This will be good for us. Maybe we won't charge so much shit, and live in so much debt, and have less stuff and become a better society.

One can dream.

Thanks oldart. You know what? I'm adding your comment to the main post.

Andrew Martin, author of this New York Times article, comes awfully close to being a captive industry hack for not mentioning once in his article how the credit card companies have been padding their revenues from merchants.

You'd think this would make them give credit to a larger group of people so they could recoup any loses. Widening their customer base would make more sense. In fact, a card that was fair and available without all the usary rates might be very profitable.

"When you swipe your card at a store, the merchant doesn't get paid right away. It takes about a month for the card company to actually pay up."

Although I agree with the rest of this post, I wanted to let you know that not all merchants wait a month for their money. Our restaurant sees those funds within 1-2 days.

That being said, there's a reason earlier cultures stigmatized the moneylenders...

@4: Part of the agreement merchants are required to sign to accept credit cards is to not charge credit card users a different price. Simply put, merchants cannot pass on the fee.

I'm personally real close to just writing off credit entirely.

@6: Thanks for this. I'll update the post.

The problem is that people with bad credit should pay higher fees... since they have bad credit.

The credit card industry made a huge mistake by lobbying for weaker debt reduction laws under GWB. People understand that credit cards are worse than before and use them less, keep lower balances, etc. That means the credit card companies make less money than before, so they get sneaky and try to come up with new ways to get money from consumers.

Cash, credit, whatever.
The real problem behind ALL these symptoms is the fact that the ruleset defining all national monies (eg. postive-interest) actively encourages greed, interest/usury and speculation.

Use a different ruleset (ie. negative-interest) and you will get different behaviours. Douglas Rushkoff is currently the most vocal proponant of "complementary currencies".

The current monetary system is backed soley by debt. Nothing else. There is --and will always be-- more debt than money to ever pay it off. This is not a sustainable economic system. Period.

Am I crazy for think that the entire card network should be taken out of the hands of private for-profit corporations? If cards are a competing currency to cash, shouldn't the government be running it? Credit cards are nothing more than a line of credit, let the banks deal with that, but make the fed or a not-for-profit run the transaction and authorization network. Visa et al could stick around but they'd be more banks than merchant services companies. Does that make any sense?

I have no credit cards. I am so glad of this.

THAT SAID - another way merchants are fucked is that they have to pay per transaction, and if it is a tiny one, they still have to pay. And generally, the CC companies won't let merchants charge a minimum.

Bullshit.

@15: You are not crazy in thinking that.

If they can't make money when they get it from the feds at 0 percent, then they really need to die.

Time to put a cap on the rates.

NOW.

Hey Jonathan - what's the story on fees for debit card transactions? Does it depend on whether you use a PIN or it's run as "credit" through the Visa/MC network? Would love to know how the merchant and other fees work for these kinds of transactions.

I second Anthony's question. I already try to not use my credit card with small/locally-owned businesses (though, I think with this info I'll be more likely to remember)... sounds like debit cards are not as bad, but how bad are they?

Anthony:

Your answer is here, at (New York Times owned about.com, making their complete omission of merchant fees in their article even more embarrassing):

When you use a debit card, you can sometimes choose how the purchase is processed. It can either be an online transaction or an offline transaction. If you punch in your personal identification number (PIN), it’s an online transaction – it gets completed electronically and it’s done pretty quickly. If you don’t use your PIN and you sign a charge slip instead, it’s an offline transaction. Offline transactions are processed much like plain-vanilla credit card purchases.....

When you do an offline transaction[Debit + no pin or credit card] and simply sign a charge slip, the retailer has to pay a small percentage of your total purchase – perhaps 2%. This fee goes to the bank that issued your debit (or credit) card as an interchange fee.

What about online transactions [Debit + PIN]? Retailers can get those done for a lot less. They might only pay 10 cents or so per transaction.

The Consumer's Union says it better than I ever could....
"The Senate just PASSED credit card reform today. The bill goes back to the House for a final vote TOMORROW.
But the banks hope to derail reform at the very last minute with scare tactics trumpeted on the front page of today's New York Times.
After months of raising rates and lowering credit limits for responsible card holders to make up for their bad investments elsewhere, they say these rules will hurt those very same responsible customers.
These rules are not the problem. The banks are the problem. Don't let them change the subject. Make sure your Representative hears from you right now.
The banks can raise your interest rates, and then slap that higher rate retroactively on charges you already made. They can add fees, lower your credit line and change your due date at any time and for no reason. They like that power, and will say anything to keep it.
After they gambled away their own capital on risky investments and then borrowed to the hilt to gamble some more--they now say the problem is irresponsible American credit card holders. Hardly.
These rules make sure you get the deal you signed up for. If you are offered a low rate, and you charge something at that rate, you will repay that debt at that rate. If the banks want to add fees, they have to give you notice and time to find a better deal. Instead of tricks in small print, you get a card agreement you can count on.
The banks hope to pit Americans against one another so we will stop looking at them. It's the oldest trick in the book. Tell your Representative you aren't falling for it.
The Senate passed this bill today by a large margin--90 to 5! Let's make sure every Representative votes with you, not with the banks."
Sincerely,
Pam Banks
CreditCardReform.org
A project of Consumers Union
1101 17th Street NW, Suite 500
Washington, DC 20036

