Could you clarify what the entire point is?
What things qualify as “free” under your definition (rather than just “paid for by someone else”)?
Too much sugar.
I realize that. I was addressing the malarkey that they’re somehow doing the consumer a favor by negating the need for the consumer to provide credit history when applying for credit. That’s utter bullshit. As you say, the reports aren’t there for Joe Average Consumer; they’re for the lending institution.
I get soooooooo sick of hearing that. Are we just supposed to be satisfied with whatever happens? If you are completely satisfied you will never progress.
Those developing countries aren’t BASED on credit. Here in the US, we are.
I really do get so sick of other countries hating on America - I don’t insult your country…where the fuck is it again, and why do I care? Got any oil? If not, fuck off.
The costs of things like “free miles” have an entire hierarchy. Basically, someone pays for it somewhere, and that “someone” is almost never anyone but consumers. In many cases, the person getting the freebies is the one who pays - and probably overpays for the privilege, which is why I alluded to “free drinks” in casinos.
For every exceptionally fast-moving, crafty card-swapper who never seems to pay anything of return value for freebies, there are a thousand who end up generating equivalent income or more for the card. I could make a longer case that the crafty one ends up paying as well, just not in any obvious or straightforward way. One way is that a long history of card-jumping will eventually cost them credit standing on a major loan and they’ll pay higher fees and interest as a result. Or, like any shell game, they’ll hit a point where there is no next freebies card to jump to, and get stuck with years of excessive card fees and interest.
“Free” is only in the short run, and only those gamblers who can take one lucky win and leave the casino can even hope to end up ahead. Since few of us can “leave the casino”…
I think you’re wrong about the crafty credit-card swappers ending up paying for our own freebies. Sure, it’s all ultimately paid for by credit card users in aggregate, but that doesn’t matter to me. If I’m more disciplined and careful than others, then I’ll reap the rewards. And if I failed to take advantage of the opportunities, it would just mean more profit for the credit card companies. The suckers are getting fleeced either way.
It’s possible for people to beat the house. They do it by being smart, careful, and good at math.
Sure, it’s possible that my net returns will be negative due to having to pay a higher interest rate on a future loan, or that I’ll fail to keep track of my credit cards and end up paying interest in penalties. But that’s a calculated risk I’ve made. So far I’m several thousand dollars in the black and my credit report looks just fine.
There are a lot of people where I work who tell me how much money they’re making off scratch-off lottery tickets, and I just smile and ignore them. Bless their hearts.
Lawyers aren’t very good at math. 
Years ago I was the victim of identity theft, before that word became a household name. The credit bureaus were happy to fix records, but those records would be reset each month after the credit card company had sent in its tape with the bogus information. So it was necessary to contact the source of the misinformation (about a dozen of them) to clean up my file.
The procedure has been streamlined since then, and I’m not sure what the current situation is. (I’ve actually been an identity theft vic twice, but the 2nd time was a scam on my cc, as opposed to opening umteen credit cards in my name fraudulently.)
Ramira: And part of what makes the developed world great is solid consumer protections. When you fix unambiguous responsibilities on the big corps, they toughen up their security procedures and everyone wins, especially the small merchant. During the 1970s credit card companies would send free credit cards in the mail, whether they were ordered or not. That practice ended when they became liable for fraudulent and predictably fraudulent charges made with them. Curb the acts by bad players and responsible parties can compete.
Sounds like you’re suggesting that I’m failing to account for costs. I don’t believe that’s the case, but I’m not sure how I’d prove it to you.
The most likely unaccounted cost from such a strategy is the fact that people spend more on credit cards than they do in cash. However, I used credit cards before I started trying to optimize for credit card rewards, so in comparison to the default state of using credit cards, this shouldn’t cause me to spend any more. All I’m doing is carefully selecting which credit card I use.
There’s the possibility that my credit score is getting ruined. I think I addressed that (and it’s not, that I can tell).
I guess I could be buying stuff I don’t need. Pretty sure that’s not the case. A few times, I haven’t bought enough stuff to meet the spending requirements on a card, and I’ve bought gas and grocery store gift cards to make it up, then spent them down as normal to pay for gas and food.
What am I missing?
Based on the lottery analogy, I assume the implication is that you’re suffering from confirmation bias.
A case can be made that it’s paid by all consumers in aggregate, to greater or lesser individual degree that is probably higher than you think. Those rewards don’t come from nowhere, and they very rarely come from the credit card issuer’s profit base.
