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#150418 - 09/29/08 10:58 PM "The Office Pool" - "When will CC's be refused?"
ponder Offline
Enthusiast

Registered: 12/18/06
Posts: 367
Loc: American Redoubt
There is an interesting pool at one of the local businesses. The winner is the one who picks the date and time that the first news article states that VISA,MC & AmEx are no longer accepted by businesses.

When these three giants falter from their huge debt, businesses will not be paid. Debit cards may survive. Retailers may be forced to hold merchandise until the perverbal check clears.

Any thoughts or predictions? The DOW closed down 777 on Monday. Will it drop 2000 Tuesday or rise 200?
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PonderosaSports.com
Horseshoe Bend, ID
American Redoubt
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#150420 - 09/29/08 11:27 PM Re: "The Office Pool" - "When will CC's be refused?" [Re: ponder]
MartinFocazio Offline

Pooh-Bah

Registered: 01/21/03
Posts: 2203
Loc: Bucks County PA
Well, let's see. I work at the agency that does the web site for a major issuer of credit cards.

I get - on a weekly basis - the transaction volumes, the average balances, delinquency rates, late payment rates - all of the good and juicy inside information about the credit card business. I can't share a bit of it.

The decision to take/not take credit cards is one that is made by the business; further, Visa and MC is nothing but a process network and processing entity that operates for the bank. Visa & MC hold no consumer debt - the issuing banks do. Thus you have a Chase Visa, a Wamu Visa, a Citibank Visa, but you (usually) only have an "American Express" card or a "Discover Card".

This is because American Express and Discover issue cards directly and hold consumer debt. They have a higher level of risk. All of these issuing companies have finely tuned mechanisms for detecting changes in the market. You may have noticed that this past summer, the credit card companies began to raise interest rates even on "good customers" who carried debt, made payments on time, but still had their rates raised. This was because they saw the pending slowdown, detected an increase in late/nearly late payments, and they reacted accordingly to protect their cash-flow with higher interest payments.

Cash reserves of these companies are huge...tens of billions. Discover has about 37 billion in all sorts of assets against 6 billion in receivables, Amex has about 127 Billion in assets against about 47 billion in receivables.

You'll need on the order of 50% non-performing receivables to rally damage these firms, and maybe more.


Now, to win the prize, I can tell you about scores of companies that no longer take credit cards - to save on the processing fees and the cut taken by the various players along the way.

Certainly, we've seen the "cash discounts" for gas.

Where I live, "The Baker" - a local business - no longer takes any kind of credit card, and I've been in more than a few places - mostly restaurants - that have gone "cash-only".

I'll post a picture of the sign at "The Baker" after I stop by tomorrow.

If you need a citation right now, well ask Google for "Companies No Longer Accepting Credit Cards" and there we have:

http://www.contracostatimes.com/ci_10531774
"Pacific Gas & Electric Co. says it will soon halt a nearly two-year-old pilot program that enabled customers to use Visa brand credit cards for monthly utility payments.

Oct. 1 is the last day that PG&E will accept Visa credit cards for recurring or one-time payments of their bills, said Tamar Sarkissian, a spokeswoman for the San Francisco-based utility. The program was available only to residential customers Sarkissian said.

"When we began the program, it was a no-fee pilot program," said Brian Swanson, a PG&E spokesman.

By state regulations, such a program had to be cost-neutral. "We discovered that the savings from the program did not cover the costs," Swanson said."


I work in NYC, I work in and with financial service firms. Today's "crash" was only big in terms of points, it's nowhere near the 23% decline of 1929, and while there's fundamentally bad stuff happening, there's a hell of a lot more that will need to go wrong before we see a wholesale collapse of the credit card industry. There's MANY more companies ahead in line for failure before we see that.

If you want to worry about a business sector, I'd suggest you take a look at Aviation, which was barely able to handle the fuel price spike, now you'll see a downturn in passenger volume and then you'll see mergers and closures at an incredible pace.

I'd also be looking for a job NOW if I worked in the Hotel industry (might be too late for that).

In terms of opportunities - opening a General Store in what's left of "Downtown America" might not be a bad idea. Localized supply chains.

Also, if you live in a suburban area, an ultra-light (think carbon fiber), high-tech electrically assisted regenerative braking wagon for your team of horses might be a great way to do local delivery for a wide range of companies from the grocery store to the pharmacy. Also would be interesting to see if Machine Shops - 3d Fabs and so forth - start cropping up with the latest in CNC and sintered polymers instead of the old lathes and files.

Milk Men! Put on your Bow Ties! There's a Market Opportunity Coming! Re-Localization of markets!




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#150421 - 09/29/08 11:54 PM Re: "The Office Pool" - "When will CC's be refused?" [Re: MartinFocazio]
nursemike Offline
Old Hand

Registered: 11/09/06
Posts: 870
Loc: wellington, fl
Originally Posted By: martinfocazio


Milk Men! Put on your Bow Ties! There's a Market Opportunity Coming! Re-Localization of markets!



WADR, 'milk persons' is the proper usage.

OTOH, your analysis of the situation is concise, insightful, well-informed, and in all respects superior to similar presentations by all the elected officials, appointed officials, and national party candidates who spoke today.

Have you considered runing for office?
_________________________
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#150429 - 09/30/08 12:53 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: nursemike]
Art_in_FL Offline
Pooh-Bah

Registered: 09/01/07
Posts: 2432
Forty years ago it was pretty rare for a person to use credit on anything but a house or vehicle. Most daily transactions were made with cash. Larger ones a cheque. If you had the money you could spend the money. If not you waited and saved until you did.