I've already frozen one of my three credit cards and canceled another. I think that if the last one starts treating me as they are likely to start treating me - I don't have perfect credit and I sometimes carry a balance but I am responsible and have good credit - that just might be the deathblow that gets me off credit cards for good. I've known what asshole pirates these companies are for years but I skated by without catching the worst of it. Now, well... I guess the time is right to tell them where they can put their completely arbitrary rate hikes.

I hates me some credit card companies. I got rid of all mine, they're like evil plastic rectangular monkeys on your back.

@24: Thanks to the (industry-rewritten) new bankruptcy law came into force, your credit rating is now dependent upon the amount of available credit you have.

In other words, the banks have rigged the game. If you cancel your cards, your available credit goes down. Then your credit score goes down. Your interest rates go up, and your ability to apply for future credit goes down.

Like I said, vile pigs.

What a amazing racket the CC companies have set up for themselves. They take 3% of just about half the transactions that happen in the world. Imagine if you had to pay the feds 3% of all of your income just for the privilege of accepting the money they print.

I do use Visa for the mileage on Alaska Airlines, but even those benefits are getting more and more difficult to cash in on.

@29: I know of a few restaurants here that play the same game, plus a few coffee shops that are pretty rigorous about minimums before debit/credit transactions. I cannot blame 'em one bit.

Soon cash is going to be a status symbol again, like a gold (then platinum)(then titanium)(then diamond)(then unicorn snot) card used to be. The tables need to be turned back around so that the CC companies understand that THEY exist for OUR convenience.

I'm going to start using cash as much as I can.

@24 has done a good thing.

I froze one of my two cards (reducing it from a ridiculous Chase (used to be WaMu) rate of 29 percent down to 2 percent!) and have been trying to get rid of the second one.

Eventually I'll open a credit union debit card and cancel the other card entirely.

As a shareowner of BofA (and a few regional banks) I can tell you they are INTENTIONALLY ripping you off by altering limits so you bump up over them and making half the money on FEES not the supposed interest.

It's intentional. And it's WRONG.

@2: I worked for 3+ years as a fraud investigator for a large online retailer, and I have to say that even though, yes, it's the merchants that are stuck with the ramifications of fraud, some banks are better than others when dealing with it. Some have excellent ways for merchants to verify charges before finalizing the purchase, and some make it much easier to resolve fraud for both the merchant and the cardholder, while other banks clearly don't care about protecting merchants or cardholders. In my experience, the companies who advertise fraud protection tend to be better on the merchant end, too. There's a reason I will always have an AmEx card, and a reason I have no interest whatsoever in ever having a MasterCard.

I'm going to continue using my main credit card (my emergency card has already been canceled by the cc company) as usual until they try to pull this kind of shit. As soon as they try anything, I'll cancel it, and make it clear why I'm doing it. I think anyone who's in a position to do this (isn't currently in debt) should go with the same tactic. Make these motherfuckers see the consequences of their actions.

@26

Dr. Jon,

Yeah, I'm aware of that rule. At this point I no longer care. The credit bureaus are not only part of this robber barony, they're ringleaders, and I refuse to pay any further attention to what they think of me. Let them lower my credit score. I'm going to try to go back to the old model of saving up for what I need before I buy it, and if I have to get a loan, for a house, say, I'll just suck it up and accept whatever terms I have to from a small, relatively honest local bank, and try to get better terms by making a down payment and offering collateral.

I just don't want to play the big banks' games any more. They've gone way past the point of just being uncharitable but legitimate financial businesses into what amounts to usury and loan sharking. They go out of their way to cripple their victims with debt. I want no part of it.

The notion that Americans "need" readily available credit really falls strangely on my ears. I think that Americans only "need" that credit if they in fact "need" all the things they're buying with it, and I'm really deeply unconvinced of that - for example, I'm unconvinced we "need" an auto industry that produces new editions of every single model of every single car every single year or that we "need" people to buy all those new cars.

@35,

Since we live in a country with an abysmal social safety net, yes, many/most Americans need easily available credit. Illness is still the number one reason for bankruptcy.

I always pay with cash. I only use my one credit card for those very few online purchases and that one or two large purchase that I just did not have the cash on hand at the time).

