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They need to do some careful thinking before shoving this idea onto consumers. People with revolving balances that are paid off each month are going to unceremoniously dump those who do, I know I will do that down to one card that I will keep for purchase protection. Right now they at least earn merchant fees off those customers.
So they pretty much will be gaining nothing, I am betting it will be near that amount they loose by people using their cards less.
There is a reason why so few banks control the market on credit cards, and this would make it difficult for others to come in and compete.
If the "Big Three" of credit cards decided to start charging interest from the time of sale, this would make it EASIER for another bank to come in an compete. All a competing bank would have to do to take market share from the Big Three is offer a card with deferred interest. Regardless of what kind of incentive The Big Three could offer to use their cards, I think most people could figure out that it would be outweighed by interest charges they would have to pay. They would be effectively shooting themselves in the foot.
Quote:
Originally Posted by Weekend Traveler
Charging interest effective the date of the transaction would be just the next step in the falling service provided to consumers. Similar to the 5% cash advance fees, higher interest rates in an era of cheap money, reduced perks for charging, and higher fees. All were implemented without a competitor really coming into the market to offer a better alternative.
Yes, interest from the date of the transaction is coming and soon.
There is no competitor because The Big Three all offer a the best version of the product that is on the market and they do it on a scale that makes it hard for other banks to match (think Walmart). If they started charging interest from the transaction date, this would be a huge game-changer. I can't see how it would work to their advantage (at least how you describe it....this discussion is all based on a rumor you heard, basically).
If that ever happens, I will stop using credit cards for anything other than hotels, and will pay the card off the day after the charges hit the account. I do not need their credit; credit cards are a convenience to me, not a necessity.
Whoever does not get rid of the grace period will take a lot of the market, the other credit card companies may make enough money charging interest on the daily balance, but the one that takes the large market share will end up getting the bulk of merchant fees, if it is Discover, or American Express they will end up really raking it in. Merchant fees are 2-3% of the purchase. On average the money is lent out 30 days or less for people paying it off at the end of the month, that represents a ROI of 24-36% annualized on average if the company lending the money also owns the POS equipment and network, they get the entire merchant fee, companies like American Express, and Discover do it that way, if they decide to keep the grace period, and get the bulk of transactions they will be making lots of money. Sure the others might get more ROI on the little money they invest, but they will not be able to invest more money into it, since people just won't buy stuff using their cards anymore, unless they trick people into using their cards, I don't think paying to use a credit card will be as popular as they expect, and they will lose a lot of business.
Good points! Of course American Express is trying to go back to their original "up-market" model. So, you could envision a situation where those that can are using Amex with a grace period and those that cannot are getting nailed for the interest on the other cards.
There is no competitor because The Big Three all offer a the best version of the product that is on the market and they do it on a scale that makes it hard for other banks to match (think Walmart). If they started charging interest from the transaction date, this would be a huge game-changer. I can't see how it would work to their advantage (at least how you describe it....this discussion is all based on a rumor you heard, basically).
I could absolutely see Walmart stepping into this market if they saw an opportunity.
There is a reason why so few banks control the market on credit cards, and this would make it difficult for others to come in and compete. Charging interest effective the date of the transaction would be just the next step in the falling service provided to consumers. Similar to the 5% cash advance fees, higher interest rates in an era of cheap money, reduced perks for charging, and higher fees. All were implemented without a competitor really coming into the market to offer a better alternative.
Yes, interest from the date of the transaction is coming and soon.
But what are you going to do with the people that charge in the month, and pay it off before it's due? Ahhh, you see little grasshopper, they can't do that. That would mean adding an interest/finance charge on an item I bought with my cc on July 5, got the bill on July 30, due on Aug 5, and paid in full for what I purchased, not plus interest. You trying to tell me that you actually sat in on a conversation with (whom) and rather than spread more stupid rumors to start drama, give out details of your untruths. I pay my cc off before the first 30 day bill is past due, I owe no charges. I have heard your hype before. The company's would go broke because the people that pay their bills would cancel their cards. That good flow of asset cash is what keeps them fluid.
One of these days you are going to run out of stuff to pull out of your A$$. But, until then, we all know you are still full of it, because your eyes are still brown.
In today's economy, banks and cc company's are fighting for good credit people. They are not going to push the one's away that are their bread and butter. As I used to say to my 12year old, turn your brain on before you put your mouth in gear.
This like charging annual fees will not become common. The credit card industry is not a cartel and even if it was it would not matter as they are not selling a product people need to survive.
I talked to a friend who just went to a conference othis. He said nothing was mentioned about inyerest fro the time of purchase. he also said that would bascially fix the rate and eliminate much of people they want to continue business with. He said basically they want to eliminate the outstnding amount of credit debt they carry from month to month.Much of this will be done by lowering or eliminating many that have to high a debt to income ratio and por credit ratings.
Way too much competition for them to ever think of implementing this. People will go back to cash or debit cards. It won't happen.
I wouldn't believe a "friend" who told me this unless they were a bank CEO, and even then I wouldn't believe it, because that CEO would be fired within a week of implementing this.
This sounds similar to one of those frauds or hoaxes that Snopes always debunks. Check your sources, people! Don't believe everything you hear.
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