Credit CARDs
March 3, 2010 8:03 AM Subscribe

"I Stopped Denying People." Former Bank of America employee Jackie Ramos appears on the Daily Show last night in a segment covering the sweeping credit card reform the went into effect last week.
posted by lunit (188 comments total) 27 users marked this as a favorite

The one thing I got out of my own family's finaail apocalyse was the message: Never Get A Credit Card Ever. It is Usury.

Also, saw the huge Bank of America sign in Times Square flickering and crashing out yesterday. Thought it was apt.
posted by The Whelk at 8:21 AM on March 3, 2010 [5 favorites]

I'm going to find an offer a punch in the nose to the first person who chimes in that she was "stealing from her employer".
posted by Ickster at 8:21 AM on March 3, 2010 [1 favorite]

financial*
posted by The Whelk at 8:21 AM on March 3, 2010

I love you Jackie Ramos. How come it's the people making a little better than minimum wage who are showing us how to do the right thing?
posted by toodleydoodley at 8:22 AM on March 3, 2010 [5 favorites]

The love of money is the root of all evil.
posted by DU at 8:26 AM on March 3, 2010

The thing that really makes me loathe the for-profit banking industry is the 'convenience' charges. Billing customers for the privilege of speaking to a teller is why I wouldn't spill a single tear for them (except perhaps one of joy) if they were first against the wall in a revolution.
posted by mullingitover at 8:28 AM on March 3, 2010 [14 favorites]

Both Jon Stewart and Stephen Colbert have been going hammer and tongs at the banks and the credit card industry lately. Good for them.
posted by blucevalo at 8:34 AM on March 3, 2010 [3 favorites]

Chase sent me a letter in the mail saying they were scaling back my cash back rewards, only instead of just being honest and saying, "We're scaling back our cash back bonus, because fuck you," they tried to pass it off as "enhancing" the rewards. That, taking two months and three phone calls to get me a new card when my old one was stolen, and making me spend several minutes arguing with the operator over why I didn't want the $7/month credit monitoring service when I just want to activate my new card! are why Chase sucks the balls of all.
posted by dirigibleman at 8:49 AM on March 3, 2010 [5 favorites]

Perhaps I'm a bit dense, but which of these links goes to her Daily Show appearance?
posted by Senor Cardgage at 8:50 AM on March 3, 2010

How come it's the people making a little better than minimum wage who are showing us how to do the right thing?

Your question answers itself.

Perhaps I'm a bit dense, but which of these links goes to her Daily Show appearance?

"the Daily Show"

She shows up around 6:15.
posted by mrgrimm at 8:58 AM on March 3, 2010 [1 favorite]

She shows up around 6:15.

Ah. Gotcha.
That link goes to the Feb 23 episode and the FPP said "last night"

I thought perhaps she appeared as a guest last night.
posted by Senor Cardgage at 9:00 AM on March 3, 2010

So why are these usury practices allowed in the US? I called my (Canadian) Bank the other day to ask for a reduction in interest charged on my Visa. They dropped it from 16% to 11.5% no questions asked. No fees, no convenience charge. The lending practices that I read in the article would be illegal in most other countries.
posted by weezy at 9:00 AM on March 3, 2010

I called my (Canadian) Bank the other day to ask for a reduction in interest charged on my Visa. They dropped it from 16% to 11.5% no questions asked.

Yeah, but you probably had to wait in the Emergency Credit Waiting Room for like 6 months before they approved you also socialism.
posted by DU at 9:07 AM on March 3, 2010 [82 favorites]

I thought perhaps she appeared as a guest last night.

Ah, good point. Perhaps an obsessive mod will correct the error.
posted by mrgrimm at 9:10 AM on March 3, 2010

Yeah and I heard canadians who need immediate, critical credit have to sneak across the border cuz credit in america is so much better and better educated or something something STALINHITLER!!!
posted by spicynuts at 9:14 AM on March 3, 2010 [2 favorites]

So why are these usury practices allowed in the US?

They didn't used to be. Each state used to regulate the banks doing business in their state. The Supreme Court in Marquette v. Omaha ruled that a state couldn't regulate the activities, within the state, of banks based out of state. This allowed states desperate for jobs to repeal usury laws to attract banking operations which could now do business nationally. And because the 1978 Supreme Court decision was followed by thirty years of more or less right wing governance, the old patchwork of state anti-usury laws was never replaced with equivalent federal regulation. (Until now, maybe — I haven't been following what actually ended up in the new consumer lending laws they've been passing this term.)
posted by enn at 9:18 AM on March 3, 2010 [13 favorites]

So why are these usury practices allowed in the US?
Because God and the Bible and God don't make no junk.
posted by TrialByMedia at 9:23 AM on March 3, 2010 [3 favorites]

This is the best front-page MetaFilter post I've seen in a while. Everything she said about her former employer is absolutely true, and probably applies to some extent to just about every corporation with more than 500 employees.

I mean, 29.99% interest? Seriously? How could anyone who actually needed the credit enough to use it ever hope to pay that off?
posted by Vorteks at 9:25 AM on March 3, 2010

You think 29.99% is bad? Try 79.9%. I'm not kidding, that is not ajoke. Also, there's an annual fee too.
posted by Talanvor at 9:31 AM on March 3, 2010 [3 favorites]

Thanks for that info enn, it amazes me that people still use banks in the US after ... y'know... that lil' mess they made recently. And their usury practices. I know I'd have me a hollowed-out mattress if I lived there.
posted by weezy at 9:33 AM on March 3, 2010

it amazes me that people still use banks in the US after ... y'know... that lil' mess they made recently

I hear the banks in Iceland are great.
posted by Talanvor at 9:35 AM on March 3, 2010 [4 favorites]

Dear Mr. Vorteks,
     A "talking shit on the internet about your bank" convenience fee has been charged to your account, 
and your interest rate has been increased to 44.9999%, as per page 2281 of Appendix VII of your contract 
(see invisible ink instructions to view).  Thank you for choosing us to take care of you!

All the best,
Your Neighborhood Transnational Bank

posted by Salvor Hardin at 9:38 AM on March 3, 2010 [21 favorites]

OMFG. Did you guys see the Colbert segment on Kwedit? I thought it was a joke, but it looks like a 100% real attempt to get kids to rack up credit-card-style debt online (complete with a "Kwedit Score"). And then, I'm not kidding, try to get Mom & Dad or Grandma to pay it off by "Passing the Duck".

This can't possibly be real. Except I think it is. Please somebody tell me I've been tricked.
posted by straight at 9:42 AM on March 3, 2010 [8 favorites]

I hope I have the balls to get fired like her if I'm ever in a position to get fired by doing right.
I hope that if I'm ever in the same position as her manager, I'll have the balls to get fired along with her instead of just telling her she's right.

posted by You Can't Tip a Buick at 9:46 AM on March 3, 2010 [9 favorites]

So why are these usury practices allowed in the US?

Because corporate greed is king in the US of A.

Just look at who the Federal Reserve benefits, or take a look at the news:

Banks could win, consumers could lose, thanks to Dodd
Dallas Fed President: Break Up Banks That Are Too Big
Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs
Is the U.S. Hiding How it Bailed Out AIG and Goldman?
AIG expected to post 4th-quarter loss, investors seek bailout fund update
Would Some Big Banks Profit From a Greek Debt Default?
posted by HP LaserJet P10006 at 9:49 AM on March 3, 2010 [5 favorites]

Just something to keep in mind...

I had a car loan, and its was a damn good loan. 4.1%, through a credit Union, for 3 years. Now, about a year into this car loan, I received a decent windfall through the untimely death of a loved family member. I could have done a lot of things with the money: bought a buttload of video equipment, editing suite, or perhaps a 60 inch flatscreen. Trust me, I briefly considered those possibilities.

However, I made the smart move and paid off my car loan and student loan.

The car loan, once again, was a local credit union. I wrote the check, they sent me the lien, and shipped me a tent requesting I open a checking account or do some other banking with them in the future. All was said and done.

The college loan, however, was a royal pain in the ass to close. 2 days after I mailed the check, I received a phone call.

Him: "Mr. XXXXX, we've received a check with the directive to pay off the remainder of your balance."
Me: "Yep."
Him: "Are you aware there may be a fee for early fulfillment of debts?"
Me: "May be? You want to show me where I would have seen this?"
Him: "Well, in our new policy..."
Me: "Effective when?"
Him: "Upon receipt of the letter we have sent you, you will be subject..."
Me: "I haven't received the letter. I find it hard to believe you'd be changing your policies nowhere near January or July 1st, so I'm a bit taken aback."
Him: "Well, there were future interest payments we would need to take into account..."
Me: "I haven't received notification of this. If you charge me a nickel for this early fulfillment crap, I'm going to have to contact the New York State Attorney General for clarification."
Him: "I don't believe that will be necessary."
Me: "You're right. The check covers the remainder of the principle. Have a good day."

I did receive the letter, but they never attempted to collect that early fulfillment BS. I never got around to checking my original policy to see if anything was on it, but I can only assume there wasn't. They claimed they needed 30 days to process the payment, then attempted to collect a $17 interest payment incurred during that wait time. My brother is a telecommunications lawyer, but he called them as "XXXX's attorney" and informed them that this was in violation of some law he could have made up on the spot for all I knew, but ultimately, they dropped the issue.

My credit rating went down a smidge, but not significantly. I was going to look into appealing this, but ultimately my credit rating is spotless aside from this and a Blockbuster video debt I refused to pay (the DVD played fine when I had it, so whoever rented it from them must have scratched it...wankers) so it wasn't such a big deal. I guess I just forgot about it.

I'm calling for a mass exodus of debts and balances to local credit unions. These companies are too big, they failed, and they deserve to hurt, not us.
posted by Bathtub Bobsled at 9:51 AM on March 3, 2010 [31 favorites]

I have actually spoken to Ms Ramos, as a customer, when I was closing out my credit card, which mercifully did not have a big balance on it. I remembered her because she seemed too smart and alert to be working for an outfit that was otherwise populated by dishonest robots.
posted by anigbrowl at 9:51 AM on March 3, 2010 [6 favorites]

The one thing I got out of my own family's finaail apocalyse was the message: Never Get A Credit Card Ever. It is Usury.

Use the card responsibly, pay it off every month, and don't buy things on credit that exceed the amount of money that you currently have in the bank. If you and your family lack enough self-control to do these things, then no, you should not have a credit card.

You're not alone, as many Americans can't manage to live within their means. For those of us with better money-management skills, credit cards are an uber-convenient way to buy things. (In ten years of having credit cards, I've never paid interest on a purchase).

I'll also be the first to tell you that banks and credit cards often take advantage of people who don't manage their finances well. To combat this, we should do two things:

1) We should regulate the banks and outlaw many of the more egregious practices.

2) More importantly, we should educate people on basic money management skills. With internet banking, there's no excuse for not knowing how much is in your bank account. With ridiculously simple tools like Mint, there's no excuse for not setting a basic budget and sticking to it. This should be a required part of every high-school curriculum.
posted by chrisamiller at 9:52 AM on March 3, 2010 [6 favorites]

it amazes me that people still use banks in the US

Yeah, so, um....we just bought a house. Please tell me how we could have done that without getting a bank involved.

p.s. we do not have 150,000 in cash under the mattress.
posted by the bricabrac man at 9:55 AM on March 3, 2010 [1 favorite]

And then, I'm not kidding, try to get Mom & Dad or Grandma to pay it off by "Passing the Duck".

That page is rather disturbing. Among other things, it explains how racking up debt and then trying to get your friends and family to bail you out is "a great opportunity to start a conversation about financial literacy and the responsible use of credit".

Reading that was a great opportunity to start a conversation with my monitor about having my fist go through it.
posted by FishBike at 9:57 AM on March 3, 2010 [7 favorites]

it amazes me that people still use banks in the US after ...

While it doesn't surprise me that people still use banks, meaning financial services institutions in general -- it's difficult to be more than a day laborer without a checking account -- it does surprise me that people continue to give the big national banks their money when they're so unabashedly consumer-hostile. There are lots of credit unions and decent local and specialty banks around. Particularly CUs.

The major reasons people seem to have for sticking with the BoAs and Citibanks of the world seem to be (1) perceived convenience, particularly with regards to online banking, and (2) ATM availability.

Point 1 may be semi-valid; some small banks just don't have websites that are up to the level of slickness that the big national ones are. However, there are many which are just as functional, and work just as well with Quicken and Mint.com, which gives you a nice reporting frontend regardless of what tools your bank's site offers itself.

Point 2, ATMs, is admittedly an issue, although I've eschewed the big banks for more than a decade now and after a very short adjustment period haven't had an issue. First, lots of small banks and CUs offer ATM fee reimbursement, where they cover the cost of using other banks' ATMs up to $10 or so per month. As long as you don't go to the ATM every day, this takes much of the sting out. (I still don't like it as a long-term solution because it means eventually the cost is getting passed on to me and other bank customers indirectly, but it gets over the mental hurdle for a lot of people.) What many people don't realize is that any store that lets you pay with a debit card and offers cash back is effectively a fee-free ATM: every time you go into the grocery store and buy something, you can just pay with your debit card, get cash back, and it's just like taking money out of an ATM. No fee. (So rather than pay $2 for the "convenience" of using some ATM outside a store, you can often just walk into the store, buy a pack of gum or something, get $20 cashback, and at least enjoy your minty "fee". I'd rather the money go to Wrigleys than Citibank or some shifty ATM operator any day.)

I'd urge anyone still using a major bank to take a hard look at their actual needs and see whether a local bank or credit union might serve them better. They've coasted on name recognition and false intimations of solidness that turned out to be nothing but a cover for a rotten core; the more people move their money away from them, the better.
posted by Kadin2048 at 10:05 AM on March 3, 2010 [14 favorites]

the bricabrac man: "Yeah, so, um....we just bought a house. Please tell me how we could have done that without getting a bank involved."

Ahem. You really didn't know about credit unions?
posted by mullingitover at 10:07 AM on March 3, 2010

Yeah, so, um....we just bought a house. Please tell me how we could have done that without getting a bank involved.

If you're willing to share the place with four other couples, you could do a TIC.

Other than that, I'd recommend something involving dynamite and a good insurance plan.
posted by Bathtub Bobsled at 10:08 AM on March 3, 2010

You're not alone, as many Americans can't manage to live within their means. For those of us with better money-management skills, credit cards are an uber-convenient way to buy things. (In ten years of having credit cards, I've never paid interest on a purchase).

My husband lost his job last year and I've had to go part-time and we are barely hanging on. We are carrying a balance. I hope you didn't mean to sound smug because there are days when I can barely see through my fear. Many of your fellow Americans are hurting pretty badly right now and have not received anything resembling a bail-out from anybody. Instead, they're getting thirty percent interest during a recession.
posted by melissa may at 10:10 AM on March 3, 2010 [51 favorites]

Kadin2048: "Point 2, ATMs, is admittedly an issue"

Not really. I've been a credit union member for a long time and there's a network of shared credit union ATMs all over the country. There are two shared credit union ATMs within walking distance of my apartment. As an added bonus, credit unions offer shared branching, which means I can walk into another credit union of which I'm not a member and get service without any hassle. Try walking into Wells Fargo and making a deposit into your Bank of America account. My actual credit union branch is located in Oregon, and I've lived in California for four years but with direct deposit, online banking, and shared branches it's never been an issue.
posted by mullingitover at 10:12 AM on March 3, 2010 [2 favorites]

Credit card reform did nothing for me except hike my 7.9 fixed to a 12.99% variable all in the name of "well due to economic hardship, we had to raise your perfect credit. We're doing it to everyone."

