Keeping a good credit rating: how often should you use credit?
Steve
I have no debts and haven't used credit for years. I have a good
rating, but I am told it would be better if I used some credit ( and
paid it back in a timely way ).
I was thinking of getting a credit card and using it as a debit card
for a small number of circumstances to do just that.
How often and how much is the *minimum* I would need to borrow to
boost and then maintain my credit rating?
JR Weiss
> I have no debts and haven't used credit for years. I have a good
> rating, but I am told it would be better if I used some credit ( and
> paid it back in a timely way ).
>
> I was thinking of getting a credit card and using it as a debit card
> for a small number of circumstances to do just that.
>
> How often and how much is the minimum I would need to borrow to
> boost and then maintain my credit rating?
There's no single or simple answer. A higher credit limit will reduce
your score, but paying back borrowed money will increase it. MAYBE
some Fair-Isaac analyst wh knows the secret formula could give you an
answer if you gave him every detail of your financial situation...
The cheapest ways are to get a no-fee credit card and pay it off every
month, so it costs you nothing; and a no-closing-cost Home Equity Line
of Credit that you can "borrow" from (e.g., for a home renovation) and
repay immediately.
Clincher
"JR Weiss" <j...@invalid.invalid> wrote in message
news:h9o8t1$9qv$1...@news.eternal-september.org...
Getting a lender to approve a credit card or not closing it for insufficient
usage will be his bigger problem right now.
In this envrionment, lenders are cherry-picking the most profitable
customers. They're not in the business of giving cards to those who use only
a "minimum" amount of credit for the sake of "maintaining" a credit score.
JR Weiss
>>> I have no debts and haven't used credit for years. I have a good
>>> rating, but I am told it would be better if I used some credit (
>>> and paid it back in a timely way ).
>>>
>>> I was thinking of getting a credit card and using it as a debit
>>> card for a small number of circumstances to do just that.
>>>
>>> How often and how much is the minimum I would need to borrow to
>>> boost and then maintain my credit rating?
>> The cheapest ways are to get a no-fee credit card and pay it off
>> every month, so it costs you nothing; and a no-closing-cost Home
>> Equity Line of Credit that you can "borrow" from (e.g., for a home
>> renovation) and repay immediately.
> Getting a lender to approve a credit card or not closing it for
> insufficient usage will be his bigger problem right now.
>
> In this envrionment, lenders are cherry-picking the most profitable
> customers. They're not in the business of giving cards to those who
> use only a "minimum" amount of credit for the sake of "maintaining" a
> credit score.
If he already has a good credit rating, there should be no reason for a
lender to refuse him a credit card, especially if that lender is the
bank or credit union where he already has accounts. The lender will
not be able to discern his future use of the card...
Clincher
>> In this envrionment, lenders are cherry-picking the most profitable
>> customers. They're not in the business of giving cards to those who
>> use only a "minimum" amount of credit for the sake of "maintaining" a
>> credit score.
>
> If he already has a good credit rating, there should be no reason for a
> lender to refuse him a credit card,
'Course there is. Namely, the opportunity cost of not allocating that credit
line to someone who'll use the card for its own sake and pay interest as
well. There's been so much hype about "credit scores" that consumers focus
all their attention on their that and forget all about their profitability
ratings.
Lenders aren't even being coy about that anymore: you're seeing actual
reasons for denial such as "account maintenance expenses expected to exceed
projected revenue." and "low balances combined with high existing limits."
>The lender will not be able to discern his future use of the card...
They don't need to - they use past data to make a prediction and act on it.
Same as for predicting risk of default.
JR Weiss
>> If he already has a good credit rating, there should be no reason
>> for a lender to refuse him a credit card,
>
> 'Course there is. Namely, the opportunity cost of not allocating that
> credit line to someone who'll use the card for its own sake and pay
> interest as well. There's been so much hype about "credit scores"
> that consumers focus all their attention on their that and forget all
> about their profitability ratings.
There's no such cost, because there's no hard limit to the credit
lines. As high-risk credit is reduced, low-risk credit can be
increased. it does the lender no good if the customer pays interest
but then defaults on the principal.
> Lenders aren't even being coy about that anymore: you're seeing
> actual reasons for denial such as "account maintenance expenses
> expected to exceed projected revenue." and "low balances combined
> with high existing limits."
For someone who makes large purchases, the 2-3% the lender gets from
the purchases will obviate the first cliam, and the second one doesn't
apply to the OP who doesn't have such existing lines.
>> The lender will not be able to discern his future use of the card...
>
> They don't need to - they use past data to make a prediction and act
> on it. Same as for predicting risk of default.
An ethical lender will not refuse credit on such grounds. The OP will
be better off looking for another lender if he runs into an unethical
one.
Rod Speed
> Clincher wrote:
>
>>> If he already has a good credit rating, there should be no reason
>>> for a lender to refuse him a credit card,
>>
>> 'Course there is. Namely, the opportunity cost of not allocating that
>> credit line to someone who'll use the card for its own sake and pay
>> interest as well. There's been so much hype about "credit scores"
>> that consumers focus all their attention on their that and forget all
>> about their profitability ratings.
>
> There's no such cost, because there's no hard limit to the credit
> lines. As high-risk credit is reduced, low-risk credit can be
> increased. it does the lender no good if the customer pays interest
> but then defaults on the principal.
They obviously attempt to lend to those who wont do that last.
>> Lenders aren't even being coy about that anymore: you're seeing
>> actual reasons for denial such as "account maintenance expenses
>> expected to exceed projected revenue." and "low balances combined
>> with high existing limits."
> For someone who makes large purchases, the 2-3% the
> lender gets from the purchases will obviate the first cliam,
Like hell it does, particularly with cards that
dont have a fee and which pay rewards.
> and the second one doesn't apply to the OP who doesn't have such existing lines.
He didnt say that.
>>> The lender will not be able to discern his future use of the card...
>> They don't need to - they use past data to make a prediction
>> and act on it. Same as for predicting risk of default.
> An ethical lender will not refuse credit on such grounds. The OP will
> be better off looking for another lender if he runs into an unethical one.
Its got nothing to do with ethics, everything to do with what
makes the lender economically viable over the long haul, stupid.
Clincher
"JR Weiss" <j...@invalid.invalid> wrote in message
> Clincher wrote:
>
>>> If he already has a good credit rating, there should be no reason
>>> for a lender to refuse him a credit card,
>>
>> 'Course there is. Namely, the opportunity cost of not allocating that
>> credit line to someone who'll use the card for its own sake and pay
>> interest as well. There's been so much hype about "credit scores"
>> that consumers focus all their attention on their that and forget all
>> about their profitability ratings.
>
> There's no such cost, because there's no hard limit to the credit
> lines.
The larger the outstanding credit line, the riskier the bank's own position
looks and the higher the bank's own cost of borrowing. Banks are absolutely
rationing their credit lines, in the interest of managing *their* "FICO."
>> Lenders aren't even being coy about that anymore: you're seeing
>> actual reasons for denial such as "account maintenance expenses
>> expected to exceed projected revenue." and "low balances combined
>> with high existing limits."
>
> For someone who makes large purchases, the 2-3% the lender gets from
> the purchases will obviate the first cliam,
I remind you the OP is explicitly uninterested in making large purchases.
> and the second one doesn't
> apply to the OP who doesn't have such existing lines.
Effectively, it's "zero balances" - that's even worse.
>>> The lender will not be able to discern his future use of the card...
>>
>> They don't need to - they use past data to make a prediction and act
>> on it. Same as for predicting risk of default.
>
> An ethical lender will not refuse credit on such grounds.
Ah, so all the OP has to do is find an "ethical" credit card issuer.
Thank you for proving my point beyond doubt.
Obvious jab aside, what the bank is doing here not unethical. A credit card
loan is an investment like any other - almost by definition, it's made
without being able to discern the future. All we can do is assess the data
we do have and make the best possible prediction. That's not unethical, it's
what any smart investor does.
JR Weiss
>> it does the lender no good if the customer pays interest
>> but then defaults on the principal.
>
> They obviously attempt to lend to those who wont do that last.
And they have apparently failed miserably...
Still, the OP does not fit in that risk category, from the information
provided.
>> For someone who makes large purchases, the 2-3% the
>> lender gets from the purchases will obviate the first cliam,
>
> Like hell it does, particularly with cards that
> dont have a fee and which pay rewards.
Which cards are those? I haven't seen a no-fee rewards card offer yet.
>> and the second one doesn't apply to the OP who doesn't have such
>> existing lines.