The funny thing is that we had a substantial savings rate driven by people saving up for big purchases and the proverbial rainy day. This meant the banks had cash to lend out. Now we have a savings rate that hovers between zero and negative numbers. Nobody saves up to buy a car. last time I bought a vehicle the man was shocked that I paid with a cheque and offered to go to the bank and get cash.

Of course I'm told that easy credit is 'progress'. Even though using credit almost always increases the actual price paid. A neighbor got one of those rent-to-own deals on a TV. When I multiplied out his payments he will have paid about three times what you could buy the same TV set for if you paid cash.

He made the same money as I did. If he would have just saved what he would pay the rental place he could pay cash, own it outright, and do it in just a couple of weeks. But he wanted the TV set now.

Which is, in a nutshell, is how we got into this mess.

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#150431 - 09/30/08 12:57 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: ponder]
Am_Fear_Liath_Mor Offline
Carpal Tunnel

Registered: 08/03/07
Posts: 3078


To give an insight into what is going to happen is shown by a statistic released today in the UK. The approvals for new mortgage business last month, is at 2% of the same value it was just 1 year ago at just £143 million. There has been a drop of 98% in the value on new mortgage loan approvals in the space of just 1 year.

http://news.bbc.co.uk/1/hi/business/7641535.stm

http://www.wsws.org/articles/2004/jan2004/debt-j15.shtml a report dating back from 2004.

June 1993 - US Consumer debt = $825.9 Billion

June 2008 - US Consumer debt = $2.587 Trillion = around $24,000 /household

The consumer debt graph has been essentially an exponential graph since the end of the second world war.

The unsecured consumer debt bubble has yet to burst. The credit card debt bubble is unsecured meaning that it is based on no real fixed assets. If you think sub-prime was scary then you haven't seen nothing yet.





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#150441 - 09/30/08 02:44 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: Am_Fear_Liath_Mor]
Paul810 Offline
Veteran

Registered: 03/02/03
Posts: 1428
Loc: NJ, USA
Forget credit cards, I'm waiting for when US currency becomes so devalued it's useless. At that point I'll be glad I have some gold, silver, and items to barter. wink

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#150442 - 09/30/08 02:59 AM Re: "The Office Pool" - "When will CC's be refused [Re: ponder]
Arney Offline
Pooh-Bah

Registered: 09/15/05
Posts: 2485
Loc: California
Originally Posted By: ponder
The winner is the one who picks the date and time that the first news article states that VISA,MC & AmEx are no longer accepted by businesses.

As Martin already mentioned, this bet doesn't really make sense to me, at least for the reason given. Businesses stop accepting credit cards all the time, usually because the fees aren't offset by a hoped for increase in total sales when they accept credit cards. For example, a small restaurant may have to pay CC fees every month that it otherwise wouldn't have to if it only accepted cash, but the average bill may be higher if people could charge it.

If I default on my credit card balance, it's the issuing bank that hurts, not Visa/MC/AMEX/Discover. Last year, there was over $2 trillion in credit card transactions just in the US, and the CC companies charge 3,4,5% for each transaction. You do the math.

The ironic thing is that people who declare bankruptcy often get deluged with more credit card offers. That's sick.

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#150451 - 09/30/08 04:04 AM Re: "The Office Pool" - "When will CC's be refused [Re: Arney]
Todd W Offline
Product Tester
Pooh-Bah

Registered: 11/14/04
Posts: 1928
Loc: Mountains of CA
AMEX told me they were no longer issuing business lines of credit when I asked about lowering my rates. My local credit union lowered my rate by ~3% a couple months ago so I figured why not try AMEX too!??! So they are cutting back apparently.
_________________________
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#150457 - 09/30/08 08:22 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: Art_in_FL]
dougwalkabout Offline
Crazy Canuck
Carpal Tunnel

Registered: 02/03/07
Posts: 3219
Loc: Alberta, Canada
Originally Posted By: Art_in_FL
Forty years ago it was pretty rare for a person to use credit on anything but a house or vehicle. Most daily transactions were made with cash. Larger ones a cheque. If you had the money you could spend the money. If not you waited and saved until you did.


Ding! That's the right answer. Guess I'm old fashioned, because that's been my financial style from day one. (Though forty years ago, I was just sorting out the difference between thumbs and toes.) Now I own my own place, have a low overhead business, have a bit set aside, and owe not one penny. People have been living high off credit and snickering at my frugal ways and old cars for fifteen years; now my discipline is speaking louder than words. "Pride cometh before a fall," says an old book, and it's going to be a long way down for some.

Anyway, regarding CC, I think there are two kinds of credit card issuers: those that plan on people paying off their balance (mostly), and those that rely on people paying minimums only (i.e., loan shark interest rates).

I had a credit card issued from one of the latter. Their game was blatantly obvious: get me in debt up to my eyeballs. Total SOBs. So I dropped the credit line from $15G to 500 bucks, just for laughs. They didn't like that, oh no. Now I use it for Internet purchases only, protecting my interests and theirs from fraud and the Russian mob. Instead of being grumpy and snarly, they should have offered me a corner office with perks. My fiscal conservatism was the right(eous) path. Hope these predatory types get a major spanking; they deserve every whack.

