Credit Cards

[beefcaketrade]

No credit cards are NOT off-limit to the poor. There are credit cards that are offered to people with no credit history and no income and you don't even need a co-borrower or co-signer. I was in university when I got my first credit card, a no annual-fee credit card that actually had rewards feature on it. I had NO credit history, no job, no nothing and I got approved for it. And I used it everywhere to buy stuff with it and merchant fee covered!! And now I see Capital One advertising all the time offering credit cards to people with no credit history, low credit history sure with low credit limit and high APR. But if you are poor, WHY would you need high credit limit? And if you are able to pay off the balance in full by due date each month, what do you care if the APR is a thousand percent??

Everything in life is how you handle it. You are subsidizing others ONLY if you want to.

Some people can get cash secured CC if they keep a certain balance at a chequing account at the card issuer's bank. Some people straight up won't get a CC from traditional lenders. I duno, is there a subprime CC lender out there?

In either case, those cards don't have rewards. For sure.

You missed the point though. Reward card owners reap more benefits than cash payers or CC without rewards. The price of goods/services is the same for all. The poor is subsidizing the rich with their reward cards. The end.

Your CC at university. What year was this? Pre financial crisis I assume? Also, what were the rewards? Bet you didn't get 2-3% cash back.

 

[Llxa]

TL & DR in general.

But regarding this point, meh. It's a wash I think. Yes, time value of money. But most people who pay off the credit card entirely every cycle, I assume do so from their chequing account. Which aint' earning anything.

So again, what is is like on the ground instead of discussing in theory? Yes, CC allows delayed payment. Yes, there is time value of money. Yes, for people that are on a payroll, there is a lump sum payment at a certain time of the month. But I think most people have their money in a chequing account or maybe a savings account earning essentially nothing. And then you take that money out and you pay off the CC bill in full. The actual 'time value of money' gained by keeping the money longer to earn some kind of interest or investment is probably negligible here. Unless you are dealing with large sums of CC payments.

Well a dollar saved is a dollar saved, no matter where it's coming from; they are all your money. You might not be earning any interest on your chequing/saving account but you are earning returns SOMEWHERE unless you don't invest AT ALL with your money and they are ALL dumped in chequing/saving. You could've transferred your money from the 0% interest savings account to your investment account for it to earn > 0% rate of return and then transfer it back to the savings account to pay for the credit card? You would've still earned something on whatever was the amount of the credit card balance. If you pay it right away with cash, then you earn ABSOLUTELY nothing!! And you just erased completely the time value of money.

And EVEN IF all your money is in 0 interest-bearing accounts with absolutely no returns earned, by using credit cards, you would've still been compensated by the merchant fee that merchants pass onto you in the price of the goods that they charge, that's 5-10% saved right there.

Still worthwhile to have a credit card. And ALL you have to do is pay on time which is what you would've have to do anyway if you were using cash. You are NOT doing anything extra with credit cards but getting all the benefits.

 

[Llxa]

Some people can get cash secured CC if they keep a certain balance at a chequing account at the card issuer's bank. Some people straight up won't get a CC from traditional lenders. I duno, is there a subprime CC lender out there?

In either case, those cards don't have rewards. For sure.

You missed the point though. Reward card owners reap more benefits than cash payers or CC without rewards. The price of goods/services is the same for all. The poor is subsidizing the rich with their reward cards. The end.

Your CC at university. What year was this? Pre financial crisis I assume? Also, what were the rewards? Bet you didn't get 2-3% cash back.

Doesn't matter. I got compensated for the merchant fee by being able to use credit cards at the merchants who passed on the fees in the price. Yes reward card holders do get better compensations but getting a credit card is still better than paying cash because you are NOT paying extra for the merchant fee for nothing. I will illustrate what I mean:

Let's say the price of an apple in this grocery store is $1. Without the merchant fee of 5% that the credit card issuer charges to the store, the price would've been 1 * (1-0.05) = $ 0.95 but because the store owner wants to pass onto the shoppers the merchant fee that he/she got charged, so he/she charges $1 for the apple.