Yea and now I owe $350 min. Thanks reform. The card companies did a mass 'screw you' to everyone before Feb. 22nd. How is that mass reform? -- stormpooper

Uh, they can't ever do it again?

Suppose you lost your job and couldn't make payments on that $188 or whatever. Your interest would have shot up to 30%, and assuming a linear relationship between your interest rate and your payments, you would have had to pay $808 a month.

So, um, try not to be so selfish and short sighted?
posted by delmoi at 10:13 AM on March 3, 2010 [4 favorites]

> You're not alone, as many Americans can't manage to live within their means.

My husband lost his job last year and I've had to go part-time and we are barely hanging on. We are carrying a balance.

I had to use my credit cards to make up the shortfall during the LAST recession we went through (ten years ago). I am still trying to pay off that balance. But that balance was due to me trying to pay, oh, RENT.
posted by EmpressCallipygos at 10:14 AM on March 3, 2010 [2 favorites]

Ahem. You really didn't know about credit unions?

*I've* heard of them, but I really don't know the first thing. I thought they were for well-defined groups (employees of a certain big company or a union or whatever). Is there a For Dummies link on CU's that I can read? (Even more dumbed down and spelled out than Wikipedia, I mean--I'm seriously ig'n'ant when it comes to financial stuff.)
posted by DU at 10:20 AM on March 3, 2010

p.s. we do not have 150,000 in cash under the mattress.

Then you do not have the money for a house.
posted by Civil_Disobedient at 10:23 AM on March 3, 2010 [4 favorites]

*I've* heard of them, but I really don't know the first thing. I thought they were for well-defined groups (employees of a certain big company or a union or whatever).

Where I live, in addition to the autoworkers credit union and the one associated with the big university and the one for school employees, there's a "community" credit union that you just have to live in a certain area to access.

I've been really glad to do my banking with a credit union when I hear stories about things like people's interest rates being increased for being just a couple of days late with a credit card payment (as happened to us once or twice during a recent protracted financial crisis) or being hit with multiple overdraft charges in a cascade from a single error--when this happened to me once, the credit union reduced it to one fee, and when it happened again recently because of another bank's error in processing a transfer to my account, they cancelled $125 of fees altogether.
posted by not that girl at 10:25 AM on March 3, 2010

This might be a good place to start, DU (holy crap, there's a .coop domain!) It sounds like there are restrictions to join, but there are a lot of potential points of entry and the CUs are eager to get people in if they can.
posted by nanojath at 10:25 AM on March 3, 2010 [1 favorite]

I guess there was one thing I thought was apparent in my earlier post that I guess I hadn't stressed enough.

The reason for the headaches with the major banks results from the inherent nature of an operation with that magnitude.

A local credit union won't risk angering a customer over $17, or impose a small fee when they can avoid it, but a major bank thrives on this. To a small bank, $17 is $17, and they'd rather not haggle over that if it risked losing the account.

A big bank like Bank of America? $17 times 500,000 accounts equals... a lot. They can afford to lose 10-12 people with the good sense to say "to hell with this rubbish."
posted by Bathtub Bobsled at 10:29 AM on March 3, 2010

Then you do not have the money for a house.

I don't get it...you're saying no one should buy a house unless then can pay for it in full up front?
posted by the bricabrac man at 10:30 AM on March 3, 2010 [2 favorites]

Yeah, I just found that .coop too. Never heard of that. There's a CU in my zip code, so maybe I'll open a personal account there. My wife handles our joint stuff at a Regular Mammoth Bank. We aren't particularly unhappy with them, but "local" and "non-profit" (I didn't know that!) banking sounds pretty awesome.

Now I'm filled with questions, but this isn't the right place.
posted by DU at 10:31 AM on March 3, 2010

Point 2, ATMs, is admittedly an issue

I'm old enough to remember when my mom had to get cash at the grocery store by writing a check for cash back, or we had to go to the bank and talk to an actual teller to do this, so even credit union ATMs seem like an improvement to me. The easy availability of ATMs, and the lack of need for carrying cash, is a "we live in the future" thing for me.

I moved my credit card last year. It was a card I'd had since college and I had a high enough limit on it that I could have bought a small car (which is to say a significant fraction of our household annual income). Citibank's representative tried to guilt me into staying with them but didn't offer me any financial breaks for it because I didn't carry a balance and I didn't use the card very often. I wasn't making them any money so it wasn't worth it. Never am I so grateful for my dad's Depression-era expectation-setting in my childhood as when I read articles like these.
posted by immlass at 10:31 AM on March 3, 2010 [1 favorite]

The credit union I belong to has us 'buy a membership' which is basically a $50 minimum is kept in the savings account. It used to be for firemen or the navy or something like that, but now anyone can join. I think that's the case with many credit unions.

We joined them because we got an got an auto loan through them with a great low rate. But I like them and am planning to move my Chase checking over to them. Chase makes me keep $300 in my Savings in order to not have any stoopid fees for whatever. I feel like I'm constantly on the lookout to prevent fees with them so screw it. I'm moving all my local banking to the credit union.

I also have an account with USAA which is opening it's membership to more than military folks only. If you can get on with them they are pretty great too. I've pretty much gotten out of the habit of using ATMs but my USAA card covers the fees for up to 10 withdraws from anywhere so I can use it at any ATM (up to 10 times).
posted by dog food sugar at 10:34 AM on March 3, 2010

There's a joke in my department: upstairs they sell you the credit, downstairs we collect on it.

Why does this remind me of this?
posted by Pollomacho at 10:49 AM on March 3, 2010 [1 favorite]

I love my local bank, which refunds all ATM fees, gives decent interest on my checking account 2.17% (actually it was absurdly good interest, almost 6%, before the recession started up). Compared to my old Bank of America account, which gave barely 1 percent for my savings account (which had to be seperate from checking), only allowed me to use their ATMs, charged a monthly fee unless I complained about it once a year, and would charge $39 for overdrafting, it is the BEST THING EVER. When I move away I'm going to need to find a way to keep this bank, I only wish they issued a credit card, because I'm sure it would be sane and reasonable compared to the national ones.
posted by haveanicesummer at 10:50 AM on March 3, 2010 [1 favorite]

With internet banking, there's no excuse for not knowing how much is in your bank account.

Maybe you know something I don't, but in my experience, there would be no excuse if all banks were honest about the way they post transactions.

Large banks in particular love to hide transactions, hold back on posting them, and play shell games with them, especially if it involves overdraft fees that they can collect by doing so. I know that the response is, "Well, you should know better than to have a balance in your account that is so low that the bank can collect those fees," but all the same, internet banking is not a panacea, nor is it all that it's cracked up to be.

Redundant here, but please don't keep your hard-earned money with a large bank. Move it to a community bank or a credit union.
posted by blucevalo at 10:50 AM on March 3, 2010 [3 favorites]

The Whelk : The one thing I got out of my own family's finaail apocalyse was the message: Never Get A Credit Card Ever. It is Usury.

Credit cards rock - Just pay them off every month, simple as that.

dirigibleman : instead of just being honest and saying, "We're scaling back our cash back bonus, because fuck you," they tried to pass it off as "enhancing" the rewards.

Really? I got a similar notification, and considered it one of the most refreshingly honest letters I've ever received from a company... Basically they said "in order to maintain our current profit margin, we've decided to raise your rates and lower your rewards".

Wonder why the difference...
posted by pla at 10:52 AM on March 3, 2010

That's why we must get away from the big banks. check out
posted by brneyedgrl at 10:54 AM on March 3, 2010

gives decent interest on my checking account 2.17% (actually it was absurdly good interest, almost 6%, before the recession started up)

What. All the banks I've checked in the last N years have always been far below 1%, at least for reasonable (i.e. less than $1e6) balances.
posted by DU at 10:54 AM on March 3, 2010 [1 favorite]

oops....check out move your money .org
posted by brneyedgrl at 10:54 AM on March 3, 2010

Another credit union resource: National Federation of Community Development Credit Unions.

In particular, Alternatives Federal Credit Union in Ithaca has been an innovator in developing non-predatory consumer debt products.
posted by yarrow at 10:59 AM on March 3, 2010 [1 favorite]

bricabrac man : I don't get it...you're saying no one should buy a house unless then can pay for it in full up front?

For most purchases (and I'd even include cars) - YES.

For a house, few of us have a choice but to go into some amount of debt. $150k, though, may well count as merely a decent downpayment in a lot of markets (a friend just bought a place - Nothing all that special - For $650k; The absolute minimum you should put down on that comes to $130k).

That said, even though we usually need to go in debt to buy a house, don't let the size of the numbers involved trick you into rationalizing "well, if I have to pay this much for the next 15 years, I might as well pay this much more for 30. That leads to us ridiculing your sob story about the mean banks expecting you to pay them back. ;)
posted by pla at 10:59 AM on March 3, 2010

Credit cards rock - Just pay them off every month, simple as that.

I've never understood this. If you have the money to pay the credit card off, why use it in the first place? Are there still people who don't have debit cards? Or are you really just trying to run up a credit rating so you can get a mortgage someday?
posted by Mars Saxman at 11:02 AM on March 3, 2010 [3 favorites]

You're not alone, as many Americans can't manage to live within their means. For those of us with better money-management skills, credit cards are an uber-convenient way to buy things. (In ten years of having credit cards, I've never paid interest on a purchase).

How are they more convenient the debit cards? They're not. obviously lots of people are incapable of being responsible with these things, so why are they allowed to have them? Because big banks get to profit directly off of that irresponsibility.

Oh, and on top of that if you don't get one you get bad credit (or actually 'no' credit, which is just as bad), so even if you never plan to live beyond your means you still have to get one just to be able to get big loans for things like houses and cars.

Total B.S.
posted by delmoi at 11:05 AM on March 3, 2010 [2 favorites]

I have heard that everyone is eligible for some credit union somewhere, although I don't know if that's 100% true. But you should be able to find one with a little research.

I'd like to give a little shout-out to mine, First Entertainment. I joined when I worked at Sony Pictures in 2000 and they've been my bank every since. They gave me a car loan when my credit wasn't great, and they gave me a debt consolidation loan too. Credit Union ATMs are a network, so I can usually find one from some random credit union and not have to pay a fee.

And when that fails, Big Mac's liquor at the end of my street has an ATM with a 50 cent fee (my CU charges no fee for out-of-network). ATM fees are really really small potatoes compared to all the major screwing big banks do.
posted by drjimmy11 at 11:07 AM on March 3, 2010

If you have the money to pay the credit card off, why use it in the first place? Are there still people who don't have debit cards?

Time-shifting payments can be useful. It can also makes sense financially if you have no fees, because you hang onto your money for longer (== more interest).

On a more mundane level, I find it a lot easier to sign my name than remember Yet Another Security Code.

Or are you really just trying to run up a credit rating so you can get a mortgage someday?

You say that like it's a scam that the customer is trying to run.
posted by DU at 11:07 AM on March 3, 2010 [7 favorites]

Large banks in particular love to hide transactions, hold back on posting them, and play shell games with them, especially if it involves overdraft fees that they can collect by doing so.

My bank does shit like this to me all the time. Like taking three days to credit my paycheck into my account and at the same time taking over a WEEK to debit money, so OOPSIES! the money is debited during that "no man's land" period of time and ZOMG! OVERDRAFT!

I could kick them in the nuts, really I could. I don't know of any good community banks in RI, but if YOU do, tell me about them.
posted by grapefruitmoon at 11:09 AM on March 3, 2010

I've never understood this. If you have the money to pay the credit card off, why use it in the first place? Are there still people who don't have debit cards?

I have a debit card, but I don't use it. If I'm going to buy something online or set up a recurring monthly payment on a bill, I want to have the option to review my bill and dispute the charge, if necessary. If I used a debit card, I'd have to pay first and get refunded later.
posted by ThePinkSuperhero at 11:11 AM on March 3, 2010 [10 favorites]

Market not free enough. Needs more freedom.
posted by hamida2242 at 11:14 AM on March 3, 2010 [1 favorite]

blucevalo : Redundant here, but please don't keep your hard-earned money with a large bank. Move it to a community bank or a credit union.

For your checking, it doesn't make much difference.

For savings - Your savings account should never contain more than the minimum buy-in for the longest term no-penalty CD you can find (usually $500 or $1000, 5 year, and in my experience, PenFed almost always has the best rates around).

So either way, I agree, you shouldn't keep it at a large bank. You shouldn't keep it at a small local bank, either though. Thanks to the magic of the internet, you can keep your money at the highest yield nationally with little actual effort.

Mars Saxman : I've never understood this. If you have the money to pay the credit card off, why use it in the first place?

Then - And I seriously don't mean this to cause offense - You shouldn't use credit cards.

Basically, credit cards take away the burden and risk of carrying around large amounts of cash. With my bank, if I want more than $300 (the daily ATM limit), I need to actually go in to see a teller. With Visa, I can blow $15k on a whim (not necessarily a good thing if prone to such whims, BTW).

Additionally, credit cards give me a pretty comfy layer of consumer protection, from nearly 100% protection against outright fraud, to automatic warranties on anything I buy, even "buyer's regret" protection if I realize the next day that I don't really need that 6' bronze statue of a Llama in my garden. :)

Note, however, that debit cards do not usually give you those same protections - They don't even protect you from fraud in quite the same way (put bluntly, you've spent your money, not the banks, so they have a lot less motivation to look into disputes).
posted by pla at 11:17 AM on March 3, 2010 [3 favorites]

Are there still people who don't have debit cards?

I stopped using mine after I got charged for a $16K plate of hot wings due to a keying error by the waitstaff at a local wings emporium. Since we had the downpayment for our house for the closing later that week in the savings account, and overdraft protection that linked the two, it went through.

We did manage to settle everything in time to buy the house, but that put me off using debit cards instead of credit for daily expenses where I need to use a card. But I started using American Express when I was in grad school precisely because it forced me to pay off my expenses every month while protecting me from bank errors. Amex may be a sucky big corporation, but it works for me.
posted by immlass at 11:19 AM on March 3, 2010 [5 favorites]

I don't know of any good community banks in RI, but if YOU do, tell me about them.

Yes, that's the rub -- finding a good one. I'm having trouble finding one myself and am more likely to scram to a credit union when I have the chance. Looking on the googles it seems that there are quite a few credit unions in RI.
posted by blucevalo at 11:19 AM on March 3, 2010

I think it's great to say people should be more financially responsible and that we should have more education about finance.

However, I think that if people have responsibility to live within their means, then businesses also have a responsibility to respect that as a social ideal. So how do we feel about companies spending billions of advertising dollars trying to convince people that they need to buy a bunch of new stuff every year? Or finding other, often devious ways to encourage people to give in and spend more than they can on stuff that's not important?

Also, not everyone has the sort of existence where they can just bop online at any time with a reliable high-speed internet connection and use Mint.

