[jjbrr]

I attended a lecture given by Dave Ramsey on the subject. He adamantly suggests never using a credit card ever.

Obviously if you can't pay off the balance every month, it's retarded to use a credit card because of penalties.

Obviously if you're so rich that the present value of your cash is substantially higher than the future value, credit is a clear choice.

If you're somewhere in between, perfectly sound arguments can be made for both sides.

[Echognome]

Why it may be rational to spend more than you currently earn:

http://en.wikipedia....come_hypothesis

Who bears the burden of credit card costs?*

http://en.wikipedia....i/Tax_incidence

*At least in my opinion the added price of the credit card transaction is like a tax on goods, except levied by the credit card company. I argue this is the case since the vast majority of places do not have a difference in pricing by form of payment.

[kenberg]

We just signed a contract to have a new porch built onto our house. The company allows for $5,000 to be paid by cc, the rest they want by check. I signed and congratulated them on this policy. They could accept credit cards and raise prices to cover the cost of it. Doing that, I would give them more money by cc, they would give some of it to the cc company, and then the cc company would give a portion of that back to me, keeping part as their share. I prefer to cut them out of the deal, they do nothing useful. Writing a check directly to the company is just as easy as signing for a credit card transaction.

There are a lot of folks out there wanting to grab a piece of every transaction. I am delighted to see them cut out of this one.

[barmar]

Yes, the vendors pay for the cost of the credit card transaction. I think that in many cases they pay this fee willingly. By accepting plastic, they make their business more attractive to customers, so they make more sales. Hopefully, the increased revenue makes up for the increased cost of doing business.

It's like the free WiFi that many businesses offer. It gets people into the business, and they spend money there.

It's very similar to the "loss leader" philosophy: by losing money in one part of the business you can make money in another part.

[kenberg]

There are of course reasons businesses do what they do. Fifty years ago, grocery stores and others gave S&H Green Stamps. Store X did it so store Y figured they had to do it also. You collected the damn things, pasted them in a book, and when you got enough you went off to the S&H store and traded them in for a toaster or something. Customers collected green stamps, S&H collected money without having to actually do anything useful. No one regrets the passing of this enterprise.

Plastic has its uses, that's true. But only sometimes. In the case of my new porch, it's a fair bet that a person who cannot pay cash should not be buying one. It will be nice, but not worth going into debt over. So it's write a check now or use plastic now and write a check at the end of the month. Actually it's spread over several checks as the job goes through stages but you get the idea. The sole purpose of using plastic would be to get the rebate at the end of the year, convenience doesn't enter into it. At some point it makes sense to cut out the cc companies from this transaction, otherwise I guess people could buy a house and put it on Visa. One hell of a rebate at year's end. That cash has to come frmo somewhere.

[jdonn]

kenberg, on Feb 23 2010, 06:44 AM, said:

At some point it makes sense to cut out the cc companies from this transaction, otherwise I guess people could buy a house and put it on Visa. One hell of a rebate at year's end. That cash has to come frmo somewhere.

From the fees stores pay, and from irresponsible users who don't pay off their balances. I don't see why that should concern me.

[Al_U_Card]

If they can't get the carbon trading bubble to inflate it may well be the credit card bubble that is next in line.....a likely start would be to charge interest from the time of purchase....maybe np for you but a lot of debt for many and a
'good" way to get people to go after the "cash" in the system that they will be using to inflate away the economy...

[helene_t]

jdonn, on Feb 22 2010, 07:34 PM, said:

helene_t, on Feb 22 2010, 10:35 AM, said:

In any case, I refuse to participate in such a game. Credit cards are unsafe and too expensive to use (even if it's someone else who pays the costs).

You are taking a strong moral stand which is financially illogical Everyone else paying for something that you can use to your benefit is a good reason to do it, not a good reason not to.

Nothing illogical about factoring in the costs to society/shops/othercustomers when making decisions. Maybe oldfashioned and/or crazy, though.

If I were to make a living of screwing the shops, I would prefer shoplifting to credit card usage. After all shoplifting has less overhead.