>
> He didnt say that.
The implication was clear.
>> An ethical lender will not refuse credit on such grounds. The OP
>> will be better off looking for another lender if he runs into an
>> unethical one.
>
> Its got nothing to do with ethics, everything to do with what
> makes the lender economically viable over the long haul, stupid.
It's got EVERYTHING to do with ethics, because lenders are now
attempting to recover losses that stemmed from their clear preference
for short-term profits over ANY long-term considerations! Ethical
lenders like my current credit unions have not been hit significantly
by the recent bank implosion, because their ethics prevented them from
participating in the risky games preferred by those who went under and
by those who required govamint bailouts.
JR Weiss
>>>> If he already has a good credit rating, there should be no
>>>> reason for a lender to refuse him a credit card,
>>>
>>> 'Course there is. Namely, the opportunity cost of not allocating
>>> that credit line to someone who'll use the card for its own sake
>>> and pay interest as well. There's been so much hype about "credit
>>> scores" that consumers focus all their attention on their that
>>> and forget all about their profitability ratings.
>>
>> There's no such cost, because there's no hard limit to the credit
>> lines.
>
> The larger the outstanding credit line, the riskier the bank's own
> position looks and the higher the bank's own cost of borrowing. Banks
> are absolutely rationing their credit lines, in the interest of
> managing their "FICO."
Again, this doesn't apply to the OP. He's not looking for a "large"
credit line, and many banks have already significantly reduced current
credit lines. The OP's risk would be extremely low.
>> For someone who makes large purchases, the 2-3% the lender gets from
>> the purchases will obviate the first cliam,
>
> I remind you the OP is explicitly uninterested in making large
> purchases.
Not necessarily so. He is uninterested in paying interest by making
extended payments on large purchases. His cash spending habits are
unknown.
>> and the second one doesn't
>> apply to the OP who doesn't have such existing lines.
>
> Effectively, it's "zero balances" - that's even worse.
Unlikely. His expressed desire was to increase his FICO score. To do
so, he would have to USE his credit lines responsibly.
>> An ethical lender will not refuse credit on such grounds.
>
> Ah, so all the OP has to do is find an "ethical" credit card issuer.
>
> Thank you for proving my point beyond doubt.
And what point was that?
> Obvious jab aside, what the bank is doing here not unethical. A
> credit card loan is an investment like any other - almost by
> definition, it's made without being able to discern the future. All
> we can do is assess the data we do have and make the best possible
> prediction. That's not unethical, it's what any smart investor does.
Except many lenders (as well as insurance companies) are now turning to
other, new, unproven "measures" of risk, with the ONLY real intent
being to increase their current bottom line. Real lenders' ethics
would dictate that creditworthy, low-risk customers should be
accommodated. They would also dictate that revenue structures be
applied equally across the board to same-risk customers, so that a
creditworthy customer is not refused because he plans on playing by the
rules (e.g., payment in full each month).
Marsha
> Rod Speed wrote:
>> Like hell it does, particularly with cards that
>> dont have a fee and which pay rewards.
>
> Which cards are those? I haven't seen a no-fee rewards card offer yet.
>
I have a Discover card that charges no fees and gives 0.25 to 0.5% cash
back on everything and, for every 3-month period, offers 5% cash back
for certain things. I just applied $50.00 in rewards fees to my balance.
Marsha
Rod Speed
> Rod Speed wrote
>>> it does the lender no good if the customer
>>> pays interest but then defaults on the principal.
>> They obviously attempt to lend to those who wont do that last.
> And they have apparently failed miserably...
Like hell they have with credit cards.
> Still, the OP does not fit in that risk category, from the information provided.
So why did you bring that up yourself ?
>>> For someone who makes large purchases, the 2-3% the
>>> lender gets from the purchases will obviate the first cliam,
>> Like hell it does, particularly with cards that
>> dont have a fee and which pay rewards.
> Which cards are those? I haven't seen a no-fee rewards card offer yet.
Then you need to get out more.
>>> An ethical lender will not refuse credit on such grounds. The OP will
>>> be better off looking for another lender if he runs into an unethical one.
>> Its got nothing to do with ethics, everything to do with what
>> makes the lender economically viable over the long haul, stupid.
> It's got EVERYTHING to do with ethics,
Nope.
> because lenders are now attempting to recover losses that stemmed from their
> clear preference for short-term profits over ANY long-term considerations!
Wrong with credit cards. ALL they are doing is rationing
credit because there has been a significant credit crunch.
> Ethical lenders like my current credit unions have not
> been hit significantly by the recent bank implosion,
Credit card issuers have only been hit by increased problems
due to a doubling of the unemployment rate and the credit crunch.
Thats why operations like Amex that never got involved in the property bubble
and now pulling the plug on plenty they chose to extend credit to in the past.
> because their ethics prevented them from participating in the risky games
> preferred by those who went under and by those who required govamint bailouts.
Not one of the credit card issuers has been bailed out by govt.
Rod Speed
> Clincher wrote
>>>>> If he already has a good credit rating, there should
>>>>> be no reason for a lender to refuse him a credit card,
>>>> 'Course there is. Namely, the opportunity cost of not allocating
>>>> that credit line to someone who'll use the card for its own sake
>>>> and pay interest as well. There's been so much hype about "credit
>>>> scores" that consumers focus all their attention on their that
>>>> and forget all about their profitability ratings.
>>> There's no such cost, because there's no hard limit to the credit lines.
>> The larger the outstanding credit line, the riskier the bank's own
>> position looks and the higher the bank's own cost of borrowing.
>> Banks are absolutely rationing their credit lines, in the interest
>> of managing their "FICO."
> Again, this doesn't apply to the OP. He's not looking for a "large"
> credit line, and many banks have already significantly reduced
> current credit lines. The OP's risk would be extremely low.
>>> For someone who makes large purchases, the 2-3% the
>>> lender gets from the purchases will obviate the first cliam,
>> I remind you the OP is explicitly uninterested in making large purchases.
> Not necessarily so.
He said that VERY unambiguously.
He JUST want to use the credit card like a debit card so he has what
appears to be some credit transactions to try to increase his score.
> He is uninterested in paying interest by making extended payments
> on large purchases. His cash spending habits are unknown.
How he plans to use the card is known, he said that very explicitly.
>>> and the second one doesn't apply to the OP who doesn't have such existing lines.
>> Effectively, it's "zero balances" - that's even worse.
> Unlikely. His expressed desire was to increase his FICO score.
> To do so, he would have to USE his credit lines responsibly.
You dont know whether he plans to pay of his card balances in full every month or not.
He appears to be asking whether that approach would increase his score.
>>> An ethical lender will not refuse credit on such grounds.
>> Ah, so all the OP has to do is find an "ethical" credit card issuer.
>> Thank you for proving my point beyond doubt.
> And what point was that?
>> Obvious jab aside, what the bank is doing here not unethical. A
>> credit card loan is an investment like any other - almost by
>> definition, it's made without being able to discern the future. All
>> we can do is assess the data we do have and make the best possible
>> prediction. That's not unethical, it's what any smart investor does.
> Except many lenders (as well as insurance companies) are now turning
> to other, new, unproven "measures" of risk, with the ONLY real intent
> being to increase their current bottom line. Real lenders' ethics would
> dictate that creditworthy, low-risk customers should be accommodated.
Nothing to do with ethics, its about who produces decent income without risk, stupid.
> They would also dictate that revenue structures be applied equally
> across the board to same-risk customers, so that a creditworthy
> customer is not refused because he plans on playing by
> the rules (e.g., payment in full each month).
Mindlessly silly when those dont produce anything like as much income as those who dont.
SMS
Your best option is to get a Schwab Bank Invest First Visa Credit Card.
There is no annual fee, no foreign transaction charges (Schwab absorbs
the 1% Visa fee and doesn't add their own fee) and they give 2% cash
back, deposited into a Schwab account (this is similar to what the old
Countrywide Bank Visa 2% cash back card did prior to it being
discontinued). 2% cash back on all purchases is very rare these days, I
don't know of any other cards that do this anymore.
Once you have that card, use it for all purchases, and start billing all
your recurring monthly bills to the card (phone, cell phone, Internet,
cable or satellite, insurance, etc.). For a while, PG&E (gas and
electric company in Northern California) allowed you to pay your bill
with a Visa card but they dropped that program. Three advantages are
that you now only have to pay less individual bills, you don't allow
these companies to get money directly from your checking account, and
you'll likely get several hundred dollars a year back in cash back.
