Hi Dragan,

You are far better off with your current strategy! Obviously, if the fees added up to $43 BILLION last year the money is going somewhere < s >.

The general case is this:
Merchants pay a fee for the luxury of having your plastic pay for your purchases. Generally in the 4% range, it can be lower at larger chains. You don't know and most won't tell you.
Long ago merchants resisted, but eventually came the point where more people were walking out when they didn't take credit cards, so they 'came aboard' so to speak. (Also, in the early days, you could ask for and get a 2%-4% discount for paying cash).

The credit card companies then collect their (additional) 9%-22.5% (or more for 'store' credit cards) when people carry a balance from month-to-month. The rate is the annual rate, so the monthly fee is the pro-rated percentage.
Credit cards can also be used to 'get' (i.e. borrow) cash, and in those cases the interest starts accumulating as soon as the cash hits your hands and often is charges at a different rate.

I use my credit card but always pay my balance in full every month. That gives me the small satisfaction of screwing THEM out of a few dollars a month because on a larger purchase I will wait until it is too late for them to get it on my next statement, giving me an extra month of using their money.

Credit (real credit) is a wonderful thing for businesses because it lets them grow and prosper more, meaning more jobs too. But that kind of credit is NOT what credit cards are about.

Credit for people (let's exclude the home mortgage) is not such a good thing for the individual, especially when the rate is well beyond typical bank loan rates. Credit cards always carry rates well beyond 'sensible' rates. The reason...
The main reason is that they prefer not to refuse anybody and so must charge a higher rate to make up for the delinquents. In other words, the rest of us must pay for their laziness (not checking thoroughly) or their timidity to say no AND US USERS HAVE TACITLY ACCEPTED THAT!

With $43. BILLION collected last year it is apparent that many many people have become slaves to their credit card companies. And this is particularly bad for society at large, although a very good situation for business generally and banks in particular.
It's 'good' for business in this way... people with large outstanding balances (the huge percentage of whom take it very seriously) lose virtually any flexibility in their day-to-day life but most specifically in their work. Their (credit)obligations mean they NEED their job badly, so they find themselves conceding things like loss of benefits and longer hours and performing questionable procedures ('I would have said something but I need my job') and on and on.
So, indirectly, business gains leverage which ultimately gives them more profit. The credit card companies, of course, get the fees directly.

I wouldn't be surprised if many companies, when checking references and backgrounds, do credit checks too, possibly rejecting some who are not in hock up to their necks. After all, these people might be in a position to worry about themselves (as a whole, rather than just their bills) as so could become trouble-makers when extra hours and such are demanded. By the way I feel that extra hours are now rarely directly 'demanded' but rather forcefully implied.

The "beauty" of the system is that good marketing has ensured that people (the users) DEMAND credit cards and accept the high rates. People just gotta have that bauble today and it's gotta be that expensive one they saw on TV or in the magazine. If it gets too bad, which it does for many, they declare bankruptcy and then start shopping at Walmart.

Cheers



>>About thirty years ago I stopped using my credit cards. I still made purchases but I paid cash. One day I received a letter from one of the stores which stated, "You are not using your credit card! You are hurting our company by not doing so. We are dependant upon the 22 1/2 percent interest rate required by credit card purchases".
>
>I actually never understood this. Maybe I simply am incapable of understanding it, having learned my economics in a completely different world (yes, another child of socialism). I'm getting anywhere between 30 and 60 offers for various credit cards each year. They all promise no interest charged if you pay on time, or something to that effect - I've never managed to understand all the terms. So where does the 22.5% apply, and who gets it? The credit card company or the seller? I thought the retailer actually gets less when you pay using a credit card, because he has to pay to someone to validate it (and that's about 4% or so), but they still go ahead because people are more ready to spend money when they have a feeling they're not really paying, so they spend more. And the retail gets money immediately from the creditor - but then, cash is even more immediate, albeit it has its own cost in security issues. So, what's the deal, actually?
>
>I'm sticking to my debit card. Has all the advantages of plastic money, and no (percentual) strings attached.