Amex and Discover are "issuers" and also "networks" - so they issue the card (and take on the debt) and run the payment networks and get a cut of the transaction fees.

It's way more complex, I've left out a lot of moving parts, but suffice it to say that 50% of the debt could go into default and both of these companies would still be standing.

For Visa/MC, it's a network, and cards are issued under the Visa/MC branding and the banks participate in the network costs and fees, but the banks also hold their own cardhoder debt (to a degree, this is where things like credit default swaps start to come into the picture, and more. It's hideously complicated)>

The Amex Bank and Discover Bank are separate corporations and while there's money flowing to/from these banks in a variety of ways, it's not like the Visa/MC - Bank relationships.

Have a look at creditcards.com for some really good info on the subject.

That's been in effect for a little bit They are still issuing, but under the old rules of "if you don't need it, you qualify"

Hmm, apparently American Express Co. sold off American Express Bank last year. I didn't know that.

Discover is unique since Discover Bank is part of Discover Financial Services, but I don't believe that it's owned by DFS. However, since pretty much all Discover Cards are issued by Discover Bank, if Discover Bank suddenly went belly up and totally stopped operations, then pretty much everyone's Discover Card in their wallets would presumably be useless at that point because there's no issuing bank.

Hmm, some of your arguments don't wash worth beans where I come from - ie. Canada. But I don't don't doubt that your experience is different from us.

We have both true debit cards and bank cards with POS (point of sale) transactions. A true debit card is linked with either MasterCard or Visa and has a card number compatible with those systems. A bank card has a different set of digits. The reason why debit card use is the highest in the world in Canada is because our regulations and banking system is totally different.
1. Debit cards are indeed protected as well or even better than credit cards. However with a credit card you usually have extra item insurance and returning items bought by over the Internet is a bit easier. (But then again, Paypal is superior for the Internet convenience factor). The nation wide value of theft from bank/debit cards is less than from both paper cheques and CCs even though the majority of transactions are by debit.
2. Practically ALL debit/bank cards have the option for miles/points/cashback, etc. In fact, with my bank card and my airmiles rewards card I double up on the rewards with each transaction when I use a particular gas company!
3. Bank cards (not true debit cards) may have a unknown ceiling on them that most users are not aware of when using POS at the gas pump and most people don't even bump into it. It used to be around $60-65 but was raised to $100 per transaction. This pertains only to POS at the pump as set by the gas company and not other transactions.
4. Our banks are all linked into into the Plus, Cirrus and Interac networks which means I can use my bank card practically anywhere in the world.
5. POS is literally EVERYWHERE in Canada, including your neighbourhood pizza delivery boy!
6. POS is an extremely frustrating experience in the US, when I travel south, it is next to impossible to find anyplace that uses it including gas stations where it makes the most sense. CC, greenbacks and traveller's cheques, which aren't as convenient, are things I have to resort to when I can't find a POS site. I get feedback from my brother living in Colorado - cheque use is rampant (and so is cheque fraud) compared to living up here.
7. Your #3 is valid only when using a true debit card to book the hotel or rental card. Most places won't let you book with a bank card and once the payment transaction has been made there is no hold on your account if you use the bank card to pay for your actual transaction (ie not for booking).
8. The near instantaneous transaction of a debit actually makes it easier to keep track of your money and bank accounts.

I've had a bank card since Nov '81 and a true debit card since Feb of '82 and haven't looked back since. Actually, I gave up the debit card for a simple bank card when I changed banks because POS is available everywhere here. In fact, the only reason I ever got a CC in the first place was one was required when making golf course reservations over the phone! I've used computer banking exclusively since '94 and I don't know what a "teller" is! Cheques are used to pay the rent only, a book of 25 will last me 2 years!

Going back to the original post - credit card rates are beginning to escalate with companies bumping from the mid-teens up into the mid-twenties partly because
a) more people are defaulting.
b) they need the interest to make up for losses elsewhere in their system.
c) banks will lower their limits to limit their lending exposure which in turn will cause credit ratings to drop for some people because they are using a higher % of their available credit.