Unfortunately, without any existing credit cards you may find it
difficult to get a credit card. Whatever you do, don't use it as a debit
card.
SMS
> The larger the outstanding credit line, the riskier the bank's own position
> looks and the higher the bank's own cost of borrowing. Banks are absolutely
> rationing their credit lines, in the interest of managing *their* "FICO."
It can be rather amusing. I was going to get the Delta Amex for one year
with no fee to get enough miles for a free ticket. So they sent the card
with a $2000 limit which was rather worthless to me. The Costco Amex I
have has a credit limit that's more than an order of magnitude greater
than that. When I called to cancel they didn't offer a greater limit.
Later they called and said that they could increase the limit by
decreasing the limit on the Costco Amex card, but by that time I was too
annoyed to continue with the whole thing.
SMS
> For someone who makes large purchases, the 2-3% the lender gets from
> the purchases will obviate the first cliam, and the second one doesn't
> apply to the OP who doesn't have such existing lines.
It's pretty rare these days to find a merchant that's paying 2-3% on MCC
or Visa (perhaps they're paying that for Amex, but even Amex is not
averse to negotiating lower rates. The rate for card-swipe purchases is
around 1.6%, though there is also a per-transaction fee of around 20�
(which is why merchants hate low value credit card purchases).
How long will some of these rewards cards be paying 2% cash back or even
1% cash back to card holders that pay their balance in full each month
and never pay any interest? One 2% card I had discontinued their rebate
program in March. It was good while it lasted though. I did notice a
caveat on merchant accounts that says "Reward cards process at a higher
rate," so they are gouging the merchant, who probably can't distinguish
between rewards and non-rewards cards. Does anyone even use a
non-rewards card any more?
> An ethical lender will not refuse credit on such grounds. The OP will
> be better off looking for another lender if he runs into an unethical
> one.
Ethics has nothing to do with it. If the lender has a limited amount of
credit they are willing to extend then they want to extend it to the
most profitable customers.
Clincher
> Except many lenders (as well as insurance companies) are now turning to
> other, new, unproven "measures" of risk,
Unproven how?
You've got someone who has shunned credit for years suddenly wanting a
credit card. The most likely reasons someone does that are:
1) The OP's stated reason: He doesn't really want credit. He just wants the
appearance of using credit for the sake of gaming his credit score. He'll
only use it as much as necessary for that purpose and prefer debit or cash
otherwise.
2) The applicant has just lost a job, been warned of pending layoffs or
cutbacks, had or thinks he'll have a medical emergency, or otherwise no
longer thinks he can mantain his debt-free lifestyle. So now he suddenly
wants a line of credit.
#1 is a low profit indicator, #2 is a high risk indicator. Either way, it's
not an attractive way to invest your money. With the supply-demand situation
for consumer credit the way it is, banks can probably find dozens of more
profitable ways to invest their money - why would they jump at this?
> with the ONLY real intent
> being to increase their current bottom line.
Um, yes. Do for-profit businesses, especially those with shareholders, have
any other calling?
> Real lenders' ethics
> would dictate that creditworthy, low-risk customers should be
> accommodated. They would also dictate that revenue structures be
> applied equally across the board to same-risk customers, so that a
> creditworthy customer is not refused because he plans on playing by the
> rules (e.g., payment in full each month).
Nope. Credit is not a right - it's a business proposition that either side
is free to decline from participating in if it doesn't fit his financial
goals.
Coffee's For Closers
j...@invalid.invalid says...
> Steve wrote:
>
> > I have no debts and haven't used credit for years. I have a good
> > rating, but I am told it would be better if I used some credit ( and
> > paid it back in a timely way ).
> >
> > I was thinking of getting a credit card and using it as a debit card
> > for a small number of circumstances to do just that.
> >
> > How often and how much is the minimum I would need to borrow to
> > boost and then maintain my credit rating?
> There's no single or simple answer. A higher credit limit will reduce
> your score, but paying back borrowed money will increase it. MAYBE
> some Fair-Isaac analyst wh knows the secret formula could give you an
> answer if you gave him every detail of your financial situation...
As I understand it, there are no humans, even at Fair, Isaac, who
can work out a a FICO credit score with pen and paper. Even they
aren't completely sure how the computer model works.
--
Get Credit Where Credit Is Due
http://www.cardreport.com/
Credit Tools, Reference, and Forum
JR Weiss
> Not one of the credit card issuers has been bailed out by govt.
Just showing, yet again, how clueless you really are... WaMu was among
the most visible.
JR Weiss
>>> I remind you the OP is explicitly uninterested in making large
>>> purchases.
>
>> Not necessarily so.
>
> He said that VERY unambiguously.
>
> He JUST want to use the credit card like a debit card so he has what
> appears to be some credit transactions to try to increase his score.
>
>> He is uninterested in paying interest by making extended payments
>> on large purchases. His cash spending habits are unknown.
>
> How he plans to use the card is known, he said that very explicitly.
Not at all! What he said was:
"I was thinking of getting a credit card and using it as a debit
card for a small number of circumstances to do just that."
That "small number of circumstances" could well include large purchases
where cash is inconvenient, checks may not be accepted, and he would
now use a debit card.
>>>> and the second one doesn't apply to the OP who doesn't have
>>>> such existing lines.
>
>>> Effectively, it's "zero balances" - that's even worse.
>
>> Unlikely. His expressed desire was to increase his FICO score.
>> To do so, he would have to USE his credit lines responsibly.
>
> You dont know whether he plans to pay of his card balances in full
> every month or not.
The implication is clear that with his current fiscal habits he is
unlikely to carry a significant balance for a long time. Obviously you
are unable to comprehend fiscal responsibility.
>> Except many lenders (as well as insurance companies) are now turning
>> to other, new, unproven "measures" of risk, with the ONLY real
>> intent being to increase their current bottom line. Real lenders'
>> ethics would dictate that creditworthy, low-risk customers should
>> be accommodated.
>
> Nothing to do with ethics, its about who produces decent income
> without risk, stupid.
No. "It's about" HOW companies produce income and how they misstate,
ignore, or mishandle risk (or lack thereof).
Obviously you also can't comprehend that NOBODY can produce "decent
income without risk."
Rod Speed
> Rod Speed wrote
>> Not one of the credit card issuers has been bailed out by govt.
> Just showing, yet again, how clueless you really are... WaMu was among the most visible.
It was a hell of a lot more than just a credit card issuer, fuckwit.
Rod Speed
> Rod Speed wrote
>>>> I remind you the OP is explicitly uninterested in making large purchases.
>>> Not necessarily so.
>> He said that VERY unambiguously.
>> He JUST want to use the credit card like a debit card so he has what
>> appears to be some credit transactions to try to increase his score.
>>> He is uninterested in paying interest by making extended payments
>>> on large purchases. His cash spending habits are unknown.
>> How he plans to use the card is known, he said that very explicitly.
> Not at all!
Fraid so.
> What he said was:
> "I was thinking of getting a credit card and using it as a debit
> card for a small number of circumstances to do just that."
> That "small number of circumstances" could well include
> large purchases where cash is inconvenient, checks may
> not be accepted, and he would now use a debit card.
Thats straight from your arse, we can tell from the smell.
>>>>> and the second one doesn't apply to the OP who doesn't have
>>>>> such existing lines.
>>>> Effectively, it's "zero balances" - that's even worse.
>>> Unlikely. His expressed desire was to increase his FICO score.
>>> To do so, he would have to USE his credit lines responsibly.
>> You dont know whether he plans to pay of
>> his card balances in full every month or not.
> The implication is clear that with his current fiscal habits
> he is unlikely to carry a significant balance for a long time.
Different matter entirely.
> Obviously you are unable to comprehend fiscal responsibility.
You never ever could bullshit and lie your way out of wet paper bag.
>>> Except many lenders (as well as insurance companies) are now turning
>>> to other, new, unproven "measures" of risk, with the ONLY real
>>> intent being to increase their current bottom line. Real lenders'
>>> ethics would dictate that creditworthy, low-risk customers should
>>> be accommodated.
>> Nothing to do with ethics, its about who produces decent income without risk, stupid.
> No.
Yep.
> "It's about" HOW companies produce income and how
> they misstate, ignore, or mishandle risk (or lack thereof).
Wrong, as always.
Currenty the reason credit card issuers are rationing credit is because we've
had a credit crunch and they clearly prefer to lend to those who will produce
the best income on the restricted credit that they have available.
Not a shred of 'ethics' whatever involved in choosing not to make credit
available to those who dont use their cards much and who minimise
what the card costs them by paying off their balance in full every month.