I'm glad we have had some credit card reform, but I'd be happier if the maximum interest rate for any loan of any kind was capped at say 9%, and if falling behind on payments meant a cutoff of further purchases and a compassionate plan aimed that helping them pay off the remaining balance. People with problems paying off credit shouldn't get higher interest rates and more fees; they should just get less credit. I'm not an economist, but if someone tried to tell me banks couldn't still make a profit under rules like that, my B.S. meter would start going off.
posted by freecellwizard at 11:20 AM on March 3, 2010 [3 favorites]

grapefruitmoon : I could kick them in the nuts, really I could. I don't know of any good community banks in RI, but if YOU do, tell me about them.

If you happen to have a teacher as a 1st degree relation, the Coventry Teacher's Credit Union will go out of their way to help you.

Keep in mind, though, that many of those posting delays occur by law, not (just) so the banks can screw you. For example, one I recently learned - NEVER deposit more than $5k at a time, or you have a "hold" put on your entire account for 10-14 days. Because you just know that Osama handles the Al Qaeda payroll through his local community credit union. X(
posted by pla at 11:25 AM on March 3, 2010

Keep in mind, though, that many of those posting delays occur by law,

Seeing as how this mostly a recent thing and even 6 mos. ago the delays were much more reasonable (One day for a check to credit, not THREE), I"m gonna go with "No, they're just fucking with me." Unless the laws have changed in the last six months. Also, it's not all the time. Sometimes the money is there the next day. Sometimes... not. It seems pretty capricious.
posted by grapefruitmoon at 11:30 AM on March 3, 2010

Despite Mint's reputation as a smooth-sailing budgeting/money management alternative, I don't trust its security, or, as this thread points out, its responsiveness to e-mails for help/tech support. Maybe I'm being overly cautious, but hey, it's my money. Mint seems to have ready answers for all these questions, but I still don't trust it.
posted by blucevalo at 11:34 AM on March 3, 2010

Another thing to consider for the usefulness of credit cards and carrying a balance:

Last month, I experienced both a temporary downturn in income, AND a freakishly high gas bill, that was triple its usual rate. I'm on a fairly strict budget, so I could not afford three times the alloted amount I'd set aside for the gas bill.

Also, I plan on contesting the gas bill (and sorting out why it was that high, and whether I am due a refund), but that will take a while to sort out. Meanwhile, this current bill is staring me in the face. So my choices are:

a) contest the bill and get past-due notices on my account while I'm trying to sort that out, or

b) use my credit card to pay off the bill in full, and then pay down the balance over the course of the next four months or so while I combat the gas company.

This is a very specific set of circumstances -- I knew my income decrease was temporary (I've gotten work again as we speak), and I knew my gas bill would come back down to normal levels soon. This is just to take care of this one months' excessively high charge that happened to come at the same time as an excessively low income period for me. But it's not so specific to be uncommon.
posted by EmpressCallipygos at 11:35 AM on March 3, 2010 [1 favorite]

freecellwizard : but if someone tried to tell me banks couldn't still make a profit under rules like that, my B.S. meter would start going off.

Well, at least one of your points (9% cap, or any arbitrary number) would mean exactly that. Right now, we have ultra-low interest rates. In the 80s, you had a prime rate over 20%, meaning the banks would end up effectively paying you to borrow money at anything less than that.

But more to the point, others have said it, and it bears repeating - Banks exist to make a profit. Don't use banks. Use a credit union or other non-profit bank-like entity. They only need to make enough to cover expenses, not placate shareholders.

Seems almost the most sublime of ironies though - In a capitalist society, the best places to keep your money follow socialist principles of operation.

grapefruitmoon : Seeing as how this mostly a recent thing and even 6 mos. ago the delays were much more reasonable (One day for a check to credit, not THREE)

"Many consumers find that after depositing a check into their bank account, their deposit is not immediately available. The availability of funds is governed by Regulation CC of the Federal Reserve Board "

One thing to note here - Banks used to pretend to care, because they saw it as good for business. They can veryify that a check will clear almost instantly, and at their discretion, make those funds available to you. Doing so amounts to giving you a loan at 0% until it really does clear, however.

The laws have changed drastically over time, both recently and in a major way, in 1999 (with the repeal of the Glass-Steagall Act). But the part most of us actually notice just reflects a shift toward banks simply not caring in the least if you come or go with your pitiful sub-millions accounts. If they could get away with it, they wouldn't even waste their time on those of us who keep only a few thousand in their accounts to cover monthly expenses.
posted by pla at 11:42 AM on March 3, 2010

blucevalo : Redundant here, but please don't keep your hard-earned money with a large bank. Move it to a community bank or a credit union.

For your checking, it doesn't make much difference.

...

Thanks to the magic of the internet, you can keep your money at the highest yield nationally with little actual effort.

Unless you care about where your money is being invested by those banks. That actually requires considerable effort (or else I'm just not good at it).

For example, Wells Fargo is one of the largest investors in the private-prison corporation GEO Group, but the only reason we really know that is because the GEO Group is so horrible.

So, if as you suggest, I go online and find a St. Louis bank that's available to me (in CA) and offers one of those special "high-interest checking" accounts (with a variety of clauses and restrictions designed to spur fees and charges).

How do I know what that bank is going to turn around and do with my money? Seriously. My father keeps pressuring me to take my money out of my 2% savings account at my credit union, but at least there I know (or I am delusional enough to believe) that my money isn't going toward anything evil.
posted by mrgrimm at 11:50 AM on March 3, 2010

My bank does shit like this to me all the time. Like taking three days to credit my paycheck into my account and at the same time taking over a WEEK to debit money, so OOPSIES! the money is debited during that "no man's land" period of time and ZOMG! OVERDRAFT!

Do you use Direct Deposit for your paycheck, or is that option not available to you?

The company I work for offers DD, and I signed up as soon as I could. The money is in my account and available instantly, rather than processing for however many days. I'm amazed that the majority of my co-workers don't take advantage of this.
posted by Talanvor at 11:51 AM on March 3, 2010

According to Regulation CC,

The following types of deposits must be made available on the first business day following the banking day of deposit (“next-day availability”):

[Long list which I won't reproduce here]

The reg goes on to describe exceptions and other permutations, including whether the check is "local" or "non-local" or was deposited in person or at an ATM (or a "non-proprietary" ATM). The reg appears to give banks a fair amount of leeway in establishing other exceptions as well, including exceptions that allow banks to delay the availability of funds for a "reasonable amount of time."
posted by blucevalo at 11:54 AM on March 3, 2010

If you have the money to pay the credit card off, why use it in the first place?

In my case, points. My President's Choice MasterCard gives me .5% of every purchase in points, that can in turn be used to buy groceries.

At the moment, I have my Internet, cell phone, and car payments all set to automatically charge my credit card on their billing date every month.
I also have my bank account set to auto-pay the appropriate amounts off my credit card on the day after said appropriate billing dates every month.

Together with diligently putting major purchases on my credit card and paying it off in full that same day, I make about $100 a year that I can turn around and spend on groceries. Since I never incur interest on the card by making sure the balance is always at zero, it's basically free (to me) groceries.
posted by Shepherd at 12:03 PM on March 3, 2010

Yea and now I owe $350 min. Thanks reform. The card companies did a mass 'screw you' to everyone before Feb. 22nd. How is that mass reform? -- stormpooper

Uh, they can't ever do it again?...So, um, try not to be so selfish and short sighted?

Yes, the "reform" did nice things for people who may lose their jobs (many of whom will still need to declare bankruptcy, so I'm not sure of even that). But it was primarily a MASSIVE gift to credit card companies, many of which jacked their interest rates way up months ago in preparation for this.

A single line in the bill could have reverted interest rates back to their October 2009 levels -- Chase and Capital One jacked up their rates in November -- but then Congress might not have gotten adequately greased by their Wall Street buddies.
posted by coolguymichael at 12:08 PM on March 3, 2010

I've never understood this. If you have the money to pay the credit card off, why use it in the first place?

To get rewards. If you pay your balance off each month, and you have a rewards card, you basically get money for nothing.
posted by infinitywaltz at 12:10 PM on March 3, 2010

My President's Choice MasterCard gives me .5% of every purchase in points, that can in turn be used to buy groceries.

A Discover card will give you 1-2% (sometimes a much as 5% on certain categories of purchases) back in cash.

I hate credit card companies. Which is why I use a credit card for as many purchases as possible. Because by paying the card in full each month, I'm a net drain on their business.

I don't know why they don't do something to get rid of net-negative customers like me. My guess is that they need that possibility of paying your card each month and accruing no interest to get people hooked, knowing that most of them will end up paying interest eventually.
posted by straight at 12:23 PM on March 3, 2010 [1 favorite]

pla: Well, at least one of your points (9% cap, or any arbitrary number) would mean exactly that. Right now, we have ultra-low interest rates. In the 80s, you had a prime rate over 20%, meaning the banks would end up effectively paying you to borrow money at anything less than that.

So, if I loan you $100, and at the end of the year you pay me back $109, didn't I just make a profit? Why does it matter that the prime rate is 20%? Is the point just that they are making less profit than they are making if they lend at 20%?

Also, you are seriously making me think about switching to a credit union.
posted by freecellwizard at 12:25 PM on March 3, 2010

I don't know why they don't do something to get rid of net-negative customers like me. My guess is that they need that possibility of paying your card each month and accruing no interest to get people hooked, knowing that most of them will end up paying interest eventually.

They also make a bunch of money from the merchants via the transaction fees, which sometimes are higher when people buy with these kinds of cards. I'm sure they're making more from that than they are paying out to you.
posted by FishBike at 12:26 PM on March 3, 2010

If you pay your balance off each month, and you have a rewards card, you basically get money for nothing.

You never get money for nothing with a credit card.
posted by blucevalo at 12:27 PM on March 3, 2010

straight: "OMFG. Did you guys see the Colbert segment on Kwedit? I thought it was a joke, but it looks like a 100% real attempt to get kids to rack up credit-card-style debt online (complete with a "Kwedit Score"). And then, I'm not kidding, try to get Mom & Dad or Grandma to pay it off by "Passing the Duck".

This can't possibly be real. Except I think it is. Please somebody tell me I've been tricked."

Oh it's real. I said something about it on twitter a few weeks back and their CEO got all hostile about me saying that it was evil.
posted by dejah420 at 12:27 PM on March 3, 2010 [4 favorites]

Many banks publish (usually in some addendum to one of their depositor agreements, on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying 'Beware of the Leopard') a list of routing prefixes that will get posted to your account faster than others. I do not pretend to understand the infrastructure behind this, but it has something to do with the Expedited Funds Availability Act's definition of "local" and "non-local" banks.

My general understanding is that 'local' deposits are supposed to post in two days, 'non-local' ones in a week, unless there's something amiss with the check. But there's really no way to tell, unless you want to break out your bank's list and start analyzing routing numbers, whether a check is going to be local or non-local.

Additionally, I've written a check to someone who used the same bank that I do, and they did an electronic deposit (basically scanning the check and emailing it in), and the money transferred almost instantly. Which is just another reason to never write a check that you can't cover; the person you hand the check to could be a member of the same bank and, with the new electronic-deposit systems, could have the money in a matter of minutes or hours depending on your bank's policies.

Plus, there are some circumstances under which someone can accept a check, but turn it into an ACH transaction and process it that way. (ACH is the system that normally processes direct deposits and debit card transactions.) So you really can't assume any kind of float on the checkwriting end, any more than you'd assume a float when using a debit or ATM card.

I know someone who went around and trained bank employees on the EFAA (aka Reg CC) back when it was new. I think it involved a giant check costume. Ah, for the days before PowerPoint.
posted by Kadin2048 at 12:29 PM on March 3, 2010

I've never understood this. If you have the money to pay the credit card off, why use it in the first place? Are there still people who don't have debit cards? Or are you really just trying to run up a credit rating so you can get a mortgage someday?

Bingo.

I use my credit card if I want to buy a pack of gum. I hardly ever carry cash.

I pay it off every week online.

It's extremely convenient, and the reward points I get mean I've had quite a few free flights.
posted by generichuman at 12:33 PM on March 3, 2010 [1 favorite]

I love you Jackie Ramos. How come it's the people making a little better than minimum wage who are showing us how to do the right thing?

Probably because most people make little better than minimum wage at some point in their lives, so it's like having the majority of car accidents close to your house.

I'm just happy somebody does the ethical thing instead of what's best for them financially, once in a while.
posted by davejay at 12:33 PM on March 3, 2010

If you pay your balance off each month, and you have a rewards card, you basically get money for nothing.

If you don't get addicted to heroin, and you enjoy shooting heroin, basically there's no harm done, right?

I mean, basically credit is useful and harmless so long as you have the discipline to use it wisely, but when you realize there is an entire corporation of employees whose goal is to try and coerce you into using it unwisely (or outright manipulate you into it, with varying due dates and universal default and whatnot) then it becomes a lot more sinister.
posted by davejay at 12:38 PM on March 3, 2010 [6 favorites]

My general understanding is that 'local' deposits are supposed to post in two days, 'non-local' ones in a week, unless there's something amiss with the check. But there's really no way to tell, unless you want to break out your bank's list and start analyzing routing numbers, whether a check is going to be local or non-local.

Two business days for local, five business days for "non-local" (according to Reg CC). But you're right, the definitions in Reg CC of what is local and what is not are not exactly ironclad, nor, I suspect, are they uniform across regions or across institutions. Your comment makes me suspect that they mostly just flip a coin.
posted by blucevalo at 12:38 PM on March 3, 2010

I hope you didn't mean to sound smug because there are days when I can barely see through my fear.

Look, my heart goes out to you if you're on tough times, it really does. Maybe you were sick and medical bills piled up. Situations like that expose major flaws in our society and I hate to see them happen.

That said, a huge proportion of people who are hurting right now are hurting because they made dumb decisions. They were living beyond their means to begin with, and not putting away money in an emergency fund. Then the recession hit, someone lost a job, and they were screwed. Then after losing their job, many of them continued to try to keep up with the Joneses, which made them doubly screwed.

Putting a balance on your credit card is not a good way to get through tough times, unless you know for certain that it's a short-term thing. (i.e. I have a signed job contract that starts next month)

The list of things I would do before putting large balances on a credit card are pretty long. Drastically cut my expenses. Sell most of my possessions. Move to a smaller house or apartment. Get a loan from a credit union. Trade my car in for a beater. Eat PBJ every night. If I was unemployed, I'd hock newspapers on the corner, or start mowing lawns door-to-door - anything I could get.

Bottom line, if you're hurting because of events that were beyond your control, then I feel for you. You're the reason that we need strong regulations.

The people who spent like idiots are the ones that I'm scorning. They're the reason that we need to teach kids financial management.
posted by chrisamiller at 12:46 PM on March 3, 2010

For those people advocating not using credit cards at all, I have to ask if you've never been unemployed, gotten a salary cutback, or never had an emergency. I'm being serious, not combative.

Credit cards suck, but for some people they are a necessarily evil. In The Daily Show link, the interviewer jokes about how poor people don't deserve credit cards. However, it's the lower-income folks who need it because they tend to have less disposable income for emergencies or larger purchases. I'm not just talking about cars or homes, but flat tires, broken fridges, broken bones, etc.

What do you do if you have a strict budget, like Empress, and you get a flat tire? You don't get paid until next week, but you have to get to work and there's not really a good public transit system in your city. You use a credit card to get it fixed.