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#150458 - 09/30/08 10:56 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: dougwalkabout]
Eugene Offline
Carpal Tunnel

Registered: 12/26/02
Posts: 2995
I think a lot of people are under the misconception that people are using credit when they are using their debit card. I use mine for everything rather than hand enter transactions and use it via credit rather than atm becaue I get rewards points. My credit and debit card look almost identical so unless you were close enough to see the word debit or checking on the cards its impossible to tell.

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#150459 - 09/30/08 10:57 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: dougwalkabout]
bws48 Offline
Old Hand

Registered: 08/18/07
Posts: 831
Loc: Anne Arundel County, Maryland
As Martin pointed out, VISA and MC card's debt are held by banks. Despite what you may hear on the news, there are a good many solid banks out there that have not been severely damaged by this crisis and are in really good shape. These tend to be local and large regional banks that that have been run "traditionally" and "conservatively." The folks who were and are doing things right don't get the publicity they deserve. Per Douglas Adams "Don't Panic."
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#150460 - 09/30/08 11:25 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: bws48]
KG2V Offline

Veteran

Registered: 08/19/03
Posts: 1371
Loc: Queens, New York City
I use my CC all the time, but I treat it the way Amex used to be. Bill paid IN FULL when it comes. Just a way to NOT carry cash/Pay the $1.50 fee for not going to a branch of my bank (none really close to work). They must love/hate me, as they don't make any money from MY side of the transaction
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Blog: http://kg2v.blogspot.com

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#150462 - 09/30/08 11:54 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: KG2V]
Russ Offline
Geezer

Registered: 06/02/06
Posts: 5357
Loc: SOCAL
Same with me. Regardless how big it is I pay it off when due. It's just my thing to not have outstanding debt, no deficit spending on my part. The American public needs to get over its obsession with instant gratification. Buy/make do with what you can afford or save up to buy it outright.
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Better is the Enemy of Good Enough.
Okay, what’s your point??

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#150467 - 09/30/08 01:17 PM Re: "The Office Pool" - "When will CC's be refused [Re: KG2V]
Arney Offline
Pooh-Bah

Registered: 09/15/05
Posts: 2485
Loc: California
Originally Posted By: kc2ixe
They must love/hate me, as they don't make any money from MY side of the transaction

Actually, think of it this way--say your bank charges you $1.50 for every time you use another bank's ATM. And say you normally take cash out three times a month, so your bank is losing out on $4.50 a month.

AMEX skims roughly 2-3% off every transaction you make (last that I read). I have no idea how much the issuing bank gets of that, but just for argument's sake, let's just say your bank gets 2.5% of your AMEX charges. At 2.5%, you'd only have to charge $180 worth of goods/services to equal paying $4.50 in ATM fees. Since I charge so much on my CC, my monthly CC bill is far, far larger than $180 every month and I suspect that yours is, too.

OK, so maybe your bank isn't get all of that merchant fee, but some combination of companies other than the merchant is getting that money.

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#150471 - 09/30/08 01:27 PM Re: "The Office Pool" - "When will CC's be refused [Re: Arney]
Arney Offline
Pooh-Bah

Registered: 09/15/05
Posts: 2485
Loc: California
Originally Posted By: Arney
If I default on my credit card balance, it's the issuing bank that hurts, not Visa/MC/AMEX/Discover.

Actually, upon further thought, this is only partly correct. AMEX and Discover do have their own banks (American Express Bank and Discover Bank) so I presume that if I default on a AMEX-only balance or a Discover balance, AMEX or Discover take the hit. But for any Visa, Mastercard, or bank-issued AMEX balance, which make up the lion's share of the credit card universe, it's the issuing bank that carries the consumers' debt, not the credit card company.

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#150473 - 09/30/08 01:36 PM Re: "The Office Pool" - "When will CC's be refused [Re: Russ]
Grouch Offline
Enthusiast

Registered: 07/02/08
Posts: 395
Loc: Ohio
Originally Posted By: Russ
Buy/make do with what you can afford or save up to buy it outright.

It took me a long time to get this point but I now live by it. I think we need to teach our kids that credit is an evil, last resort for all but major purchases such as houses.

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#150474 - 09/30/08 01:54 PM Re: "The Office Pool" - "When will CC's be refused [Re: Arney]
thseng Offline
Old Hand

Registered: 03/24/06
Posts: 900
Loc: NW NJ
It is stupid to use a credit card and then carry a balance from month to month that you are paying interest on. If you use a credit card and then pay the full balance at the end of the month you are smarter, but I invite you to take the next step: Start using a debit/check card only. The check card works exactly the same way as far as the store is concerned and has the same fraud protection, but you will probably find that you spend a little bit more wisely.

On a related note, I understand that the cost to the store of processing a “credit card” signature based transaction is significantly higher that processing a “debit” PIN based transaction. In many stores, the customer is asked to arbitrarily choose whether his check card transaction is treated as a debit card or a credit card and they don’t seem to care which you choose. I can only speculate that their contract with the merchant service prohibits them from expressing a preference for PIN based transactions in the same way it prohibits them from imposing a surcharge on card transactions in an attempt to recoup their fees.

These processing fees are a nice profit center. There are now many credit unions offering checking accounts with up to 6% interest on the first $25k balance if you have one direct deposit and at least ten check card purchases per month.
_________________________
- Tom S.

"Never trust and engineer who doesn't carry a pocketknife."

