The big difference is that "deadbeats" have many more options if they want to leave, because they are much more likely to have intact credit ratings. So if their card issuer treats them like crap, they can just dump them for another.

Don't bet on it, bunkies...

One thing is certain in every business cycle (boom/bust): that would be the boomerang effect. Capitalists always (and that is not a term I use lightly) overreact to market conditions, and CC issuers are no exception.
Right now, they may be going after "deadbeats," but in a year or two, when things improve (if federal spending policies don't ignite hyperinflation first), they'll be going full force after the "revolvers" and reviling the deadbeats all over again.
And it will all be in the name of ROI...
...the morons...

Or I could just get a CD that pays 3% a year, invest that same

100 million dollars I had to have to loan out to people, and make 3 million dollars with almost 0 cost to me.

So I could make more then 2x the profit, with less work.

I know that most consumerist posters are idiots, because they can't see things a bigger picture.

But no...they have to try and squeeze us. And when no blood comes out of that stone, all the money and effort wasted by their attempts to squeeze us turns us from meager but reliable sources of income, into losses.

Oh yeah - while enthusing about my cashback, I forgot about the whole consumer protection thing. You don't get extended warranties and the ability to chargeback with a debit card.

Some are appalling, granted. And advertised as if they are of HUGE benefit. The "rewards" program offered with my debit card, for instance. I think it worked out that I'd have to run $50,000 through the thing just to get a $5 gift card for Chilis/Applebees/some other shitehole I'd never set foot in of my own volition. Gee, thanks, bank, that's a great incentive program you have there!

Indeed. And debit cards can also result in holds on your checking account balance (when you go to a hotel, restaurant or bar, or pay for gas at the pump, for example), that take days to clear, can make it as though your available balance doesn't exist, and cause you to get NSF fees when yes, you DO have money in the bank to cover those charges.

For those lacking in discipline who can't trust themselves not to get into debt, sure, credit cards are best avoided. But I'm sick of being told how stupid I am for falling into the "trap" of spending on credit cards.

Let's see... In the past twelve months I've earned around $900 cashback (yes, cash, not some poxy "rewards" points that can't be redeemed for anything I'd ever want) by using my credit cards, and I've paid not one penny in interest (or any other kind of charge, for that matter) - given that I use my cards for EVERYTHING, I'm sure I've earned a decent amount for my card issuers during that time, albeit not as much as I'd have earned were I to carry a huge balance and pay them late/overlimit fees every month.

Some rewards programs definitely do suck. But there are those that don't, and if you use them to your advantage (which will involve spending money and using the card and thus keeping the issuer happy too), you will do very nicely.

... they just earn the credit card company a fee every time they use the card. Assuming they do use it, of course.

:D

Don't get me wrong, I hate Big Credit as much as you do, i just prefer to take their money from them in the form of cash back, rather than sever all ties.

Bullshit, you have no idea what you are talking about. 2% of WHAT? You are equating the 2% someone estimated they make in merchant fees on every transaction SOMEONE ELSE MAKES with a 2% margin on cost of goods sold. That is beyond apples to oranges, that's apples to orangutans.

To make 100% clear how you are wrong, consider that I open a credit card company, Acme Cards, and I issue 10,000 credit cards. I have a staff of 5 people, all of whom I pay $100K. We pay $100K a year for rent on our office. Each customer spends $10,000 a year on his card, and we make 2% of that via merchant fees. Everybody pays off their balance in full for this exercise--nobody ever carries a balance.

10,000 cardholders x $10k * 2% = $2,000,000 (2 million) revenue per year.
Pay Salaries and Rent: minus $600,000
Profit: $1.4 Million.

Sounds like a great business model to me! Especially when you consider that hella people DO carry balances, and the money you get from late fees, etc.

Go figure. I paid off a buttload of credit card debt and Bank of America promptly and thoughtfully sends me multiple mailings with those "checks" to try and get me re-hooked.

No thanks, BoA. I love that zero balance. I love it so much I want to live in sin with it.

