I received an offer from, let's name names, Premier Bank today. They want me to become one of their VISA card customers. And, in many ways, it is a nice offer. Interest is down, potential credit line is up; all in all, it is not a bad offer...until you get to the fees in the small print (or in the initial 4 fees, not so small print): There are two one time fees--Account set up fee: $29.00 and Program fee: $95.00. Then there are two annual fees: The Annual Fee: $48.00 and the Participation Fee: $72.00 (billed at $6/month). So, if you accept this offer, before you charge a single thing, you owe these people over $200.00. And it gets worse.
If you want to use an outside Autodraft service to pay their bill every month, that will cost you another $11.00 per payment. However, it ain't that much cheaper to use their in-house service. Autodrafts requested through their automated systems "(i.e. Voice Response or Internet)are assessed at $7.00 per transaction." Then there is a $3.95 charge for Internet access. (I'm not sure if that is a per usage, a one-time or a monthly fee.) The thing is that, these days, I look to be able to pay my bills online without actually writing checks. A couple of minutes at the computer and the bill in question is paid--and the institution being paid gets their money faster.
This is what gets me. The sons-of-bitches who think up these schemes are looking to bleed the middle class of this country dry. At one time, the middle class was the strength of our society. That is changing. The middle class is being eroded away while the wealth it generates is being accumulated in fewer and fewer hands.
It's like this offer; I haven't sat down to run numbers, but I will bet that, by the time all those fees are figured in, the effective interest rate being paid will be up over 20%. As far as I'm concerned, that is usury. Or, to put it another way, when I was growing up, we locked people up as loan sharks for charging that much interest on "loans." We need to re-examine a lot in our society to determine what is actually good for the whole and what is good for only a very small part of the whole. Anything falling into the latter category needs to be examined with a microscope.
Aside: Don't jump in here with an impassioned attack on social welfare, either. Those programs are supposed to be for bringing people up to certain minimum living standards which the majority of us would consider actually rather grim. I'm talking about anything that makes that top 5-10% of us even richer and that widens the fissures in our social fabric.So, you can be sure that this offer has already hit the paper shredder. In fact, one of our goals this year is to consolidate our debt into a fixed-rate home equity loan and eliminate all the high interest credit card debt we have accumulated in the past 15 years. We figure we can pay everything off, pay our share of the upcoming wedding and still have money left over for improvements to the house and an emergency fund while actually paying less per month than we are paying now. Then we use the plastic like cash; if you don't have the cash to pay off the card at the end of the month, you don't use the card. Period.
3 comments:
Some of this makes sense. Many better customers pay off their balance every month, so some kind of fee seems in order. The example you give seems egregious.
Jerry, The CC companies do not want customers who pay off their debt each month. Those are the customers they actually want to get rid of because those are the customers who make them the least money. Let's do a little Econ 101 here: There are three sources of income for CC companies; 1) the fee they charge businesses for each transaction, 2)the interest they charge for outstanding balances over 30 days old and 3) the fees they charge. Well, actually the vendor per transaction charge goes to VISA (or Mastercharge) for processing the transaction and sending it on to the bank that issued the card. So, the banks rely upon the interest and fees generated for their income. If you pay your bill in full and on time via US mail each month, the issuing bank makes $0 off your card.
Nope, the customer the issuing bank wants to see is the person who runs the card up near the credit limit, pays near the minimum each month and is occassionally late...or uses one of the "special" payment options a few times a year. That card holder is a cash cow and is to be milked for as long as possible...
Note: American Express and Discover, since they both collect and finance, get all the income a card generates. But, if you check them out, you'll see that their "small print" fee structure is actually less.
I actually agree with what you said. My wife had poor credit some years ago and I had to teach her how to read the offers she received. I told her which one to accept (a mediocre but simple to understand offer). The credit card business needs to be regulated more that it is. After all they are offering vast amounts of credit. What annoys me about them is that unlike most businesses with repeat customers, they are trying to find ways to penalize their customers.
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