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#150478 - 09/30/08 02:10 PM Re: "The Office Pool" - "When will CC's be refused [Re: Grouch]
Stu Offline
I am not a P.P.o.W.
Old Hand

Registered: 05/16/05
Posts: 1058
Loc: Finger Lakes of NY State
I put money in the bank every week, and when I have enough, I'll buy myself a new car. Then start putting money away for the next one. Money is also put away for household items, emergencies etc.
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#150522 - 09/30/08 08:16 PM Re: "The Office Pool" - "When will CC's be refused?" [Re: Eugene]
MartinFocazio Offline

Pooh-Bah

Registered: 01/21/03
Posts: 2203
Loc: Bucks County PA
OK, I'll use my insider information here -

NEVER EVER EVER EVER use a Debit Card if can use a CREDIT CARD. Just make sure you can PAY IT OFF IN FULL


Why?

1. The consumer protection laws for CREDIT are much much stronger than for DEBIT.

2. DEBIT transactions rarely give you miles, points, cashback, whatever.

3. DEBIT cards can put a FREEZE on your BANK ACCOUNT for HUNDREDS AND HUNDREDS OF DOLLARS if you use them in hotels or for rental cars, as they block out your "potential" charged.

Don't use debit cards except as an ATM card.


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#150524 - 09/30/08 08:21 PM Re: "The Office Pool" - "When will CC's be refused [Re: Grouch]
MartinFocazio Offline

Pooh-Bah

Registered: 01/21/03
Posts: 2203
Loc: Bucks County PA
Originally Posted By: Grouch
...credit is an evil, last resort for all but major purchases such as houses.


Here's when to use credit:

1. If you need equipment to do your job and you will account for the cost of money over time as a decrease in your pay. For example, if you're a mechanic, you need a big tool set, and you might need to go $10,000 in the hole to pay it off. There are any number of Paydown Planners on the web to tell you what those tools will actually cost over time - say $17,000. If you're going to earn $75,000 with your $17,000 tool set, AND you don't take on any other debt, it's worth it. If you can't pay the $17,000 and your other bills without MORE debt, you can't afford it.

2. Performing assets. Homes were, until recently, a performing asset, in that they increase in value more than the rate of inflation and the cost of your money. The crux of the whole thing that's happening now is this isn't working anymore, at least for houses. On the other hand, for education it does work. A college education VASTLY increases your salary, and can be paid off over a LONG time, so it can been seen as a well-performing debt.


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#150526 - 09/30/08 08:27 PM Re: "The Office Pool" - "When will CC's be refused [Re: Arney]
MartinFocazio Offline

Pooh-Bah

Registered: 01/21/03
Posts: 2203
Loc: Bucks County PA
Originally Posted By: Arney
Originally Posted By: Arney
If I default on my credit card balance, it's the issuing bank that hurts, not Visa/MC/AMEX/Discover.

Actually, upon further thought, this is only partly correct. AMEX and Discover do have their own banks (American Express Bank and Discover Bank) so I presume that if I default on a AMEX-only balance or a Discover balance, AMEX or Discover take the hit. But for any Visa, Mastercard, or bank-issued AMEX balance, which make up the lion's share of the credit card universe, it's the issuing bank that carries the consumers' debt, not the credit card company.


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.


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#150527 - 09/30/08 08:28 PM Re: "The Office Pool" - "When will CC's be refused [Re: Todd W]
MartinFocazio Offline

Pooh-Bah

Registered: 01/21/03
Posts: 2203
Loc: Bucks County PA
Originally Posted By: ToddW
AMEX told me they were no longer issuing business lines of credit when I asked about lowering my rates. My local credit union lowered my rate by ~3% a couple months ago so I figured why not try AMEX too!??! So they are cutting back apparently.


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" smile

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#150532 - 09/30/08 09:34 PM Re: "The Office Pool" - "When will CC's be refused [Re: MartinFocazio]
Arney Offline
Pooh-Bah

Registered: 09/15/05
Posts: 2485
Loc: California
Originally Posted By: martinfocazio
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.

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.

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#150543 - 10/01/08 12:19 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: MartinFocazio]
Roarmeister Offline
Old Hand

Registered: 09/12/01
Posts: 960
Loc: Saskatchewan, Canada
Originally Posted By: martinfocazio
OK, I'll use my insider information here - NEVER EVER EVER EVER use a Debit Card if can use a CREDIT CARD. Just make sure you can PAY IT OFF IN FULL

Why?
1. The consumer protection laws for CREDIT are much much stronger than for DEBIT.
2. DEBIT transactions rarely give you miles, points, cashback, whatever.
3. DEBIT cards can put a FREEZE on your BANK ACCOUNT for HUNDREDS AND HUNDREDS OF DOLLARS if you use them in hotels or for rental cars, as they block out your "potential" charged.
Don't use debit cards except as an ATM card.


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! smile I've used computer banking exclusively since '94 and I don't know what a "teller" is! smile smile 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".

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#150549 - 10/01/08 01:06 AM Re: "The Office Pool" - "When will CC's be refused?" [Re: MartinFocazio]
thseng Offline
Old Hand

Registered: 03/24/06
Posts: 900
Loc: NW NJ
Originally Posted By: martinfocazio

1. The consumer protection laws for CREDIT are much much stronger than for DEBIT.

2. DEBIT transactions rarely give you miles, points, cashback, whatever.

3. DEBIT cards can put a FREEZE on your BANK ACCOUNT for HUNDREDS AND HUNDREDS OF DOLLARS if you use them in hotels or for rental cars, as they block out your "potential" charged.

Don't use debit cards except as an ATM card.


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.
_________________________
- Tom S.

"Never trust and engineer who doesn't carry a pocketknife."

