# Credit cards - how do they work? **URL:** \ **Category:** Factual Questions\ **Created:** [August 31, 2001, 5:22pm UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149 "2001-08-31T17:22:39Z")\ **Posts on this page:** 14\ **Page:** 2
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [August 31, 2001, 11:03pm UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/21 "2001-08-31T23:03:44Z")
Visa, MC etc, are a clearinghouse for the payments. Your card and your contract is with an issuing bank who sets conditions etc. That is why pretty much the bank will issue you a Visa or MC. What bank issued the card and with what conditions is way more important than whether it is Visa or MC. ---
**Author:** ![SpoilerVirgin](https://avatars.discourse-cdn.com/v4/letter/s/4491bb/32.png) [@SpoilerVirgin](https://boards.straightdope.com/u/SpoilerVirgin)\ **Post date:** [August 31, 2001, 11:37pm UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/22 "2001-08-31T23:37:03Z")
Although many people now use credit cards primarily for convenience, the real purpose of a credit card is as a quick and convenient form of **loan**. So from the point of view of the customer, he or she is able to make purchases he otherwise could not make, because he can borrow the money from the credit card company, even though there will be a reckoning to pay in the form of interest if he or she still doesn’t have the money when the credit card bill arrives. Many Americans now live on loans from credit card companies, sometimes very large loans from a very large number of credit card companies. From the point of view of the store, these are people who would not be making the purchases if it weren’t for the credit card. They simply wouldn’t have the money to pay for that new computer, or that dinner out, or that pair of lavender jade earrings that I saw online last night and couldn’t resist… (O.K., so now that I’ve been paid I will have the money to pay for them when the bill comes, but I didn’t have the cash in hand last night when the impulse struck me. Not to mention the fact that it’s difficult to shove cash through your hard drive.) It adds up to a huge business with benefits on both sides, as long as the consumers don’t get too deep into debt. From an [ABC News](http://abcnews.go.com/onair/2020/diaz000628.html) piece: > [@](#): > > The average American household has 13 payment cards, including credit cards, debit cards and store cards. There are 1.3 billion payment cards in circulation in the United States. > > Americans carry, on average, $5,800 in credit card debt from month to month. If one were to make only the minimum payment on that debt every month, it would take 30 years to pay off — and include an additional $15,000 in interest. ---
**Author:** ![Kamikazee](https://avatars.discourse-cdn.com/v4/letter/k/b9e5f3/32.png) [@Kamikazee](https://boards.straightdope.com/u/Kamikazee)\ **Post date:** [August 31, 2001, 11:51pm UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/23 "2001-08-31T23:51:44Z")
If looking for a CC don’t overlook your friendly local Credit Union. Many have great rates and no annual fees. OK enough of the shameless self promotion. Seriously the wise consumer would pay off the card in full each month, and use the CC company for an interest free loan. Worked with a lady who charged every thing and paid in full each month and then flew to Hawaii twice a year with free airline tickets from her CC co. ---
**Author:** ![barbitu8](https://avatars.discourse-cdn.com/v4/letter/b/839c29/32.png) [@barbitu8](https://boards.straightdope.com/u/barbitu8)\ **Post date:** [September 1, 2001, 12:19am UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/24 "2001-09-01T00:19:25Z")
I know this is not the Pit, but let me tell you about my experience with the Federal Credit Union, from which I had a Visa. First, a little background to show why I was infurated at them to begin with. In 1994 I bought a new car but could not locate my title. I thought maybe the Credit Union had it, even tho I paid off the loan, but they said No. I had to run around the city like a headless chicken trying to get a duplicate title when I decided to go back to the Credit Union. This time I asked to let me look at my file, and there it was, in plain sight. Now, a while later, I got a Visa statement from the Credit Union with the due date