Rewards Credit Cards?

[CYdTracked]

I realize that this won't be a popular opinion... But please realize that utilizing cards of these nature are making your everyday purchase more and more expensive.

Check out this site:
Unfair Credit Card Fees

Just a small excerpt from the site:
So you may seem like you are getting something for nothing, you aren't. We are all paying for your first class trips, your digital cameras, and your cash back.

I'm surprised someone hasn't torn you up about this yet actually. What about ATM fees, aren't they a scam too? We wind up paying for about anything these days one way or another, if credit cards were such a pain stores wouldn't accept them. Plus there are plenty of fools that keep balances on them and keep the business thriving by paying outrageous interest rates on the balance. If we all paid off our balances each month credit cards would probably not exist.

 

[superdorf]

I'm surprised someone hasn't torn you up about this yet actually. What about ATM fees, aren't they a scam too? We wind up paying for about anything these days one way or another, if credit cards were such a pain stores wouldn't accept them. Plus there are plenty of fools that keep balances on them and keep the business thriving by paying outrageous interest rates on the balance. If we all paid off our balances each month credit cards would probably not exist.

I'm sorry to say this but you are absolutely wrong. You pay the ATM fees directly yourself when you take money out of your account. Also, many banks don't charge when you use their ATM machines.

Retailers don't have a choice in the matter. Would you still shop at Target/Wal-Mart/Hy-Vee if the didn't accept credit cards? Visa/Mastercard have the retailers right where they want them, and they spend MILLIONS marketing cards to the consumer.

Credit card fees charged to merchants are basically an entire second business to Mastercard/VISA. My guess is that this is now the "bread and butter" of their operation. You, me, and everyone else indirectly pays these fees in higher prices at the grocery, store, gas pump, and anywhere else credit cards are accepted.

If you follow the link from my original post you will find more information. On some card transactions up to $2 per $100 spent goes directly to Visa/Mastercard.

I guess the bottom line is that if you think you are getting something for nothing... You aren't.

 

[247cy]

Maybe I'm old, but I tend to pay for everything with cash. I like going to the bank and asking the teller for cash from my account. I find that the money is harder to spend when you actually have to hand it over to someone. I use plastic occasionally for online purchases and to rent a car or book a hotel room, but other than that I try to stick to the paper.

 

[Phaedrus]

Maybe I'm old, but I tend to pay for everything with cash. I like going to the bank and asking the teller for cash from my account. I find that the money is harder to spend when you actually have to hand it over to someone. I use plastic occasionally for online purchases and to rent a car or book a hotel room, but other than that I try to stick to the paper.

And consumer studies prove you out. The average consumer spends something like 15-20% more per transaction when purchasing with a credit card.

Cash is best, debit card is next best, imo.

Here's a link to an interesting article about "Rewards" programs.

Raw Deal: Rewards programs are really a rip off - Jun. 2, 2008

Bottom line: Credit cards wouldn't use them if they didn't make them money.

 

[ISUAlum2002]

I'm sorry to say this but you are absolutely wrong. You pay the ATM fees directly yourself when you take money out of your account. Also, many banks don't charge when you use their ATM machines.

Please. You don't think that retailers have built in the small percentages of fees that they pay to the card companies into the retail prices that they set on their products? Think of it as a tax on the retailers. And as we all know, businesses don't pay taxes, their customers do.

If the situation truly was as dire as the article you posted makes it out to be, then yes, retailers would stop accepting the cards. I still see plenty of old timers asking what the date is so they can write out a check and then digging around in their coin purse for exact change.

This is pretty much the one area where those of us who are financially responsible get to take advantage of those who are not, as they are the ones who finance our rewards by paying the ludicrous interest charges.

 

[Phaedrus]

This is pretty much the one area where those of us who are financially responsible get to take advantage of those who are not, as they are the ones who finance our rewards by paying the ludicrous interest charges.

There would be the lottery, too....

Taxes on the stupid are fun...:yes:

 

[superdorf]

Please. You don't think that retailers have built in the small percentages of fees that they pay to the card companies into the retail prices that they set on their products? Think of it as a tax on the retailers. And as we all know, businesses don't pay taxes, their customers do.