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#150554 - 10/01/08 02:12 AM Re: "The Office Pool" - "When will CC's be refused [Re: thseng]
UTAlumnus Offline
Old Hand

Registered: 03/08/03
Posts: 1019
Loc: East Tennessee near Bristol
Quote:
Start using a debit/check card only. The check card works exactly the same way as far as the store is concerned and has the same fraud protection, but you will probably find that you spend a little bit more wisely.


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?

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#150555 - 10/01/08 02:16 AM Re: "The Office Pool" - "When will CC's be refused [Re: Arney]
UTAlumnus Offline
Old Hand

Registered: 03/08/03
Posts: 1019
Loc: East Tennessee near Bristol
Quote:
Hmm, apparently American Express Co. sold off American Express Bank last year.


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

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#150557 - 10/01/08 03:46 AM Re: "The Office Pool" - "When will CC's be refused [Re: UTAlumnus]
BobS Offline
Old Hand

Registered: 02/08/08
Posts: 924
Loc: Toledo Ohio
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.
_________________________



You can run, but you'll only die tired.


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#150561 - 10/01/08 04:32 AM Re: "The Office Pool" - "When will CC's be refused [Re: thseng]
Arney Offline
Pooh-Bah

Registered: 09/15/05
Posts: 2485
Loc: California
Originally Posted By: thseng
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.

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.

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#150573 - 10/01/08 12:08 PM Re: "The Office Pool" - "When will CC's be refused [Re: Arney]
thseng Offline
Old Hand

Registered: 03/24/06
Posts: 900
Loc: NW NJ
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.
_________________________
- Tom S.

"Never trust and engineer who doesn't carry a pocketknife."

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#150578 - 10/01/08 01:05 PM Re: "The Office Pool" - "When will CC's be refused [Re: thseng]
Eugene Offline
Carpal Tunnel

Registered: 12/26/02
Posts: 2995
I always understood that when you ran your debit card through signature based since it was going through the credit system you were covered. I recall banks advertising this and I have had to use it twice, one time my card was copied by a gas station the other was when when Yahoo cached it in their store processing system, both times the bank did treat it like a credit card and refunded my $.
I've been through both sides of the Visa agreement a few times, you know when you get those e-mails telling you to write 'see id' or somehting else silly on the back of your card to 'protect' you, respnding with the part of the visa agreement forbidding that helps.


Edited by Eugene (10/01/08 01:06 PM)

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#150596 - 10/01/08 04:03 PM Re: "The Office Pool" - "When will CC's be refused [Re: Eugene]
sodak Offline
Addict

Registered: 03/20/05
Posts: 410
Debit cards can cause you to be cleaned out, as others have said. With credit cards, you can only be held responsible for the first $50 of fraud. I don't own any debit cards.

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#150602 - 10/01/08 05:00 PM Re: "The Office Pool" - "When will CC's be refused [Re: sodak]
Eugene Offline
Carpal Tunnel

Registered: 12/26/02
Posts: 2995
Where are you getting this info, like I said the banks are saying use their debit card anywhere you can use a credit card and recieve the same protaction benefits and I have persnally received that protection twice.

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#150603 - 10/01/08 05:24 PM Re: "The Office Pool" - "When will CC's be refused [Re: Eugene]
Russ Offline
Geezer

Registered: 06/02/06
Posts: 5357
Loc: SOCAL
My ATM/debit card has daily limits which should mitigate any losses should be it used by an unauthorized person. I only use it as an ATM card, for POS purchases I use cash or a credit card.
_________________________
Better is the Enemy of Good Enough.
Okay, what’s your point??

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#150609 - 10/01/08 06:16 PM Re: "The Office Pool" - "When will CC's be refused [Re: Russ]
LeeG Offline
Member

Registered: 03/24/08
Posts: 100
Loc: Phoenix, AZ
To start:
Federal Reserve Consumer Handbook

Credit holds on a Debit card block funds in your account until the hold is released (3-14 days). Funds on hold are unavailable to clear checks or ATM withdrawals.

Personally, I charge almost everything on my CC, but I almost never carry a balance from month to month.

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#150655 - 10/01/08 11:39 PM Re: "The Office Pool" - "When will CC's be refused [Re: Arney]
MartinFocazio Offline

Pooh-Bah

Registered: 01/21/03
Posts: 2203
Loc: Bucks County PA
Originally Posted By: Arney

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.


Let's just say that if you looked into my work history, you would DISCOVER that I work for the company that plans, designs and runs the web site for a particular credit card company. This is a web site where you can DISCOVER things about a famous cash back program and you might even DISCOVER the company also has a bank. If you snoop around a bit on certain web sites where people Link In to other people, you might even DISCOVER that I was one of the folks who helped with the strategy and planning for that online bank as well as the credit card site and perhaps it would help you DISCOVER more about why I know so much about things in the credit card industry.

Just FYI.
DFS is publicly traded, plenty of info online about them.

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#150691 - 10/02/08 05:00 AM Re: "The Office Pool" - "When will CC's be refused [Re: dougwalkabout]
Art_in_FL Offline
Pooh-Bah

Registered: 09/01/07
Posts: 2432
Originally Posted By: dougwalkabout

I had a credit card issued from one of the latter. Their game was blatantly obvious: get me in debt up to my eyeballs. Total SOBs. So I dropped the credit line from $15G to 500 bucks, just for laughs. They didn't like that, oh no. Now I use it for Internet purchases only, protecting my interests and theirs from fraud and the Russian mob. Instead of being grumpy and snarly, they should have offered me a corner office with perks. My fiscal conservatism was the right(eous) path. Hope these predatory types get a major spanking; they deserve every whack.