If you pay cash: You pay the full $1 subsidizing the store owner for the merchant fee but without using the credit card. Because for you, since you are not using the credit card and using cash, the price is supposed to be $0.95 for you because that was the price of the apple when the store owner didn't offer credit cards and didn't have to pay merchant fees to credit card issuers. But now you are forced to pay $1 because that's the price, so as a result, you just lost (1 - 0.95) = $ 0.05 and still didn't enjoy the convenience of using the credit card, the delayed payment, the time value of the money and etc.

If you pay by credit card with no feature: You pay the $1 but you got to use the credit card and enjoy all the benefits of not having to pay right away, having extra funds to invest and etc. so for you with the credit card with no feature, you lose or gain $ 0 (1 - 1) = $0 You paid that extra $0.05 for exactly the convenience of using the credit card.

If you have a credit card with good features of let's say 2% cash back: Then on top of you getting compensated for the merchant fee, you actually earn extra 2%. So in terms of merchant fee, you still pay $0 (1 - 1) = $0. It's just on top of that, you get 2% cash back.

But in terms of merchant fee, the users of the credit card with no features and the ones with the cash back feature BOTH got compensated the SAME. The user who got to have the higher reward credit card got it all on their own merit, NOT at the expense of the no-feature credit card holder thus not subsidized by the no-feature credit card holders. In other words, if the no-feature credit card holders do not exist, the credit card holder would've still gotten the card with the rewards because the credit card issuer would've still wanted to offer it to him/her. MANY of those reward cards with the high rewards carry an annual fee; those credit card holders actually have to pay extra to enjoy those rewards. So WHERE is the subsidy?

Your question was regarding the merchant fee and in that aspect, ALL credit card holders are equal. The features or rewards on credit cards is basically a result of supply and demand just like everything else has nothing to do with subsidy. The only people who are subsidizing are the ones who are paying cash (because they actually listened to and got coached by those credit card-hating financial advisors); they are the ones who are subsidizing the store owners for the merchant fee.

 

[Llxa]

One of the most often cited studies is one conducted by Dun & Bradstreet, where the company found that people spend 12-18% more when using credit cards instead of cash. Years ago people considered you a freak if you did not have a CC, now a days its common and that trend is growing.

Many more college students in 2015 had debit cards (85 percent) than credit cards (56 percent), according to a survey by student loan provider Sallie Mae titled “Majoring in Money.” The top reasons students cite for not having a credit card are that they don’t feel like they need one (51 percent) and they want to avoid debt (47 percent).

Seems like the millennial's have learned from watching the previous generation implode on CC debt.
View attachment 170591

But there is NO DEBT if you pay off the entire balance by the due date each month!!! OMG We are raising financial morons here who have no idea how to manage their finance optimally. If you can't pay for something at the end of the month, then you are NOT supposed to buy it!! If you have been paying by cash, you wouldn't be able to afford it anyway, so WHY do people think it's different if it's a credit card?? You are already allowed to NOT pay for something for 30 DAYS, what more do you want?? Completely free?

This is NOT a discipline issue. This is an attitude problem. Greed!! Well just like that wife in that story of "The Fisherman and the Goldfish", she ended up right back to where she started, in a broken bathtub. Well I guess for those credit card holders who expect they never have to pay for anything forever just because they have credit cards, they ended up back to where they started: Paying everything RIGHT AWAY with cash. LOL

 

[Llxa]

As soon as one CC offers guaranteed disposal, then I may be their customer.

The CC may charge me annual fee of $100 with no grace period.

Some may choose old CC with NO annual and grace period. (Free to choose one of two)

No need. You just need to move to Vermont or California.

 

[beefcaketrade]

Doesn't matter. I got compensated for the merchant fee by being able to use credit cards at the merchants who passed on the fees in the price. Yes reward card holders do get better compensations but getting a credit card is still better than paying cash because you are NOT paying extra for the merchant fee for nothing. I will illustrate what I mean:

Let's say the price of an apple in this grocery store is $1. Without the merchant fee of 5% that the credit card issuer charges to the store, the price would've been 1 * (1-0.05) = $ 0.95 but because the store owner wants to pass onto the shoppers the merchant fee that he/she got charged, so he/she charges $1 for the apple.