@36

I agree with you fundamentally about the broken system but your example is a fine illustration of the fact that credit is only allowing the underlying problems to get worse while we become less and less able to afford to deal with them.

Another hidden way merchants get bent-over is by the "Rewards" cards. Different kinds of cards are processed at different fee rates for the merchants. Guess what, the "Rewards" cards cost the store a higher percentage to run than a regular card or debit card. The merchants are actually the ones giving you the "Reward", not the credit card companies.

The credit card industry, much like the healthcare industry, does very little help and mostly harm to the consumer.

Sure, the idea of credit cards are good. The essential purpose is there for a reason, yet they get to do fuck all and have no checks or balances on their industry.

For example, FMT had a late payment by 10 days (first time ever) and they cut his credit. He was like, wtf?!?! And they were like "uhhhh times are tough, so your limit is going down. F U consumer".

It makes no sense. And much like the healthcare industry there is too much money in congress to do fuck all about it. Goddamnit.

Credit is not a right. Its a privilege. A moderately expensive privilege. Don't like it? Don't use it.

When you use your credit card to make a $3 coffee purchase, you're totally fucking the merchant over. They pay so much in fees that there's no profit. For small purchases, USE CASH.

@40

You could cancel your credit cards and urge people you know to do the same. Don't get back into the racket at all until and unless you can get a credit card agreement that doesn't include a clause that allows them to fuck you however and whenever they please. Right now each and every card includes language - if you hadn't noticed - that allows them to do whatever they want with your rate, limit, and credit score, at any time, for no reason.

That's never sat right with me. Recently one of my cards, with which I'd always been a model customer, told me apropos of nothing, with no explanation, that they would be doubling my interest rate. I canceled the account immediately. Try it! It feels good.

Sorry, I can't really feel pity for people who don't carry a balance. If you don't carry a balance, you don't need a credit card - just get a debit card.

I do feel bad for people who legitimately need more than 30 days credit and can't get it in any other way but a CC and are getting hit by higher rates and fees even though they pay on time. But my definition of "legitimately need" is probably more conservative than most. I think credit should be used only for emergencies or to serve an investment (i.e. a small business, education, something that has a return).

With regard to merchants getting f'd - has anyone done a study on how much incremental business merchants get due to CC's? Real CC's, not debit. I.e. is there any incentive at all for merchants to accept CC's or do merchants offer CC processing simply because consumers demand it?

@42

No profit in a $3.00 cup of coffee?... Right... Poor merchant's... no profit in those $3.00 cups of coffee.

@44

Red Mill won't take credit cards... and they seem to be doing just fine.

Who's out there holding guns to merchant's heads forcing them to take credit cards.

Is it the same person holding guns to consumers heads forcing them to use credit cards?

bank of america jacked up the interest rate on my credit card to 95%. fuck the fucking fuckers! i switched to becu the next day.

@42 - ha ha, yeah, @45 is right - coffee is exactly the worst example to use here. Coffee is almost all margin.

Try again?

When you pay for a $5 purchase of groceries at an independent grocer that's probably a better example as I seem to remember groceries having low margin.

Seems to me that small, independent stores often have minimum CC purchases sizes but you'll notice that not many national coffee chains do not.

You_Gotta_Be_Kidding_Me:

You are right(ish). Nobody is forcing consumers or merchants to use credit cards, in the sense that there isn't physical coercion.

But, surely you recognize there are many subtler forms of coercion in play here, for both consumers and merchants.

Most of us only get paid once or twice a month. Paychecks may not match up with expenses. A small amount of responsibly used credit makes perfect sense. Simply telling someone to save up a month's costs in advance is a bit crazy; if you have a suspended animation machine, let me know. Holds used on debit cards, for say the purchase of gas, can totally wipe out a balance for days. Again, using a credit card for those purchases is nearly obligatory.

Carrying around large amounts of cash is a theft risk, it exposes the person to inflation affects and adds a huge logistical problem to our economy that electronic transactions eliminates. (See Loomis / REI / SPD fracas.)

For merchants selling things more expensive than fast food, it seems risky to expect customers to always have cash or checks on hand. So, they accept credit cards. And since the market for transaction processors (for debit or credit cards) is, at best, four heavily intertwined companies, the oligopoly sets the terms.

I tend to agree with the pro-nationalizers at this point. Just like the Fed clears checks for banks, the Fed should clear electronic transactions. The $40 billion in merchant fees + $20 billion in consumer fees charged by these credit card issuers are nothing more than a drag on our economy, a monopoly tax out of proportion to the true costs of the task.

@46,

It figures that with all your reported wealth you know fuck all about running a business. Not taking credit = no customers. Red Mill is an aberration, which you, of course, are too pig ignorant to realize.

@44,

I use a credit card instead of debit because if someone steals my card or otherwise gets ahold of my number I won't wind up with zero $s in my bank account.