Credit card companies, when they first started out, made the majority of their money on interest. Now they make the majority on penalties and fees.

In common CC parlance those who pay off their CC bill every month are called "deadbeats". The card companies prefer "revolvers", people who roll over their debt each month and just make the minimum payments. Reason being that "deadbeats" can easily walk away. "Revolvers" remain captive and are typically digging themselves in deeper every month.

In many ways the behavior and business model of the CC companies is like a dairy farmer. Milking the captive animals, who will (if everything goes according to plan) never be free, over and over again. Taking a few cents of every transaction; substituting, at a price, for discipline and savings; and making a killing if their captives stumble.

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#150711 - 10/02/08 12:47 PM Re: "The Office Pool" - "When will CC's be refused [Re: Art_in_FL]
MartinFocazio Offline

Pooh-Bah

Registered: 01/21/03
Posts: 2203
Loc: Bucks County PA
Originally Posted By: Art_in_FL

Credit card companies, when they first started out, made the majority of their money on interest. Now they make the majority on penalties and fees.


I AM NOT DEFENDING THESE FEES, I AM DEFENDING THE PRACTICE OF POSTING FACTUAL, RESEARCHED INFORMATION. DON'T GET ALL CRANKY IF IT SEEMS I AM DEFENDING THESE FEES....

It's not true that the CC companies make "most of their money on fees" (and Revenue is NOT profit):

"According to a February report in the Wall Street Journal, revenue from fees increased from $17.1 billion in 2006 to $18.1 billion in 2007. "In 2003, the revenue from fees was $12.8 billion. That represents a 41% increase in fee revenue in just four years," says Bill Hardekopf,CEO of LowCards.com. "During this time of lower interest rates and more defaults, fees provide a steady income for issuers."

"Fees now account for 39% of the revenue for credit card issuers according to RK Hammer, a bank card advisory firm."


I suggest this site as well:

http://www.pbs.org/wgbh/pages/frontline/shows/credit/more/rise.html



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#150778 - 10/03/08 02:04 AM Re: "The Office Pool" - "When will CC's be refused [Re: MartinFocazio]
Art_in_FL Offline
Pooh-Bah

Registered: 09/01/07
Posts: 2432
First, it is it is pretty well accepted that capitalized statements are seen as yelling. Put in bold print doubly so. By any measure a breach of etiquette.

Second, I worded the statement broadly on purpose. This isn't a forum on economics or accounting. But even broadly worded it is accurate.

"Fees now account for 39% of the revenue for credit card issuers according to RK Hammer, a bank card advisory firm."

Only 11% off on its face.

But what your missing here is that the penalties part I mentioned are not just fees. There are also interest penalties. In most cases the CC companies maintain the right to raise your interest rate to a default rate if you are late on any payment. Under universal default pricing this can apply even if the late payment is not on your account with them. In either case it is entirely possible to see your interest rate rise to over 30%. But none of this is listed as a fee because it is listed as a penalty. A semantic dodge by the CC companies and more of an issue than a simple late fee because a fee is a one-time charge while a drastic increase in interest rate is applied monthly.

Now nobody thinks that your payment history shouldn't be part of your credit rating and the interest charged. But the interest rate charged has to be kept in proportion to the actual risk and costs of maintaining the account. That is not what I'm talking about. What I'm talking about is abuse.

The CC companies are allowed by law to set their fees and interest at any rate they desire and both fees and penalties have become a major profit center. The companies are also allowed to alter their policies to increase the odds of a card user making a late payment so they can apply these fees and penalties. Practices like setting the due date on a Sunday or holiday are pretty much the norm now. And they are a fine, but unscrupulous, way of making sure you will get more people to miss it so you can make more profit by laying on fees and penalties. Delaying the clearance of cheques or late postings of payments are also common but clearly, IMO, unethical practices.

Used to be, for the most part, the interests of both those offering credit and those using credit were aligned. The banker wanted you to know and understand the rules and they made their money from you complying with these established rules. There was no desire for the credit holder fail.

I have and keep several credit cards. But dealing with them is like dealing with a rabid dog. You always keep your eyes on what is going on and after handing over funds you count your fingers.

Of all the ways to use credit, discounting payday and title loans or Big Al and his crew of thugs down the block, credit cards are the most problematic. Made worse because they have a financial interest in you failing.



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#150785 - 10/03/08 03:09 AM Re: "The Office Pool" - "When will CC's be refused [Re: Art_in_FL]
BobS Offline
Old Hand

Registered: 02/08/08
Posts: 924
Loc: Toledo Ohio
After my divorce I no longer have a CC. I don’t travel by plane, rent a car or hotel ahead of time.

I live quite well without them.
_________________________



You can run, but you'll only die tired.


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#150808 - 10/03/08 03:28 PM Re: "The Office Pool" - "When will CC's be refused [Re: ]
thseng Offline
Old Hand

Registered: 03/24/06
Posts: 900
Loc: NW NJ
Originally Posted By: BigDaddyTX
Now we have 1 credit card that we keep well paid up on, with a low limit, as an ICE card. We could easily get the limit raised if we needed to get a transmission replaced or something and didn't have the cash. I think that not having a CC like that doesn't benefit you. What if TSHTF and you just need to get through that one month, and you end up getting a payday loan or something that costs you $20 per $100 they loan.

