Credit Cards

[lomiller]

In fact I have personal experience with theft of my debit card number and had zero problems recovering the funds.

Lucky you, but your anecdote changes nothing. If there is a problem on a credit card the burden of proof is on the credit card company, on a debit card the burden of proof is on you.

Another common issue with debit cards these days is “overdraft protection”. If you have this overdraft protection on an account, instead of rejecting a transaction simply because you don’t have the cash they will allow the transaction and charge you a penalty for the overdraft. Worse they won’t even tell you until you get your bill so you can have multiple overdraft charges that far exceed the value of the purchase you were making.

Typically they try and present this as a “free service” but on many account types they will not allow you to not have it.

 

[wolfgirl]

You must have a relatively high limit on your credit card. But, really, that should always be a thought in your mind - can I really afford this? If it's a latte and you're not sure, then don't order it. If it is a latte, and it's considered relatively chump change to you, then it would the same whether you were using a CC or a check - there's still a limit on how much you can spend.

I suppose I mis-spoke when I said I don't have to "think" about how much money is in my account right now. I didn't mean I don't have to give any thought at all to how much money I'm spending. It's just that, say I need to buy a $50 item, but I don't have $50 in my actual checking account at that moment. I do know, however, that I will have $50 by the time the payment is due because that will be after payday. I can use the credit card, knowing that I will be able to pay for it when the time comes. It's a short-term, no-interest loan if used correctly and wisely. I would not, for example, buy a $500 item, knowing I would not have $500 to spare when the payment is due. So yes, I have to think about it, but I don't have to worry about having the actual amount of money on hand at the time.

 

[wolfgirl]

I bought a TV from Circuit City, and got interest free, no payment financing for 3 years on a credit card. I won't pay a penny until the month before I become liable for the accrued interest, and then I'll pay off the whole thing.

So, I'm not paying interest, and I'm not paying off my balance each month, but I'm still gaining a substantial benefit over any other way I could have paid.

(I'm sure such deals had nothing to do with CC going out of business. . . )

I've been taking advantage of these deals for years, mostly at Best Buy. And again, I've never paid a penny in interest. I've bought most of the appliances in our house this way, garage doors, riding lawn mower, and some the furniture. Over a year ago, I bought a 52" LCD HD TV, Blu-Ray, sound system, etc. on a 36-month plan and will pay it off when it's due.

What I typically do is divide the balance by the number of months, so let's say $3,600 over 36 months, coming to $100 a month. The minimum payment is around $35, so I pay that every month, and then put the additional $65 into my savings account. Then when the final payment is due, I take the money out of savings and voila, bill is paid. That way, I don't have to worry about whether I'll have the money when it's due. I "pay" a monthly payment that I feel comfortable with, but some of it is to myself, earning interest (albeit very little, but still better than paying interest).

(Side note: I actually told the Best Buy salesman that's what I was going to do, and he asked for more details. When I explained it to him, he said he was going to go home and tell his wife about it. Is this really rocket science, people?)

Again, it requires discipline and responsibility (still can't buy more than I can afford to make the monthly "payments" on) and organization (making sure to never have a late payment and paying close attention to final due date), but it's well worth it.

As drkitten said, they can offer these deals because most people don't manage to get it paid in time, so the company gets the mucho interest from them. So they can afford to have the people like me who never pay them interest.

So to those of you who can't seem to manage your credit, I say "Thanks!"

 

[wolfgirl]

By the way, it's not that I don't feel comfortable using a cc, but that the risk/rewards of having one can't favor me, so I opt to not play a game I can't win.

And what many of us are saying is that it's not that the risks/rewards can't favor you or that you can't win the game, it's that you haven't learned how to do so. Just because you can't, doesn't mean we can't. Pay your balance every month, pay no interest, game won.

 

[Jaggy Bunnet]

Say you're a vendor and you accept credit cards. The average credit card without rewards or bank card with visa/mc logo will cost you 2.2% of your total sale to process the charge. If its a rewards card that cost can be 5% or higher.

Those charges are reflected in the cost of goods you purchase.

They are also reflected in the cost of goods that you purchase, for cash. I get a kickback of some of that cost from the credit card company. You choose not to.

That is also the reason 99.9% of the credit card terminals automatically opt you in for PIN based transaction since the PIN based ATM transaction is usually .25 cents or so per transaction.

Not in the UK they don't. If I want to pay by credit card, I pay by credit card, not by debit.

Not to mention the credit card itself usually has an annual fee and if you do live paycheck to paycheck all it takes is once sick week or anything to happen and then your credit is defaulted to 29.9% and a 59.00 latefee is applied and you're done.

