BMX Bandit said:

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fc2112 said:

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CC companies must be highly profitable. The handful of times my number got stolen, and a few thousand dollars of stuff got bought, they just wrote it off as "no problem".

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They are following the law, not blowing it off because they are making so much money

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Both are true.

Their margins are grossly good because they take a piece of something like 70% of all transactions now.

Did you ever see superman 3?

A small percentage of every transaction adds up to ALOT when you are talking about billions of transactions. If the US GDP is 27 trillion per year.

And the CC and payment service vendors are involved in 70% of those transactions.

And the payment vendors like VISA and Mastercard are ONLY charging 3% to facilitate those transactions.....that is 567 BILLION dollars they accumulate before they even tack credit card interest and fees onto the credit card holders.

In mafia terms....that is how much they are skimming off the top of every transaction before the credit card holders pay them protection money.

All great until they drop all their customers due to the lack of revenue vs risk.

It would be better to look at how we allow the credit system to screw people. The credit rating system is pure garbage. Capping opportunities at credit only hurts the consumer.

rab79 said:

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infinity ag said:

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aTm2004 said:

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The CC companies will make up the lost revenue by limiting or eliminating cards with no annual fee.

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This may happen.
I always get no annual fee cards and pay off every month. They make no money from people like myself.

They make their revenues from the dolts who run up bills and don't pay and accumulate large amounts of debt.

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Did you forget about the transaction fees they charge merchants? Why do you think some gas stations have cash and cc prices that are different, with cc price typically 10 cents higher than cash?

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Ah yes you are right, that's true.

I am still conflicted about this issue. As long as interest rates are clearly marked before the loan is taken, I can't see why it isn't okay and needs to be capped.

10andBOUNCE said:

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fc2112 said:

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CC companies must be highly profitable. The handful of times my number got stolen, and a few thousand dollars of stuff got bought, they just wrote it off as "no problem".

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VISA profit % before taxes has been in the 50s and even looks to be in the 60s based on their 2024 income statement. As a comparison, AAPL is closer to 30%. Home Depot in 2023 was at 13%.

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Don't confuse the payment network (visa, Mastercard) with the banks (Chase, capital one, Wells Fargo). The payment networks have extremely high margins, whereas banks get like 15% ROE on their consumer cards. The consumer cards actually drag the ROE down for some banks.

MemphisAg1 said:

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Government needs to stay out of business contracts.

No one forces somebody to run up a balance on a card.

Cap it at 10% and a lot of people will lose access to credit, plus the banks will make up for it with fee increases elsewhere. Meaning responsible people will "socialize" the cost of other people's bad choices.

If people want to do stupid, that's on them.

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agree to an extent.

I once missed a payment by 2-days on a CC, completely my fault I just forgot to send it.

The next month there was a $35 late fee and 100's of dollars in interest. The interest was the average monthly balance of the last six months x 19% PER MONTH and it continued to accumulate every day until I paid off the late fee, which I didn't see until the next monthly statement. I never got any kind of notification that my payment was late, or that I was being charged interest at that rate and how it was accumulating. And to be clear, I do understand the terms and conditions of my payment are in the fine print, but no one actually reads that and it's deceptive and predatory to charge that much interest especially since I'd made the payment on the previous months bill 28-days earlier (2-days late)

In other words
FEB Statement $1,000
Paid 2-days late - why I wasn't just charged interest for those 2-days? I did PAY it, just late.
Late Fee $35
Interest begins to accumulate until the next statement (~30-days)
Ave Monthly Balance $1,000
19% x $1,000 = $190/30-days = $6.33 per day
Get next months statement !!! WTF IS THIS???
Late Fee $35 + Interest $190

Fortunately I was able to call the CC company and my 20+ years of on time payments I got them to waive everything.

The 'minimum payments' on the CC are designed to keep you in debt for decades. At the 19% per month rate and the minimum payment a $1,000 bill would cost you several thousand dollars to pay off. In what world is that fair to anyone? And when I called the guy on the phone flat out said this is how the CC make their money.

Profitability and having a ton of sales volume from the amount of transactions they touch isn't necessarily a correlation to assume. VISA is really good at being profitable and have obviously rewarded those who invest in them.

agracer said:

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The 'minimum payments' on the CC are designed to keep you in debt for decades. At the 19% per month rate and the minimum payment a $1,000 bill would cost you several thousand dollars to pay off. In what world is that fair to anyone? And when I called the guy on the phone flat out said this is how the CC make their money.