If you pay cash: You pay the full $1 subsidizing the store owner for the merchant fee but without using the credit card. Because for you, since you are not using the credit card and using cash, the price is supposed to be $0.95 for you because that was the price of the apple when the store owner didn't offer credit cards and didn't have to pay merchant fees to credit card issuers. But now you are forced to pay $1 because that's the price, so as a result, you just lost (1 - 0.95) = $ 0.05 and still didn't enjoy the convenience of using the credit card, the delayed payment, the time value of the money and etc.

If you pay by credit card with no feature: You pay the $1 but you got to use the credit card and enjoy all the benefits of not having to pay right away, having extra funds to invest and etc. so for you with the credit card with no feature, you lose or gain $ 0 (1 - 1) = $0 You paid that extra $0.05 for exactly the convenience of using the credit card.

If you have a credit card with good features of let's say 2% cash back: Then on top of you getting compensated for the merchant fee, you actually earn extra 2%. So in terms of merchant fee, you still pay $0 (1 - 1) = $0. It's just on top of that, you get 2% cash back.

But in terms of merchant fee, the users of the credit card with no features and the ones with the cash back feature BOTH got compensated the SAME. The user who got to have the higher reward credit card got it all on their own merit, NOT at the expense of the no-feature credit card holder thus not subsidized by the no-feature credit card holders. In other words, if the no-feature credit card holders do not exist, the credit card holder would've still gotten the card with the rewards because the credit card issuer would've still wanted to offer it to him/her. MANY of those reward cards with the high rewards carry an annual fee; those credit card holders actually have to pay extra to enjoy those rewards. So WHERE is the subsidy?

Your question was regarding the merchant fee and in that aspect, ALL credit card holders are equal. The features or rewards on credit cards is basically a result of supply and demand just like everything else has nothing to do with subsidy. The only people who are subsidizing are the ones who are paying cash (because they actually listened to and got coached by those credit card-hating financial advisors); they are the ones who are subsidizing the store owners for the merchant fee.

TL & DR. What's with all these numerical examples you keep using in your replies?

Dude, nobody is arguing paying with a credit card is better than using cash at a merchant where there is a single price charged for all payment methods, because you are essentially paying for what you are getting (i.e. paying for the benefit of using CC and so you are using what you are paying). Go hound somebody else who is arguing against that. That ain't me. So a lot of your reply is useless mumble jumble.

The final point, and my point, is that you're still missing the point here. It's a very simple concept and it is true and there is no need for me to have to defend it lol. Fixed price for all. Merchant incorporates expected swipe fees into price. As a result, obviously this price increase to offset swipe fees hurts people that don't use CC, and benefits those that use CC. Furthermore, the people that have reward cards benefit the most. The system is set up to benefit people with reward cards. In general, only wealthy people qualify for top reward cards. End of story.

Minimum wage guy pays cash, while rich WS guy puts it on his rewards amex and gets points back. They paid the same inflated price that incorporated CC fees. Rich WS guy wins some stuff and poor guy gets nothing. Poor guy loses. Poor guy just paid more so other rich guys with reward cards can have the luxury of using their CCs at the store. Poor subsidizing the rich.

 

[jk90029]

TL & DR. What's with all these numerical examples you keep using in your replies?

Dude, nobody is arguing paying with a credit card is better than using cash at a merchant where there is a single price charged for all payment methods, because you are essentially paying for what you are getting (i.e. paying for the benefit of using CC and so you are using what you are paying). Go hound somebody else who is arguing against that. That ain't me. So a lot of your reply is useless mumble jumble.