Nope, no annual fee. And if you are buying the same things that you would have bought for cash, there is no greater risk of getting into debt. The cash you would have paid doesn't vanish and is sitting in your bank account when the bill comes.

nothing is free.. but i guess as long as people think it is they won't bother to notice the fees they're paying in higher prices to begin with

The higher prices can't be avoided. There is no separate cash price. So you can either pay by a credit card and get something out of it, or pay by cash and get nothing.

 

[Jaggy Bunnet]

I've been taking advantage of these deals for years, mostly at Best Buy. And again, I've never paid a penny in interest. I've bought most of the appliances in our house this way, garage doors, riding lawn mower, and some the furniture. Over a year ago, I bought a 52" LCD HD TV, Blu-Ray, sound system, etc. on a 36-month plan and will pay it off when it's due.

What I typically do is divide the balance by the number of months, so let's say $3,600 over 36 months, coming to $100 a month. The minimum payment is around $35, so I pay that every month, and then put the additional $65 into my savings account. Then when the final payment is due, I take the money out of savings and voila, bill is paid. That way, I don't have to worry about whether I'll have the money when it's due. I "pay" a monthly payment that I feel comfortable with, but some of it is to myself, earning interest (albeit very little, but still better than paying interest).

(Side note: I actually told the Best Buy salesman that's what I was going to do, and he asked for more details. When I explained it to him, he said he was going to go home and tell his wife about it. Is this really rocket science, people?)

Again, it requires discipline and responsibility (still can't buy more than I can afford to make the monthly "payments" on) and organization (making sure to never have a late payment and paying close attention to final due date), but it's well worth it.

As drkitten said, they can offer these deals because most people don't manage to get it paid in time, so the company gets the mucho interest from them. So they can afford to have the people like me who never pay them interest.

So to those of you who can't seem to manage your credit, I say "Thanks!"

My experience of these deals is that they rarely offer the best price. Normally the store actually receives a lower price for the equipment from the finance company who treat the difference between what they pay the store and what you pay as interest.

For example, a $1000 dollar purchase by you, paid for over 36 months might actually result in the shop getting $800 from the finance co. As far as the finance company is concerned they are getting $200 of income for lending $800 for 3 years.

A different store might be selling the same item for a lot less than $1000.

 

[lomiller]

For myself I mostly use my credit card for regular items like groceries, gas and regular bills (which mostly auto charge to my CC). I’ll also put some other planned expenses on it. I bought some new furniture recently for example and had the cash set aside, but put it on my credit card rather then writing a check. Other less predictable necessities like bike repairs or a new lawn mower go on it as well but usually get paid off immediately as well since I usually have cash set aside for emergencies.

Day to day purchases like coffee, lunch, entertainment and the like are almost always cash but on occasion I will eat out and put that on my credit card simply out of convenience.

The limit on my card is something like $20K IIRC, but since I almost always pay in full I never get close to that.

 

[blutoski]

The higher prices can't be avoided. There is no separate cash price. So you can either pay by a credit card and get something out of it, or pay by cash and get nothing.

I observe this varies by merchant. In the food court across the street from my office, about half offer a cash discount of 2% or 2.5%. I assume this represents their transaction charge.

There was a foofaraw a few years ago when merchants marketed this as a 2% surcharge for using cards. This violated their contract with the processors, and they were read the riot act.

My impression is that the % 'cash discount' is a wording distinction with enough difference to skirt the letter of the contracts, if not the spirit.

 

[Nursedan]

I suppose I mis-spoke when I said I don't have to "think" about how much money is in my account right now. I didn't mean I don't have to give any thought at all to how much money I'm spending. It's just that, say I need to buy a $50 item, but I don't have $50 in my actual checking account at that moment. I do know, however, that I will have $50 by the time the payment is due because that will be after payday. I can use the credit card, knowing that I will be able to pay for it when the time comes. It's a short-term, no-interest loan if used correctly and wisely. I would not, for example, buy a $500 item, knowing I would not have $500 to spare when the payment is due. So yes, I have to think about it, but I don't have to worry about having the actual amount of money on hand at the time.

Thanks for the clarification. I see your point.

 

[Nursedan]

Lucky you, but your anecdote changes nothing. If there is a problem on a credit card the burden of proof is on the credit card company, on a debit card the burden of proof is on you.

Another common issue with debit cards these days is “overdraft protection”. If you have this overdraft protection on an account, instead of rejecting a transaction simply because you don’t have the cash they will allow the transaction and charge you a penalty for the overdraft. Worse they won’t even tell you until you get your bill so you can have multiple overdraft charges that far exceed the value of the purchase you were making.

Typically they try and present this as a “free service” but on many account types they will not allow you to not have it.

First, luck had nothing to do with my example. It's just what happens.

Second, where are you getting your information from? What you described is not overdraft protection, but simply what happens when one overspends their checking account.

