Credit-Card Debt Nears $1 Trillion as Banks Push Plastic • Hacker News Board

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#191

Post by morgante » Fri, May 20, 2016, 9:24 PM UTC

chinathrow wrote: post #172

patio11 wrote: post #171

Earlier quoted context omitted.

Merchant here. We don't get a cut from "the exorbitant high fees"; we pay 2~3% for the (substantial utility of) being able to reliably take money from you in seconds.

I see I need to back that up: some merchants ask you if you would like to pay in your local curreny at POS when you are travelling abroad with a credit card. DCC, dynamic curreny conversion at Visa/Mastercard or similar. The gains on higher fees are then split between the merchant and the processor. Edit: Yes I think the fees are exorbitant - hence some lawsuits in the US and some EU countries with regulated, lower i…

> I see I need to back that up: some merchants ask you if you would like to pay in your local curreny at POS when you are travelling abroad with a credit card.

That's an annoying situation and (is entirely optional). But it's also a relative outlier and is definitely insufficient evidence to claim that the whole system is irreversibly corrupt.

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#192

Post by morgante » Fri, May 20, 2016, 9:32 PM UTC

winslow wrote: post #80

prostoalex wrote: post #57

Earlier quoted context omitted.

That is correct, the total outstanding debt was down as of year ago (side benefit of lower gas prices leaving more cash in the pockets of consumers), but the article mentions the banks have revved up their credit card distribution since then: "Because many creditworthy consumers are still cautious about spending, lenders are turning more aggressively to subprime borrowers. Lenders issued some 10.6 million general-pur…

So we are back at the subprime lending model. Correct me if I am wrong but from my understanding this is what ultimately caused (or one of the biggest factors along with adjustable rate mortgages) the housing collapse and economic downturn circa 2007/2008. So how is this subprime lending any different via the credit cards? We could hypothesize that credit card debt won't be as massive as mortgage debt and thus may no…

It's actually substantially different. Most importantly, it's much hard to paper over shoddy lending practices with credit cards.

If you give a subprime borrower a mortgage and the market continues to go up, they can pay it back with the gains from selling the house. On paper, it looks like everybody won.

With credit cards however, the owner eventually does have to pay the debt back. If you're too loose with handing out credit cards, it's easy to end up with a bunch of people defaulting.

Plus, the scales are an order of magnitude different. Moreover, credit card debt isn't tied to the rest of the economy as heavily as mortgages are.

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#193

Post by morgante » Fri, May 20, 2016, 9:34 PM UTC

hyperpape wrote: post #13

mkj wrote: post #6

What's the amount carried over each month (and interest paid)? That seems the more interesting figure.

Given that this is > $12,000 for a family of four, I'm guessing that it's not that much less, and at least half of it is carried over month to month, if not more.

Why do you assume that?

I'm single but will sometimes have a debt of $10k in a month but never carry any over.

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#194

Post by lotsofpulp » Fri, May 20, 2016, 9:35 PM UTC

morgante wrote: post #190

chinathrow wrote: post #122

Earlier quoted context omitted.

The rewards system is the wrong incentive here in my eye. It corrupts everyone and everything down to each penny, on every transaction. Everyone along the line where the money flows is incentivised to get you a) hooked on credit cards and b) on paying by credit cards. The issuer, the merchant, the card institute, the processors in between and even the buyer get's a cut from the exorbitant high fees.

> It corrupts everyone and everything down to each penny, on every transaction. I'd love to know how I'm supposedly being "corrupted." I've never once carried a balance, but have flown thousands of miles for free.

There is no such thing as free...you simply flew thousands of miles paid for by paying an extra 1 or 2 percentage points for everything.

On the other hand, if you did not fly thousands of miles using miles and points, and you still paid the same price as the cardholders, then you helped pay for those who did fly around for free.

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#195

Post by nucleardog » Fri, May 20, 2016, 9:46 PM UTC

maxxxxx wrote: post #176

rm_-rf_slash wrote: post #25

Earlier quoted context omitted.

There was an eerily prescient 2006 documentary about consumer credit called "Maxed Out," which featured a scene where someone recalled going to a conference of bank and credit card executives, and one of the CC CEOs plainly stated: "The bulk of our profits come from people making minimum payments for the rest of their lives." As for "pay-in-full" folks like you and me, credit card companies could care less. Whenever…

When I came to the US I couldn't figure what "minimum payment" means. It took a while to realize that it's a totally arbitrary amount and really has no meaning for any kind of financial planning. I bet a lot of people think they are paying off their debt by making minimum payments.