The final point, and my point, is that you're still missing the point here. It's a very simple concept and it is true and there is no need for me to have to defend it lol. Fixed price for all. Merchant incorporates expected swipe fees into price. As a result, obviously this price increase to offset swipe fees hurts people that don't use CC, and benefits those that use CC. Furthermore, the people that have reward cards benefit the most. The system is set up to benefit people with reward cards. In general, only wealthy people qualify for top reward cards. End of story.

Minimum wage guy pays cash, while rich WS guy puts it on his rewards amex and gets points back. They paid the same inflated price that incorporated CC fees. Rich WS guy wins some stuff and poor guy gets nothing. Poor guy loses. Poor guy just paid more so other rich guys with reward cards can have the luxury of using their CCs at the store. Poor subsidizing the rich.

Probably “If you buy my land for $100K, then I give you cash reward of 3% which is $3K”

 

[sle]

None of my CC has annual fees including my airlines credit card.

Actually, some of the higher end cards that do charge a membership fees are very much worth the cost. I get way more out of my platinum Amex then I pay for it (done the calculations, obviously) and little things like ability to donate points directly to charities of my choice are nice as well.

 

[vanzandt]

Credit cards make it easy for people to spend money.
Next time you wanna buy that $3000 living room set.... take cash.... see how hard it is to peel off those $20 bills.
With credit cards its painless.
Just food for thought.

 

[Llxa]

TL & DR. What's with all these numerical examples you keep using in your replies?

To illustrate to you what I mean.

The final point, and my point, is that you're still missing the point here. It's a very simple concept and it is true and there is no need for me to have to defend it lol. Fixed price for all. Merchant incorporates expected swipe fees into price. As a result, obviously this price increase to offset swipe fees hurts people that don't use CC, and benefits those that use CC. Furthermore, the people that have reward cards benefit the most. The system is set up to benefit people with reward cards. In general, only wealthy people qualify for top reward cards. End of story.

But the difference in price level between the places that accepts all credit cards and the stores that don't is only 5-10% and not any higher. If the cash back rewards for instance is priced into the price of the goods, then the % difference should be higher but it's not so that's why I am not sure if the rewards are being borne by the credit card holders that do not have the features. And besides not all rewards can be used everywhere; some are only confined to certain category of merchants and I don't observe any difference in prices between merchants where you can use the rewards cards and the merchants where you can't. That's why I feel while the merchant fee is passed onto the customers while the rewards are not. It's just a supply & demand issue.

Minimum wage guy pays cash, while rich WS guy puts it on his rewards amex and gets points back. They paid the same inflated price that incorporated CC fees. Rich WS guy wins some stuff and poor guy gets nothing. Poor guy loses. Poor guy just paid more so other rich guys with reward cards can have the luxury of using their CCs at the store. Poor subsidizing the rich.

Whoever chooses to use cash not necessarily the poor is NOT subsidizing, but is just getting less than what he/she has paid for vs. the credit card holders with regards to merchant fees. There is no subsidizing here. You don't understand the meaning of subsidizing. Subsidizing is where the one group of people is able to get a product/service without paying while another group is paying for it like for example subsidized housing where the apartment is supposed to cost $500 per month but the guy gets to live there for $1 a month because the taxpayers are paying the other $499 and without the taxpayers paying the other $499, the guy would have to pay $500 hence the housing is subsidized by the government. In terms of merchant fees, BOTH the credit card holders AND the cash payers are paying the SAME amount it's just that the credit card holders are getting it compensated via using the credit card. But if tomorrow none of the cash payers are there paying for the merchant fee, the credit card holders would still have to pay the merchant fee so there is NO subsidizing from the cash users.

And besides it's the cash users' fault that they choose to use cash and not get a credit card. I told you plenty of issuers now offer credit cards to consumers of low income, even no income, low credit score even no credit history. Many seniors and students have low or no income they can still get credit cards no problem. They don't want to get the credit card because they choose to listen to those stupid financial advisors who advocate a backward cash-only economy and pay for services that they don't get to enjoy, that's their problem. There is a sucker born every minute. Have the guts to own instead of trying to hide behind some kind of non-existent "class struggle" for everything. It REALLY gets old.