@LabanDenter: Here, spend 3 minutes at this site: [www.truecostofcredit.com]

And then come back and let me know if you've learned anything.

@econobiker: Sorry I forgot to mention that the linked together part only allows you to transfer money from one to the other - not that one will draw money from another.

@frank64: The best idea is to have multiple checking accounts for different purposes and link them together. Use only one to auto pay bills, use one for daily spending money- gas,food, use one for storing savings and accepting deposits, maybe have one for online purchases only and have an extra idle one with minimum balance.

The idle one is if one of the others gets blown out some how so you quickly convert it to one of the other functions without having to go open another account until it is convienent for you to get to the bank. We did this and it worked when one of our cards was compromised for our spending account and we had to shut that account down.

@ocirats: Apart from the reasons above some folks do not like car rental places locking down their money which is what happens when using a debit card.

@nataku83: I know what you mean about the dealership experience. I had one friend use the max ($5,000? maybe) available for a GM reward but that was on a new Oldsmobile so that shows how long ago that was...

I racked up debt in my younger years and now I'm paying it off. No new charges, just paying them off one by one a la snowball method. If someone, not naming names, (Okay, yes I am: CAPITAL ONE) decides to jack up my rate 10 points then I will opt out. They lose my business and any potential for profit, I keep my rate, and I never use them in the future.

I'm not a deadbeat but I'm also not a profitable customer. Most people make the assumption that you either pay off every month or you pay the bare minimum because you're just so damn broke - after all, why else would you have debt?!

My debt came from being 17, on my own and trying to eat. Now I'm 23, middle class and paying my dues. Everyone with a balance isn't an irresponsible consumer who deserves their credit lines revoked for ruining the financial system, as some have suggested, here and in past threads.

Well, I have a cashback card, so the "blackouts" thing is not an issue. I have a card that pays me 5% cash back for all purchases made at the grocery, gas stations, or drug stores. That's essentially free money, and a substantial amount. I've never paid any sort of annual fee or a penny in interest charges. I get hundreds of dollars per year in cashback rewards for doing essentially nothing, and actually getting BETTER consumer protection than those of you who use debit cards.

I don't see how that is "no perceptible benefit", ocirats. If they are trying to market debt, it's obviously not working in my case. More likely, they're just trying to get me to keep using my card so that they can make a percentage off of all the merchants.

@BZMedia:

I agree with you. Many of these "incentives" are just marketing tools with no perceptible benefit to your average consumer.

@balthisar:

I could see going for the time-value of money argument if you have a large balance and enough time in your day to keep track of these things. I just don't see any material interest racking up with most consumer loans. Just my thoughts.

@BZMedia: My filet mignon is quite tasty, thank you!

I have a Discover that gets used for most purchases every month ever since BoA screwed me over. We're talking upwards of $1000 purchased every month and paid in full. Every 2 months, I get another $20 credit I can use. YAY for LL Bean gift cards!

@oneandone: Congratulations! I've been a deadbeat for several years now. I love it.

And a giant screw you to Bank of America that cut the available credit of my oldest acct in half. $15K, of which I used and paid off about $300 every month cut to $7K. It is now used for a $50 recurring registration fee every 3 months. $300 a month to $200 a year. Oh yeah. Screw them.

What most people fail to see for some strange reason, is those rewards generally suck. They aren't in the business of giving away goodies. They are a tool to suck in new debtors. Period.

Credit Card Rewards = That juicy morsel of filet mignon sitting in the center of a very large bear trap that's just been sharpened.

And 2% before costs is 2% over thousands of transactions plus if they could not make a profit on that maybe they should not be in business huh?

Sorry if this is obvious to everyone else, but rather than taking the extra step of paying off my CC bill every month, why wouldn't I just use my debit card? Are the CC rewards *that* great, taking into account annual charges, blackouts, etc.?

I just wish they hadn't called me deadbeat before today.