the next day! I sent it in immediately, as I always do and they charged me a late fee on the next statement. I called them up, explained that it was impossible for me to pay on time because of their late mailing. I went up several levels, trying to get someone in authority to waive the interest without success. A while back, I had a Visa from another place, with their office in Indiana. Their statement was lost in the mail and I never got it. When I got their next statement with the interest, I called them up, and without any ado, after explaining that I never got the prior one, they waived the interest. My “friendly” credit union was unwilling to do what an outfit in another state did without hassle. Not to mention my problem with my car title. So, please, don’t tell me about credit unions. ---
**Author:** ![Kamikazee](https://avatars.discourse-cdn.com/v4/letter/k/b9e5f3/32.png) [@Kamikazee](https://boards.straightdope.com/u/Kamikazee)\ **Post date:** [September 1, 2001, 12:27am UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/25 "2001-09-01T00:27:14Z")
WOW, perhaps you were shuned as a child??? Seriously though your situation sounds all too common. Any “bank” has the ability to jerk you around. I could tell you horror stories of my banking years… throwing away correspondence from clients… only helping them if their balance was high enough on and on… Switched to CU 5 years ago and have found them to be quite different. Still not perfect by any stretch. ---
**Author:** ![The\_Ryan](https://avatars.discourse-cdn.com/v4/letter/t/7feea3/32.png) [@The\_Ryan](https://boards.straightdope.com/u/The_Ryan)\ **Post date:** [September 1, 2001, 1:42am UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/26 "2001-09-01T01:42:29Z")
> [@](#): > > \*Originally posted by PookahMacPhellimey \* > I don’t know about other cards, as far as the one I work for is concerned that is illegal. It is called suppression, and if the Card Company finds out , the establishment is in trouble. I really don’t get this. What’s wrong with a company charging what it wants to charge? Am I just being a libertarian fool? ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [September 1, 2001, 3:22am UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/27 "2001-09-01T03:22:52Z")
\>\> I really don’t get this. What’s wrong with a company charging what it wants to charge? Am I just being a libertarian fool? well, if the company has voluntarily signed a contract saying it won’t do something, I can see why it would be wrong to do it. It’s not like they had a gun to their heads when they signed it. ---
**Author:** ![EvilGhandi](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@EvilGhandi](https://boards.straightdope.com/u/EvilGhandi)\ **Post date:** [September 1, 2001, 7:45am UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/28 "2001-09-01T07:45:08Z")
God help us, Quoth, PookahMacPhellimey “so I seized this once in a lifetime opportunity to show off my “expertise”.” Someone with some expertise (and just a bit of humility)answering a thread. ---
**Author:** ![Lynn\_Bodoni](https://avatars.discourse-cdn.com/v4/letter/l/e47c2d/32.png) [@Lynn\_Bodoni](https://boards.straightdope.com/u/Lynn_Bodoni)\ **Post date:** [September 1, 2001, 8:44am UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/29 "2001-09-01T08:44:13Z")
> [@](#): > > \*Originally posted by WEW \* > \*\*One other note…studies have shown (no, I don’t have a cite), that people tend to spend more when they have a credit card. I know I do. > > The other night, the Mrs. and I went out with some friends. There had been a mix up at the bank, and I knew in advance that my Debit card would not work, so I had to use cash. I kept track in my head how much we had spent, and made sure that we stopped well before the cash ran out, so we could leave a good tip. If my Debit card had been functioning properly, I would have spent more. \*\* I don’t have a cite either, but I’ve spent quite a few years in retail, and this is correct. Credit cards don’t “feel” like money to many people. Many, if not most, consumers will happily spend a lot more if they are charging the purchase. Someone who pays in cash generally spends a lot of time looking at the price tag, then staring off into space (obviously computing price and tax, and figuring out how much further s/he can stretch that dollar). I know that I will carefully calculate my book purchases when I’m paying cash…and I know that I really shouldn’t buy books online at ALL. It’s just too easy to spend a couple of thousand bucks in a couple of hours. ---