I just looked at my latest credit card statement and it's going to take me 12 fucking years to pay off about $1,500 if I am making the minimum payment. Some day I hope to have a higher income in order to make more than the minimum, but as is stands I am a poor college student who will live with this debt until I'm in my thirties. (Not to mention my other card with more than three times the balance!)
posted by too bad you're not me at 12:49 PM on March 3, 2010 [1 favorite]

Many of you people talk as though keeping folks under a constant burden of debt is a bug. It's a feature. It's all part of the cheap labor plan.
posted by Legomancer at 12:52 PM on March 3, 2010 [4 favorites]

What do you do if you have a strict budget, like Empress, and you get a flat tire?

Then I'd argue that your budget wasn't very good. You have to have some cash put aside for the little things like that that invariably pop up. If you can't afford to create an emergency fund like that, then you need to take a hard look at where your money goes and find ways to cut back. Maybe that means living in the shitty part of town, or shopping at goodwill, but shit - in my opinion there is nothing worse than being over your head in debt.
posted by chrisamiller at 12:54 PM on March 3, 2010

I mean, basically credit is useful and harmless so long as you have the discipline to use it wisely, but when you realize there is an entire corporation of employees whose goal is to try and coerce you into using it unwisely (or outright manipulate you into it, with varying due dates and universal default and whatnot) then it becomes a lot more sinister.

Well, yeah, which is why it's probably not a good idea to go into it with an attitude of "Oh boy, free money!"

Instead, it's better to think, "This company is trying to rip me off, but by being smart, I can rip them off instead, and it's legal," which is how I like to think of rewards programs.
posted by infinitywaltz at 12:58 PM on March 3, 2010 [1 favorite]

a huge proportion of people who are hurting right now are hurting because they made dumb decisions

This is like blaming the victims of the Haiti earthquake for living in poorly constructed houses.

Maybe that means living in the shitty part of town, or shopping at goodwill...

Or cleaning the house of the bailed-out CEO whose bank just foreclosed on your own home.
posted by HP LaserJet P10006 at 1:05 PM on March 3, 2010 [1 favorite]

This is like blaming the victims of the Haiti earthquake for living in poorly constructed houses.

Do you seriously believe that most people who have credit card balances had no choice but to spend all that money? Do you think that people are so helpless against marketing and consumerism that we should blame the corporations for the money that they spend on stupid shit?

Did people really need sham-wows when a rag works just fine? Did we really need huge houses in the suburbs and giant SUVs? No, but we wanted them, and so we stuck our fingers in our ears and said "La la la la housing prices will always go up, and I can afford to spend way more than I make on stupid shit."

I'll be the first to rail on corporatism and tell you that we should regulate the hell out of them, but blaming them for the poor choices that people made is dumb.
posted by chrisamiller at 1:13 PM on March 3, 2010 [1 favorite]

(I'll also be the first to tell you that we need to pay living wages and make healthcare free, but again, my ire is focused on people who had a choice, not minimum wage earners and the chronically ill)
posted by chrisamiller at 1:15 PM on March 3, 2010

Delmoi:

Note: Help maintain a healthy, respectful discussion by focusing comments on the
issues, topics, and facts at hand—not at other members of the site.
posted by stormpooper at 1:18 PM on March 3, 2010

I've never understood this. If you have the money to pay the credit card off, why use it in the first place? Are there still people who don't have debit cards?

Name one advantage of debit cards over credit cards, assuming you pay your credit card bill in full every month. I can't understand why anyone would ever use a debit card.
posted by caddis at 1:22 PM on March 3, 2010 [5 favorites]

Pretend you only make $600 a month. Now, that $600 might pay your rent, and your food, and pretty much nothing else that you need to live.

Except that you feel as if you'll never be able to make more money unless you have a better job, and the better jobs are in another part of town that you need a car to get to, because there's no public transportation where you are. So you get a lift from friends to various interviews, and you get a job that pays you $1100 a month.

Okay, now a decent car will run you $14,000, and you don't have that kind of money, so you can't take the job. But with a loan making it $275 a month, you figure this worth the risk (of losing the job and still having a car payment) because you'll net a few extra hundred after gas and insurance, and a 25% bump in your salary is worth some risk, right?

If you keep your job, and get a better one, and pay off the car, and your life is better, then you look like a genius for taking the loan (and the risk) -- but if you lose your job and can only find one that pays $800, you end up taking a loss for years to come, lowering your standard of living, and looking like a fool.

So, now let's take the same scenario, but you only make $400 a month currently, which isn't enough to get you rent and food unless you live in squalor. You get an offer for a credit card, and if you just put $50 a month on it until you get a better job, you won't have to live in squalor. Roaches and rats or future debt? Most people take the debt.

Now, you still don't have a car to get to the good part of town where the jobs are, but you might manage to get a better job eventually -- but if it doesn't allow you to stop using the credit card and pay off the credit card, you're no better off and likely worse off.

Most people -- myself included -- who say that discipline is the key to using credit responsibly are in a position to want credit but not need it; we're not faced with the choice of future debt at high interest rates vs being homeless or going without medical care.

I don't think anyone out there has sympathy for someone that buys a car they can't afford, or ramps up their credit card with charges for porn and cigarettes, so let's move them off the table. That leaves people for whom credit is a less-appealing choice (and so easily rejected) and people for whom credit is a bad choice but still better than the alternatives (and so easily sympathized with.) Credit card companies on the whole make more profits from the latter than the former, and it can be hard to find sympathy for those companies when they obfuscate how bad a choice they really are.

(end rant)
posted by davejay at 1:35 PM on March 3, 2010 [13 favorites]

Name one advantage of debit cards over credit cards

With a debit card, you are spending money you have, so if you lose your job the next month you may have no money left but you also don't owe anyone anything, and don't have to pay interest on that money you spent. Neither of those things are true with a credit card.
posted by davejay at 1:40 PM on March 3, 2010

Do you use Direct Deposit for your paycheck, or is that option not available to you?

Nope, sadly. I do have the option to be paid in cash, but that creates headaches of its own (and makes me feel kind of like I'm working for Marlo Stanfield).
posted by grapefruitmoon at 1:41 PM on March 3, 2010

Fuck. From my rant, "and pretty much ~~nothing~~everything else that you need to live."
posted by davejay at 1:41 PM on March 3, 2010

Grapefruitmoon,

I feel your pain. Getting paid by check now is a total hassle. Especially when I don't know if my boss will be back by Friday to write the checks.
posted by josher71 at 1:45 PM on March 3, 2010

Did people really need sham-wows when a rag works just fine? Did we really need huge houses in the suburbs and giant SUVs? No, but we wanted them, and so we stuck our fingers in our ears and said "La la la la housing prices will always go up, and I can afford to spend way more than I make on stupid shit."

I invite you to come over and help me find that sham-wow and that SUV parked out front of the huge house in the suburbs that you so clearly think I have. You can look while I clean up with the rag I've always used. I may be late, because the subway I've always used usually runs late, and the apartment I actually live in is a hike from the subway anyway.

In conclusion, not all people who carry credit card debt do so because of frivolous things. Besides, my credit score is in the high 700's, so I must be doing something right.
posted by EmpressCallipygos at 1:45 PM on March 3, 2010 [1 favorite]

Maybe you were sick and medical bills piled up.

Yes, in addition to my husband's job loss I was (and am) sick and medical bills piled up. Medical debt contributes to an estimated 62% of all US bankruptcies and with the current economy and health care bill disaster I don’t expect things to change soon. Before this happened, I handled my credit according to your moral principles but like most middle class people without family wealth, I knew I could be crippled by a perfect storm of unavoidable and catastrophic expenses. And now I have been. However, please don’t elevate me above anyone else in dire financial straits right now; while we snipe at each other over businesses that have received lavish government support to continue functioning are preying on us all. Please reread this article and be kind. You don’t know why your neighbor is suffering, but it’s enough to know that he is.
posted by melissa may at 1:49 PM on March 3, 2010 [5 favorites]

freecellwizard : So, if I loan you $100, and at the end of the year you pay me back $109, didn't I just make a profit?

No, because I only count as one person, and you assumed that I will pay you back in full and on time. When a bank issues loans, they have a value equal to the amount of the loan, plus the lifetime interest on the loan, minus the amount of the loan times the risk of default. And that ignores a lot of details.

I've just spent about an hour trying to figure out how to explain those details in a way that makes sense, so hopefully I succeed here... :)

First, you have to consider inflation (which averages around 3%). If you loan money at less than that, you flat out lose value over time. Aside from forcing a hard lower limit to "profitable", this has deeper implications that I'll get to in a minute.

Second, when a bank lends you money, it:
A) Has to come from somewhere - Not necessarily real physical money, but at the very least it has to trace back to what amounts to a permission slip from the Federal Reserve to pretend you have X dollars. The Federal reserve charges the Federal Funds Rate for those permission slips, so that right there you have a baseline below which the bank really loses money (with a lot of caveats that I won't get into here).
B) Reduces the amount the bank can give to someone else - Such as another bank, which occurs at exactly the prime rate (by definition, prime = fed+3% in the US).

Now, built in to just those two conditions, you might see the underlying cause of credit freezes (both to consumers, and across the board). If the bank can't charge at least prime plus some amount that outweighs the risk of you defaulting, they will refuse to lend to the general public because (even if they don't outright lose money), they can make more lending to other banks. And if inflation exceeds the difference between prime and the fed rate (the 3% just mentioned), banks won't loan to other banks. When both hold true, as happened last year, all lending grinds to a halt.

So, to get out of that mess this time, we saw two major actions - The Fed dropped their rate to as close to zero as matters (and no one bring up Japan, please), and the treasury promised to cover Fanny and Freddy's butts. As a result, banks could lend at record-low rates because they had almost no risk.

That worked fairly well, but unfortunately has a rather nasty side effect - It basically puts both the inflationary cost (Fed rate less than inflation literally means Uncle Sam pays you to take his money) of those loans, as well as the burden for defaults, directly on we-the-people. IMO, probably worth it to avoid a 20 year depression; But we can expect pay those costs (and I haven't even mentioned the bailouts and stimulus bills) for a looooong time to come.
posted by pla at 1:55 PM on March 3, 2010

On a lighter note... You've got to listen to me, Babar.
posted by grapefruitmoon at 1:59 PM on March 3, 2010 [1 favorite]

With a debit card, you are spending money you have, so if you lose your job the next month you may have no money left but you also don't owe anyone anything, and don't have to pay interest on that money you spent. Neither of those things are true with a credit card.

This makes no sense. For the hypothetical consumer who has enough in his bank to pay by either credit or debit, what difference does it make if their money comes out of your checking/savings account immediately or they pay it off at the end of the month before the bill is due? In both cases you have the money in the bank, but in the latter case you had another few weeks to earn interest on it, and you've received whatever "rewards" the credit card company pays out. If you lose your job a week after you make your purchase, you can still choose to pay for the purchase.
posted by Thoughtcrime at 2:00 PM on March 3, 2010 [2 favorites]

Look, I'm just going to point to davejay's post above, because he gets to the heart of this conflict:

I don't think anyone out there has sympathy for someone that buys a car they can't afford, or ramps up their credit card with charges for porn and cigarettes, so let's move them off the table. That leaves people for whom credit is a less-appealing choice (and so easily rejected) and people for whom credit is a bad choice but still better than the alternatives

We're talking about different groups of people here - I'm talking about the first group, you guys seem to belong to the latter. I tried to make that clear and apparently failed. Best of luck to all of you.
posted by chrisamiller at 2:00 PM on March 3, 2010

This makes no sense. For the hypothetical consumer who has enough in his bank to pay by either credit or debit, what difference does it make if their money comes out of your checking/savings account immediately or they pay it off at the end of the month before the bill is due? In both cases you have the money in the bank... [emphasis added]

That's the key, right there. With a credit card you can spend money you do not have in the bank, intentionally (on anticipation that you will be receiving your next paycheck as expected) or not (that is, you might not realize your spouse has spent some money, and so you overestimate your current available balance.)

The original question I was answering wasn't about the hypothetical consumer who has enough in his bank to pay by either credit or debit, it was "assuming [the hypothetical consumer pays their] credit card bill in full every month." A person can have the intention and habit of paying the bill in full every month, yet still charge to a credit card before that money is in the bank. With a debit card, this cannot be done*.

And so that's the advantage of a debit card. You can call it a crutch for people with poor discipline, or you can call it a safety measure against accidentally spending more than you have on hand -- by either description, that's a benefit.

Another benefit: if you mail in your credit card payment on time, but for some reason it never reached the credit card company, you may suffer a late payment fee, an interest rate hike, a credit report negative hit, or some combination of all three. None of these can happen with a debit card.

In short: a credit card allows you to make certain mistakes, and to be damaged by certain things outside of your control, that cannot harm you when you use a debit card.

*this assumes you don't have one of those fucked up banks that lets you overspend, smacks a big overdraft fee on you, and so on -- I have a credit union that doesn't do that, myself, and those overdraft capabilities/fees are a bastardization of what a debit card is that is done purely in the name of profit to offset the profits lost vs you using your credit card.
posted by davejay at 2:18 PM on March 3, 2010

chrisamiller: For most everyone, fixed costs (rent, gas, food, insurance) vastly outweighs luxury costs (shamwows). I am willing to give all of the irresponsible people who wasted all their money on shamwows a pass if that's what it takes to also bail out the people who are having trouble making their fixed costs. This is my governing principle when considering the ethics of debt, and although I am not religious I hold it with an utterly unswayable religious fervor.
posted by You Can't Tip a Buick at 2:22 PM on March 3, 2010 [3 favorites]

I don't think anyone out there has sympathy for someone that buys a car they can't afford

All of you paid for your cars in cash? Really?
posted by desjardins at 2:30 PM on March 3, 2010 [1 favorite]

I'll be the first to rail on corporatism and tell you that we should regulate the hell out of them, but blaming them for the poor choices that people made is dumb.

No, your argument is veering way off the point.

The concern we have is regarding the method in which the banks and creditors recover the debt at an obnoxiously disproportionate amount to the actual debt. I don't give a shit if you have $5000 in credit card debt because you spent it all on beer, porn, and iTunes. The fact of the matter is, if a bank is going to get that money back, they have to give the person the opportunity to actually pay that money back.

What they are doing is akin to a doctor making a person dance to pay for treatment of a broken leg. These people have $5000 in debt so the banks raise their interest rates and add fees? So after giving this bank $1000 at an interest rate of 29.99%, guess what? You still owe that bank $4400. How the hell are you going to get out of that hole?

So you may say "well, they dug their own grave..."

SCREW.THAT.

This person then decides to default on the debt. Or, perhaps, they go for a long drive in the garage, and the bank has no way of recovering the loss from a dead person do they? So, who pays the margin?

Well, fortunately for the bank, they get to write off the loss, some losses they can get credited for, and if this becomes common place, they raise the rates for everyone else who has an account with them.

The fact of the matter is these banks are exploiting these people, and their collection methods aren't fiscally wise, nor morally proper.
posted by Bathtub Bobsled at 2:36 PM on March 3, 2010 [6 favorites]

The list of things I would do before putting large balances on a credit card are pretty long. Drastically cut my expenses. Sell most of my possessions. Move to a smaller house or apartment. Get a loan from a credit union. Trade my car in for a beater. Eat PBJ every night. If I was unemployed, I'd hock newspapers on the corner, or start mowing lawns door-to-door - anything I could get.

