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Firstly, credit card companies don't make people open an account nor do they make you spend money they can't pay back. In what way do they "screw over the poor", because they give them a credit card?
You been on a college campus lately??? This is how it starts. Offer an 18 year old freshman living off ramen noodles a coupon for a free pizza and a two-liter if they fill out the card application...... They'll do it....
Now the actualy card shows up a month later and the kid will rack it up a lot of the time.
Is it the credit card companies' fault that he did this???
No, that isn't the point... The point is that they make the bulk of their profits off high risk individuals. It is how they operate.
I'm not saying "feel sorry for the guy who racked up a couple thousand in debt.".... What I'm saying is that we shouldn't bail out the credit card companies for KNOWINGLY handing out cards to high-risk borrowers just because they got burned, because they'll go RIGHT back to doing the same thing tomorrow because that's how they make the vast majority of their money... That's where they differ from the mortgage industry.
Quote:
Originally Posted by Humanoid
Secondly, there are a variety of cards that are targeted towards "daddy warbucks who pays off his card every month". They can make money off these cards whether or not they pay off the balance each month as these people usually making a lot of transactions.
I'm not saying they won't make anything, but ask ANYone who is familiar with the credit card industry who their bread and butter is.......
Just because the CC companies raise the credit limits doesn't mean that a person has to charge to the limits. I feel that goes back to being responsible.
I agree but I think some are misunderstanding my point on the cc companies part. If I have a person that is slow to repay me, unable to pay the balance in full I sure am not going to extend more credit to them. Now if I have a person that repays on time, pays balance in full I wouldn't raise their limit without them asking for it just because I could.
No, that isn't the point... The point is that they make the bulk of their profits off high risk individuals. It is how they operate.
This is not accurate. Until fairly recently they actually avoided subprime. Then some companies started to figure out that they can actually make money off this group with the right sort of terms.
Regardless, even today this group does not represent the bulk of their profits. This group has high default rates and low limits. The bulk of their profits come from low risk borrowers that carry a balance.
Also, I should add different card companies do things different. The bulk of American Express' profit comes from merchant fees.
Quote:
Originally Posted by Rhett_Butler
I'm not saying they won't make anything, but ask ANYone who is familiar with the credit card industry who their bread and butter is.......
Hint: It isn't Mr. Warbucks.
Depends on the company. For example American Express has a number of exclusive cards for both business and individuals. The cards are often by invitation only.
For a standard credit card money the bread and butter is middle-class folks with decent incomes and good credit histories. They load up on toys and pay a lot of interest, yet have relatively low default risk.
You keep using American Express as your example. American Express almost isn't a credit card though (in it's original form anyway).... Most require you pay off the balance monthly. They have a different model all together, but ask yourself this: Why did they venture into the market of cards that carry balances and such???
Seriously, the bulk of the credit card industry is basically predatory lending now. Yes, perhaps back when Visa was Visa and Master Card was Master Card and before the advent of the "Bank Card" things were different...... Most have LONG strayed away from how credit cards worked in the 70s and 80s (to a lesser extent).
As far as who's to blame??? Best analogy I can think of is a bartender and a patron... Sure the guy should know his limit and not drink too much, but the bartender (in this case having the patron's history of alcohol consumption and how it affects him) needs to be a responsible party and cut the guy off before it gets out of hand as well..... Plenty of blame to share.
This is very true...Credit Cards are given to stupid teenage girls with no concept of money the moment they turn 18 and they max them out. Then they can't pay them off and will either go bankrupt or will go into even more debt to pay them off. This is a cycle with no end. It only gets worse.
I disagree. Parents who teach their children responsibility and how to manage their money will have children who don't max out cards. My son has had a credit card since he was 18. He uses it every month and pays it in full each month. He often makes a mid-month payment on to date charges as well. He's now almost 23 and has yet to pay a dime of interest. He saves 10-25% of his paycheck--and after being laid-off a few months ago had a cushion to fall back on. He found work after about two weeks. He's currently under-employed as a janitor, but at least has income to cover his COBRA payments and other responsibilities. He wasn't afraid to pick up a broom until he can land another job. It's unfortunate that so many others who are out of work don't have the same work ethic and sense of responsibility. At 22 he's got enough in the bank to live for 18 months without changing his lifestyle, because he's been living below his means all along.
This is not accurate. Until fairly recently they actually avoided subprime. Then some companies started to figure out that they can actually make money off this group with the right sort of terms.
Regardless, even today this group does not represent the bulk of their profits. This group has high default rates and low limits. The bulk of their profits come from low risk borrowers that carry a balance.
Also, I should add different card companies do things different. The bulk of American Express' profit comes from merchant fees.
Depends on the company. For example American Express has a number of exclusive cards for both business and individuals. The cards are often by invitation only.
For a standard credit card money the bread and butter is middle-class folks with decent incomes and good credit histories. They load up on toys and pay a lot of interest, yet have relatively low default risk.
American Express has gotten to where they sendout card to almost anyone since they started losing accounts to others that did not charge a fee and gave credits oir cashback.They ;like many credit cards use to limit cards and limit credit based on credit reporting but charge a fee. American express also has alot of defaults on business cards so they are tightening as are all others.
it certainly is about time that credit card companies start tightening up. they need to be more vigilant and not count on taxpayers to bail them out too.
Maybe we have it all wrong. Black Friday shoppers spent more this year than last year.
Folks have money and credit after all. THE AMERICAN CONSUMER LIVES !!!!
Early data shows strong Black Friday shopping - Yahoo! News (http://news.yahoo.com/s/ap/20081129/ap_on_bi_ge/holiday_shopping_3 - broken link)
snippet:
"
Sales on the day after Thanksgiving rose to $10.6 billion, according to preliminary figures released Saturday by ShopperTrak RCT Corp., a Chicago-based research firm that tracks sales at more than 50,000 retail outlets.
Last year, shoppers spent about $10.3 billion on the day after Thanksgiving, dubbed Black Friday because it was historically the sales-packed day when retailers would become profitable for the year."
You keep using American Express as your example. American Express almost isn't a credit card though (in it's original form anyway).... Most require you pay off the balance monthly. They have a different model all together, but ask yourself this: Why did they venture into the market of cards that carry balances and such?
Most American Express cards allow you to carry a balance in some form. Also, they started to offer more standard credit cards because that is what the consumer wanted. They still make most of their money from merchant fees.
Quote:
Originally Posted by Rhett_Butler
As far as who's to blame??? Best analogy I can think of is a bartender and a patron... Sure the guy should know his limit and not drink too much, but the bartender (in this case having the patron's history of alcohol consumption and how it affects him) needs to be a responsible party and cut the guy off before it gets out of hand as well..... Plenty of blame to share.
Should we also blame cattle ranchers, grocery stores etc for the high rate of heart disease? If we are going to start blaming businesses for offering a product that can be abused, then there is going to be a lot of blame worthy businesses.....
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