2

6/25/2007 8:50:27 AM

Quote :

"^they really are fucking scum, they give people low credit limits to intentionally fuckup their credit. When they give you a 500 dollar limit and lets say you charge 300 in a month, but fully intend to pay it in full. Well its reported as you having a 60% debt/credit ratio even if you are going to pay it in full before the due date. "

worse still, Cap 1 does NOT report your credit limit correctly. They instead report your HIGHEST BALANCE as your CREDIT LIMIT. Which means unless you routinely max out your card, your Cap One card will ALWAYS show at or near 100% utilization, effectively slaughtering your credit score.

People don't know enough about credit... you should never use Cap One.

[Edited on June 25, 2007 at 10:44 AM. Reason : d]

[Edited on June 25, 2007 at 10:45 AM. Reason : d]

[Edited on June 25, 2007 at 10:49 AM. Reason : df]

6/25/2007 10:42:54 AM

^ that's true with any revolving credit card - not just capital one

6/25/2007 10:49:02 AM

^no, that's true with any charge card.

most credit cards are revolving accounts, and do in fact have their credit limits reported correctly.


Most charge cards will advertise "no limit", etc. So you can clearly see it is a charge card. Cap One is the only one to advertise its cards as credit cards but report them as if they were charge cards.

[Edited on June 25, 2007 at 10:52 AM. Reason : d]

6/25/2007 10:51:00 AM

This is concerning:

Quote :

"^ she, and no...i've paid all my bills (rent/progress energy/time warner) on time. i've just never had any desire to have a credit card (as per seeing my parents' experiences), until now...and if i didnt need credit to get a mortgage, i would never get one."

Umm check the credit report - I've heard of parents using their kids' SSN's to get additional credit once they've fucked up their own histories. For your sake, I hope that it is not the case...

Anyhow if you keep getting turned down, apply for a secured card. Your bank freezes $500 or so of your bank account, but you pay the card off monthly like normal. If at any point you're delinquent, they take that frozen $ and pay off the debt and cancel your card. In about a year you should be able to roll it over into a normal unsecured card. Bonus here is it forces you to save another $500 toward the house.

6/25/2007 6:05:43 PM

Quote :

"probably because they know you will pay it off and not incure fees"

I hate this shit. It's all fucking backwards. I was making 2,000 a month with no bills and 10,000 in the bank but they wouldn't hand me a $500 limit card. On the other hand, as soon as you are in debt over your head and can't make payments, you'll start getting dozens of offers.

I wonder if being on co-op had anything to do with it. Technically still a full time student, but they might not have seen it that way.

6/27/2007 9:34:01 AM

Quote :

"I wonder if being on co-op had anything to do with it. Technically still a full time student, but they might not have seen it that way."

you tell them what your income and occupation are...it only had something to do with it if you told them that

6/27/2007 9:50:13 AM

Quote :

"as soon as you are in debt over your head and can't make payments, you'll start getting dozens of offers."

The offers you'll receive when you're in debt over your head are NOT the kind you want anyway.

6/27/2007 11:57:35 AM

I don't get this, they send a million offers to people with horrible disgusting credit and they repeatedly say that the highest risk customers are the ones who make the most profit! I probably got 20+ offers when I turned eighteen and then the vultures show up on campus sometimes.

Make sure there isn't something horribly wrong with your credit report (fraud, ID theft etc). I wouldn't be suprised if one day they turn down very good credit customers since they won't make any money off them.

If you can get one through the SECU.

6/27/2007 3:16:44 PM

Quote :

"they repeatedly say that the highest risk customers are the ones who make the most profit!"

who does? Your friends? Have one of them declare bankruptcy, then see how many are eager to give them a credit card.

Lets do some math here:
Let's say you and a brother each have a credit card with a $1000 limit. You both have an appaling interest rate of 20%. Credit card companies not only get your interest payments, but they also get 5% from merchants everytime you use the card (it varies).

Now, you spend $1000 with the card and then pay interest all year, unable to use the card again since it is maxed out. The credit card company gets the 5% from merchants, or $50. They also get your 20% APR interest payments, or $200, for a total earnings of $250 for the year.

Now, your brother pays off the credit card every month after spending to the maximum. That means every month he spends $1000 with the card and the card company gets the 5% from merchants, or $50 a month. As it is paid off every month, your brother makes no interest payments. After 12 months the card company has earned $600 from merchants for the year.

Now, which customers should a credit card company prefer? You, which earns them only a 25% return on their investment, or your brother which earns them a 60% return?

6/27/2007 3:32:01 PM

Who pays the credit card companies 5%? There is no way the % is that high. The % is either lower or the max amount is capped.

Quote :

"According to the North Carolina Office of the State Comptroller and this Schedule of Fees document, a $100 transaction on a VISA card results in fees of $1.62. MasterCard clocks in at $1.80 and American Express comes in a $2.19"

http://www.bargaineering.com/articles/why-do-merchants-dislike-american-express.html

[Edited on June 27, 2007 at 3:55 PM. Reason : link]

6/27/2007 3:52:30 PM

The brother borrowed twelve times as much. How does that make for a valid comparison? Also, doesn't the first guy still owe $1000?

Either I'm naive or this example sucks.