**Author:** ![Drake\_Christensen](https://avatars.discourse-cdn.com/v4/letter/d/96bed5/32.png) [@Drake\_Christensen](https://boards.straightdope.com/u/Drake_Christensen)\ **Post date:** [September 1, 2001, 8:53am UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/30 "2001-09-01T08:53:32Z")
I seem to remember some gas stations used to charge differently for cash vs credit cards. Maybe back in the '70s? Maybe even more recently. Also, at arcade game auctions put on by Super Auctions they charge something like 10% extra for credit cards. At least, they did last year, the last time I bought something at one of their auctions. So that sort of thing has been and is currently done. ---
**Author:** ![OxyMoron](https://avatars.discourse-cdn.com/v4/letter/o/e9a140/32.png) [@OxyMoron](https://boards.straightdope.com/u/OxyMoron)\ **Post date:** [September 1, 2001, 2:10pm UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/31 "2001-09-01T14:10:24Z")
> [@](#): > > \*Originally posted by Drake Christensen \* > \*\*I seem to remember some gas stations used to charge differently for cash vs credit cards. Maybe back in the '70s? Maybe even more recently. > \*\* As I recall, at that time gas stations only took their own charge cards - it’s pretty recent that they started taking Visa and MasterCard. Exxon could, of course, do whatever they want with their own card. (I remember my Dad’s wallet thick with Exxon, Mobil, Gulf, ARCO, Union 76, Texaco…) P.S. For more on credit cards, see [this thread](http://boards.straightdope.com/sdmb/showthread.php?threadid=83707) and [this thread](http://boards.straightdope.com/sdmb/showthread.php?threadid=84066). ---
**Author:** ![hardygrrl](https://avatars.discourse-cdn.com/v4/letter/h/a3d4f5/32.png) [@hardygrrl](https://boards.straightdope.com/u/hardygrrl)\ **Post date:** [September 1, 2001, 4:06pm UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/32 "2001-09-01T16:06:52Z")
_Enter the Fraud Analyst_ Any purchase where the card is NOT present (mail, phone or online), Visa/Mastercard has automatic chargeback rights. In short, if a customer contests the charge, the merchant HAS to give the money back. Of course, we do make the customer sign a legal document stating they did not make the charge, which we can take to the merchant. Account number thievery is, without a doubt, the biggest fraud trend. Think about it. You still have the card in your possession so you think everything’s ok. Then you get your statement with multiple fraud charges. That’s why credit card companies tend to be anal about heavy online purchasing activity. We WILL verify that activity with the cardholder. _Exit the Fraud Analyst_ ---
**Author:** ![PookahMacPhellimey](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pookahmacphellimey/32/3175_2.png) [@PookahMacPhellimey](https://boards.straightdope.com/u/PookahMacPhellimey)\ **Post date:** [September 1, 2001, 7:45pm UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/33 "2001-09-01T19:45:45Z")
Slight aside: > [@](#): > > \*Originally posted by EvilGhandi \* > \*\*God help us, > > Quoth, PookahMacPhellimey > > “so I seized this once in a lifetime opportunity to show off my “expertise”.” > > Someone with some expertise (and just a bit of humility)answering a thread. \*\* Although if you keep posting like that I will rapidly become insufferably arrogant. 🙂 ---
**Author:** ![The\_Ryan](https://avatars.discourse-cdn.com/v4/letter/t/7feea3/32.png) [@The\_Ryan](https://boards.straightdope.com/u/The_Ryan)\ **Post date:** [September 1, 2001, 8:00pm UTC](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149/34 "2001-09-01T20:00:10Z")
> [@](#): > > \*Originally posted by sailor \* > well, if the company has voluntarily signed a contract saying it won’t do something, I can see why it would be wrong to do it. It’s not like they had a gun to their heads when they signed it. If so, I think that PookahMacPhellimey should have made that more clear. Saying that something is “illegal” implies that it is against a law, not a contract. [Previous page](https://boards.straightdope.com/t/credit-cards-how-do-they-work/79149.md?page=1)