I think you miss my point... In a grocery environment this fee almost completely erodes your profit.

And yes, the retailers are absolutely passing this cost on, but it is charged to everyone.

Let me ask the group this question, if the fee was passed DIRECTLY on to you would you still use your card.

For example, you go to Target/Hy-Vee and buy $150 worth of just groceries. You swipe your "Chase Freedom" or equivalent, and the card reader says:

This card requires a fee of $1.25 to be used on this transaction, Yes/No

Would you still use the card? If things don't change this is the direction I see retailers heading.

 

[ISUFan22]

I realize that this won't be a popular opinion... But please realize that utilizing cards of these nature are making your everyday purchase more and more expensive.

Check out this site:
Unfair Credit Card Fees

Just a small excerpt from the site:
So you may seem like you are getting something for nothing, you aren't. We are all paying for your first class trips, your digital cameras, and your cash back.

I am aware - yet, it's not going to stop anytime soon. I'll take advantage of the rewards.

It's a scam. Keep the debit card; you'll end up spending 15-20 percent more using the credit card to get that 1% cash back.

It's even cooler when they fail to credit your account for a couple weeks, and forcing you to accrue a service charge.

And how about when they jack your interest rate up to 30 percent, because they "think" you have too much debt load and "might" be late or miss a payment. That is soooo cool.

Credit cards ROCK!!!! I love spending $100 in fees to "save" $10 in Rewards money....

How is it a scam? As long as I pay off the balance each month, the CC company gets zero money from me.

 

[superdorf]

How is it a scam? As long as I pay off the balance each month, the CC company gets zero money from me.

You pay more for everything you buy... But it won't stop until retailers/consumers do something to stop it... So in the meantime... charge away!

 

[keepngoal]

I think you are way off base and have a real personal feeling attached to this.

Some places have cash discounts ... great! use cash.

Most places have the same price no matter how you pay ... great! Use your personal freedom and be responsible with your choice.

What I am hearing from you is that you are upset that you pay the same amount for products or services with cash as those that use CC's while part of the margin in those products or services goes to a third party.

I really don't see that is wrong with that.....

-keep

 

[CYdTracked]

Please. You don't think that retailers have built in the small percentages of fees that they pay to the card companies into the retail prices that they set on their products? Think of it as a tax on the retailers. And as we all know, businesses don't pay taxes, their customers do.

If the situation truly was as dire as the article you posted makes it out to be, then yes, retailers would stop accepting the cards. I still see plenty of old timers asking what the date is so they can write out a check and then digging around in their coin purse for exact change.

This is pretty much the one area where those of us who are financially responsible get to take advantage of those who are not, as they are the ones who finance our rewards by paying the ludicrous interest charges.

Great response!

That's my thing too, if you are financially responsible why wouldn't you used a cash back rewards card? If I stop using my CC I'm not going to save money. Wether I pay cash, check, debit, or CC my spending habits are not likely to drastically change. I'm not using a CC just to spend money, I use it for every day purchases. I pay cash for small things but for gas, goceries, or retail stores I use the CC and pay the balance off on the next bill. If I can save 1-3% by doing that great. Your theory may have some truth to it that by using a CC it inflates prices but its not something that is going away so by not using it I am basically screwing myself out of money I can get back. With the Freedom card I get $200 back of the money I spent plus they give me another $50 on top of that that.

If you are financially responsible using CC's are not hurting anything. And by not having money constantly going out of my bank account I can earn interest on it for that many more days. I try to keep just enough in the checking to cover the bills, the rest goes into a high interest savings and I pull out of that when needed.

 

[ISUFan22]

I think you miss my point... In a grocery environment this fee almost completely erodes your profit.

And yes, the retailers are absolutely passing this cost on, but it is charged to everyone.

Let me ask the group this question, if the fee was passed DIRECTLY on to you would you still use your card.

For example, you go to Target/Hy-Vee and buy $150 worth of just groceries. You swipe your "Chase Freedom" or equivalent, and the card reader says:
Would you still use the card? If things don't change this is the direction I see retailers heading.

And if it goes that direction, I'll go back to using my debit card...as many would I think. Then the fee would go away and I'd go back to the CC.

A circle of fun.