We are just coming out of a protracted period of financial woe--legal dispute we had no choice about, that cost about $47,000 over 22 months, and came right on the heels of back-to-back emergencies that wiped out the emergency fund I had been so proud of before. We found it surprising how intractable many of our expenses were, though we did cut back quite a bit. For instance, we had taken on a car payment (I hope we don't do that again!) and that ended up being a large fixed expense we really couldn't get rid of. Every time I looked into selling that car and buying something older either with the dregs of cash on hand or with a smaller loan, it just didn't end up making sense either financially or from the POV of needing a reliable car for work.

Likewise, selling our house and moving into a smaller place (or a comparable place for less money in the city we now live in a suburb of) looked great on paper, but was impossible. The housing market had crashed, we couldn't count on selling our house, we didn't have the money for a down payment on a new place (see above re: back-to-back emergencies wiping out liquid funds), and with legal bills out of our control and mounting, certainly didn't have the means to take the risk of carrying two mortgages until our old house sold.

Selling stuff? We tend to buy used furniture or get it as hand-me-downs; our electronics are usually at least one generation behind the current one and not worth much (we probably bought them used and cheap ourselves); I don't own jewelry. We don't own a lot of saleable goods. Maybe a garage sale--old toys, kids clothes, a stroller we're not using anymore--would have netted enough for a week's groceries. Not enough to make a big difference.

I'm a stay-at-home mom, and at various times we'd consider whether I should get a job. The kinds of things I could do evenings and weekends didn't pay enough, we thought, to be worth the stress and loss of family time, and the kinds of things I could do on weekdays would have required paying for childcare. I don't have the wardrobe for an office job, and the upfront expense of buying appropriate clothes was a barrier. I was able to do some freelance writing from home thanks to some connections I have.

We borrowed as much from our credit union as we could, as you said, before using the credit card (also through our credit union, who, bless them, have kept our interest rate at 8.9% despite our racking up a high balance and making a couple of payments a day or two late).

I didn't mean to go into so much detail about our specific situation. I just meant to say that I was surprised by how intractable many of our expenses were--sure, we cut down on entertainment and eating out and travel, and deferred things like clothing purchases, stopped buying organic food and started buying store brands, but the floor below which we were not able to go any lower was surprisingly high.
posted by not that girl at 2:36 PM on March 3, 2010 [8 favorites]

What not that girl said. There are some expenses you just can't get out of. Also, one bad decision can really snowball. So you were giddy when you got a new job and bought a flatscreen with a credit card, only to lose your job several months later. Well fuck you, you'll be paying for that one mistake for years.
posted by desjardins at 2:44 PM on March 3, 2010 [4 favorites]

Do you think that people are so helpless against marketing and consumerism that we should blame the corporations for the money that they spend on stupid shit?

Apart from individual personal situations, which are irrelevant, corporations exist primarily to generate profit. They often create false needs for their "stupid shit," some of which is necessary, some of which is not, by spending millions of dollars on ever-more aggressive marketing and advertising, all of which exist to prime the urge for instant gratification. Most "stupid shit" would not generate demand were it not for the false need created for it.

Your argument that people (in general) should just be able to resist "consumerism" is a reductio ad absurdum in an economy that for the past 30 years (at least) has been based on a hand-in-hand relationship between economic growth and extravagant spending, and not just on the part of individual consumers. I'm not saying that people who make stupid budgetary decisions don't bear responsibility for their actions. But your definition of people who "have a choice" (a choice not to spend) seems to me either overly broad or overly vague.
posted by blucevalo at 2:45 PM on March 3, 2010 [1 favorite]

Actually, I think I'm done discussing this issue.

I realize its only a matter of time before the "pull themselves up by their bootstraps" crowd experiences the sudden and unforseeable hardships everyone comes across at some point in their life.

And its only a matter of time before someone is very down on their luck, they have no money, huge amounts of debt, they just lost their job, no prospects on the horizon, the wife left him to run off with a coffee shop owner, andthe only thing he has to his name is the gun he's holding to his head, when suddenly... on the tv comes a politician or a bank CEO that says "It is up to these people to help themselves. This is the land of opportunity and they should go find theirs...(subtext "fuck you, got mine!)"

...a twinkle comes to the man's eye when he asks himself whether he's going to use his last bullet to shoot the tv, or the man behind it. A glow comes to his face when he realizes prisons have free room and board, and with being shanked to death the only downside he could care less 'cause he was about to end it anyway.

I assure you reform will soon follow.
posted by Bathtub Bobsled at 2:53 PM on March 3, 2010 [3 favorites]

desjardins : All of you paid for your cars in cash? Really?

I bought my most recent car almost 10 years ago. Half down got me a zero interest note for two years, so I took it and kept the rest in an interest-bearing account. Otherwise, yes, I would have paid for it in cash (well, on plastic that I paid off at the end of the month).

Important point - I didn't buy a $40-60k luxury/sporty car, which every dealer I visited really wanted to push me into (apparently when they see early-20s males walk in, the dollar signs start flashing in their eyes). I bought a $12k no-frills compact sedan, which has served me quite well since then.

My next car, which I won't buy until my current one dies (hopefully another 5+ years), I might go for something a bit more toy-like, only because I hike a lot and could use a few more inches of clearance on many of the access roads to trails in my area. But still looking at the under-$20k market for a smallish Jeep or similar, sure as hell not talking about something like an H3.
posted by pla at 2:56 PM on March 3, 2010

Name one advantage of debit cards over credit cards, assuming you pay your credit card bill in full every month.

None, with that assumption, but life is full of the unexpected, and who's to say something won't happen between now and next month that will affect your ability to repay? Using a debit card protects me from accidentally falling into debt, by preventing me from accidentally spending money I don't actually have. Why risk debt if I don't have to?

I can't understand why anyone would ever use a debit card.

It's safer and more convenient than carrying around thousands of dollars in cash, and it's more convenient than stopping by an ATM every few days. It's also essential if you want to buy things online without borrowing money to pay for them.
posted by Mars Saxman at 3:04 PM on March 3, 2010 [1 favorite]

You say that like it's a scam that the customer is trying to run.

Sorry DU - I phrased that poorly. Nothing wrong with working the system the way it's built to be worked.
posted by Mars Saxman at 3:08 PM on March 3, 2010

I'm a stay-at-home mom, and at various times we'd consider whether I should get a job. The kinds of things I could do evenings and weekends didn't pay enough, we thought, to be worth the stress and loss of family time, and the kinds of things I could do on weekdays would have required paying for childcare.

That's great, and I've not intention of criticizing the way you want to lead your life, but let's not pretend that isn't a choice. You looked at the lifestyle you wanted -- a certain level of material comfort, plus being able to stay at home with the kids. You couldn't afford this on one income, so instead of sacrificing one element (either the level of material comfort or days with the kids) you went to a credit union.

I'm not saying it's good or bad, but it surely is a choice. Affordable child care would go quite a way to easing some of this dilemma, to be sure, but you assuredly CHOSE to be a stay at home mom who then sought out credit -- many other families in your position don't have that option or choose and different path, and require two incomes to stay above water.
posted by modernnomad at 3:14 PM on March 3, 2010

I don't get it...you're saying no one should buy a house unless then can pay for it in full up front?

Tis what I did. put down the full amount as the earnest money from my personal checking account for %15 off the asking price. And got the home. After the 1st offer for the tax appraised value at 5% over the tax value was rejected. Was remembered by the real estate agent too as he'd never seen that.

The less credit sloshing about the system - the lower the real estate price.

Oh and an anagram: Debit Card - bad credit
posted by rough ashlar at 3:17 PM on March 3, 2010 [1 favorite]

If you pay your balance off each month, and you have a rewards card, you basically get money for nothing.

You never get money for nothing with a credit card.

Eh? Really? I've made probably about $400 off of my credit card rewards over the time since I've been using them. I pay them off in full every month. What has this cost me?
posted by PhoBWanKenobi at 3:18 PM on March 3, 2010

Using a debit card protects me from accidentally falling into debt, by preventing me from accidentally spending money I don't actually have. Why risk debt if I don't have to?

Honestly, having the opportunity to take on modest debt and still be able to pay my rent is a comfort to me, not an OMGscarysituation. Based on the comments here, I'm fairly certain that I'm not the only person who feels this way.
posted by PhoBWanKenobi at 3:20 PM on March 3, 2010

Bathtub Bobsled : I realize its only a matter of time before the "pull themselves up by their bootstraps" crowd experiences the sudden and unforseeable hardships everyone comes across at some point in their life.

Hey, then you'll hate hearing about me! Currently unemployed (laid off from a company hemorrhaging the red ink), and taking entirely too long to find another job despite 15 years experience in my field (the only down-side to living in the middle of nowhere, I guess). Recently bought a house, and as I just posted, my car could use replacement but fortunately should at least keep functioning for a few more years. I don't come from a wealthy family (lower middle class), and (when employed) my profession only pays perhaps 25% above median in my area. And even contracting day-jobs have all but dried up lately.

And yet, I have not fallen one penny behind on my CC bills or mortgage, because when I did have a job (and when I get another one in the near future), I lived entirely within my means and put a decent amount away for the future every two weeks.

So when I spew "nonsense" about personal and financial responsibility, yes, I can point to myself and say, without hypocrisy, "yes, you can!". Put down the $3/bag junk food and $100 meals out and invest in cooking ingredients (your heart as well as your wallet will thank you). Stop blowing $20-$30 (before another $20-$30 in snacks) going to movies when for $10 you can watch more than you could ever stand from Netflix for $10/month. Lose the premium cable package (or cable altogether - You can get entire TV series, ad free, for that same $10/month from Netflix). Drop your $100/month cell package (or even any landline over $50/month) and pick up a tracphone; and then - get this - don't use it!... Hang up and live, people!

I hear so many people telling me how they've already cut their expenses to the bone, and then watch them do all of the above, and much, much more. So many places you can save money... The real problem here doesn't come from people unexpectedly unemployed (though they have my deepest sincere sympathy - Good luck to us all) - It comes from people living beyond their means before they found themselves out of a job.
posted by pla at 3:26 PM on March 3, 2010

All of you paid for your cars in cash? Really?

We did. Well, in the last 14 years my husband and I have bought two cars; an $1800 truck that was a POS the day I bought it but which works fine as a second vehicle, and a 1999 Toyota Camry that a friend was selling (in 2004) for eight grand. We were able to make that second purchase because my husband works for a company that offers an employee stock purchase plan that lets you buy the stock for less than it's worth, then sell it immediately; all the income from that went into a special savings account. We try to keep about a car's worth of money in there.

You know what, though? Not everybody has access to those kinds of resources. And the folks who do tend to be the rich ones, frankly. Rich get richer, poor get poorer.
posted by KathrynT at 3:28 PM on March 3, 2010

None, with that assumption, but life is full of the unexpected, and who's to say something won't happen between now and next month that will affect your ability to repay?

Right, but that doesn't matter. If you had used a debit card, and "something happened", then what? How do you pay for the something? You're worse off.
posted by smackfu at 3:32 PM on March 3, 2010

Honestly, having the opportunity to take on modest debt and still be able to pay my rent is a comfort to me, not an OMGscarysituation. Based on the comments here, I'm fairly certain that I'm not the only person who feels this way.

Well, certainly - all I'm saying is that I don't see the point in constantly running up and paying off debt. Why not just pay your expenses out of money you actually have, and save the credit for the unexpected? I'm not arguing against credit cards; I'm arguing that it doesn't make sense to buy things in anticipation of your next paycheck.

Hmm, perhaps that explains some of the disconnect. My understanding is that when people say they charge things and pay the card off in full every month, the cash flow looks like this:

paycheck -> charge expenses -> pay for last month's expenses -> charge more expenses -> next paycheck

That's fine as long as you can keep all the plates in the air, but next month's bill is going to come even if your next month's paycheck doesn't. If you have enough discipline to simultaneously set aside an entire paycheck and leave it untouched all month, so you can use it to pay off next month's bill, then I can see how you could do this without taking on any extra risk: but it seems like an awful lot of juggling just to get the half-percent bonus, or whatever it is. Totally not worth it to me.
posted by Mars Saxman at 3:34 PM on March 3, 2010

you assuredly CHOSE to be a stay at home mom

Right - because there can't be a situation where the child requires care due to a medical condition and "professional" care would far exceed a combined salary.
posted by rough ashlar at 3:37 PM on March 3, 2010 [2 favorites]

What has this cost me?
The anonymous nature that cash can provide?
posted by rough ashlar at 3:38 PM on March 3, 2010 [1 favorite]

I'm a net drain on their business.

REally? You sure about that?

They get to charge the merchant and get to sell your demographics to others as 2 "benefits" they get.
posted by rough ashlar at 3:51 PM on March 3, 2010

If you have enough discipline to simultaneously set aside an entire paycheck and leave it untouched all month, so you can use it to pay off next month's bill,

I don't think having savings and an emergency fund is that crazy an idea. Yes, if you don't have that, and are living paycheck to paycheck, running up credit debt is risky. But so is the underlying financial strategy — just living paycheck to paycheck is FAR riskier than someone using their credit card for everyday expense with a couple of months expenses saved in the bank.
posted by smackfu at 3:53 PM on March 3, 2010

I personally know more and more people who work on a cash basis. And I mean cash - they don't even have a bank account.

I have faith that fair banks will evolve in the same way as the organic food industry. In the 60's and 70's it was a quirky way to serve a peculiar demand to people willing to pay more. Then the industry slowly grew until it caught people's attention. (Yes I know about changes in Federal Law, um, stick with me for a minute). Organic food is common now in many places.

The problem is information asymmetry, the economist's favorite principle. However, that asymmetry is falling. People are becoming better informed, they have better access to information, and the information itself is less obfuscated. You can't choose a bank when you feel they are all the same. As a result...they are. And the news is not good.

I have a dream - that one day comparing and choosing health insurance will be as easy as selecting a car or a computer. Not idiot proof, but straightforward enough.
posted by Xoebe at 3:55 PM on March 3, 2010

Steve Irwin used to handle snakes and crocodiles for a living. Sure, snakes, especially poisonous ones, have killed a lot of people. Crocodiles eat people. They are inherently dangerous. Did that stop Steve Irwin form playing with them? No, because he was really good at it, and was ready for the consequences of being bitten by one. Also because he got a tangible benefit from playing with snakes and crocodiles, i.e., a paycheck.

My point being, credit cards and banks are like snakes and crocodiles. If you know how to handle them, how to stay away from their sharp, poisonous parts, and you can derive a tangible benefit from it, then use them. If you have no clue what you're doing, at least understand that they are prone to screwing you over, and maybe don't use them.

Now then, Steve Irwin isn't necessary the best example, I mean it's an imperfect analogy, because once the animal kingdom fucked him over, it fucked him over pretty hard. But that's why I used snakes and crocodiles as examples. Stingrays are more like day trading.

And, Don't Buy Stuff You Can't Afford.
posted by jabberjaw at 3:57 PM on March 3, 2010 [2 favorites]

Why not just pay your expenses out of money you actually have, and save the credit for the unexpected?

. . . because I've amassed a nice chunk of change through credit card rewards.
posted by PhoBWanKenobi at 4:08 PM on March 3, 2010

The anonymous nature that cash can provide?