- I pay my bills online.
- I never rely on them to remind me to pay my bill; instead, I check my statement online several weeks in advance myself.
- I have multiple checking accounts at different banks set up to pay my bills so I can use an alternate one if there is ever a problem with one.
- I pay far enough in advance that I can fix any problems before my payment is actually late, and I check again to make sure it went through BEFORE the due date.
- I never charge more money than I have money in my checking accounts to cover. If I ever need more, I have savings accounts linked that can instantly transfer money to checking (no delay), and a debit card that allows me to pull cash directly from savings.

It's possible I could still "slip up", but I highly doubt that I will under anything but the most extraordinary circumstances.

Don't really care if they offer up a sacrificial lamb or a golden calf for signing up, me & the credit card industry have parted ways for good.

Hasta la vista, baby.

@johnva: I don't really, I just use the card for convenience and reward points. But diasdiem is right. The one time I miss or forget I pay a ton.

I'm really more concerned about people that don't pay off, like my in-laws that abide by the rules and now their rate is going up. I may just loan them 5K to pay it off. Hopefully they will "decline" the offer to raise the rates and will have their card dropped but keep the old rate.

And please raise your hand if your not 'greedy'

do you want to get ahead in life?

Do you want nice things? A raise? travel? Etc etc.

Just about everyone here can be labeled greedy.

After all you have money left over to go on the internet. Heck your so greedy you have money to buy a computer to go online.

If everyone was a 'deadbeat' c.c. user, and paid their cc off before any interest. There wouldn't be any credit card's. No company works on a 2% margin BEFORE costs.

@oneandone: Good for you! And during school? That's a major accomplishment.

I've been CC-bill free for almost a year now, and it is SUCH a relief given the changes that CC companies have been making left and right to terms. I do use my cards occaisionally to keep them active, but I'm not interested in rewards or points, just having an available credit balance until I can get a real emergency fund in place.

I guess what she meant was that I'm not going to make her any money today.

I'm a deadbeat too, one who pays off their card each month. I got a nasty reminder that they are raising rates to "maintain the profitability on your account". What BS.

HERE'S MY SOLUTION:

They ought to change the law that if the rate is raised, that they issue a new card with the rate printed in big font what it is. That way people using it will know they may be paying that rate, and other people will see how high that particular card can go.

Really, CC companies get a slice off the top of pretty much everything: merchant flat-rate fees, merchant transaction fees, finance charges, annual fees from the suckers who subscribe to them, any protection programs they manage to con you into buying... even without usurious rates and predatory lending, it's easy to sit and watch the cash roll in. Their only real costs above standard operating expenses seem to be rewards programs (which are more than covered by transaction fees) and defaulters. And it's on that second point that I dare to beleive they could make more money under the new legislation: there's plenty to be made shaving a bit off the top of virtually every monetary transaction and getting finance charges from responsible borrowers without incurring much risk.

Congrats! I can't wait for that feeling too. Seems like every time I make any progress though, there is a new car repair, or vet bill or something that keeps my wheels spinning. Slowly but surely....

I ended up just getting a used Saturn, discount be damned.

The damage to your credit score from doing that yearly is probably reasonably minimal as long as it's not your only account and you don't do it more frequently than that.

@takes_so_little: That was the credit card industries' "Holy Grail". To figure out who would charge and carry enough balance to be glutonly profitable for the companies yet who would not default on their balance and get charged off.

There was this semi-famous case:

[www.upi.com]

"During a six-year period, Ruth Owens made payments totaling $3,492 on a Discover Card debt of only $1,895 that only increased due to accumulated late fees and other charges, even well after she made her final purchase, the Cleveland Plain Dealer reported. Discover eventually inflated her debt to a balance of $5,564 and filed a lawsuit against Owens in August 2003 for breach of contract."

By the card companies' definition this woman would have been a "great customer" until she finally defaulted.

If she had walked away from the original $1800 purchase she would have been better off than trying to pay sometimes here and there...

@nataku83: As an aside from the topic, your statement got me wondering where those GM credits will go with the new GM...