Ultimately, I've learned from this thread much about how people manage credit cards.

 

[Puppycow]

Uh-oh

WASHINGTON — Striking at a lucrative bank business, the Senate on Thursday voted to force credit card companies to reduce fees for debit card transactions and permit merchants to offer customer discounts based on their payment method.

The 64-33 vote inserted the fee requirement in a package of new financial rules the Senate is considering to ward off a repeat of the financial crisis.

The vote was a major defeat for banks, which lobbied hard against it. But the measure attracted heavy bipartisan support and surpassed a 60-vote threshold for passage. Seventeen Republicans voted for the amendment; 10 Democrats voted against it.

The measure from Sen. Richard Durbin, D-Ill., would force credit card companies to charge businesses less for debit card transactions than for credit card payments.

Under current practice, a business that accepts major credit cards signs agreements with the card companies to pay a percentage of each transaction, usually about 2 to 3 percent. But credit card charges cost more to process than swipes with a debit card.

I'm not sure what the unintended consequence will be yet, but I'm guessing there will be one.

 

[Jaggy Bunnet]

I observe this varies by merchant. In the food court across the street from my office, about half offer a cash discount of 2% or 2.5%. I assume this represents their transaction charge.

There was a foofaraw a few years ago when merchants marketed this as a 2% surcharge for using cards. This violated their contract with the processors, and they were read the riot act.

My impression is that the % 'cash discount' is a wording distinction with enough difference to skirt the letter of the contracts, if not the spirit.

I have a recollection that it is illegal to charge a different price in the UK, but can't find anything to back this up. I can find reference to Australia changing its law to allow additional charges.

In any event, I suspect the credit card companies generally prevent this in their contracts - so you can charge a lower price for cash but if you do the credit card company might pull your ability to accept payments by credit card.

 

[blutoski]

I have a recollection that it is illegal to charge a different price in the UK, but can't find anything to back this up. I can find reference to Australia changing its law to allow additional charges.

In any event, I suspect the credit card companies generally prevent this in their contracts - so you can charge a lower price for cash but if you do the credit card company might pull your ability to accept payments by credit card.

Yes, this is my impression. The merchants are aware that they're walking a fine - and untested-in-Canada - line when offering cash discounts now that they've obviously lost the pass-along-the-cost-directly approach.

However, I have noticed that some merchants are still charging transaction costs for small dollar purchases. eg: 50c for a debit or credit transaction under $5. Usually scrawled in Jiffy Marker on a cardboard square taped to the side of the cash register facing the pad.

 

[Davidlpf]

I would like to mention that most hotels require a credit card to make reservations and to check-in.

 

[Jaggy Bunnet]

I would like to mention that most hotels require a credit card to make reservations and to check-in.

It is also likely to be more difficult to hire a car if you don't have a credit card.

 

[theprestige]

That is also the reason 99.9% of the credit card terminals automatically opt you in for PIN based transaction since the PIN based ATM transaction is usually .25 cents or so per transaction.

While I can't claim to have made an exhaustive survey of credit card terminals, I can say that 100% of the terminals I've ever used automatically opt to treat my debit card as a debit card, and my credit card as a credit card.

They're always very obvious about it, too. And they always ask my permission before charging any fee or billing any creditor.

Gas pumps, grocery store checkouts, the register at the Kwik-E-Mart... none of them behave the way you describe.

 

[Nursedan]

I would like to mention that most hotels require a credit card to make reservations and to check-in.

I have no credit card and have stayed in hotels in America and Europe - how is this possible???

Hint - it rhymes with credit.

 

[Mongrel]

I have no credit card and have stayed in hotels in America and Europe - how is this possible???

Hint - it rhymes with credit.

And to take the required deposit they've 'blocked off' an amount of money in your account. If you're on a tight budget and are unaware of the procedure that can come as quite a surprise

 

[gnome]

Someone mentioned the time value of money.

Unless you're investing the money you deferred payment on into an interest-bearing account of some kind, there is no difference. I haven't done the math, but I'm betting savings-account rates give a negligible difference only between paying now vs. paying within 30 days.

 

[Supernovae]

Someone mentioned the time value of money.

Unless you're investing the money you deferred payment on into an interest-bearing account of some kind, there is no difference. I haven't done the math, but I'm betting savings-account rates give a negligible difference only between paying now vs. paying within 30 days.

Its risk vs reward.

As I've said before.. some people love playing the credit card game to think they're getting something for nothing. They're either "paying more at the pump" or they're getting fees in there somewhere.

If reward cards stopped the world would save 5% off their retail purchases and people would stop shopping in hopes they get "Rewarded" for it Yes, reward cards often charge merchants - especially mom and pop places ~5% in fees + the terminal fee + Monthly fees + statement fees.