I don't know if it's a law here, but every account statement I've ever gotten on revolving credit has always included a statement below the minimum to the effect of: "If you only pay the minimum payment, it will take you 10 years, eight months to fully pay off this debt."

When you see that beside a $2000 or $3000 balance, it paints a pretty clear picture of what paying the minimum is doing for you. I think the only way it could be improved is by adding in how much interest you'll pay over that time period.

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#196

Post by nucleardog » Fri, May 20, 2016, 9:53 PM UTC

throwawaykeno wrote: post #63

harryh wrote: post #47

Earlier quoted context omitted.

Ya, I've seen these. It seems like the fee would likely be more than the value of the reward making it a losing proposition? Just wondering if the OP found a better way.

The land lord I use allows paying with plastic. There is a ~2% fee. It's better than a wash financially, but just barely. But it's net win for me even when it's a wash because I don't have to worry about mailing a check every month. FWIW in months when I buy expensive plane tickets or make reimbursed purchases I skip paying rent with the CC.

I helped a landlord I was working with on other projects set up a basic Stripe form on the website for one of their properties. No subscriptions or automated payments, you can just go to their site and send them money via credit/debit card.

They eat the couple percent in transaction fees. In return, almost all of their tenants now pay online and instead of the property manager chasing people down for money, everyone generally pays on time (or, in a number of cases, early).

Depending on your priorities, "not having to chase people down for money every month" might be worth paying the $500/mo.

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#197

Post by morgante » Fri, May 20, 2016, 9:58 PM UTC

lotsofpulp wrote: post #194

morgante wrote: post #190

Earlier quoted context omitted.

> It corrupts everyone and everything down to each penny, on every transaction. I'd love to know how I'm supposedly being "corrupted." I've never once carried a balance, but have flown thousands of miles for free.

There is no such thing as free...you simply flew thousands of miles paid for by paying an extra 1 or 2 percentage points for everything. On the other hand, if you did not fly thousands of miles using miles and points, and you still paid the same price as the cardholders, then you helped pay for those who did fly around for free.

The value of the points to me exceeds the transaction costs.

For example, I willingly pay a 1.8% fee to pay my taxes via a credit card. I end up getting back 5-10% in bonuses.

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#198

Post by toomuchtodo » Fri, May 20, 2016, 10:20 PM UTC

kdamken wrote: post #153

toomuchtodo wrote: post #139

Earlier quoted context omitted.

I've edited the comment. The part "I'm one of them" is from the article title.

Gotcha, thanks for clarifying. Congrats on saving that much too! Sounds like you're on track to do very well.

Only because I fell hard financially first.

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#199

Post by ChemicalWarfare » Fri, May 20, 2016, 10:33 PM UTC

mwexler wrote: post #142

ChemicalWarfare wrote: post #92

Earlier quoted context omitted.

It's banks that do, CC companies primarily just facilitate the data exchange between the parties involved and charge per tx fee. The way banks make money on those payments is the way any other interest loan payment works - you'll eventually pay what you owe but by the time you're done you paid the original debt + interest.

Actually, the issuing banks will get some of the transaction fees as well, so they make out both ways. The "CC companies" are better thought of as networks (Visa, etc.) and they live mostly on those transaction fees, as you mention. The networks don't issue any cards, and they carry debit and other transactions as well, so not quite right to call them "CC companies".

Probably splitting hairs at this point, but yes, the issuing bank will typically get a per-tx interchange fee from the merchant bank. Merchant bank will charge the merchant to recoup that cost.

Yea 'CC Companies' is not the most accurate term, but when someone uses that term in a casual conversation I typically know what they mean :)

Re: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

#200

Post by nitrogen » Fri, May 20, 2016, 10:40 PM UTC

joslin01 wrote: post #185

johansch wrote: post #111

Earlier quoted context omitted.

You pretty much fit the description of a financially irresponsible person, I have to say, I'm afraid. (You seem to be aware too so that's good I guess.)

What did you think when I told a story how to lose at credit cards? That I was financially responsible? Did you think I thought I was financially responsible. Honestly your comment states the obvious and is just rude, so no you did not "have to say" it I'm afraid. I bear the tolls my financial foolishness cost me. Keep your judgments in your head and do not justify them with a smug veil of concern ("I'm afraid" "good…

This is a bit of an overreaction.