Even better than an emergency credit card is an emergency fund in a savings account. When TSHTF, the last thing you need is to add high-interest credit card debt on top of it.

I know, I know, you're like me and you don't have one extra penny in the budget to start socking away for an emergency fund that just sits there doing nothing. But if that's the case, you're not going to be able to pay off the emergency credit card at the end of the month, either! Now your budget that you thought didn't have room for any saving has to somehow make room for CC interest payments from now until forever.

And there WILL be an emergency.
_________________________
- Tom S.

"Never trust and engineer who doesn't carry a pocketknife."

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#150811 - 10/03/08 04:31 PM Re: "The Office Pool" - "When will CC's be refused [Re: thseng]
wildman800 Offline
Carpal Tunnel

Registered: 11/09/06
Posts: 2846
Loc: La-USA
When I was active duty and stretching every dollar to the max, I would get a little money put to the side by dumping my change into a jar.

When the jar was full, I'd roll up the change and stash the rolls in an ammo box in my armory. When those small emergencies would arise, after a while, I just pulled the needed rolls out, changed them into dollar bills at the bank.

Being change, that money wasn't touched until I really got into a bind.

That's 1 way to start building an emergency stash of cash.
_________________________
QMC, USCG (Ret)
The best luck is what you make yourself!

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#150825 - 10/03/08 06:38 PM Re: "The Office Pool" - "When will CC's be refused [Re: ]
wildman800 Offline
Carpal Tunnel

Registered: 11/09/06
Posts: 2846
Loc: La-USA
If it's lockable and has weapons in it,,,it's an armory!!
_________________________
QMC, USCG (Ret)
The best luck is what you make yourself!

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#150839 - 10/03/08 08:47 PM Re: "The Office Pool" - "When will CC's be refused [Re: wildman800]
LeeG Offline
Member

Registered: 03/24/08
Posts: 100
Loc: Phoenix, AZ
I think many are underestimating how useful credit is. Credit is a tool - a financial tool. As long as you use it for what it's intended for, its a good thing, not a bad thing.

Credit becomes bad when we begin to use it to buy 'toys' as opposed to things they increase our potential for generating wealth.

Student loans are a good example. Relatively few high school graduates could afford to pay for college, but with a loan, they can get a degree that increases their skill and marketability many times over, causing a net increase in their overall wealth.

Same with new businesses. Credit can be used to put a business in action sooner, and generate significantly more wealth that would have been possible by saving and buying.

Finally, if it was truly a TSHTF situation, would you really refrain from using credit because you weren't sure of your ability to repay later? Is that a principle you'd die for or let a loved one suffer for?

Some people don't like credit of any sort. That's fine. Some people don't like guns. Both can be dangerous when used unwisely, but both can be very beneficial when used appropriately.

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#150840 - 10/03/08 09:02 PM Re: "The Office Pool" - "When will CC's be refused [Re: LeeG]
Arney Offline
Pooh-Bah

Registered: 09/15/05
Posts: 2485
Loc: California
Originally Posted By: LeeG
I think many are underestimating how useful credit is. Credit is a tool...Is that a principle you'd die for or let a loved one suffer for?

Excellent point. It's much too simplistic to just say "Debt is evil, pay-as-you go divine!"

And let's not forget the role of insurance in big and small (i.e. personal) SHTF situations. We can argue about the credit card versus savings account for SHTF situation all day, but a true SHTF situation is if you become disabled while still fairly young and can't ever work again. You'll really, really be grateful if you have decent disability insurance. None of us can save enough while we're still young to live on for decades in that situation. Well, not unless we invented Google or the iPod or something like that.

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#150842 - 10/03/08 10:11 PM Re: "The Office Pool" - "When will CC's be refused [Re: LeeG]
BobS Offline
Old Hand

Registered: 02/08/08
Posts: 924
Loc: Toledo Ohio
Originally Posted By: LeeG
.

Finally, if it was truly a TSHTF situation, would you really refrain from using credit because you weren't sure of your ability to repay later? Is that a principle you'd die for or let a loved one suffer for?


No one is going to die for lack of a credit card.

Walk into any emergency room and you will get taken care of.
_________________________



You can run, but you'll only die tired.


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#150843 - 10/03/08 10:35 PM Re: "The Office Pool" - "When will CC's be refused [Re: BobS]
LeeG Offline
Member

Registered: 03/24/08
Posts: 100
Loc: Phoenix, AZ
Originally Posted By: BobS

No one is going to die for lack of a credit card.

Walk into any emergency room and you will get taken care of.


I never said credit card, I said credit. So walking into an emergency room you are either using the credit the hospital is forced by law to give you (assuming you will repay), or you are just sponging off taxpayers.

But this is exactly the kind of thing credit should be used for: something that increases your chances of creating long term wealth. You can't create much wealth if you are dead or crippled.

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#150856 - 10/04/08 02:02 AM Re: "The Office Pool" - "When will CC's be refused [Re: LeeG]
BobS Offline
Old Hand

Registered: 02/08/08
Posts: 924
Loc: Toledo Ohio
I don’t know that insurance can be called credit? And the hospital charges well for it’s serviced, don’t make them out as a money-strapped entity.

I never said to stick taxpayers with a bill; I said you don’t need a CC (or even credit) to get help at a hospital. If it’s a life issue they give you medical help and then get your insurance and payment info later.

I had a heart attack, my dad and I were having lunch and I had the attack, he drove me to the hospital. They ran me into the CAT lab almost right away. It was the next day before they got my insurance info. No credit needed to have the stints put in.