@pkoutoul: You are exactly right and that is what that industry is doing.

@pecan 3.14159265: I flat-out refuse to pay an annual fee on a credit card. My CC has American Airlines miles, and Mr Ruthless and I take one international vacation a year, with the flight financed by the CC miles. We buy virtually everything we can with it, pay it off at the end of the month, etc. The bulk of my miles, however, seem to come every year when I try to finangle myself out of the annual fee (the first year is free). They won't, so I cancel the card, open a new one, and get 25k miles all over again. I know I'm dinging my credit, but we don't have any large purchases looming (we own a home, and have cash on hand to buy a car) so it doesn't seem to matter much.

@RogerTheAlien: No.

I too was puzzled with the "deadbeat" definition the first time I heard it thinking it was in reference to charged off accounts. As nataku83 said it is evidence of the demented greed mentality at major banks. I recognized that this happened when they replaced profits from growth with profits from penalties as the major revenue source. Maybe it started rolling when ATMs started to make money in fees versus being free...

@statgrad: It is just that the card companies got greedy on all the % juice from the balance holders at 16.99% to 29.99% that the responsible people started to look like non-profitable customers. Some VP somewhere took all the $ made on the balance holders to his/her annual bonus and now that person is running with their tail between his/her legs...

I am proud to now be one of the people CC will either be courting or despising, which ever way they end up going. As of yesterday, I have been without CC debt for 2 weeks and am SO happy to be done with it. Slightly more than $12,000 paid off in 4 years, 2 of which were during graduate school. I am so proud of me! Just wanted to share.

@johnva: They were my first CC and they kept raiseing my limit, trying to get my into debt trouble I assume, but I used it responsibly. Now I have a Chase Rewards card and only use that one every few months to keep it active.

Credit card companies love interest charges.

@pecan 3.14159265: It's still an inacurate use of the word. Why don't they call us "aquarium castles?"

@pkoutoul: Yes, its counter-intuitive (to us). The financially responsible CC users don't make CC companies as much money as those who carry a balance, are late in paying, go over limits, etc. Hence, they are deadbeats.

CC companies make money in fees (paid by the stores) for all of the responsible customers, which amounts to a couple percent. If you pay your bill off each month, the CC company still made ~2%/month or ~24% APR off of your purchases for the loan they gave to you on your card, and the store essentially paid the interest for that loan. The stores subsidize the cash-back programs. Not the irresponsible card holders.

Most of the anti-Capital One stuff you hear about comes from people who pay them interest. Those people evaluate a credit card company entirely differently from someone who is not a revolver.

(And no, I'm not an employee of theirs. I just have one of their cards and haven't had any problems with it.)

I'm a dreamer, I know.

It's almost as if the credit industry is going to be run in some kind of... responsible fashion? That doesn't sound right.

@RogerTheAlien: I think consumerist is aware of the irony, though.

If I don't come out ahead, then I'll just go to someone else who will play ball.

People who pay their balance in full every month make less money for the company.

Can we get a Consumerist dictionary already?

Yes, it is an industry term, equivalent to being a freeloader. In other words, they get the benefit of using the card, but don't earn the credit card comapany any interest.

I dont really use my credit cards other than for credit score and every once in a while to keep them active, so as long as they dont jack the annual fee up too high, they can do whatever they want to mine. As a matter of fact Capital One (I know I shouldnt have one but they were the only company to issue me one when I was 18 with no credit and I keep it for FICO) just jacked my rate up from 8.00 to 18.99. I use it to pay one monthly bill then I pay it just to keep it active so in reality they could crank it to 100.00 and I still wouldnt care.

Rewards programs are just too good at retaining customers for them to want to get rid of them. I also have doubts that they will "bring back" annual fees in a serious way. I bet that they will become slightly more common, but it's just too easy for people who are "deadbeats" and have good credit to switch to some other card for them to put up with much. I know I will drop any card that starts charging an excessive annual fee and refuses to waive it.