Those are always welcome to get a debit card if they want the convenience of plastic.
> Obviously you also can't comprehend that NOBODY
> can produce "decent income without risk."
Thats what debit cards do, fuckwit.
JR Weiss
>> Except many lenders (as well as insurance companies) are now
>> turning to other, new, unproven "measures" of risk,
>
> Unproven how?
Most visible example is the practice of using credit scores for
insurance underwriting. While some actuaries may be able to draw
correlations between credit scores and underwriting risk, it is hardly
a proven relationship.
Another is the practice of raising interest rates when a customer
happens to pay late even once on a non-associated account. A single
event is hardly a proven measure of the risk associated with the rate
increases charged.
> You've got someone who has shunned credit for years suddenly wanting
> a credit card. The most likely reasons someone does that are:
>
> 1) The OP's stated reason: He doesn't really want credit. He just
> wants the appearance of using credit for the sake of gaming his
> credit score. He'll only use it as much as necessary for that purpose
> and prefer debit or cash otherwise. 2) The applicant has just lost a
> job, been warned of pending layoffs or cutbacks, had or thinks he'll
> have a medical emergency, or otherwise no longer thinks he can
> mantain his debt-free lifestyle. So now he suddenly wants a line of
> credit.
>
> #1 is a low profit indicator, #2 is a high risk indicator. Either
> way, it's not an attractive way to invest your money. With the
> supply-demand situation for consumer credit the way it is, banks can
> probably find dozens of more profitable ways to invest their money -
> why would they jump at this?
A clear, legitimate reason for #1 is a person intending to buy a home
in this "down" market, who wants to also get the lowest possible
interest rate. Those rates now demand arbitrarily higher credit scores
than before the current financial crisis.
A legitimate reason for #2 is a person growing older who is planning to
buy significant life or long-term care insurance, and who is all too
aware that the insurance companies will charge him more if he doesn't
have a "premium" credit score.
#1 only is a low profit indicator for a narrow-minded company using a
short-term outlook. The consumer may become a customer for the
lender's -- or the lender's associates' -- other financial products.
#2 is a high risk indicator only if one of those specific items is true
in the case, and even then primarily for an insurance company, not a
credit card issuer. We have no reason to believe the OP's reasons
include any of them.
>> with the ONLY real intent
>> being to increase their current bottom line.
>
> Um, yes. Do for-profit businesses, especially those with
> shareholders, have any other calling?
Apparently you have learned NOTHING from the recent collapse of many
large banks and financial firms! They were so focused on their current
bottom line that they lost sight of their long-term viability. They
ignored high risk for short-term gain.
>> Real lenders' ethics
>> would dictate that creditworthy, low-risk customers should be
>> accommodated. They would also dictate that revenue structures be
>> applied equally across the board to same-risk customers, so that a
>> creditworthy customer is not refused because he plans on playing by
>> the rules (e.g., payment in full each month).
>
> Nope. Credit is not a right - it's a business proposition that either
> side is free to decline from participating in if it doesn't fit his
> financial goals.
Ethics are not only about rights, they are about fairness and openness.
Especially when public funds are at risk in the form of governmnet
provided insurance and guarantees, the public has the right to expect
fairness in business dealings.
Clincher
"JR Weiss" <j...@invalid.invalid> wrote in message
> Clincher wrote:
>
>>> Except many lenders (as well as insurance companies) are now
>>> turning to other, new, unproven "measures" of risk,
>>
>> Unproven how?
>
> Most visible example is the practice of using credit scores for
> insurance underwriting. While some actuaries may be able to draw
> correlations between credit scores and underwriting risk, it is hardly
> a proven relationship.
Correlation is the bottom line, if it's repeatable enough to reduce your
odds of getting claims filed.
What's unproven (and what gets consumers outraged) is the issue of causation
but causation isn't even a requirement in well accepted underwriting rules
(the fact that you *had* an accident doesn't cause you to have an accident
in the future but no one questions using accident records in insurance
underwriting.) All that affects the bottom line is the correlation, and it's
been proven enough for the insurance companies to bet their own underwriting
on it.
> Another is the practice of raising interest rates when a customer
> happens to pay late even once on a non-associated account. A single
> event is hardly a proven measure of the risk associated with the rate
> increases charged.
Underwriting isn't about proving what a specific person will do in the
future, it's a means of improving the statistical odds. What matters is If
one group that has no lates has had significantly fewer defaults than a
control group that has had one default. If so, than the latter is a risker
group and they'll have to offer the prospective lender a higher rate of
return on their investment if they want to attract capital.
>> You've got someone who has shunned credit for years suddenly wanting
>> a credit card. The most likely reasons someone does that are:
>>
>> 1) The OP's stated reason: He doesn't really want credit. He just
>> wants the appearance of using credit for the sake of gaming his
>> credit score. He'll only use it as much as necessary for that purpose
>> and prefer debit or cash otherwise. 2) The applicant has just lost a
>> job, been warned of pending layoffs or cutbacks, had or thinks he'll
>> have a medical emergency, or otherwise no longer thinks he can
>> mantain his debt-free lifestyle. So now he suddenly wants a line of
>> credit.
>>
>> #1 is a low profit indicator, #2 is a high risk indicator. Either
>> way, it's not an attractive way to invest your money. With the
>> supply-demand situation for consumer credit the way it is, banks can
>> probably find dozens of more profitable ways to invest their money -
>> why would they jump at this?
>
> A clear, legitimate reason for #1 is a person intending to buy a home
> in this "down" market, who wants to also get the lowest possible
> interest rate.
Never said the OP's desire was illegitimate. It makes perfect sense *for the
OP* but the fact remains that it fails to offer attractive incentives for a
credit issuer to back it financially.
> A legitimate reason for #2 is a person growing older who is planning to
> buy significant life or long-term care insurance, and who is all too
> aware that the insurance companies will charge him more if he doesn't
> have a "premium" credit score.
This actually falls into bucket #1.
> #1 only is a low profit indicator for a narrow-minded company using a
> short-term outlook. The consumer may become a customer for the
> lender's -- or the lender's associates' -- other financial products.
In better economic times, this was probably the reason a lot of people like
the OP got credit cards (and even more credit card offers).
But that's not the economic situation in the here and now.
>>> Real lenders' ethics
>>> would dictate that creditworthy, low-risk customers should be
>>> accommodated. They would also dictate that revenue structures be
>>> applied equally across the board to same-risk customers, so that a
>>> creditworthy customer is not refused because he plans on playing by
>>> the rules (e.g., payment in full each month).
>>
>> Nope. Credit is not a right - it's a business proposition that either
>> side is free to decline from participating in if it doesn't fit his
>> financial goals.
>
> Ethics are not only about rights, they are about fairness and openness.
> Especially when public funds are at risk in the form of governmnet
> provided insurance and guarantees, the public has the right to expect
> fairness in business dealings.
"Fairness in business dealings" only apply when you have business dealings
with someone in the first place. In this case, we're talking about lenders
declining to get into a business relationship with you. You're jumping the
gun.
JR Weiss
>> For someone who makes large purchases, the 2-3% the lender gets from
>> the purchases will obviate the first cliam, and the second one
>> doesn't apply to the OP who doesn't have such existing lines.
>
> It's pretty rare these days to find a merchant that's paying 2-3% on
> MCC or Visa (perhaps they're paying that for Amex, but even Amex is
> not averse to negotiating lower rates. The rate for card-swipe
> purchases is around 1.6%, though there is also a per-transaction fee
> of around 20� (which is why merchants hate low value credit card
> purchases).
A quick example is the on-line merchant using PayPal as a payment
agent. Their rates go from 1.9% (plus transaction fee) for the largest
merchants in domestic transactions to 3.9% for small merchants in
international transactions. With the ubiquity of small merchants,
on-line purchases, and ebay/PayPal, the 2-3% range I used is not rare
at all.
> How long will some of these rewards cards be paying 2% cash back or
> even 1% cash back to card holders that pay their balance in full each
> month and never pay any interest? One 2% card I had discontinued
> their rebate program in March. It was good while it lasted though. I
> did notice a caveat on merchant accounts that says "Reward cards
> process at a higher rate," so they are gouging the merchant, who
> probably can't distinguish between rewards and non-rewards cards.
Again, many lenders got on the "rewards" bandwagon in an attempt to
gain short-term market share without understanding the long-term
viability of the programs. That is clearly illustrated by your
examples and the "agreements" that give the lenders carte blanche to
change terms unilaterally with little or no notice.