 

[AIT]

This is pretty much the one area where those of us who are financially responsible get to take advantage of those who are not, as they are the ones who finance our rewards by paying the ludicrous interest charges.

Yep. I've had my rewards card for a few years now, and I don't think I've ever paid a fee. I've been charged fees a couple times, but got them waived. My credit card company is more helpful than my bank or anyone else I send money to. As long as you're a good customer, credit cards seem eager to please you to keep you around.

 

[keepngoal]

You pay more for everything you buy... But it won't stop until retailers/consumers do something to stop it... So in the meantime... charge away!

most times you are paying the same no matter how you choose to pay ... so how is that paying more? the only caveat to that is when the merchant offers a discount for cash prices ... then they are 'giving' money to you.

-keep.

 

[superdorf]

I'm not suggesting that people will actually stop using these cards. I realize that many people posting are financially responsible and to them it makes complete sense to get something, basically for free. I am just putting out some information that many people don't know.

I also think that the fee will end up being passed directly to you when you swipe your card, and that will be when people will change.

 

[superdorf]

most times you are paying the same no matter how you choose to pay ... so how is that paying more? the only caveat to that is when the merchant offers a discount for cash prices ... then they are 'giving' money to you.

-keep.

Sorry, I'm trying to say that retailers are charging overall higher prices to cover these fees...

Just like when the price of fuel, or utilities rise they have to charge more.

 

[keepngoal]

Sorry, I'm trying to say that retailers are charging overall higher prices to cover these fees...

Just like when the price of fuel, or utilities rise they have to charge more.

gotcha... now that I agree with.

-keep

 

[AIT]

You pay more for everything you buy... But it won't stop until retailers/consumers do something to stop it... So in the meantime... charge away!

If everyone stopped using credit cards, then the fees would go away and merchants could lower prices. If I stop using my credit card while everyone else keeps using theirs, it makes no difference to the merchant and prices stay the same. I might as well keep using my credit card and get the rewards.

 

[everyyard]

Wondering what some of you have for these since there are so many any more. I just signed up for the Chase Freedom card this weekend: Chase Freedom Credit Card, Rewards Credit Card or Cash back Credit Card, VISA, Visa Credit card, Chase Freedom Visa and I don't think I've found a better deal out there so far. 3% cash back on your top 3 category purchases and 1% on everything else plus $50 cash back after your first purchase. I don't get why anyone would opt for the points system over the cash back option. It's $0.01 per point and most of the rewards are basically the same cash value as taking the cash back rebates.

The gift cards are funny, 1000 points get you a $5 card which you could have had $10 cash back instead. The 5000 and 10000 points cards for $50 and $100 are equal to the cash back ammounts though.

Any other good deals out there? I also have a GM Mastercard that earns 5% towards a new car but the problem is you can only cash up to $2000 on that at once and also I am screwed because they will not allow that to be used along with a GM Family First discount (part of the employee discount program) which I am eligble for so it's 1 or the other and the GM employee discount is usually well over $2000 on most vehicles so not sure what I am going to do with that card but I can hold onto it for now I guess because at some point the family member that allows me to qualify for the GM discount will pass away and I will no longer be eligible for that. If you have State Farm insurance they have a 1% back CC you can use towards your account, however I no longer use them so I weaned myself off of using that card because its doing me no good now.

One of the last 2 or 3 issues of consumer reports magazine had a review on this very thing. might be worth checking out. The summary as I recall is that none of them are that great.

 

[Kyle]

If everyone stopped using credit cards, then the fees would go away and merchants could lower prices. If I stop using my credit card while everyone else keeps using theirs, it makes no difference to the merchant and prices stay the same. I might as well keep using my credit card and get the rewards.

This is a very obvious version of a collective action problem. For any individual the rational choice is to use a rewards card. However, as a group the rational choice is to not use credit cards. The negative externalities of using a card (the fee's) are spread out over the entire population through higher prices charged by retailers.

I have actually seen some places that are either charging for use or not taking cards. The Flying Burrito in Ames charges an extra 25 cents to use a card. Presumably this helps them keep their prices down in general. When I went to California last year I just about blew a gasket because I had to go to three gas stations before I found one that would accept a credit card. The ones that didn't take cards were cheaper.