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Right.
Yesterday I switched my CC autopay from one bank to another. As I was setting it up, the default payment is "Minimum Balance", not "Statement Balance". So they want me to just click and have it pay the minimum which I think is 10% of the balance and they charge huge interest on the 90%.

I am sure this trick works with most people who just click through and forget about it.

Ags4DaWin said:

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BMX Bandit said:

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fc2112 said:

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CC companies must be highly profitable. The handful of times my number got stolen, and a few thousand dollars of stuff got bought, they just wrote it off as "no problem".

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They are following the law, not blowing it off because they are making so much money

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Both are true.

Their margins are grossly good because they take a piece of something like 70% of all transactions now.

Did you ever see superman 3?

A small percentage of every transaction adds up to ALOT when you are talking about billions of transactions. If the US GDP is 27 trillion per year.

And the CC and payment service vendors are involved in 70% of those transactions.

And the payment vendors like VISA and Mastercard are ONLY charging 3% to facilitate those transactions.....that is 567 BILLION dollars they accumulate before they even tack credit card interest and fees onto the credit card holders.

In mafia terms....that is how much they are skimming off the top of every transaction before the credit card holders pay them protection money.

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Stop conflating the payment networks with the banks. Banks are charging interest and fees. Networks are charging an assessment fee.

No one is forcing you or anyone else to take out a credit card. If you or I do, it's our responsibility to understand the terms in advance.

I hate credit card companies, and many years ago when I was young I was caught in their snare. Took a long time to get out.

But more than I detest credit card companies, I hate the government getting involved in private matters. They need to stay the hell out. They only screw things up when they touch something with lots of unintended consequences.

fc2112 said:

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CC companies must be highly profitable.

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So are you angry because some company made too much money? Seems very democrat of you. They also believe your paycheck is too high.

Beyond that - what do you think will happen when you limit how much a bank can make on credit cards? Do you think they'll just shrug their shoulders and move on or do you think they'll have to squeeze it out of other parts of the business. They may decide to make it impossible for people to have a credit card and pay it off every month without penalty. They may decide to charge an annual fee on every single card. Maybe some of those benefits like cash back or free Global Entry get axed?

The government needs to gtfo out of business. If the bank is ok with the risk and they aren't tricking or forcing people into credit cards with high rates, it's their business.

I am all for moneychangers tables getting a good tumping.

"Dead Beats"

That is what the CC industry calls people that:

- Pay off the balance monthly. NEVER ever carry a balance.
- Selects cards that have a bunch of award points for signing up. Keeps them a year or two then dump.
- collects additional award points.

I ran a mid sized business off high award point CC's. Pay off and PROFIT

This whole conversation is idiotic. Competent adults should be free to contract and if they make stupid deals, that is on that individual.

Hell, people should be free to contract with Visa for seven years indentured servitude if their balance ever exceeds X amount.

What's next? We start having the government take blacks to the dmv to get their Drivers licenses.

aTmAg said:

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A bunch of people will simply not be able to get credit cards anymore.

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A huge number of people don't know how to control themselves with credit cards. Not giving them to them would be one of the best things to ever happen to them.

Just like china not shipping us any packages for a while. It'd save Americans billions in wasted products they don't need or will ever use.

MemphisAg1 said:

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No one is forcing you or anyone else to take out a credit card. If you or I do, it's our responsibility to understand the terms in advance.

I hate credit card companies, and many years ago when I was young I was caught in their snare. Took a long time to get out.

But more than I detest credit card companies, I hate the government getting involved in private matters. They need to stay the hell out. They only screw things up when they touch something with lots of unintended consequences.

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But why do you blame them for your youthful indiscretions where you thought that money was free?

I had another friend who is 56 now who told me the same story. He makes bad financial decisions because he likes to show off.

ttu_85 said:

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"Dead Beats"

That is what the CC industry calls people that:

- Pay off the balance monthly. NEVER ever carry a balance.
- Selects cards that have a bunch of award points for signing up. Keeps them a year or two then dump.
- collects additional award points.