> Does anyone even use a non-rewards card any more?
I do. I generally cannot make good use of any of the "rewards" I have
seen offered, so I am unwilling to pay a fee for them.
>> An ethical lender will not refuse credit on such grounds. The OP
>> will be better off looking for another lender if he runs into an
>> unethical one.
>
> Ethics has nothing to do with it. If the lender has a limited amount
> of credit they are willing to extend then they want to extend it to
> the most profitable customers.
Again, short-term gain has been allowed to override long-term
viability. That puts both shareholders and the public at higher risk.
A customer that is less profitable in the short term, but is a stable
long-term customer, is more of an asset to the company in the long term.
JR Weiss
> Your best option is to get a Schwab Bank Invest First Visa Credit
> Card. . .
>
> Once you have that card, use it for all purchases, and start billing
> all your recurring monthly bills to the card (phone, cell phone,
> Internet, cable or satellite, insurance, etc.). . .
>
> Unfortunately, without any existing credit cards you may find it
> difficult to get a credit card. Whatever you do, don't use it as a
> debit card.
Wait a minute...
First you tell someone to get a credit card and use it for utilities
that should lamost NEVER be paid with a credit card. Then you tell him
to not use a credit card as a debit card ((which could well be used in
lieu of paper checks for utilities). Which is it?!?
JR Weiss
>>>> Except many lenders (as well as insurance companies) are now
>>>> turning to other, new, unproven "measures" of risk,
>>>
>>> Unproven how?
>>
>> Most visible example is the practice of using credit scores for
>> insurance underwriting. While some actuaries may be able to draw
>> correlations between credit scores and underwriting risk, it is
>> hardly a proven relationship.
>
> Correlation is the bottom line, if it's repeatable enough to reduce
> your odds of getting claims filed.
You are apparently among those who misunderstand and misapply
correlation. Simple correlation does not show causal relationships.
if underwriters are using correlation as "the bottom line," they are
misusing it, as I suspected already.
> What's unproven (and what gets consumers outraged) is the issue of
> causation but causation isn't even a requirement in well accepted
> underwriting rules (the fact that you had an accident doesn't cause
> you to have an accident in the future but no one questions using
> accident records in insurance underwriting.) All that affects the
> bottom line is the correlation, and it's been proven enough for the
> insurance companies to bet their own underwriting on it.
Actually, a lot of people question the use of accident records, because
insurance companies again misapply the concept simply "bacause they
can" and they can successfully lobby against legislation that would
control the practice.
Best example is a person who has not had an accident or ticket in 15+
years, and gets one or the other. Immediately the insurance rates go
up for up to 3 years, even if there is no cost to the underwriter (in
the case of the ticket) and no evidence to support their claim that
there is an increased risk of a claim because of the event. While
multiple or closely-spaced accidents/tickets may support the practice,
one-off events should not be treated the same.
>> Another is the practice of raising interest rates when a customer
>> happens to pay late even once on a non-associated account. A single
>> event is hardly a proven measure of the risk associated with the
>> rate increases charged.
>
> Underwriting isn't about proving what a specific person will do in
> the future, it's a means of improving the statistical odds. What
> matters is If one group that has no lates has had significantly fewer
> defaults than a control group that has had one default. If so, than
> the latter is a risker group and they'll have to offer the
> prospective lender a higher rate of return on their investment if
> they want to attract capital.
Again, the statistics are being misapplied because the group being
punished is too large and not representative of the group that actually
raises the risk, and the punishment of the increased interest rates is
hugely disproportionate to even the perceived increase in risk.
Single, unrelated events are used to trigger unreasonable increases in
interest that do not in any way reflect the market or the increase in
risk.
>> A clear, legitimate reason for #1 is a person intending to buy a
>> home in this "down" market, who wants to also get the lowest
>> possible interest rate.
>
> Never said the OP's desire was illegitimate. It makes perfect sense
> *for the OP* but the fact remains that it fails to offer attractive
> incentives for a credit issuer to back it financially.
Actually, it does not fail to attract MANY credit issuers -- it only
fails to attract those who are too narrow-minded to look at the full
picture. The OP will likely find credit at a local bank or credit
union even if he doesn't find it at a megabank.
>> #1 only is a low profit indicator for a narrow-minded company using
>> a short-term outlook. The consumer may become a customer for the
>> lender's -- or the lender's associates' -- other financial products.
>
> In better economic times, this was probably the reason a lot of
> people like the OP got credit cards (and even more credit card
> offers).
>
> But that's not the economic situation in the here and now.
Actually, it is!
The OP is (as far as we can tell) financially stable and responsible.
There is no legitimate reason to refuse him credit. However, the FICO
score punishes him for being fiscally responsible and paying for most
things in cash. Lenders should be looking to take on those people as
new customers to replace the deadbeats, irresponsible borrowers, and
unemployed people who have recently defaulted.
I still get solicitations for new credit on almost a daily basis!
>>> Nope. Credit is not a right - it's a business proposition that
>>> either side is free to decline from participating in if it
>>> doesn't fit his financial goals.
>>
>> Ethics are not only about rights, they are about fairness and
>> openness. Especially when public funds are at risk in the form of
>> governmnet provided insurance and guarantees, the public has the
>> right to expect fairness in business dealings.
>
> "Fairness in business dealings" only apply when you have business
> dealings with someone in the first place. In this case, we're talking
> about lenders declining to get into a business relationship with you.
> You're jumping the gun.
I disagree. A contract does not have to be concluded for a business
relationship to exist. Also, a person has the right to expect fair and
ethical treatment from a public corporation, especially a regulated one.
The OP should look first to the banks with which he already has a
business relationship. In the event he is refused or expects to get
better terms elsewhere, he may decide to shop around.
I also submit that when a lender solicits a potential customer by mail,
he has already initiated a business relationship. The lender has
likely pulled credit reports (or bought them from someone else) and
thereby begun the information-gathering process before even meeting the
customer. Further, those lenders that advertise are soliciting
business relationships with all creditworthy potential customers. The
actual business relationship begins when the potential customer
responds to the advertising and starts the application process, since
personal information is provided. The potential customer has the right
to expect fairness whether responding to an ad or solicitation, or
walking into a bank and asking for information in anticipation of
applying for credit.
SMS
> A quick example is the on-line merchant using PayPal as a payment
> agent. Their rates go from 1.9% (plus transaction fee) for the largest
> merchants in domestic transactions to 3.9% for small merchants in
> international transactions. With the ubiquity of small merchants,
> on-line purchases, and ebay/PayPal, the 2-3% range I used is not rare
> at all.
LOL, Paypal is hardly a good example. You've chosen a very expensive,
non-traditional, credit card processor as your example! Even a small
business can easily get 1.64% using the processor offered through Costco.
> Again, many lenders got on the "rewards" bandwagon in an attempt to
> gain short-term market share without understanding the long-term
> viability of the programs. That is clearly illustrated by your
> examples and the "agreements" that give the lenders carte blanche to
> change terms unilaterally with little or no notice.
Charles Schwab offers a flat 2% cash rewards card. Clearly they believe
that the additional business it generates for their brokerage accounts
is worth the offering. You must have a Schwab account to deposit the
rewards into. I question how long they will continue this since the
typical Schwab customer is probably not the type of customer that
carries a balance and pays interest.
> I do. I generally cannot make good use of any of the "rewards" I have
> seen offered, so I am unwilling to pay a fee for them.
Charles Schwab offers a no-fee card with 2% cash back, and there are
many many cards that offer 1% back with no fee. While I would normally
not have an Amex card, since it's all that Costco accepts I have one,
and it offers 1% cash back, but 4% cash back on gasoline, 3% cash back
on restaurants, 2% for travel (hotels, plane tickets, car rentals,
etc.). How can you not make use of these rewards, and why do you think
that all rewards cards have fees? But thanks for subsidizing rewards for
everyone else!
> Again, short-term gain has been allowed to override long-term
> viability. That puts both shareholders and the public at higher risk.
> A customer that is less profitable in the short term, but is a stable
> long-term customer, is more of an asset to the company in the long term.
It'd be tough to find a bank (or other publicly traded company) that
thinks that way these days. The only thing that matters is delivering
better results every quarter. You might find the some privately held
banks or credit unions that think that way, i.e. USAA Federal Savings
Bank which is often ranked as the best bank in the U.S. (note that while
only certain military personnel and their families can buy insurance
from USAA, anyone can bank at USAA).