Oh no I didn't think of the costs of prosecuting me and keeping me in prison. Maybe more economically effective to abide to the law. Have to think about it.

[Apollo81]

H_KARLUK, on Feb 17 2010, 08:50 PM, said:

Plus credit cards are almost never free--  first you have to have great credit to qualify to get one (most don't) and second the moment that you don't pay the full balance, you pay interest, sometimes very high interest.

In the U.S. credit card companies send offers to infants, dead people, and pets. Anyone can get a credit card.

[Apollo81]

kfay, on Feb 18 2010, 10:45 AM, said:

My brother is one of those people who accumulates a lot of debt on his credit cards and, instead of paying off the balance, rolls it over onto some new 0% APR account and parlays the money into an investment account.

Of course he's got an awesome job so can assume the risk but he tells me he's in the black at this point, even considering everything that happened last year...

Isn't he paying 3% fees every time he rolls it? Which isn't smart?

[Apollo81]

Rain, on Feb 17 2010, 10:29 PM, said:

College students are the one group that's specially targeted, because apparently card companies want to grab brand loyalty when in college, and they figure parents will always bail out the students(?)

College students are also more likely to run up a balance, incur interest/late fees, etc because they are generally less mature and knowledgeable than older adults. I guess they are also less likely to file for bankruptcy because parents will bail them out.

[mike777]

Apollo81, on Feb 24 2010, 10:14 PM, said:

Rain, on Feb 17 2010, 10:29 PM, said:

College students are the one group that's specially targeted, because apparently card companies want to grab brand loyalty when in college, and they figure parents will always bail out the students(?)

College students are also more likely to run up a balance, incur interest/late fees, etc because they are generally less mature and knowledgeable than older adults. I guess they are also less likely to file for bankruptcy because parents will bail them out.

I guess it is just me and I am old..but to keep hearing how parents bail out 18-22 year old students shocks me....are you parents that rich?

I mean I thought we are in a recession/depression....yet everyone has a cell phone/lexus/bluetooth that has pedal issues.

[kfay]

Apollo81, on Feb 24 2010, 10:10 PM, said:

kfay, on Feb 18 2010, 10:45 AM, said:

My brother is one of those people who accumulates a lot of debt on his credit cards and, instead of paying off the balance, rolls it over onto some new 0% APR account and parlays the money into an investment account.

Of course he's got an awesome job so can assume the risk but he tells me he's in the black at this point, even considering everything that happened last year...

Isn't he paying 3% fees every time he rolls it? Which isn't smart?

Not if you look out also for the 1-time 0% balance transfers.

[JoAnneM]

I fail to see how my paying off my credit cards (only 2) every month is screwing the shop owners. They get the sales and pay the fee, which is built into the sales price. The credit card companies love me because I just funnel purchase fees to them and never cause them any trouble with collections, etc. Everything is done automatically online. I get money back from them every year for spending a lot of their card and generating those vendor fees. And both my cards are "no fee" cards. I don't see the problem, ethical or otherwise.

[barmar]

Credit card companies make most of their money on interest, not the fees they charge the shop owners. So people who don't carry a balance are reducing their revenues, and they have to make it up somehow. If no one carried a balance, they would have to charge the shops a huge amount.

Luckily for us there are plenty of people who don't pay off their balances. They're subsidizing the vendors and those of us who do.

[blackshoe]

Heh. The first time I ever used a credit card, ca. 1973 or so, the clerk looked at my signature on the charge slip, looked at my signature on the back of the credit card, looked me right in the eye and said "that's not your signature".

I told him to call the cops. Then the manager came over and smacked him upside the head. :-)

[PassedOut]

blackshoe, on Feb 26 2010, 10:56 PM, said:

Heh. The first time I ever used a credit card, ca. 1973 or so, the clerk looked at my signature on the charge slip, looked at my signature on the back of the credit card, looked me right in the eye and said "that's not your signature".

I told him to call the cops. Then the manager came over and smacked him upside the head. :-)