You won't see CC's being rejected by vendors unless it is for the usual reasons like "you've reached your limit" or "we've noticed some peculiar activity on your account".

1. I was under the impression that the consumer fraud protection for a Visa debit card, ferinstance, is now exactly the same as it is for their credit card. Perhaps you are referring to an old-school ATM/debit card without the Visa logo?

2. I don't know any millionaires that say they made it all on their Discover card bonus points.

3. They put the same freeze on your credit card. Either way you can end up liable for the authorized amount, it’s just a matter of whether you pay it now or later after the cc company has tacked on interest, late fees, over limit fees, and interest on those fees while jacking up your interest rate because they are pretending to not like you anymore.

If I understand correctly, debit cards withdraw the money from your account immediately. This means I lose the interest on the money from the transaction date until the credit card payment clears. Admittedly it's usually not much but if you watch your pennies your dollars take care of themselves. Also, what happens when you need to dispute a charge (i.e. it accidentally gets submitted twice)? Are you out the money until it's resolved?

IIRC their investment arm also split off a few years ago.

We have been convinced that we need it all now, credit cards play into this very well. People my parent’s age made most buying decisions based on how much money they had. Today a large number of people make buying decisions based on how much money they will make.

Buying on credit is not really a good long term survival mentality.

I have seen people buy lunch with a credit card (not a debit card) how sad is that?

I have been able to for the most part get away from credit cards, I feel my life is better for it.

Visa did implement a zero liability policy for debit transactions using Visa branded cards processed through its own network, however transactions or debit cards that don't meet Visa's requirements still fall under the same laws as before, and legally, debit card protection is still considerably weaker than for credit card transactions. I don't think Mastercard followed suit. I've seen some banks advertise that they offer their own protection on debit card fraud, although I have no idea how restrictive the terms are. It may be very difficult to meet the requirements to get the bank to pony up the money that is it advertising as a perk.

The pain of debit card fraud can be so much greater than for credit card fraud. A crook using your debit card can clean out your bank accounts, tap into your overdraft line of credit, cause all of your outstanding checks (like your mortgage, student loan, credit card payments, etc.) to start bouncing which then triggers all kinds of fees, penalties from your bank, late fees from the companies that got bounced checks, harming your credit, etc. Even assuming that the fraud will be pretty clear cut to prove, you'll be totally out of money and the bank doesn't need to offer you any provisional credit for about 10 days, IIRC. You'll probably have to close your bank account and open new ones, wait for your new checks and new ATM/check card to arrive in the mail, change your direct deposit information with your employer and for any other bills you automatically deduct from your bank account...it could be quite a mess even when the bank eventually makes you whole again.

The issue of "holds" or "blocks" is likelier to hit debit card users than credit card users. Most of us keep our credit card balance well below our credit limits, so that unexpected $500 hold that the hotel put on your card isn't a problem. However, there are plenty of us who don't necessarily keep enough in our checking accounts to absorb an unexpected $500 hold which could take a week or more to clear. In the meantime, unbeknownst to us, our checks could start bouncing because of the hold and we'd never know until we get our monthly statement and see the mess. In this case, there wasn't any fraud involved so you're stuck with the cost unless you're on very friendly terms with your bank and they might cut you some slack. But the companies getting all these bounced checks from you may not be so lenient.

Interesting. I'm going to have to look into this a bit more now. The actual cardholder agreement is what ultimately counts, so I'll have to dig mine up. According to the Visa website, their Zero Liability doesn't apply to ATM and PIN-based transactions, which you can't do with a credit card in the first place. They say the bank must extend provisional credit within 5 days unless you have a history of being flakey.

Granted, they could "clean you out" and this would be more painful than if they cleaned out the issuer's funny money. I don't see why you would need to close your bank account, though. The crook doesn't have your check book, all he has is a card number that can be cancelled. I don't keep more than a month's worth of expenses in the checking account, but bounced payments would be a real pain to straighten out. On the other hand, I certainly would not be oblivious for a whole month, I normally check my account online daily.

I will need to explore the issue of temporary holds a little more, as although I no longer use the credit card for routine expenses, I've continued to use it for larger discretionary ones like hotels and vacations.