Vic Smith
wrote:
>JR Weiss wrote:
>
>> A quick example is the on-line merchant using PayPal as a payment
>> agent. Their rates go from 1.9% (plus transaction fee) for the largest
>> merchants in domestic transactions to 3.9% for small merchants in
>> international transactions. With the ubiquity of small merchants,
>> on-line purchases, and ebay/PayPal, the 2-3% range I used is not rare
>> at all.
>
>LOL, Paypal is hardly a good example. You've chosen a very expensive,
>non-traditional, credit card processor as your example! Even a small
>business can easily get 1.64% using the processor offered through Costco.
>
Paypal IS the "traditional" on-line payment agent.
Many of my on-line purchases are paid via Paypal.
They were purchases using Amazon and other major on-line merchants.
Never seen Costco offered as a payment option, and I would ignore it
anyway since I have no Costco account.
Since Paypal grabbed a large market share of on-line payment handling
early, I don't think Costco is a major player, and might never be.
I am much more likely to purchase from a small merchant if he offers a
Paypal option.
Of course, some merchants chose to forego the Paypal customer base.
Their call.
--Vic
JR Weiss
> LOL, Paypal is hardly a good example. You've chosen a very expensive,
> non-traditional, credit card processor as your example! Even a small
> business can easily get 1.64% using the processor offered through
> Costco.
What some businesses CAN do and what they DO do may be very different...
> Charles Schwab offers a flat 2% cash rewards card. Clearly they
> believe that the additional business it generates for their brokerage
> accounts is worth the offering. You must have a Schwab account to
> deposit the rewards into. I question how long they will continue this
> since the typical Schwab customer is probably not the type of
> customer that carries a balance and pays interest.
>
>> I do. I generally cannot make good use of any of the "rewards" I
>> have seen offered, so I am unwilling to pay a fee for them.
>
> Charles Schwab offers a no-fee card with 2% cash back, and there are
> many many cards that offer 1% back with no fee. While I would
> normally not have an Amex card, since it's all that Costco accepts I
> have one, and it offers 1% cash back, but 4% cash back on gasoline,
> 3% cash back on restaurants, 2% for travel (hotels, plane tickets,
> car rentals, etc.). How can you not make use of these rewards, and
> why do you think that all rewards cards have fees? But thanks for
> subsidizing rewards for everyone else!
I can't use the Schwab card because I don't have a Schwab account. I
already have other brokerage accounts, so I am not going to open
another.
I don't use the Costco card because I don't need another card, and I
won't replace a Visa or MC with AmEx. I travel extensively, and AmEx
is accepted by very few businesses compared with Visa or MC. My
company (which pays for most of my travel) switched from AmEx to MC for
that exact reason.
Besides, the terms & conditions on the Costco card make it less
valuable than you make it out to be. I can't use it at the Arco gas
stations I usually use, because they don't accept credit cards. I
would have to use a "standalone gas station" that charges around 10%
more than I pay now! The Costco gas station is too far away for
routine use.
I don't see how I subsidize rewards at all...
>> Again, short-term gain has been allowed to override long-term
>> viability. That puts both shareholders and the public at higher
>> risk. A customer that is less profitable in the short term, but is
>> a stable long-term customer, is more of an asset to the company in
>> the long term.
>
> It'd be tough to find a bank (or other publicly traded company) that
> thinks that way these days. The only thing that matters is delivering
> better results every quarter. You might find the some privately held
> banks or credit unions that think that way, i.e. USAA Federal Savings
> Bank which is often ranked as the best bank in the U.S. (note that
> while only certain military personnel and their families can buy
> insurance from USAA, anyone can bank at USAA).
You even question Schwab's ability to continue their practice above, so
you must agree at some level that they are not looking at the long
term...
Why is it that USAA Savings Bank, credit unions, and other smaller
banks are able to survive on consistent, long-term policies and
practices without the "need" to push up their market share with
spectacular but risky marketing practices; but the big banks can't
survive without taking those risks? The biggest difference between
them is long-term stability vs short-term gains. WaMu, Wachovia, and
others went bankrupt chasing those short-term profits, and others
required big guvamint bailouts...
SMS
> First you tell someone to get a credit card and use it for utilities
> that should lamost NEVER be paid with a credit card.
The most financially sound way to use a credit card is to get a rewards
credit card, charge everything possible to the account, and pay the
balance in full each month. Of course if you lack financial discipline
then this may not be a good plan.
Debit cards are very dangerous. Avoid them at all costs. Your bank will
issue an ATM card that is PIN based. You still lose all the consumer
protections that a credit card offers, but at least it's less risky than
a debit card with the Mastercard or Visa logo.
Rod Speed
> SMS wrote
>> LOL, Paypal is hardly a good example. You've chosen a very expensive,
>> non-traditional, credit card processor as your example! Even a small
>> business can easily get 1.64% using the processor offered through Costco.
> What some businesses CAN do and what they DO do may be very different...
>> Charles Schwab offers a flat 2% cash rewards card. Clearly they
>> believe that the additional business it generates for their brokerage
>> accounts is worth the offering. You must have a Schwab account to
>> deposit the rewards into. I question how long they will continue this
>> since the typical Schwab customer is probably not the type of
>> customer that carries a balance and pays interest.
>>> I do. I generally cannot make good use of any of the "rewards"
>>> I have seen offered, so I am unwilling to pay a fee for them.
>> Charles Schwab offers a no-fee card with 2% cash back, and there are
>> many many cards that offer 1% back with no fee. While I would
>> normally not have an Amex card, since it's all that Costco accepts I
>> have one, and it offers 1% cash back, but 4% cash back on gasoline,
>> 3% cash back on restaurants, 2% for travel (hotels, plane tickets,
>> car rentals, etc.). How can you not make use of these rewards, and
>> why do you think that all rewards cards have fees? But thanks for
>> subsidizing rewards for everyone else!
> I can't use the Schwab card because I don't have a Schwab account. I
> already have other brokerage accounts, so I am not going to open another.
Your problem.
> I don't use the Costco card because I don't need another card, and I
> won't replace a Visa or MC with AmEx. I travel extensively, and AmEx
> is accepted by very few businesses compared with Visa or MC. My
> company (which pays for most of my travel) switched from AmEx to MC
> for that exact reason.
> Besides, the terms & conditions on the Costco card make it less
> valuable than you make it out to be. I can't use it at the Arco gas
> stations I usually use, because they don't accept credit cards. I
> would have to use a "standalone gas station" that charges around 10%
> more than I pay now! The Costco gas station is too far away for routine use.
Not true for everyone.
> I don't see how I subsidize rewards at all...
No one ever said you personally did. JUST that you can
take advantage of subsidised rewards if you choose to.
>>> Again, short-term gain has been allowed to override long-term
>>> viability. That puts both shareholders and the public at higher
>>> risk. A customer that is less profitable in the short term, but is
>>> a stable long-term customer, is more of an asset to the company in
>>> the long term.
>> It'd be tough to find a bank (or other publicly traded company) that
>> thinks that way these days. The only thing that matters is delivering
>> better results every quarter. You might find the some privately held
>> banks or credit unions that think that way, i.e. USAA Federal Savings
>> Bank which is often ranked as the best bank in the U.S. (note that
>> while only certain military personnel and their families can buy
>> insurance from USAA, anyone can bank at USAA).
> You even question Schwab's ability to continue their practice above, so
> you must agree at some level that they are not looking at the long term...
Or it remains to be seen how it will pan out.
> Why is it that USAA Savings Bank, credit unions, and other
> smaller banks are able to survive on consistent, long-term
> policies and practices without the "need" to push up their
> market share with spectacular but risky marketing practices;
> but the big banks can't survive without taking those risks?
They can, they choose not to.
> The biggest difference between them is long-term stability vs short-term gains.
And credit unions and pissy little banks will always remain credit unions and pissy little banks.
> WaMu, Wachovia, and others went bankrupt chasing those
> short-term profits, and others required big guvamint bailouts...
And not one of the australian or canadian retail banks required any bailout or
went bust either, and they have much bigger banks per capita than the US does.
Rod Speed
Repeating that lie doesnt make it gospel.
m...@privacy.net
>Debit cards are very dangerous. Avoid them at all costs. Your bank will
>issue an ATM card that is PIN based. You still lose all the consumer
>protections that a credit card offers, but at least it's less risky than
>a debit card with the Mastercard or Visa logo.
why is a mastercard or visa debit card worse than bank
debit card?