I don't really care about that at all? And many of the alternatives to credit cards people are suggesting here--essentially, living with just a checking account, using debit cards/checks (which I would have to do, because my workplace forces me to use direct deposit)--are no more anonymous than credit cards, and in fact have fewer protections offered along with them in case of theft than credit cards do.
posted by PhoBWanKenobi at 4:12 PM on March 3, 2010

Mars Saxman : but it seems like an awful lot of juggling just to get the half-percent bonus, or whatever it is. Totally not worth it to me.

I don't get this... What juggling? Whether I have to make sure I can cover my debit card now, or my credit card at the end of the month, it amounts to the same thing. Biggest difference (to me, anyway), I have way better protections from CCs (by law, not by their benevolence, though they do have a few more-or-less voluntary perks) than I would from a debit card.

And those bonuses really don't suck... My cash-back this year gave me a tidy $400 dollars - Almost a week's after-tax pay. And for doing nothing but charging things I needed to buy anyway. And yes, of course they have to come from somewhere - But if I pay my bill on time and in full every month, they don't come from me.

Yes, you can get yourself into more trouble with a credit card. You can also drink draino or consider playing the lottery your "retirement planning".
posted by pla at 4:13 PM on March 3, 2010

Oh, and Mars, a half percent bonus wouldn't be worth it to me, either. All of my cards give between 2% and 5% in rewards.
posted by PhoBWanKenobi at 4:14 PM on March 3, 2010

Because by paying the card in full each month, I'm a net drain on their business

No, they're still profiting from merchant fees.
posted by normy at 4:50 PM on March 3, 2010

Rortybomb on Ramos: "Now note what Jackie Ramos says here: people are too risky for fix pay, and that’s why they are being denied. The obvious problem is that if they are too risky at 6%, they are almost certainly too risky at 30% with fees. … That converges on another good theory I was unaware of, a “Sweat Box” theory, where the idea is just to try and get as much money as possible out of costumers upfront, and be indifferent about discharging the rest under bankruptcy later. Before I started crunching numbers, I had no idea how profitable that strategy would be, and thus how much sense it makes from a business point of view."
posted by kenko at 4:57 PM on March 3, 2010 [2 favorites]

"credit cards are great if you just use Personal Responsibility and also I got a discount on an airplane ticket as a result of using one; so if cc companies are usurious and conniving then I guess lol @ poor+dumb people or something idk?"

-some dude I was talking to about the ex-BofA employee video
posted by hamida2242 at 5:20 PM on March 3, 2010

I have a dream - that one day comparing and choosing health insurance will be as easy as selecting a car or a computer. Not idiot proof, but straightforward enough.

I have a dream that one day being able to use doctors/hospitals to avoid pain/disease/death won't be a product sold at a profit and just sort of available to everyone regardless of how much money they have in the bank, you know kind of like how it is in the rest of the developed world. But you seem like a nice person + good poster so not trying to say your dream is bad or w/e.
posted by hamida2242 at 5:25 PM on March 3, 2010 [3 favorites]

Do you think that people are so helpless against marketing and consumerism that we should blame the corporations for the money that they spend on stupid shit?

I'm currently in the process of writing a curriculum to teach people how to manage money. Except they are people without incomes. Many of whom have also expended their 4-year lifetime supply of welfare. And so I'm writing this segment about how to resist marketing and salespeople and make good financial decisions, and it occurs to me that there are all these corporations and all these business majors studying how to most effectively manipulate people into buying stuff. But the consumers never get the opposite information - how to resist manipulation. That kind of education goes beyond most financial literacy, and has much less scholarship and impact to back it up than those doing the manipulating.

So, yea, actually. I think people are kinda helpless against it. Because they are never taught how to not be.
posted by lunit at 5:26 PM on March 3, 2010 [4 favorites]

We have a hero tag for this situation, please add it.
posted by jeffburdges at 5:28 PM on March 3, 2010

No, they're still profiting from merchant fees.

I'm a little surprised at how long it took for someone to point this out. If even half the people who say they "pay it off in full each month" a) actually did that and b) were actually a drain on the CC companies then the CC companies would tack on fees or just kick them off the account. A bank or CC company isn't going to just sit there and sulk if there's some way any significant chunk of customers can or will rob them of profits.

The only way to really "beat the system" is to do like an ex-coworker did when they ran up close to $80,000 in loans/CC charges/etc, never paid any of it, then just said "peace out" and moved back to Iran.
posted by hamida2242 at 5:35 PM on March 3, 2010

hamida2242 : some dude I was talking to about the ex-BofA employee video

As opposed to laughing at people dumb enough to eat grade-Q beef at Mcdonalds? Or who can't figure out why they can't lose weight scarfing down handfuls of "diet" Ho-hos or chips? Or who complain about having no money while regularly paying their tithe to "payday loan" brokers?

Either jump to outright socialism, or accept the fact that any capitalist economy lubricates its gears on the tears of the stupid. No one needs an SUV, no one needs a 60" TV, no one needs clothes with someone else's name monogrammed into them, no one needs a quad core machine to read email and surf the web. But people buying all those things makes the world go round.

Yes, I got an extra week's pay from my CC company this year because 10x as many people ran a balance or didn't pay their bills on time. And I wish I could say otherwise, but y'know, we never have to worry about a shortage of fools in the world.

The only way to really "beat the system"

Who said anything about beating the system? None (few?) of us don't realize the CC companies still "get theirs", even if we pay on time. In this case, both merchants and customers find it valuable to use credit cards for payment, even if they need to give up a small cut of the sale.

You could argue that they then raise prices to offset such charges - But by their agreements with the CC companies, they have to charge the same for cash or credit, meaning that even if I only get my own money back... Those of you using cash or debit don't.
posted by pla at 5:45 PM on March 3, 2010 [1 favorite]

it amazes me that people still use banks in the US after ... y'know... that lil' mess they made recently
posted by Breckenridge at 6:14 PM on March 3, 2010 [3 favorites]

But by their agreements with the CC companies, they have to charge the same for cash or credit,

Actually, they can offer a cash discount, and I've been to many low-margin kinds of places that do. From the VISA merchant agreement [pdf]:

"Always treat Visa transactions like any other transaction; that is, you may not impose any surcharge on a Visa transaction. You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment."

One thing they do have to do right now is accept all cards of a certain kind (e.g. VISA), but there was some talk about permitting them to decline only the cards with higher transaction fees. I'm not sure where that went, but if that were to happen, it would sure make a mess of this cash-back credit card business.
posted by FishBike at 6:29 PM on March 3, 2010

If even half the people who say they "pay it off in full each month" a) actually did that and b) were actually a drain on the CC companies then the CC companies would tack on fees or just kick them off the account.

Sure. But for an individual actor -- the merchants are not adjusting their prices for me based on whether I use a CC or not, they factor in an average rate of credit card use. So I don't pay any more to use a CC, I don't pay finance charges or annual fees, and I get some cash back at the end of the year.

Interest free loans + cash back + fraud prevention / chargebacks = superior to debit or cash.
posted by wildcrdj at 6:32 PM on March 3, 2010 [2 favorites]

Mars Saxman: "If you have the money to pay the credit card off, why use it in the first place? Are there still people who don't have debit cards?"

It's been partially addressed before now, but there's a number of reasons and I feel compelled to contribute my two cents.

Firstly, convenience. I don't have to carry cash on hand at all times or (a checkbook). And I can import the electronic transactions into GNUcash without carrying a bundle of receipts and typing a lot, because Discover supports OFX. My local bank debit account does not.

Secondly, clever incentive schemes. My bank charges me ten cents per debit transaction, and actually credits me bogus rewards points when I sign. They do this because the interchange rate is higher. This fee quickly eats into my checking interest, so I try to avoid it where ever possible. Of all my available options, debit is suddenly last place.

Thirdly, because it's safer. I'm only responsible for the first 50 dollars of fraud and can dispute transactions with clout. With debit you're given no official recourse. My CC will send out SMS and email alerts when big ticket items roll through or I get close to a credit limit; my debit account offers none of this.

Next, because it's an interest free loan. I can put the money I would have used to finance my monthly operations with the credit card and earn interest in the mean time. If I pay in full at the due date, no finance charges accrue. Granted at the moment the rates on checking is tiny, so it's not much of a bonus. But it does mean you can roll more money into a higher interest savings account instead of having it in demand deposit form.

Finally, because cards like Discover are willing to share the interchange fee. I'm not going to pretend that this behavior 'punishes banks', but it's a nice collective bargaining tool. When you say:

"but it seems like an awful lot of juggling just to get the half-percent bonus, or whatever it is",

I feel it necessary to point out that "half-percent" is 10 percent when I'm shopping for cellphones and monitors; a far cry from fatwallet or bing's cashback. From an hourly wage perspective, I think it does quite nicely. Certainly less hassle than carrying a mortgage.

This isn't to say you should get a credit card. If you're living paycheck to paycheck, a credit card won't solve your fundamental problems. But if your finances are heading in the right direction, they can help you get there a little faster.
posted by pwnguin at 8:14 PM on March 3, 2010

Of course there are people who get into debt for stupid reasons. But are we so determined to see those people suffer as much as possible for their mistakes that we can't pass reasonable consumer protection legislation to limit usurious and abusive behavior on the part of the banks? I see parallels to this all over the place these days, from health-care reform to gay marriage benefits. If we make things better for everyone, it is true that people we might not personally like or agree with will also benefit. For a country with "I may not agree with what you say but I will defend your right to say it" so deeply ingrained in our collective soul, we certainly are unwilling to apply that same principle elsewhere. I may not agree with your purchase of a flat-screen TV on credit, but I still believe you deserve to be charged a fair interest rate with clear terms.

In the consumer / bank relationship, the bank has all the power. They can change the terms of the contract, change the rates, charge fees, and ruin your credit. That is why regulation is necessary. Regulation is the way that "we the people" can have a say in the relationship on a level that can actually affect the banks.

Bank of America once took $300 from my account due to an error. I had opened a secured credit card with them, and they transferred the deposit twice, while only crediting my secured account once. They took four months to pay it back. If I had taken $300 from them on a credit card and not paid it back for 4 months, I would have owed over $400 with the interest and penalties added. After I went in to the branch (for the sixth time since the money was taken) and explained that they agreed to give me interest on the money. A grand total of $0.23. That is why we need regulation. I have absolutely no way of forcing them to be held to the same standards to which they hold me.

The secured card did work and help me build a credit score, and now I make all my purchases on credit, paid off weekly so that there are no surprises. I think the disagreement on this point has a lot to do with the way people think about credit cards. Because I pay them off every week, and always have, in my mind it is the same as taking the money from my bank account. I would not even consider spending more than I have, barring an emergency.
posted by Nothing at 8:24 PM on March 3, 2010 [10 favorites]

And needless to say, in an emergency, I would be glad of the option.
posted by Nothing at 8:28 PM on March 3, 2010

Man, y'all claim to be super smarty-pants home-cookin' ubermensch, but you can't even understand olly olly oxen free. Crazy world we're living in...
posted by You Can't Tip a Buick at 9:43 PM on March 3, 2010

So when I spew "nonsense" about personal and financial responsibility, yes, I can point to myself and say, without hypocrisy, "yes, you can!". Put down the $3/bag junk food and $100 meals out and invest in cooking ingredients (your heart as well as your wallet will thank you). Stop blowing $20-$30 (before another $20-$30 in snacks) going to movies when for $10 you can watch more than you could ever stand from Netflix for $10/month. Lose the premium cable package (or cable altogether - You can get entire TV series, ad free, for that same $10/month from Netflix). Drop your $100/month cell package (or even any landline over $50/month) and pick up a tracphone; and then - get this - don't use it!... Hang up and live, people!

Yes, you're awesome. I mean that. It's really fantastic that you've been able to avoid debt.

What is your suggestion for Americans without health insurance who require expensive medication? Where should the budget be cut on that one? How do you afford medication that costs as much as your rent even when you've done all of the above and more?

Personal and financial responsibility are important, but not everybody is as lucky as you are to be able to live within their means - especially people with chronic illnesses who pretty much have to bleed money in order to stay relatively healthy. I cut all of my expenses to the point where I - and I'm not proud of this - stole food on occasion. I still ended up over my head in debt because I couldn't cut out my meds.

I'm far from an outlier. Many, many people in debt got that way due to healthcare costs. If you'd lost your insurance and gotten even a broken leg, your rainy day fund would have been drained and no amount of ditching your cable bill would have helped plug the gap. If you haven't been sick in the US lately and think that this would be cheap - I can tell you that the cheapest of all illnesses, a simple infection requiring antibiotics, costs $1200 to treat if you end up in the ER and at least $500 if you just visit your primary care doctor. The retail price of an MRI is in and of itself $1200. One broken limb and you're probably looking at $5000, bare minimum.

If you have both avoided debt and avoided paying out in health care costs, count yourself as one of the luckiest people alive. And stop telling others that they could have simply budgeted better. You need to appreciate what you have, not telling other people who haven't been as lucky that their failings were somehow their own. They probably weren't and you have no idea what other people need to spend money on. I know that I didn't buy anything that I didn't have to when I was out of work - and I still don't. Hell, your "budgeting options" still include Netflix. Do you think I was paying for NETFLIX when I couldn't afford my medication? FUCK NO. Your moralizing doesn't accurately reflect the reality of being totally dead-ass broke and having to make choices way more difficult than "Can I afford Doritos?"
posted by grapefruitmoon at 3:53 AM on March 4, 2010 [7 favorites]

> So when I spew "nonsense" about personal and financial responsibility, yes, I can point to myself and say, without hypocrisy, "yes, you can!". Put down the $3/bag junk food and $100 meals out and invest in cooking ingredients (your heart as well as your wallet will thank you). Stop blowing $20-$30 (before another $20-$30 in snacks) going to movies when for $10 you can watch more than you could ever stand from Netflix for $10/month. Lose the premium cable package (or cable altogether - You can get entire TV series, ad free, for that same $10/month from Netflix). Drop your $100/month cell package (or even any landline over $50/month) and pick up a tracphone; and then - get this - don't use it!... Hang up and live, people!

Yes, you're awesome. I mean that. It's really fantastic that you've been able to avoid debt. What is your suggestion for Americans without health insurance who require expensive medication? Where should the budget be cut on that one? How do you afford medication that costs as much as your rent even when you've done all of the above and more?

Or, more simply, what is your suggestion for Americans who ALREADY avoid junk food, have Netflix (but had to cut back to the $5 plan because the $10 plan was too much, never eat out because it's too expensive, and only sprung for the cheapest cell phone possible because her career called for it (otherwise she wouldn't have gotten it) -- but then get laid off from their day job and end up in the limbo of the "underemployed"?
posted by EmpressCallipygos at 4:14 AM on March 4, 2010

This remind anyone of the obesity threads?
posted by smackfu at 5:37 AM on March 4, 2010 [5 favorites]

Yes, smackfu, only the range of things people have been called idiots for in this thread seems to be even more extensive.

I was OK until the remark about quad-core machines. Them's fightin' words!

People at all income levels have managed to get into trouble with debt, and similarly people at all income levels have managed to avoid those problems. But that doesn't mean everyone can avoid debt, regardless of income. It all depends on their circumstances, what non-negotiable expenses they have, and so on. Lots of people have ended up in debt because their circumstances make all other available options look worse.