I ran a mid sized business off high award point CC's. Pay off and PROFIT

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I am one of those proud "deadbeats".

Profit!

aTmAg said:

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A bunch of people will simply not be able to get credit cards anymore.

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This. Credit cards and interest rates are based on risk. The higher the risk, the higher the interest. If you cap the interest you simply make it where a lot of people won't be able to get credit. Next you will have Gen Z/Millennials freaking out about Boomers/Gen X who have credit cards and they don't and how unfair life is. I guess we should just tell them to listen to Dave Ramsey.

In the meantime I don't GAF about what interest rates are for CC because I just use them for points. I put everything I can on them and have used that for free travel for decades and it's great. I don't know that I have ever paid interest on a credit card in spite of having very fat and very lean times in my life because I am smart and disciplined with my money and always make sure I have reserves to make sure I won't.

Living below your means is one of the greatest keys to happiness.

infinity ag said:

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MemphisAg1 said:

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No one is forcing you or anyone else to take out a credit card. If you or I do, it's our responsibility to understand the terms in advance.

I hate credit card companies, and many years ago when I was young I was caught in their snare. Took a long time to get out.

But more than I detest credit card companies, I hate the government getting involved in private matters. They need to stay the hell out. They only screw things up when they touch something with lots of unintended consequences.

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But why do you blame them for your youthful indiscretions where you thought that money was free?

I had another friend who is 56 now who told me the same story. He makes bad financial decisions because he likes to show off.

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I don't blame them for my decisions earlier in life and I never thought money was free, lol. I paid off every one of my debts with no government intrusion or assistance, as it should be.

I don't like their marketing approach, which can be deceptive and unethical at times. It's ok to despise credit card companies. But I don't want government in the middle of it. They will just screw it up.

It is a fundamental law of economics that any price/rate/etc. "ceiling" you put in place will become a floor.

If you make 10% the max, in a short time all cards (except for the few individuals with very high credit scores and very high incomes) will be at 10%.

Cutting the credit card interest and profits will impact everyone. There is a fee associated with every transaction, you just don't see it because the vendor 'eats' it. But they don't. They build that into the price of the product. Eventually, that price will go up to offset the fees. We charge fees on every purchase made with a credit card. I get charged just for running the card. If your card fails, I'll tack that fee onto the next charge. My point is that we all cover these 'freebies' and costs that people think they get for free. I've bought thousands of dollars of 'free' products from the store on my reward points, but those do trickle down to everyone. Nothing is free.

aggie93 said:

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aTmAg said:

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A bunch of people will simply not be able to get credit cards anymore.

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This. Credit cards and interest rates are based on risk. The higher the risk, the higher the interest. If you cap the interest you simply make it where a lot of people won't be able to get credit. Next you will have Gen Z/Millennials freaking out about Boomers/Gen X who have credit cards and they don't and how unfair life is. I guess we should just tell them to listen to Dave Ramsey.

In the meantime I don't GAF about what interest rates are for CC because I just use them for points. I put everything I can on them and have used that for free travel for decades and it's great. I don't know that I have ever paid interest on a credit card in spite of having very fat and very lean times in my life because I am smart and disciplined with my money and always make sure I have reserves to make sure I won't.

Living below your means is one of the greatest keys to happiness.

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Even most boomers would not command a 10% interest rate on unsecured credit. You could have an 800+ credit score and I wouldn't give you unsecured credit for 10%. The reality is that card issuing banks would require to hold your deposit accounts, and they would try to take a security position on your cash. This would likely mean that the large banks only get bigger, since they are the biggest consumer card issuers. But I personally don't want to give a bank the right to offset using my cash. Newsflash - banks have very specific language around what qualifies as default and the bar is relatively low. I foreclosed and sold a $2MM building (that had a $400M RLOC against it) for less than $700M, all payments were on time - why?

Because my Chief Lending Officer told me to. He didn't like that around renewal time, the guy was unresponsive at getting updated financials to us. Which puts him in default if we so choose it.

Capping interest rates would likely cause banks to treat consumer credit like commercial.. in order to protect against loss.

MemphisAg1 said:

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infinity ag said:

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MemphisAg1 said:

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No one is forcing you or anyone else to take out a credit card. If you or I do, it's our responsibility to understand the terms in advance.