JR Weiss
>>> Charles Schwab offers a no-fee card with 2% cash back, and there
>>> are many many cards that offer 1% back with no fee. While I would
>>> normally not have an Amex card, since it's all that Costco
>>> accepts I have one, and it offers 1% cash back, but 4% cash back
>>> on gasoline, 3% cash back on restaurants, 2% for travel (hotels,
>>> plane tickets, car rentals, etc.). How can you not make use of
>>> these rewards, and why do you think that all rewards cards have
>>> fees? But thanks for subsidizing rewards for everyone else!
>
>> I can't use the Schwab card because I don't have a Schwab account.
>> I already have other brokerage accounts, so I am not going to open
>> another.
>
> Your problem.
Nope. Not a problem at all!
>> Besides, the terms & conditions on the Costco card make it less
>> valuable than you make it out to be. I can't use it at the Arco gas
>> stations I usually use, because they don't accept credit cards. I
>> would have to use a "standalone gas station" that charges around 10%
>> more than I pay now! The Costco gas station is too far away for
>> routine use.
>
> Not true for everyone.
What's "Not true for everyone"?!?
NOTHING is "true for everyone"! But I don't expect you to be able to
understand that...
> > I don't see how I subsidize rewards at all...
>
> No one ever said you personally did. JUST that you can
> take advantage of subsidised rewards if you choose to.
SMS did. You failed to read or comprehend his statement above:
"But thanks for subsidizing rewards for everyone else!"
>> You even question Schwab's ability to continue their practice
>> above, so you must agree at some level that they are not looking at
>> the long term...
>
> Or it remains to be seen how it will pan out.
Nope. SMS's lack of confidence and the fate of other big banks are
already apparent. We don't have to wait for anything.
>> Why is it that USAA Savings Bank, credit unions, and other
>> smaller banks are able to survive on consistent, long-term
>> policies and practices without the "need" to push up their
>> market share with spectacular but risky marketing practices;
>> but the big banks can't survive without taking those risks?
>
> They can, they choose not to.
Exactly! They choose the unehtical approach, luring customers who
believe their size makes them "better" than other options.
> And not one of the australian or canadian retail banks required any
> bailout or went bust either, and they have much bigger banks per
> capita than the US does.
Gee... D' ya s'pose their exposure to the US real estate market was a
bit less than the US banks'?!?
What a maroon!
JR Weiss
>> First you tell someone to get a credit card and use it for utilities
>> that should lamost NEVER be paid with a credit card.
>
> The most financially sound way to use a credit card is to get a
> rewards credit card, charge everything possible to the account, and
> pay the balance in full each month. Of course if you lack financial
> discipline then this may not be a good plan.
The first part of that is the one I most strongly disagree with. The
"rewards" may not pay for the investment in the card. Even with your
Schwab example, if I lose money by switching brokerage accounts and
paying more in brokerage fees, I lose.
> Debit cards are very dangerous. Avoid them at all costs. Your bank
> will issue an ATM card that is PIN based. You still lose all the
> consumer protections that a credit card offers, but at least it's
> less risky than a debit card with the Mastercard or Visa logo.
Maybe.
You may lose some of the legal protections, but you may regain most or
all of them via issuer policy.
JR Weiss
In most cases it isn't.
Debit cards are issued by banks. Those banks may choose to associate
the card with one or more of the major transaction networks like Visa
or MC. Without the support of a major network, the utility of the
debit card is extremely limited.
Rod Speed
> Rod Speed wrote
>>>> Charles Schwab offers a no-fee card with 2% cash back, and there
>>>> are many many cards that offer 1% back with no fee. While I would
>>>> normally not have an Amex card, since it's all that Costco
>>>> accepts I have one, and it offers 1% cash back, but 4% cash back
>>>> on gasoline, 3% cash back on restaurants, 2% for travel (hotels,
>>>> plane tickets, car rentals, etc.). How can you not make use of
>>>> these rewards, and why do you think that all rewards cards have
>>>> fees? But thanks for subsidizing rewards for everyone else!
>>> I can't use the Schwab card because I don't have a Schwab account.
>>> I already have other brokerage accounts, so I am not going to open another.
>> Your problem.
> Nope. Not a problem at all!
Never could work out the basics of colloquial english.
>>> Besides, the terms & conditions on the Costco card make it less
>>> valuable than you make it out to be. I can't use it at the Arco gas
>>> stations I usually use, because they don't accept credit cards. I
>>> would have to use a "standalone gas station" that charges around 10%
>>> more than I pay now! The Costco gas station is too far away for
>>> routine use.
>> Not true for everyone.
> What's "Not true for everyone"?!?
The last sentence, stupid. There might just be a reason I broke your original at that point.
<reams of your mindless silly stuff flushed where it belongs>
>>> I don't see how I subsidize rewards at all...
>> No one ever said you personally did. JUST that you can
>> take advantage of subsidised rewards if you choose to.
> SMS did. You failed to read or comprehend his statement above:
> "But thanks for subsidizing rewards for everyone else!"
You do that by not bothering to get the rewards yourself, stupid.
>>> You even question Schwab's ability to continue their practice
>>> above, so you must agree at some level that they are not looking at
>>> the long term...
>> Or it remains to be seen how it will pan out.
> Nope.
Yep.
> SMS's lack of confidence and the fate of other big banks
> are already apparent. We don't have to wait for anything.
And it remains to be seen if his lack of confidence is appropriate or not.
>>> Why is it that USAA Savings Bank, credit unions, and other
>>> smaller banks are able to survive on consistent, long-term
>>> policies and practices without the "need" to push up their
>>> market share with spectacular but risky marketing practices;
>>> but the big banks can't survive without taking those risks?
>> They can, they choose not to.
> Exactly! They choose the unehtical approach, luring customers
> who believe their size makes them "better" than other options.
Thats not the reason they go that route.
>> And not one of the australian or canadian retail banks required any
>> bailout or went bust either, and they have much bigger banks per
>> capita than the US does.
> Gee... D' ya s'pose their exposure to the US real
> estate market was a bit less than the US banks'?!?
How odd that their real estate markets sagged just as badly as the US real estate market did.
> What a maroon!
Your sig is sposed to have a line with just -- on it in front of it, stupid.
SMS
> SMS wrote:
>
>>> First you tell someone to get a credit card and use it for utilities
>>> that should lamost NEVER be paid with a credit card.
>> The most financially sound way to use a credit card is to get a
>> rewards credit card, charge everything possible to the account, and
>> pay the balance in full each month. Of course if you lack financial
>> discipline then this may not be a good plan.
>
> The first part of that is the one I most strongly disagree with. The
> "rewards" may not pay for the investment in the card. Even with your
> Schwab example, if I lose money by switching brokerage accounts and
> paying more in brokerage fees, I lose.
There are no fees and no requirement to buy or sell any stock. Nor is
there any requirement to switch brokerage accounts, only a requirement
to open a Schwab account where the awards will be deposited.
You're too funny. First you say "Which cards are those? I haven't seen
a no-fee rewards card offer yet," when in fact there are many such
cards. When the best one is pointed out to you you say "I can't use the
Schwab card because I don't have a Schwab account," when in fact you
mean 'I won't use the Schwab card because I don't want to open a Schwab
account to receive the 2% back, even though the account has no cost.'
The Schwab Visa card is also good because a) they charge no foreign
transaction fees (they don't even pass on the 1% that Visa automatically
adds), and b) it's a "Visa Signature" card which has a couple of useful
benefits on occasion. See
"http://money.cnn.com/galleries/2009/moneymag/0907/gallery.credit_cards.moneymag/2.html".
The no-foreign transaction fee is really nice. The Visa card I normally
use now doesn't charge their own foreign transaction fee (most banks do
add their own 1-2%) but they do pass on Visa's own 1% fee. This can
really add up.
You sure you're not related to Rod Speed?
h
"JR Weiss" <j...@invalid.invalid> wrote in message
> m...@privacy.net wrote:
>
>>> Debit cards are very dangerous. Avoid them at all costs. Your bank
>>> will issue an ATM card that is PIN based. You still lose all the
>>> consumer protections that a credit card offers, but at least it's
>>> less risky than a debit card with the Mastercard or Visa logo.
>>
>> why is a mastercard or visa debit card worse than bank
>> debit card?
It's not. They're both just as risky. With any "debit" card you can have
your entire bank account wiped out by a thief and the bank has no obligation
to return your funds. With a credit card a thief can charge thousands and
you'll never pay a dime. The first thing I did when my bank "upgraded" their
ATM cards to Visa debit cards was toss the thing in the shredder and do my
banking online. If I need cash (once, maybe twice a year) I go to the bank
and cash a check.