I'm actually a big fan of the "save up until you can afford to pay cash" approach to things and I do that myself wherever possible. Even cars, now that I've saved up enough. It's great to stuff the equivalent of a car payment into a savings account every month, and have interest add to it rather than take away.

But I can't possibly tell anyone that just because this worked for me, it should work for them too, if only they'd try hard enough. Not unless I knew their circumstances were the same as mine, which I don't know.
posted by FishBike at 6:05 AM on March 4, 2010 [1 favorite]

That's great, and I've not intention of criticizing the way you want to lead your life, but let's not pretend that isn't a choice. You looked at the lifestyle you wanted -- a certain level of material comfort, plus being able to stay at home with the kids. You couldn't afford this on one income, so instead of sacrificing one element (either the level of material comfort or days with the kids) you went to a credit union.

I'm not saying it's good or bad, but it surely is a choice. Affordable child care would go quite a way to easing some of this dilemma, to be sure, but you assuredly CHOSE to be a stay at home mom who then sought out credit -- many other families in your position don't have that option or choose and different path, and require two incomes to stay above water.

Of course it was a choice! My point was that I found that making the kinds of decisions you claimed you'd make in a tight spot was surprisingly hard for us. I could easily see taking those kinds of actions back when I was young and single and had no children. But I wouldn't have chosen not to have a partner and kids just because someday I might be in a tight financial position and have to take a job delivering newspapers

We didn't go to the credit union for a loan to support our lifestyle. We own an affordable home for our income, we live within our means, our furniture is old crap, we buy clothes at the local consignment shops--all that stuff. We went to the credit union to help us pay $47,000 in lawyer bills we could not have predicted and had no control over. The option we had to avoid that, once it started, was to just say, "OK, here you go," and hand our daughter over to her drug addict birthmother and thug birthfather. These bills started coming after we had exhausted our emergency fund after my partner was laid off from a job and then our furnace died within a couple of months of that.

And, to be fair, I like to say I am a stay-at-home mom, but for most of the 9 years I've been a parent I've actually been a "works at home while taking care of the kids mom," first for 7 years or so as an instructor at a local college, and then, during the custody dispute, as a freelancer.

But my point wasn't to analyze my own lifestyle or defend it. I just wanted to say that, IME, the kinds of cuts you describe like selling a car or moving to a smaller place are just not that easy, unless you've made a conscious decision to have no nice things, no commitments, and no ties.
posted by not that girl at 8:04 AM on March 4, 2010

That converges on another good theory I was unaware of, a “Sweat Box” theory, where the idea is just to try and get as much money as possible out of costumers upfront, and be indifferent about discharging the rest under bankruptcy later.

This is interesting because I've been wondering about this too - also whether card companies are really just inflating their balance sheets with these imaginary amounts that are owed to them that customers are really never going to be able to pay back. And/or securitizing them in the same way that mortgages were. (Ah, yes, Planet Money is on it.) And that would intersect with the Fix Pay program - as one of the commenters noted on your link, putting someone into that program might have implications for when they have to write down those assets.

A couple of recent links from the Fed:

New proposed rules on credit card fees (including a rule that a penalty fee can't exceed the amount associated with the violation, ie a late fee on a minimum payment of $20 can't be more than $20) - these rules will be published for commentary in the Federal Register if anyone wants to comment!

And a guide to credit cards for consumers from the Fed.
posted by yarrow at 8:15 AM on March 4, 2010

You know, it occurs to me that when people say, "If I were in a tight spot, I would do this..." they're revealing that they haven't been in that position. And I think people often have a tendency to want to believe that something bad can't happen to them--that they won't be foreclosed on, or get sick, or get in a car accident. One of my writing students once wrote about how his father, passing a car accident, would always enumerate the causes of the accident: "that guy was going too fast for conditions, he was following that other car too closely, he forgot to turn his lights on." Always preventable things, things that the father would never do--so an accident like that would never happen to him.

In retrospect, I see decisions we made that helped us when money got tight (buying a house worth about 1.5 times our annual income, instead of the 3x that "rules of thumb" say you can afford) and decisions that hurt us-- like taking on a car payment. Overall, though, we make good decisions for us and our wants, needs, and income, and for the time and place we live in. And we still probably would have lost our house if the appeals court had let things drag out much longer than they did.

I like the person upthread who said that even if people make bad decisions, that shouldn't give the banking industry license to take advantage of their vulnerability. Hear, hear.
posted by not that girl at 8:31 AM on March 4, 2010 [1 favorite]

FishBike : Actually, they can offer a cash discount, and I've been to many low-margin kinds of places that do.

Hmm, +5 informative! I did not realize that, thank you. I do note, however, that such terms don't apply to checks or debit cards.

grapefruitmoon : What is your suggestion for Americans without health insurance who require expensive medication?

Look, I didn't mean to point to myself as someone wonderful or lucky - Quite the opposite, I intended that more to show myself as not anyone special; someone currently pretty damned near the worst-case scenario of their life's planning, and still managing to keep their finances in the black.

As for the cost of medical care - I do indeed consider health care costs in the US a major problem, and fully support healthcare reform (real reform, not this Obamacare BS). But I also consider that something of a red-herring in relation to the present topic. You never pay a large medical bill on plastic - Talk to the hospital's billing department directly, and negotiate an interest-free payment plan (if you think that sounds impossible, consider that they view you declaring bankruptcy and never seeing a dime as a very real possibility) that maximizes your qualifying medical expenses for tax purposes.

EmpressCallipygos : what is your suggestion for Americans who ALREADY [...] but then get laid off from their day job and end up in the limbo of the "underemployed"?

1) UI beats working at wallyworld (both financially and aesthetically), and currently you can get almost 18 months of benefits, all time you can spend looking for a real job rather than mopping floors for minimum wage.

2) If you did have a decent job, what did you spend you income on that you now consider "optional"?

I already said that the problem here doesn't start after someone gets laid off. It starts long before that, and the layoff merely shakes the table on which they've built their house of cards.

not that girl : I like the person upthread who said that even if people make bad decisions, that shouldn't give the banking industry license to take advantage of their vulnerability.

That coin has two sides. The banking industry doesn't know whether they've extended someone a lifeline or handed them another nail for their coffin.

If you have a real prospect of your situation improving in the future, going into debt for a few months beats living beneath an overpass, and you'd consider it just awful if Visa cut you off when you most needed it.

If you have no prospect of future improvement, charging one more month's bills just delays making hard choices better made earlier than later. Currently the banking industry lets people dig this particular hole more-or-less as deep as they want, and we damn them for that.

So yes, this does come down to personal responsibility, since only you can know whether you've started digging a grave or a well. The alternative cuts off both options.

Also, some of you seem to consider my list of example cuts as demonstrating my "luck". I don't believe in luck, but you want a harsher list? Living on Oodles rather than Spaghettios. Moving into a 2BR trailer as the third person/couple. Riding a bike to work (Yes, for 10 miles - Yes, even in the rain and snow, leave early and bring a change of clothes). Giving a fake name at the ER when you get pneumonia. Changing your primary leisure activity to "hunting for recyclable cans".

Unless you already live beneath an overpass and eat whatever you can find in the dumpster, you can always cut deeper.
posted by pla at 10:21 AM on March 4, 2010

If you did have a decent job, what did you spend you income on that you now consider "optional"?

Nothing. The only way I could cut any of my expenses at this point would be to make huge, sweeping changes like giving up electricity or moving back home with my parents.

That's kind of my point.

As for your recommendation to "give a fake name at the ER when you get pneumonia" -- you're actually advocating FRAUD as a cost-saving measure?
posted by EmpressCallipygos at 10:25 AM on March 4, 2010 [2 favorites]

EmpressCallipygos : [...]or moving back home with my parents. That's kind of my point.

Mine too.

As for your recommendation to "give a fake name at the ER when you get pneumonia" -- you're actually advocating FRAUD as a cost-saving measure?

At the point one might resort to that, I think we can comfortably call it "survival", not "cost saving". But yes, "crime" does exist as a possibility (if waaaaay down on the list); I don't hold it against anyone who steals bread to feed themselves.

And hey, a warm cell and 3 squares beats a cardboard box.
posted by pla at 10:49 AM on March 4, 2010

I do note, however, that such terms don't apply to checks or debit cards.

True. Although the places I've been to that offer a cash discount also offer it when paying with a debit card, this is in Canada where the typical debit card is quite a different animal from the typical debit card in the US. And I suspect merchants who do this here are violating their merchant agreement.

I guess it just shows the kind of market pressure that exists to be able to charge customers more when they use forms of payment that cost the merchant more. The credit card companies sure don't want that to happen.

It'll be interesting to see how this plays out, but in the mean time, yeah, other than the rare places that offer a cash discount, a cash-back credit card is netting you a lower price on stuff.
posted by FishBike at 10:49 AM on March 4, 2010

Talk to the hospital's billing department directly, and negotiate an interest-free payment plan (if you think that sounds impossible, consider that they view you declaring bankruptcy and never seeing a dime as a very real possibility) that maximizes your qualifying medical expenses for tax purposes.

And what if the hospital doesn't go for this? What if it decided to tack on late fees and interest charges so that the amount you owed them winds up being many multiples of the amount originally charged, like credit card companies do? And what if hospitals lobbied Congress and got a law passed making it difficult to impossible to have the debt discharged in bankruptcy, like credit card companies did?

I'm with others in that I'm getting a Panglossian whiff from the "there's always somewhere to cut" argument. Yes, people should make smart decisions, but we have a very thin safety net in this country and eventually it can run out even for the savviest financial actors.
posted by yarrow at 10:53 AM on March 4, 2010

At the point one might resort to that, I think we can comfortably call it "survival", not "cost saving". But yes, "crime" does exist as a possibility (if waaaaay down on the list); I don't hold it against anyone who steals bread to feed themselves.

*boggle*

You don't hold a grudge against someone who commits theft or fraud, but you DO hold a grudge against someone who tries to resolve their financial shortfall LEGALLY?
posted by EmpressCallipygos at 10:57 AM on March 4, 2010 [2 favorites]

I don't believe in luck

Cancer only happens to the irresponsible.
posted by dirigibleman at 11:55 AM on March 4, 2010 [2 favorites]

yarrow : And what if the hospital doesn't go for this?

Then you end up no worse than otherwise.

And as I said, they very much realize that you never paying them a penny counts as a realistic outcome. A friend of mine (no insurance, pretty low-end job) broke his arm about five years ago. Zero chance of paying the bill, he had nothing to lose (except already less-than-stellar credit) if he declared bankruptcy, and he made that clear to them. He now pays $12 a month to that hospital, and will do so for the next 50 years; and actually, things have started looking up for him and he may get to really pay it off in the near future - Money that hospital would never have seen if they had taken a hard-line stance (and they knew as much).

What if it decided to tack on late fees and interest charges so that the amount you owed them winds up being many multiples of the amount originally charged, like credit card companies do? And what if hospitals lobbied Congress and got a law passed making it difficult to impossible to have the debt discharged in bankruptcy, like credit card companies did?

And what if I could poop unicorns? Hey, just pointing out some good financial advice, take it or leave it. You can negotiate with hospitals. Let me know how well that works with Visa.

EmpressCallipygos : You don't hold a grudge against someone who commits theft or fraud

To keep themselves alive, yes. So they can keep HBO instead of paying their doctor, hell no.

but you DO hold a grudge against someone who tries to resolve their financial shortfall LEGALLY?

Okay, we've CLEARLY drifted apart here, let's back up a step or two...

What legal option did you mention that I missed, which you see me as grudging?
posted by pla at 11:57 AM on March 4, 2010

You never pay a large medical bill on plastic - Talk to the hospital's billing department directly, and negotiate an interest-free payment plan (if you think that sounds impossible, consider that they view you declaring bankruptcy and never seeing a dime as a very real possibility) that maximizes your qualifying medical expenses for tax purposes.

You've never been seriously ill. Let alone chronically ill. First, medical bills don't carry interest until they go to collection agencies. (Hi, don't ask me how I know that.) Second, hospitals don't set up payment plans - though you can pay off some at a time, they do not set up plans. Third, hospitals don't give a rat's ass what you're paying on your taxes or whether or not you declare bankruptcy. You're given your bill and you pay it or you don't. They get their money in the end whether it's from you or a collection agency lawyer.

Honestly, I'm not trying to nitpick here, but if you're going to moralize about how you could afford to get sick because you know how to negotiate with the billing department, you should at least have some idea of what the hell you're talking about before you start prattling on about "payment plans."

(I will admit that there very well could be hospitals that do this, I just haven't had the good fortune to be sick at any of them. I've gone through all sorts of "pay scales" and such to negotiate payment, but not once did anyone offer me a "plan" and not once have I ever had a medical bill charge me interest.)
posted by grapefruitmoon at 12:04 PM on March 4, 2010

My point was that you seem to be resisting the idea that credit card companies should be held to some reasonable regulatory constraints while relying on the expectation that hospitals will somehow follow similar rules voluntarily to maintain the notion that everyone's financial situation is solely their own moral responsibility.

Yes, it's good financial advice, but it's not a good argument against credit card regulation.
posted by yarrow at 12:05 PM on March 4, 2010

modernnomad: "I'm not saying it's good or bad, but it surely is a choice. Affordable child care would go quite a way to easing some of this dilemma, to be sure, but you assuredly CHOSE to be a stay at home mom who then sought out credit -- many other families in your position don't have that option or choose and different path, and require two incomes to stay above water."

I'm not the person to whom you were responding, but I have to jump in here. You say "affordable child care" like it's something that exists. For the record, before my son was born, I earned close to the 6 figure mark. I also worked 80 hour weeks, and spent about half the year traveling, often overseas. After Boy was born, I realized that it wasn't fair to him to never see me, and I chose to take a few years sabbatical and start my own (hobbyist) type company mostly to keep busy.

However, as he reached school age, I started looking around are re-entering the job market...at a bad time, I might add...and did the math. Good daycare costs about $300 a week, per kid. That's $1200 a month, 24,000 a year for childcare. That's licensed, bonded, certified, clean facilities. Sure, I could get Rent-aKid Cage care for $150 a week...but that's still not affordable for people with multiple kids.

That's not affordable for anyone not in the 6 figure bracket. It's ridiculously high. I think perhaps you don't realize what the cost of child care can be in some areas of the country. And so to suggest that the poster was being a "luxury" mom by staying home with multiple kids, rather than ponying up 50K a year in child care is shortsighted.
posted by dejah420 at 12:16 PM on March 4, 2010 [1 favorite]

Okay, we've CLEARLY drifted apart here, let's back up a step or two...

What legal option did you mention that I missed, which you see me as grudging?

.....Carrying a credit card balance for a little while. Isn't that what you've been scolding people for doing?
posted by EmpressCallipygos at 12:34 PM on March 4, 2010 [3 favorites]

yarrow : Yes, it's good financial advice, but it's not a good argument against credit card regulation.

Okay, I can see how you got that from me. Let me clear that up, if you will - I do support better regulation of banks and credit providers - I just don't care about such piddling minutiae as fee structures and transaction posting order (which as far as I can tell seem like the only issues most people care about on this topic, the ones that affect me, me, me, while ignoring the entire context that allows for someone to walk into a store and with nothing more than the swipe of a card, walk out $10k deeper in debt). I care that my bank (and all large-scale financial institutions) practice better risk management to avoid situations like the current mess in which we find the global economy.