I hate credit card companies, and many years ago when I was young I was caught in their snare. Took a long time to get out.

But more than I detest credit card companies, I hate the government getting involved in private matters. They need to stay the hell out. They only screw things up when they touch something with lots of unintended consequences.

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But why do you blame them for your youthful indiscretions where you thought that money was free?

I had another friend who is 56 now who told me the same story. He makes bad financial decisions because he likes to show off.

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I don't blame them for my decisions earlier in life and I never thought money was free, lol. I paid off every one of my debts with no government intrusion or assistance, as it should be.

I don't like their marketing approach, which can be deceptive and unethical at times. It's ok to despise credit card companies. But I don't want government in the middle of it. They will just screw it up.

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Cool!

However marketing is always deceptive as long as there isn't any lying involved. Even a shampoo claims to give you soft and silky hair and we know it does nothing of the sort.

I still don't understand why you hate CC cos. I use them within the rules and am benefiting and don't pay them a dime.

I agree that that Govt should be out of this

BrazosDog02 said:

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Cutting the credit card interest and profits will impact everyone. There is a fee associated with every transaction, you just don't see it because the vendor 'eats' it. But they don't. They build that into the price of the product. Eventually, that price will go up to offset the fees. We charge fees on every purchase made with a credit card. I get charged just for running the card. If your card fails, I'll tack that fee onto the next charge. My point is that we all cover these 'freebies' and costs that people think they get for free. I've bought thousands of dollars of 'free' products from the store on my reward points, but those do trickle down to everyone. Nothing is free.

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Yes nothing is free eventually.

But one cannot limit anyone's profits either.How do you justify that?

I don't pay CC interest at all. No annual fee. But the impact of that is felt by all CC users. Same way everyone else's behavior impacts me. So it balances out.

I don't think the government should be meddling at all in this. This is the opposite of what I vote for. This is none of their business.

My point was that while it's very exciting to the big government folks and those who don't like companies who make any profit, this cap will just create an increase elsewhere that we all pay for.

I see this as a move that aligns well with MAHA. Why shouldn't I be able to eat dyes, pesticides and other chemicals if I want to? If it gives me cancer in the end, that was my choice. The problem is that like the food companies creating ultra addictive processed foods, the financial institutions created ultra addictive financial products like these high rate credit cards. Once you get in, and rack up a balance, it's nearly impossible for these families that were barely scraping by to begin with, to keep up with payments without continuing to use credit to make ends meet each month. We protect our citizens from themselves in a lot of different areas of society. Why should this be any different?

Because that is not the role of government. This is the same line of thinking with the student loan cancellation bs.

Many people, including me have made this mistake when young but you pay your way out and learn from it.

Aggies1322 said:

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aggie93 said:

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aTmAg said:

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A bunch of people will simply not be able to get credit cards anymore.

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This. Credit cards and interest rates are based on risk. The higher the risk, the higher the interest. If you cap the interest you simply make it where a lot of people won't be able to get credit. Next you will have Gen Z/Millennials freaking out about Boomers/Gen X who have credit cards and they don't and how unfair life is. I guess we should just tell them to listen to Dave Ramsey.

In the meantime I don't GAF about what interest rates are for CC because I just use them for points. I put everything I can on them and have used that for free travel for decades and it's great. I don't know that I have ever paid interest on a credit card in spite of having very fat and very lean times in my life because I am smart and disciplined with my money and always make sure I have reserves to make sure I won't.

Living below your means is one of the greatest keys to happiness.

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Even most boomers would not command a 10% interest rate on unsecured credit. You could have an 800+ credit score and I wouldn't give you unsecured credit for 10%. The reality is that card issuing banks would require to hold your deposit accounts, and they would try to take a security position on your cash. This would likely mean that the large banks only get bigger, since they are the biggest consumer card issuers. But I personally don't want to give a bank the right to offset using my cash. Newsflash - banks have very specific language around what qualifies as default and the bar is relatively low. I foreclosed and sold a $2MM building (that had a $400M RLOC against it) for less than $700M, all payments were on time - why?

Because my Chief Lending Officer told me to. He didn't like that around renewal time, the guy was unresponsive at getting updated financials to us. Which puts him in default if we so choose it.

Capping interest rates would likely cause banks to treat consumer credit like commercial.. in order to protect against loss.