I can't imagine why anyone would want a credit card from a "credit card company" when they can get one (same logo!) from a local Credit Union. I LOVE my 9.9% interest rate, which has only gone down over time, whether I pay my balance off or use revolving credit.

Get with the program folks! Most CU's accept non-affiliated members now -- Boeing CU (BECU) is open to everyone in the state.

Huh. Funny that this thread would come up today.

After posting my earlier comments at work, I just got home and found a letter from my one remaining card provider notifying me that they would be raising my rate by a whopping ten percent with no justification whatsoever.

After calling customer service and being transferred around several times while asking them not to do this, explaining that if they did I would close the account and neither of us would really benefit from that, I was told by an "account specialist" that no, they could not not raise my rate. He really couldn't say why, just that the rate was going up, so sorry. I told him to close my account.

So, as it happens, starting today, I'm credit card free! Well, technically I still have one but I've never used it for anything except a balance transfer, I don't plan to use it, and it's going to be closed as soon as the small balance on it is paid off. So, no cards.

We'll see how this works out.

What this means is you should cancel all your credit cards now...and if you own a business you should stop accepting them as payment.

I'm not going to fall Golob's blatant appeals for more comments to win some sordid "most commented" Slog contest, so he can get cash rewards and depraved sexual favors forced from interns and the non-senior news reporters. Nice try.

@ 54 asking businesses to not accept credit cards is somewhat unrealistic. while it may save them the fees associated with processing the transaction, they loose money from customers who don't generally use cash. in the end, it would only hurt the owner.

the best option would be for consumers to use cash instead of any type of plastic. this would help both parties save at the expense of neither.

To those who think that businesses not taking credit cards is unrealistic, I know of several small businesses in NYC that do not take credit cards -- and I'd guess this town is probably second only to LA in credit card usage. They get by. People know and they go to the ATM before they go to that store (or they find out and go to one nearby). It is not the end of the world for any of the parties involved (except possibly the credit card company).

If companies in the capital of finance can do it, I'm sure companies in socially aware Seattle can, too.

My rewards cc just lowered the top reward interest from 3% to 1% and no longer pays you an extra $50 per $200 reward.

I've seen stores in Seattle that have signs requesting you pay in cash when you can. I've also seen restaurants in Olympia who do charge the minimum fee, but they also post a note explaining that they are doing so because Visa in turn charges them a fee to use the card.

I'm bad about using cash, partly because I enjoy the air miles I used to get (before they quadrupled the amount of miles you needed), and partly because I used to travel for work and there was no way I could front a $3,000 trip out of my savings. That's unrealistic.

I think what we can learn from this post is that a) most of congress is spineless and they need to put a leash on these companies and b) carry incremental amounts of cash for small purchases. I feel like a dick when I use my credit card for coffee (although it does put me 3/60,000ths of the way to getting a free ticket!).

P.S. nice discussion thread. I learned about as much from the comments as I did from the OG post. Pretty impressive Sloggers.

@ 57

It's not really a matter of financing in my opinion, as there are a large number of merchants who choose to operate under this business model. Dicks for example, only accepts cash and has been doing well for years. But statically speaking, sales generally improve by over 30% when credit cards are processed, and not all business can handle such a loss. Personally, I feel consumer's should take the initiative to combat this issue in order to prevent small business owners from suffering the consequences of their payment preferences. However I do not mean to discourage companies from deciding to go cash only, if they can afford to they certainly should.

Time to bring back debtors jails.

Jonathan you are correct- merchants who agree to process cc's are not allowed to offer lower cash prices or an extra fee for people who pay with a cc- though I see it all the time in smaller biz and I don't care that they do it. My mom owns a small biz but because it is a franchise, she is really held to the bs standards of no minimums/no extra fees to subsidize what she has to pay the cc company for her customers to use their cc and these fees. Since she has several stores, the fees she pays each month are egregious. That said, she would see a significant decline in customer count should she go to a cash-only biz- the only places I have seen successfully do so are food places. Another thing- my mom has customers who will dispute charges ALL THE TIME. Since her biz is a service industry and she has a customer databse, she can verify that people did indeed come in and receive said service. Yet customers turn around and dispute charges to their cc company who in turn takes the money back from my mom's biz. So not only are the cc making out like bandits, but all the dishonest people who dispute charges THEY ACTUALLY MADE, which gets taken back from the merchant. Not saying you shouldn't be able to dispute charges (you should and I have when my cc was stolen) but people need to stop being shady and pay for what they buy.

Job Customer care and after being moved around various existing patch is not asking them, explaining that if they cause me to be enveloping, and neither are we really better than that, I have a "reason" is not was told by the doctor, they can not valuate me better. She really can not say why, defensive achievement that extent, so sad. I told him that his accounting close.
polo