Yes, CC companies and banks exploit the stupid and the impulsive... As do salesmen and DeBeers and fast food restaurants and Ikea and the entire marketing industry, and basically every sector of our economy. But each and every one of us has the power to personally, with no help from Uncle Sam or Ralph Nader or any TLA, opt out of the banking system entirely. The very first post in this thread already covered it, in fact:

"Never Get A Credit Card Ever." Simple as that. Live on cash, and treat your bank as nothing more than a place to cash checks. But if you do choose to use credit...

EmpressCallipygos : Carrying a credit card balance for a little while. Isn't that what you've been scolding people for doing?

Oh, that... I don't grudge you for it. I would strongly encourage you not to do so, and to question yourself on the meaning of "a little while", but hey, ultimately your choice.

Just don't blame the guys who let you borrow their money when the interest on 10 years of rolling "little whiles" amounts to 3x the original bills; and don't complain about them charging $30 for missing a payment rather than immediately closing your account and sending the entire balance out for collection.

GrapeFruitMoon, I apologize, but our side-conversation has strayed from the main topic. You have it correct, I have never dealt with a chronic serious illness, only perhaps half a dozen moderately serious (but acute) issues. I only tried to relate what I know, and it sounds like you could do that better than I (very good to know about the "no interest" thing counting as standard, I had thought that, not the payment plan itself, as the biggest sticking point).

You have my sympathy, and I wish you the best, but put bluntly, your situation does not describe the mainstream day-to-day financial problems of most Americans, and as such, cannot serve as a basis for broader fiscal policy. Healthcare policy, yes; but your medical woes should not matter to Visa, any more than Christopher Rodrigues' (Visa's CEO) severe asthma should matter to you.
posted by pla at 1:07 PM on March 4, 2010

You have my sympathy, and I wish you the best, but put bluntly, your situation does not describe the mainstream day-to-day financial problems of most Americans, and as such, cannot serve as a basis for broader fiscal policy.

Really? 62% of bankruptcies are partly or entirely due to medical costs. Maybe Visa can't do anything about this, that's true, but a lot of people need credit cards because so much of their income is spent on insurance, medications, doctor's bills, etc. Even with insurance, if you have a chronic condition you're bleeding money every month. That's a lot more people than you think. If you're scraping to make ends meet to start with, you have to pick up the slack somewhere. You may not be able to pay your hospital bills on plastic, but you can buy groceries on credit while your actual "money" goes to the hospital.

For many, many people, this is as necessary as childcare and not an expense that can be negotiated. Maybe "broader fiscal policy" can't prevent it, but these (people like me) are getting screwed up the ass first with the insurance companies and then with the credit card companies. Someone, somewhere in the process could at least have the decency to use a little lube.

(And no, there's no interest, but those collection agencies... that I know nothing about... I "hear" that they're pretty persistent.)
posted by grapefruitmoon at 1:30 PM on March 4, 2010 [1 favorite]

Oh, that... I don't grudge you for it. I would strongly encourage you not to do so, and to question yourself on the meaning of "a little while", but hey, ultimately your choice.

Just don't blame the guys who let you borrow their money when the interest on 10 years of rolling "little whiles" amounts to 3x the original bills; and don't complain about them charging $30 for missing a payment rather than immediately closing your account and sending the entire balance out for collection.

Hey, at least they don't treat me with the sneering disdain of someone who blames a victim for their own misfortune. And that's why I always pay on time, so I don't get the $30 fee anyway.

I'll gladly take that over someone looking down their nose at me for not having been clairvoyant enough to know exactly how much a recession would affect me.
posted by EmpressCallipygos at 1:54 PM on March 4, 2010 [1 favorite]

Just don't blame the guys who let you borrow their money...

Just out of curiosity -- suppose my credit card company varies the due date on my card by as much as five days (ie, march it was due the 19th, april it is due the 14th), and they set the cutoff time for the due date to 12pm Eastern Standard (9am in my time zone.)

Now, suppose I'm being diligent and I wake up on April 14th, eat a nice breakfast, and then sit down to pay bills at around 9:30am, thinking I'm going to pay my credit card bill purchases five days early -- only to discover I've just missed the payment by half an hour.

And let's say I still make the payment, and everything seems fine -- until the next month, when I find my interest rate on future purchases has been raised from 12.99% to 29.99%, and my zero interest balance has also been raised to 29.99%, plus I have a late fee to boot.

Under the above scenario (every little bit of which is true, as it happened to me a little less than a year ago on a card I'd only had for a few months), then am I allowed to blame the guys who let me borrow their money?

in my case I called, found out what happened, said "are you fucking kidding me?", closed the account and immediately paid off everything, but then, I happen to have that luxury -- and they still made the late fee + one month's 29.99% on a small previously zero-percent balance. fuckers.
posted by davejay at 4:23 PM on March 4, 2010 [2 favorites]

davejay : Under the above scenario (every little bit of which is true, as it happened to me a little less than a year ago on a card I'd only had for a few months), then am I allowed to blame the guys who let me borrow their money?

I would say "yes, absolutely", and would even say you should get in touch with your state's AG office to discuss the matter.

I would not, however, consider your experience the norm. Every card I've ever had (and even most utilities for that matter) let me set my payment due date, so it seems odd that they would arbitrarily change it.

As for the interest rate, that one doesn't surprise (or bother) me. My own Visa, on which I have a near perfect payment record except for one billing glitch (on which they waved the fee) about two years ago charges me 24.99% APR. I might care if I ever kept a balance, but as I don't...

EmpressCallipygos : I'll gladly take that over someone looking down their nose at me

Ohhh-kay. Not looking down my nose at you. Describing "best practices". I didn't even notice we had a semi-private thread going until I scrolled back and saw that my last half dozen posts have basically gone back-and-forth with you.

Most of what I said, I said with an implicit "ideally" or "in general" prefacing it. The specific examples from my own experience I didn't mean smugly, merely to demonstrate that I don't just talk out my ass on this subject. I would recommend not taking my posts too personally.
posted by pla at 8:09 PM on March 4, 2010

pla: I have to warn you that as a not-particually invested observer of your conversation with EmpressCallipygos that I read it much the same way as her, and I'm not entirely surprised things quickly got emotional.

I don't think she's pleading as a special case, merely pointing out that the structure of the US legal and medical system can lead to huge unexpected expenses. Banks should be criticised for setting up systems designed for trap customers (e.g. universal default), but more than that you have seemed to attach some level of moral condemnation to carrying a card debt in statements like "Unless you already live beneath an overpass and eat whatever you can find in the dumpster, you can always cut deeper" and "So yes, this does come down to personal responsibility, since only you can know whether you've started digging a grave or a well."

I don't agree that the ability to force people into eating from dumpsters is indicative of a great banking system and in and of itself means that predatory interest rates can be justified, but setting that aside there is a level of aseticism in those statements which cannot realistically be applied to families where food, shelter, education and transport must be provided for come what may.

EC was in a situation where she needed to protect her children from external threats. GrapeFruitMoon was in a situation where medical bills needed to be paid. It's just that these aren't outlyers; people are very often rational actors, and a statement like 'you have my sympathy, and I wish you the best, but put bluntly, your situation does not describe the mainstream day-to-day financial problems of most Americans, and as such, cannot serve as a basis for broader fiscal policy' comes across a little like saying that it's OK for you to set up a strawman of people using credit cards just to buy flatscreens, but the counter example doesn't count.

Implying that credit card debt is a lifestyle choice - 'always cut deeper', for example - and largely the preserve of people who thought they'd spend it on fast living is to smear a huge range of people with moral condemnation rather than to approach them with empathy.
posted by jaduncan at 1:30 AM on March 5, 2010 [2 favorites]

I don't have kids, actually, jaduncan (yet another "I need to be fiscally responsible" choice I've made -- one of the reasons I don't is that I ABSOLUTELY cannot afford to give a child a good life now), but otherwise I agree completely with how you'd characterize this conversation.

You may not have meant it personally, pla, but your casual observations were sure coming across as judgemental comments on not just me, but everyone who carries a credit card balance. Which means most of the people in this thread. Sure, ideally we all wouldn't. But ideally, we also all wouldn't get sick, get into accidents, lose jobs, have twins when we were only expecting one child, etc. So the sort of "well, you can always do something" comments come across as terribly condescending, whether you meant them to or not.
posted by EmpressCallipygos at 4:10 AM on March 5, 2010 [1 favorite]

Implying that credit card debt is a lifestyle choice - 'always cut deeper', for example - and largely the preserve of people who thought they'd spend it on fast living is to smear a huge range of people with moral condemnation rather than to approach them with empathy.

Yes, absolutely.

I know that my debt is my own doing. I'm fine with that. I take responsibility for it. I don't want to sound all "woe is me" because really - I'm doing fine. I have a job now. I can afford insurance (because I don't pay rent, but still, it is a luxury). I'm making payments on my credit card and eventually, it will get paid off.

But the reason I have debt (and truly, not that much, <>had to supplement with a credit card to be able to continue to buy my medication, without which, I would have ended up extremely ill and in more debt from hospitalization.

And I'm totally, totally fine with that. It's what I needed to do and it got me through. I now have an emergency card that I never touch, but it's there in case something horrendous happens that having an immediate source of money can fix. And I'm lucky to have it and I know it - lots of people don't have that kind of safety net.

So really, I'm not objecting to being in debt. It's what I needed to do. I'm objecting to someone telling me that I could have done better. That anyone who is in debt could have avoided it, because that's just total bullshit. So, so, so many people who have credit card debt are people who had a rough year. Yeah, if you blow your money on things you can't actually afford or use the credit card for luxury purposes, you really shouldn't bitch about being in debt when it catches up to you. I can agree on that. But here's the thing: I'm not bitching about my debt. I'm bitching about being told that I could have avoided it and that being in debt makes me somehow a lesser person.

And now I have to get to work so that I can get paid so I can continue to eat and live indoors!
posted by grapefruitmoon at 4:11 AM on March 5, 2010 [1 favorite]

Yeah, if you blow your money on things you can't actually afford or use the credit card for luxury purposes, you really shouldn't bitch about being in debt when it catches up to you. I can agree on that. But here's the thing: I'm not bitching about my debt. I'm bitching about being told that I could have avoided it and that being in debt makes me somehow a lesser person.

I seem to be having a week in which other people say what I've been trying to say way better than I did. So I'll just nod vigorously and point at this.
posted by EmpressCallipygos at 5:41 AM on March 5, 2010

but put bluntly, your situation does not describe the mainstream day-to-day financial problems of most Americans,

Overall, 5 percent of children didn’t have prescriptions filled in 2007 because of cost, up from 3.1 percent in 2003, and 17.8 percent of working-age adults couldn’t afford drugs in 2007, up from 13.8 percent in 2003, the survey found. That translates into about 36.1 million Americans under 65 who were affected, according to the study.

Karen Davis, president of the Commonwealth Fund, a private foundation that researches health care issues, said the new study confirms previous Commonwealth studies. In 2007, nearly two-thirds of U.S. adults, or an estimated 116 million people, struggled to pay medical bills, went without needed care because of cost, were uninsured for a time or were underinsured, according to the foundation.

Hmm.
posted by rtha at 6:02 AM on March 5, 2010

"Cutting deeper" is a strawman. Just judging from the fact that we all have computers and internet connections, 100% of us on this site can "cut deeper." Then we can give our excess money to people who can't afford medication. There's your moral condemnation for the day.
posted by desjardins at 6:07 AM on March 5, 2010

I didn't see anyone mention a big plus for credit cards vs. debit cards, here, that bit me in the ass personally last year: renting a car.

I went on a vacation and met my mother, in a situation where I was to pick up the reserved rental car from Hertz, and then pick her up and drive us both to the final destination. Only Hertz told me to fuck off, because I didn't have a credit card. I use a debit card for everything, because I had run into trouble with huge credit card debt a long time ago, and my credit is shot. Sure, they let me go through a "credit check" so I could maybe earn the right to pay them my own money, but of course I failed that.

I had never had a problem with this before, and it was a completely unexpected kick in the face. I went desperately up and down the car rental kiosks at the airport trying to find someone who would take my money. This was in Harlingen, Texas, so there weren't very many choices (a half dozen or so). Thank god National was willing to rent to me that day, for about double the rate we had reserved a car with Hertz for.

So there you go, people without credit cards who use debit cards for everything: just try renting a car without a credit card. You may get a nasty surprise.

I am going to try to get a credit card with my credit union for emergencies including being able to rent a car, but I won't be surprised if they deny me because of my shitty credit. Oh well. I am now long used to having to have the money in the bank before buying things.
posted by marble at 10:42 PM on March 5, 2010

It is perfectly true to state that credit card companies exploit the stupid and impulsive (they do), but I believe the more significant observation is that "stupid" and "impulsive" are subsets of "powerless," and it's this segment of society — the powerless, regardless of how they got powerless — that credit card companies gun for. If you get cancer or AIDS or break a leg or get sued or get shot or have your car break down or are dumb with money or make impulsive purchases and are poor (rich and even middle-class people can get away with a lot of those things in the list without extra punishment), you have no power; you are open for exploitation. And once you're open for exploitation, it is in the interests of your exploiters to keep you exploitable. The tactics deployed by credit card companies could not possibly be more disgusting; it would actually be kinder if instead of the "sweat box" techniques they just held people down and beat them. They are cruel and venal, but, mind, not out of any inherent evil (or at least, any inherent evil more than that which we're all shot through with), but because they're operating efficiently in an economic system that rewards cruelty and venality. Jackie Ramos put her own economic well-being on the line to give people being sweated for money the ability to stand up and stop getting beaten — she had the opportunity to continue abetting in exploitation and instead said "olly olly oxen free" to the victims. That is fucking awesome. It's a hell of a lot bigger than any of you gang talking about how this disgusting system is okay because you're personality not getting exploited because you're personally so good at life. Maybe some of the victims that she helped up were down because they were dumb, but who the hell cares? Nothing anyone can do can make it morally right to hold them down and beat them for their money.

The moral failing that y'all are exhibiting is far and away my least favorite part of the smarty-pants corners of the Internet. Fortunately it's less often displayed here than at some other places, but that just means that it's that much more galling when the TANSTAAFL brigade shows up here, of all places.

</sermon>
posted by You Can't Tip a Buick at 8:20 PM on March 6, 2010 [1 favorite]

If you have the money to pay the credit card off, why use it in the first place? Are there still people who don't have debit cards?

If someone mistakenly charges my debit card, I have a problem. If someone does this to my credit card, they have a problem.

(The issue is whether I have access to my money while a dispute/error is being worked out).
posted by RikiTikiTavi at 8:54 AM on March 8, 2010

Just to be contrary, I've never had a problem renting a car (20-25 times over the past 6-7 years) with a debit card.

I've also had someone(s) use my number/expiration date/CVS code a few times to make purchases via phone. I had no trouble instantly getting that money back.

To me, debit cards are much better than credit cards because they don't cost as much for the merchants (i.e. more of my money goes to the seller instead of the middle man), and the lack of worry about paying off the credit card each month is worth the 50 cents or whatever of monthly interest I'd get on my meager purchases.
posted by mrgrimm at 1:19 PM on March 8, 2010

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