Back to the issue of credit, I don’t think it’s needed to build wealth. Some people do it, but the track record of how the American people use credit does not play out to building wealth.

You can’t barrow yourself into wealth or out of debt.

No money advisor worth his or her salt will tell you credit builds wealth.
_________________________



You can run, but you'll only die tired.


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#150858 - 10/04/08 02:25 AM Re: "The Office Pool" - "When will CC's be refused [Re: BobS]
Nishnabotna Offline
Icon of Sin
Addict

Registered: 12/31/07
Posts: 512
Loc: Nebraska
Originally Posted By: BobS
I don’t know that insurance can be called credit? And the hospital charges well for it’s serviced, don’t make them out as a money-strapped entity.

I get kind of tired of hearing people say things like this. Most of the cost that you are being stuck with is just being passed along from the medical suppliers. You want to know who is making all the money? Look at Johnson and Johnson, Depuy, Tyco, et al. Like with any business the hospital is charging a markup, but it ain't all that much.
Quote:


I had a heart attack, my dad and I were having lunch and I had the attack, he drove me to the hospital. They ran me into the CAT lab almost right away. It was the next day before they got my insurance info. No credit needed to have the stints put in.



You might be thinking this is splitting hairs, but yes, you did get by on credit for those services. They opened an account with your name on it and gave you net terms. You probably even have the option of paying off the bill in installments. You just chose to make a large payment with insurance funds.
BTW, that CAT lab was probably a one million + dollar room. Room, not facility. Lots of hospitals don't have the cash it takes to outright buy one of those; they take out a loan. They have to make payments on that room, so you are charged accordingly - not because the director is trying to decide just how much he can fleece the sick people. (though I am sure there most certainly are hospitals like that out there frown )

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#150859 - 10/04/08 02:33 AM Re: "The Office Pool" - "When will CC's be refused [Re: BobS]
thseng Offline
Old Hand

Registered: 03/24/06
Posts: 900
Loc: NW NJ
Originally Posted By: BobS
No money advisor worth his or her salt will tell you credit builds wealth.

Debt most certainly does build wealth. For the lender, that is.

It’s kinda like those late night cable commercials: "Buy my proven system and make $150k a month working just 6.7 seconds per day two days a week." If it's so great, why aren't you just using your own plan? The real way to make money is to sell proven money making plans on late night cable.

The best example, literally a parody of itself, is the classified ads that say:
"Send me $5 to learn how to make money just by placing classified ads."
I'll give you three guesses what the secret is.

Yes, you can use debt as a tool by taking a HELOC on your house and investing it in the stock market to build wealth. Sometimes it will work. More likely, sooner or later there is a credit crisis which naturally causes the stock market to go down at the same time the bank panics and doesn’t renew your line of credit. By the way the housing market is down too and you can’t even sell the house for enough to pay for the first mortgage (which you pulled some equity out of so you could celebrate your good credit by going on a cruise). You can’t get ahead, you can’t break even and you can’t even get out. How’s that tool working for you?

What people always forget is that risk, spread over a large group of people averages out. Risk, when it hits YOU, does not average out.
_________________________
- Tom S.

"Never trust and engineer who doesn't carry a pocketknife."

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#150863 - 10/04/08 05:29 AM Re: "The Office Pool" - "When will CC's be refused [Re: BobS]
LeeG Offline
Member

Registered: 03/24/08
Posts: 100
Loc: Phoenix, AZ
Originally Posted By: BobS

No money advisor worth his or her salt will tell you credit builds wealth.


I guess I will tell that to my employer who started his business 10 years ago with a bank loan, paid it off and now makes well over a million dollars a year and my sister and her husband who borrowed money to buy a new building for their business and paid it off in 2 years instead of 10 with the increased revenue.

On a smaller scale, I had to borrow $300 from a pawn shop (at 68% annual interest) to get the tools I needed to go from being a day laborer at $3.35/hr to an electrician apprentice at $12.50/hr. The $60 I paid in interest for that 3 month loan back in 1983 was made up in less than 1 day on the job (pawn loans always costs what they would be full term even if you pay them back the next day).


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#150868 - 10/04/08 12:34 PM Re: "The Office Pool" - "When will CC's be refused [Re: LeeG]
thseng Offline
Old Hand

Registered: 03/24/06
Posts: 900
Loc: NW NJ
Lee, it is very fortunate that you were able to change your situation so dramatically.

I could argue that you sold the item to the pawn shop to buy your tools, which is not exactly debt. Or ask you where you got the money for the item in the first place(which must have been worth more than $360). But these are all details and I'm not going to second guess you.

But I will ask you: This pawn shop - pretty empty, right? I mean they really weren't selling much stuff that people never were never able to buy back, right?

So many small business startups fail, and every one of them went into it thinking "I'm not going to be one of the ones that fails, I'm different." You see it over and over again. Yes, starting a business on a loan can work. When it doesn't, it often means bankruptcy.

If you sister's business was growing that well, I'd venture an uneducated guess that they could have made-do for, say, three years and bought the new building with cash, risk free. Yes, they would be a little less wealthy than they are at the moment, but if things had tanked, they would have had a big pile of money saved instead of a mortgage on a failed business.

As I have been saying, debt involves extra risk that is often unnessesary. You can get lucky, but you can also be very unlucky. Therefore I would advise people to avoid it.
_________________________
- Tom S.

"Never trust and engineer who doesn't carry a pocketknife."

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Trade School Tool Kit
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