No, there’s no way to prove it, though I believe you. A number of years ago, I was doing something somewhat similar because I had a ton of medical bills on credit cards and learned that I could pay no interest if I was smart about what I did with it and used the credit card offers that came. I didn’t hurt my credit, got them all paid off, and now I don’t do anything like it because I’m too lazy and I never keep a balance so I don’t need to.
It’s not something I’d recommend to people because if you take advantage of an interest free transfer and miss a payment, the roof can come in. And transfers without fees seem pretty rare nowadays. But ten years ago, it was doable and saved me hundreds or thousands of dollars. (The medical bills were really really high.)
Possible. I don’t think that Bill Door’s coworkers were among the very few who manage to actually come out ahead on lottery tickets. I think he was saying that his coworkers aren’t actually winning. They’re just not counting their losses.
Yeah, I think that’s probably true to some extent. Stores raise prices enough that they cover the credit card fees, and part of those fees make it back to people as kickbacks, which encourage them to use credit cards more, and so on. That argument fails to account for the fact that credit cards generate actual surplus by being more convenient and efficient, and that cash has costs as well (mostly in security) that aren’t usually accounted for in that explanation. But the credit card companies have us over a nice game-theory barrel.
Then again, there’s nothing that stops stores from giving discounts for cash, and very few choose to do so.
You lost me there.
There is a societal cost to using cash. You have to physically move it from place to place. You have to put in security cameras to make sure your employees aren’t stealing it, you have to hire men with guns and big heavy armored trucks to come get it every few days, you have to build large buildings with heavy doors to hold onto it and build a bunch of machines to securely dispense it. And so on.
With electronic accounting, lots of those things go away. Not all of them, and there are some other costs that weren’t there before. People can still steal money via credit cards, they just generally do it via fraud, rather than robbery. Statistical analysis does a pretty good job of catching fraud. And it’s much cheaper to have a bank of computers analyzing transactions than it is to have armed guards going by every retail establishment every day. You can argue that credit cards are actually higher cost than cash, but most people seem to have chosen credit cards.
In economics, a gain is often called a “surplus”. As in, before, we had a certain amount of wealth. Now, due to the innovation of credit cards, we have surplus wealth. Some of that new wealth is captured by credit card companies in the form of fees. Some of it is captured by me in the form of I don’t have to go by the ATM all the damn time, or risk carrying lots of cash and getting robbed. Some of it is captured by me in the form of frequent flyer miles (or whatever kickback I get).
It’s easy to look at just the fees and say that credit card companies are bilking consumers out of the costs. But it may be more accurate to say that credit card companies are sharing in the surplus created by the credit card industry.
It’s also possible that credit card companies are leading people into horrible crushing consumer debt and are evil incarnate. I’m not going to touch that argument. So, for the sake of the above argument, imagine I’m talking about charge cards, like the old American Express. All they do is replace a method of payment. No indentured servitude involved.
You wouldn’t be expected to provide that much information. There isn’t any credit rating over here and IME, when asking for a credit, you’re asked :
- Your three last payslips
-A signed statement, detailling any other credits you might have and the amount of your rent (if applicable)
The national bank also keeps files of people who’ve been barred from credit services for lack of payments or for writing bad cheques.
Note that the government would want to implement a centralized databank where all extended credits would be recorded and that banks, etc.. would have to check before extending credit (so that you couldn’t lie when asking a new one). But the credit industry is firmly opposed to the idea. So, obviously, they want to extend credit to people who lie to them and in fact can’t afford to pay back what they’re borrowing. They don’t seem that much concerned about having as much information as possible as accurate as possible.
To give another example, they’re now required by law to ask for updated information on a regular basis (maybe every other year or somesuch). I’ve received a number of letters asking for them. Never bothered to respond. The credit company keeps upping my credit limit nevertheless (it was originally € 3000, it’s now about € 18000 and I never asked anything). Once again this company obviously doesn’t care the slightest bit about my current income, other credits, etc..
So, no. Even though I’m not sure when and why that credit rating system appeared in the USA, I’m pretty sure that if it dissapeared, American banks wouldn’t ask you tons of documents before extending credit. Look at what happened during the housing bubble.
As I just mentioned, there’s no such thing in France.
Okay. A short answer would have served; I just couldn’t place exactly what you meant.
Nothing further to add.