond-cut shredder prevents that. Still, some don't think shredding is the solution. "I don't bother shredding, although if I have a statement with my bank account number on it I'll either file it or rip it right where the account number is," Litan said.

How does Litan stay safe? "I check my accounts as often as possible. I never give my bank account number online," she said. Plus, she uses her credit card rather than a debit card. "I never worry about my credit card, because I know I'm getting my money back."

One way to lessen the possibility of oneself being a victim of identity-fraud would be not to use credit cards; however, the problem can go much further than simple bogus charges being run up on one's credit. One authority in the article noted, ""We work with victims where people have businesses, are married, have worked and retired under their name."

In my view the answer to a lot of these problems may some day come about with the evolution of biometric identification cards. In the meantime, do the most possible to protect yourself and don't hold your breath waiting for the CC companies or the government to protect you.

[Finster]

Re: I=prt and Credit Cards.

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

Yes.

It didn't used to be, though. My wife and I bought our first TV in 1983, and the store wouldn't accept our check without our presenting a credit card. In 1984, we got a credit card.

Nowdays, though, you don't need them any more, and I don't have any. When I opened my last checking account, my bank offered me a debit card. It works just like a credit card, except there is no credit; it works just like a check, except there is no check.

[Jim Nickerson]

Re: I=prt and Credit Cards.

Yes.

It didn't used to be, though. My wife and I bought our first TV in 1983, and the store wouldn't accept our check without our presenting a credit card. In 1984, we got a credit card.

Nowdays, though, you don't need them any more, and I don't have any. When I opened my last checking account, my bank offered me a debit card. It works just like a credit card, except there is no credit; it works just like a check, except there is no check.

Finster,

As you do not have any credit cards, I assume it is not because you do not have good credit. Because you strike me as being financially savvy, it surprises me you don't use credit cards. There must be a deeper philosophical reason that you don't use them, do you mind sharing your reasons?

Sean has fairly well documented that everyone buying things in stores is paying something in the way of additional costs so that the merchant can participate in the banks' supremely successful scheme of marketing credit cards. I accept his contention that those customers who pay by cash, check or debit card are actually paying the most for whatever they buy.

This thread has just about convinced me that anyone interested in savings (which presumably most Americans currently aren't) probably should use a credit card, despite the fact that credit card use is the financial undoing to some degree of a segment of the population. What makes you see it differently, Finster, are you against savings? You know like "a penny saved is a penny earned." I've never had the compulsion to figure out what using CC's save in a year, but it is something.

[SeanO]

Re: I=prt and Credit Cards.

I've never had the compulsion to figure out what using CC's save in a year, but it is something.

I use a credit card that is attached to my Smith Barney FMA account. It is a hybrid credit/debit card... the things I charge against it are not debited from my account, so I continue to earn interest/dividends on whatever dollars are in the account... until the end of the month, when it is auto-debited. It is also a travel & rewards card. Between business and personal spending we usually earn enough points for my family to fly to Hawaii each year (equals about 1% of spending). There is a fee for the travel and reward program ($75 I think) and for the account ($125) - so you need to have reasonable spending levels to make it worthwhile.

It seems there are now some credit cards with more aggressive travel and/or cash back programs where you can earn more than 1% for certain purchases. Haven't had the time to look at them in detail.

In any case, I feel like I'm getting back a bit of what I pay in higher prices.

Sean