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There are many flaws with this idea and those are good points. For me I like getting my points and using the cc companies to my advantage by using credit as an asset. You just have to be careful and make sure you always have a reserve. That takes discipline. Your example on a real estate deal is different but I do see where cc companies are going to start requiring some type of security. For me I would be fine having an investment account with more money in it than I would ever put on a cc that they can use in that way because if for some insane reason I couldn't pay my bill that's likely where I would pull it from anyway. Problem is the people they are talking about helping likely can't do that.

There just isn't a free ride and trying to do something like this will either severely tighten credit or force terms on people that it was designed to help which they can't abide. So Door #3 is the government starts securing credit somehow and we all know where that leads because if you think mortgages and student loans were fun wait until we do credit cards.

They are separate but interconnected.

That is how the financial system operates...."it's separate but connected" and the entire system feeds itself.

That is why it's so profitable.

Trying to simplify it. The reason why VISA became so popular is that they are simply a payment system. They don't actually hold the debt on the card they facilitate the transaction which allows for more flexibility whereas when credit cards first originated most of the other companies held the debt themselves. Alot of vendors went with VISA over their competitors for this reason and its why VISA is one of the predominant companies now.

The bank on the card technically holds the debt. I get it. But all these systems feed each other and I didn't want to make an even LONGER post breaking down exactly how many middle men there are getting a cut from an average CC transaction.

There are alot.

No Spin Ag said:

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LOYAL AG said:

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The ripple effect of this bill will be significant. Less credit at the lower end of the economic scale. Probably less credit at the middle of the economic scale as well. This will lead to business closures in low margin businesses such as restaurants. Wal Mart and Amazon will be fine, of course. But this will hurt young families ability to juggle their lives and force more "eat at home" and less grabbing food on the go.

Yes we can all agree that fewer people eating fast food is good and fewer people being able to rack up credit card debt is good but there are no solutions only trade offs. The trade here is going to be painful in some segments of the economy. Just something to be mindful of when you're cheering for more government.

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Like everything being done these past two weeks, we're (the entire country) being adjusted in all facets, and so far, it's all been in the right direction, including this.

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And here we are. Today's reminder that everyone loves big government as long as it's controlling the right things. Most of what's been done the past two weeks is breaking up the absolute corruption the left had brought into American political machine. This action is in no way related to that. This is simply a terrible idea that will hurt both individuals and the wider economy. Yet you're cheering for it because you know best.

That's fine and all.. but you responded to a post about a bank writing off bad debt with how good the margins are for the networks. I am glad Visa makes a lot of money, they created a great business model. Banks also make strong (but not comparable to networks) returns, because they are holding a ton of risk.

My method of sparingly using credit cards and paying off the debt every month has apparently made credit card companies (banks) leary of offering me a credit card.
I don't have any credit cards that I must pay a yearly fee for and never carry a debit from one month into the next.
House and cars are all paid off too!
I'm retired with multiple retirement accounts.

Moon Shadow said:

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My method of sparingly using credit cards and paying off the debt every month has apparently made credit card companies (banks) leary of offering me a credit card.
I don't have any credit cards that I must pay a yearly fee for and never carry a debit from one month into the next.
House and cars are all paid off too!
I'm retired with multiple retirement accounts.

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Bro.. what is your credit score? If it is over 700, any bank will be happy to give you a credit card.

If it meant I wouldn't have to watch a capital one commercial ever again, I'd be ok with it.

ETA, states already have laws. No need for the feds to get involved.

10% sounds like a Trump rate to start the discussion because that's crazy low for unsecured debt for most folks when prime is 7.50…
But once people start talking about what the rate should be, your halfway there to getting a cap.

Esteban du Plantier said:

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Capping interest only results in removing access to credit for a huge portion of the population.

If someone feels they need a new Hellcat bad enough that they'll accept 20% interest, who am I to tell them they shouldn't?

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Good! I'm tired of the airport lounges being too busy

I bet a lot of people would lose the credit cards. Many of those who don't would have their limits cut to very small amounts. Better pay the card off before you need to stop for gas next week. Drive a big truck or SUV? Better not let the tank get near empty prior to stopping for gas, you won't have the credit limit to charge it.

On the other side, I wonder if those with good income and credit scores would actually qualify for better perks?