RickMerrill
Checks cost money so I use my debit card to get cash from the ATM.
(Automatic Teller Machine)
SMS
> "JR Weiss" <j...@invalid.invalid> wrote in message
> news:ha8vrh$p1d$3...@news.eternal-september.org...
>> m...@privacy.net wrote:
>>
>>>> Debit cards are very dangerous. Avoid them at all costs. Your bank
>>>> will issue an ATM card that is PIN based. You still lose all the
>>>> consumer protections that a credit card offers, but at least it's
>>>> less risky than a debit card with the Mastercard or Visa logo.
>>> why is a mastercard or visa debit card worse than bank
>>> debit card?
>
> It's not. They're both just as risky. With any "debit" card you can have
> your entire bank account wiped out by a thief and the bank has no obligation
> to return your funds.
The question is how easy it is for a thief to drain your bank account.
As PIRG states, "A thief who has a copy of a debit card restaurant
receipt can drain your checking account, even if your card itself or PIN
hasn't been stolen."
There's a big difference between an "ATM card" and a debit card with a
MC/Visa logo. All ATM card transaction are PIN based and can be used
only for POS debit based transactions, while MC/Visa debit cards can be
used for either POS debit based transactions or a Visa/MC debit
transaction (no PIN).
With a few exceptions (such as rental car transactions) a MC/Visa debit
card can be used anywhere MC/Visa is accepted, without the need for a
PIN and the money comes straight out of your checking account. This is
extremely dangerous.
See "http://www.pirg.org/consumer/banks/debit/fact.htm".
Never have a debit card with a MC/Visa logo in your wallet.
JR Weiss
> As PIRG states, "A thief who has a copy of a debit card restaurant
> receipt can drain your checking account, even if your card itself or
> PIN hasn't been stolen."
>
> There's a big difference between an "ATM card" and a debit card with
> a MC/Visa logo. All ATM card transaction are PIN based and can be
> used only for POS debit based transactions, while MC/Visa debit cards
> can be used for either POS debit based transactions or a Visa/MC
> debit transaction (no PIN).
>
> With a few exceptions (such as rental car transactions) a MC/Visa
> debit card can be used anywhere MC/Visa is accepted, without the need
> for a PIN and the money comes straight out of your checking account.
> This is extremely dangerous.
>
> See "http://www.pirg.org/consumer/banks/debit/fact.htm".
>
> Never have a debit card with a MC/Visa logo in your wallet.
Your generalizations seem to be at odds with the facts cited in your
own reference:
"The law limits consumer liability for credit card fraud to $50. For
debit card fraud, your liability is $50 if you notify the bank with 2
days of learning of the fraud"
My credit union's basic policy is virtually identical:
"If you tell us within 2 business days after you learn
of the unauthorized use of your account or card, you can
lose no more than $50 if someone used your account or
card without your permission."
...and they even remove all liability if the notice is given within 24
hours:
"If you notify us of your lost or stolen card within twenty-four
(24) hours of discovery and meet certain conditions,
you may not be liable for any losses."
So, my liability is no more with a debit card if I use a modicum of
common sense, and could actually be less.
Also, there was no vehicle given for the "if you lose your debit card,
a thief can drain your entire bank account (and even your line of
credit) -- without knowing your PIN" claim. The only way that could
happen is with further fraud and conspiracy. Depending on the day of
the week, there may be less money in the account associated with the
debit card than my credit card limit is.
So again, a modicum of common sense eliminates the risk you claim is
associated with the debit card. Besides, I don't use my debit card in
restaurants...
SMS
> "The law limits consumer liability for credit card fraud to $50. For
> debit card fraud, your liability is $50 if you notify the bank with 2
> days of learning of the fraud"
It's very different with a debit card where the money is gone and you
have to try to get it back, versus with a credit card where you're not
out any money ever.
Again, ask your bank or credit union for a plain ATM card, which they
will gladly issue to you, and destroy the Visa or MC debit card that
they automatically send out to every account holder.
imascot
> The first thing I did when my bank "upgraded" their
> ATM cards to Visa debit cards was toss the thing in the shredder and
> do my banking online. If I need cash (once, maybe twice a year) I go
> to the bank and cash a check.
>
>
My credit union "upgraded" their ATM cards, too, but when I went there to activate the new PIN, they
said I could activate just that feature, and _not_ activate the VISA swipe/no signature/no PIN feature.
So that's what I did.
J.
imascot
> "The law limits consumer liability for credit card fraud to $50. For
> debit card fraud, your liability is $50 if you notify the bank with 2
> days of learning of the fraud"
>
> My credit union's basic policy is virtually identical:
>
> "If you tell us within 2 business days after you learn
> of the unauthorized use of your account or card, you can
> lose no more than $50 if someone used your account or
> card without your permission."
>
> ...and they even remove all liability if the notice is given within 24
> hours:
>
> "If you notify us of your lost or stolen card within twenty-four
> (24) hours of discovery and meet certain conditions,
> you may not be liable for any losses."
>
> So, my liability is no more with a debit card if I use a modicum of
> common sense, and could actually be less.
>
>
> Also, there was no vehicle given for the "if you lose your debit card,
> a thief can drain your entire bank account (and even your line of
> credit) -- without knowing your PIN" claim. The only way that could
> happen is with further fraud and conspiracy. Depending on the day of
> the week, there may be less money in the account associated with the
> debit card than my credit card limit is.
>
Ah, but therein lies the rub. It is only your credit union's policy not to hold you liable, a policy which
they enjoy the freedom to change or rescind at any time. With credit cards, it is the law.
The point is not the amount stolen from your personal checking account, but the fact that it is YOUR
money, which no one is in a particular hurry to help you recover. If your credit card is lost or stolen,
it is the BANK'S money, which they have a decided interest in recovering.
J.
JR Weiss
>> "The law limits consumer liability for credit card fraud to $50. For
>> debit card fraud, your liability is $50 if you notify the bank with
>> 2 days of learning of the fraud"
>>
>> Also, there was no vehicle given for the "if you lose your debit
>> card, a thief can drain your entire bank account (and even your
>> line of credit) -- without knowing your PIN" claim. The only way
>> that could happen is with further fraud and conspiracy. Depending
>> on the day of the week, there may be less money in the account
>> associated with the debit card than my credit card limit is.
>>
>
> Ah, but therein lies the rub. It is only your credit union's policy
> not to hold you liable, a policy which they enjoy the freedom to
> change or rescind at any time. With credit cards, it is the law.
You forgot to read the referenced "law" above...
It is only the first $50 that is in question related to company policy.
> The point is not the amount stolen from your personal checking
> account, but the fact that it is YOUR money, which no one is in a
> particular hurry to help you recover. If your credit card is lost or
> stolen, it is the BANK'S money, which they have a decided interest in
> recovering.
I might agree if I was dealing with a megabank or Charles Schwab.
However, I am dealing with my local credit union that has given me no
reason for distrust of their ethics.
SMS
> My credit union "upgraded" their ATM cards, too, but when I went there to activate the new PIN, they
> said I could activate just that feature, and _not_ activate the VISA swipe/no signature/no PIN feature.
> So that's what I did.
That's a great idea for the banks/CUs so they don't have to have two
different cards, though it could cause confusion at merchants that take
MC/Visa Debit cards but don't take ATM/debit cards.
Why would anyone use a MC/Visa debit card for purchases? It just makes
no sense. You lose rewards, you lose your consumer protection, and you
incur tremendous risk. The credit card companies have done an excellent
job at brainwashing many people into using debit cards.
I can see using an ATM card at places that don't accept MC/Visa, like
most Arco stations (which charges a fee for ATM/debit card use), and Pet
Club, which doesn't charge a fee.
SMS
> Ah, but therein lies the rub. It is only your credit union's policy not to hold you liable, a policy which
> they enjoy the freedom to change or rescind at any time. With credit cards, it is the law.
>
> The point is not the amount stolen from your personal checking account, but the fact that it is YOUR
> money, which no one is in a particular hurry to help you recover. If your credit card is lost or stolen,
> it is the BANK'S money, which they have a decided interest in recovering.
Well-stated. Many people don't understand the difference between the
federal protections that govern credit cards, and the voluntary
protections that some banks and credit unions claim to offer for debit
cards. And as you stated, with credit card problems the bank needs to
prove that a charge was legitimate if you dispute it, while with a debit
card you need to prove that the deduction from your account was not
legitimate in order to get the money restored to your account.
I went through hell once with Citibank trying to get money back into my
account. Even though I had proof of what happened, it still took two
weeks to get the money back.