If the people who pay less than the full balance each month didn’t do so, the banks would squeeze us free riders who never pay interest. Not only that, but I’m getting 1.5% cash back. Just another advantage of being solvent in this system.
For awhile, I had an ultra-premium extra platinum-type card from Chase. This card was obviously marketed to the under 800 FICO score crowd. When I called the 800 customer service number, a REAL person answered INSTANTLY. No recording, no menu, no elevator music like on my other cards; just instant personal service. Rich people probably think this is SOP. I wonder if it is possible that the lower your FICO score, the longer you wait on hold and suffer other indignities.
People who are financially sinking or are just really bad/negligent with money oftentimes end up not paying off a CC. The CC company writes a lot of letters, makes phone calls, sells the debt to debt collectors, etc. and takes the loss.
Like I said, those people might intersect with people who pay late so a company might want to get a little bit of the future loss ahead of time.
Finding such an association is of course not a one-one relationship.
This is like how insurance companies work. If they find that red cars get into more accidents, they might charge more to insure a red car. (Health insurance companies digging for such associations played a major part in the loss of insurance for so many people. If you look like you’re in a group that needs insurance, they raise the rates so high you can’t afford it. They wanted to insure only the healthiest people at normal rates.)
Perhaps I’m naïve. I wasn’t aware one could simply opt to not pay a CC bill, short of going through bankruptcy proceedings.
Assuming a fairly decent credit rating such as I have had over the years, my credit limit was correspondingly high, and subsequently so was my debt, that I eventually paid off. My point was that if I had walked away from my debt obligation to the CCs, the amount of late payment fees I paid over time would not begin to cover their loss, hence my confusion.
There was a time that this was true, but it no longer is, at least for VISA. Merchants who take VISA have been able to add fees or surcharges since the beginning of 2013.
CC debt is unsecured debt. There is nothing to repossess. Technically the CC company (or the debt collectors that bought the bad debt) can sue for payment.
That doesn’t happen very often because if you’re broke, you’re broke. Blood from a stone and all that. The cost of the lawsuit is just more wasted money. If it’s a big debt and they find out you have money to pay it, look out. Most people who default are too poor for that to happen.
They can also file a claim on your estate when you die.
But there are statues of limitations on collecting debt. Typically 7 years. So they can’t haunt you forever (legally).
Sure, you’re credit rating is hurt for a while. Getting loans is going to be a problem. And since so many companies check people’s credit ratings now this can affect getting a job or apartment.
It’s like having a house foreclosed on. Not a great thing but no bankruptcy required and then it’s over. (In most states, anyway.)
Anyone charging a surcharge for credit cards is simply offering a cash discount. For anyone who doesn’t offer a “cash discount”, if you pay by cash you are subsidizing the people who pay with credit cards.
Whether it actually is in a place’s best interest to offer cash discounts depends on the normal level of cash transactions compared to card transactions. If a great deal of all your transactions are with cards, then having the ability to handle cash transactions may add more overhead then the CC companies charge for processing cards; offering a cash discount makes no sense here, as you’d prefer to minimize the amount of cash you have to have on hand as change, count, physically send to the bank, etc. If a good number of your transactions will be cash regardless of whether you offer a discount, you’re going to have significant costs in handling cash and a little more would likely not increase the expense of doing so compared to what the CC company charges.
At least, the above is my explanation for the kinds of places that tend to not want people to use cards.
This is all true. I’ll add a couple of clarifications.
The statute of limitations defines the time period in which you can be sued, or threatened to be sued, for a bad debt. After this time period, the owner of the debt can still contact you trying to get you to pay (obviously with less teeth to their argument).
It is common for lenders to sell off large batches of bad loans to collection companies. They may have, for example, 1,000 charged off loans for a total of $5 Million. They will sell this for maybe $250,000 or something like that. The collection company makes money, obviously, by getting a certain percentage of these people to pay them. They will never get all 1,000 to pay, but if they can get 100, they can get a good return on their purchase. The result of this is that you may be hounded for much longer, and much more aggressively, than you would have been by the original lender. Big banks make their money on interest, interchange, and fees. Collection companies only make money if they collect, and so will generally be much more aggressive.
Of course, their are consumer protection laws that limit what collection companies can do, and allow the consumer to prevent some methods of communication, but it can be a very bad experience.
Right. Altho CC charge 2-3%, handling cash is by no means free. Banks charge for large cash deposits, extra hold up insurance or armored cars are expensive, and cash control, counting and recounting and counting again- takes time.
But when your average trans is like $10, the fees are higher, so I dont blame business that tack on charges for small transactions.
I don’t know. I mean, there’s a little of it, but credit cards have been around for many decades, and this is still a pretty uncommon practice. What has changed that’s going to cause a change in behavior?
The thing that seems to often be overlooked is that cash costs money to accept too. It is more susceptible to theft, it requires special processes and employee time to count and secure and transport to the bank, etc. Maybe it ultimately costs less than the credit card fee, but it’s not nothing.