6/27/2007 4:12:29 PM

It was a poor example. A more accurate example would compare two guys with cards with 12K limits who spend 1K a month each for a year. Then you could easily see how the guy that carries a balance earns the credit card companies much more money.

6/27/2007 4:19:01 PM

a little off topic but i could use your help.

i dont know if i'm fucking myself over regarding credit or not. i've got a card from wachovia, but i dont really use it except to get cash from my account. i just use an add on from my parents. am i gonna get out of school and have no/bad credit or is the fact that i have a card (even though its an add on) good enough?

6/27/2007 4:25:21 PM

I would get a credit card and use it those times you pay cash and pay the credit card bill each month from your Wachovia account.

6/27/2007 4:27:59 PM

Quote :

"I wonder if being on co-op had anything to do with it. Technically still a full time student, but they might not have seen it that way."

Probably not. I'm a co-op and I didn't have any trouble getting a card with a fairly high limit from citi. Only other credit history is student loans.

6/27/2007 4:54:13 PM

Quote :

"It was a poor example. A more accurate example would compare two guys with cards with 12K limits who spend 1K a month each for a year."

No, David. Your example would be two guys, one that owes the credit card company $12,000 and the other that only owes $1,000. Not to mention your scenario is illogical: poor people do not get credit cards with $12,000 credit limits. In my scenario, neither individual at any time was borrowing more than $1000 from the credit card. Yes, your brother spent 12 times that much in the year using the card, but at any time he was only in hawk to the credit card company for $1000, and at no time did he pay any interest. As for you, just because people max out their credit cards does not mean they stop spending, just that they stop using their credit card, spending cash or using the debit card. But from the Credit Card's perspective, they might as well have stopped spending money.

For simplicity I did go with a very high interchange fee of 5%, but I was not that far off. It varies dramatically depending on the card company, charge volume, whether the card was scanned, whether ID was visually inspected, etc etc. But all of the sources I found said it averaged between 2 % and 3%, not 1.62% as you found. But the size of the purchase also causes it to vary, I suspect a $100 purchase is going to be charged a lower fee than the $5 you spent for lunch.

But even using the lower fee of 2%, the credit card company still earned more money from your brother although he didn't pay a cent in interest. That is still $20 a month or $240 a year being collected from your brother, which is more money than the $200 in interest collected from you ($220 total).

This is why credit card companies offer cash-back cards, attempting to incentivise you to use the card and collect interchange fees from merchants by giving you a share of the profits. Some cards offer 5% cash back on gasoline, which is also where they charge the highest fees, since it is often pay-at-the-pump, and the owner does a small volume of business.

[Edited on June 29, 2007 at 1:35 PM. Reason : ,.,]

6/29/2007 1:30:24 PM

Quote :

"poor people do not get credit cards with $12,000 credit limits"

A. Don't be so naïve.
B. Poor people aren't the only ones with credit card debt

Quote :

"just because people max out their credit cards does not mean they stop spending, just that they stop using their credit card"

What about those people in debt with a dozen different cards? Obviously they did not stop at one card.

Quote :

"But even using the lower fee of 2%, the credit card company still earned more money from your brother although he didn't pay a cent in interest."

Once again you are making another poor assumption. With a maxed out card your rate will be at 29.99 % in no time.

6/29/2007 1:34:46 PM

Quote :

"What about those people in debt with a dozen different cards? Obviously they did not stop at one card."

It does not matter how they go about spending money after the card is maxed; all that matters is that from the Credit Card Company's perspective you have stopped collecting interchange fees for them from merchants. Whether you are still doing it for someone else or not is irrelevant to their bottom line.

Quote :

"Once again you are making another poor assumption. With a maxed out card your rate will be at 29.99 % in no time."

Ok, at that interest rate the credit card company only has to collect interchange fees of 2.5% to break even between you and your brother ($1000 * 2.5% * 12 = $300 and $1000 * 29.99% = $299.99). I guess at that interest rate the credit card company no longer cares whether you pay it off each month or not, with the obviously exception that individuals paying their balance off each month are less likely to declare bankruptcy.

[Edited on June 29, 2007 at 1:43 PM. Reason : ..]

6/29/2007 1:43:42 PM

Quote :

"all that matters is that from the Credit Card Company's perspective you have stopped collecting interchange fees for them from merchants"

The credit card company can issue multiple cards to the same person. Capital one does it quite frequently from my understanding. Besides, who cares about interchange fees when you can make more money off interest from maxed out cards? You have people with tens of thousands of dollars in credit card debt. Do you really think there are an equal number of people who charge tens of thousands of dollars each month and pay it off? Of course not.

6/29/2007 1:49:07 PM

Have you never gotten a c.c. offer in the mail? When I turned 18 the floodgates opened and I was inundated with them.

Of course, they all had low limits and high interest rates, so I never bothered getting one.

In the mean time, I applied for a retail card and was denied.

When I decided it was time to build credit, I sent in the next c.c. offer I got, which happened to be AmEx Blue. It had a $500 limit and something in the 19% interest rate range.

After a few months of buying one small item per month and paying it off in full, I started getting much better c.c. offers in the mail.

6/29/2007 4:27:54 PM

Quote :

"Besides, who cares about interchange fees when you can make more money off interest from maxed out cards?"

I have already demonstrated mathematically that they make more money by having you pay it off each month.

Quote :

"Do you really think there are an equal number of people who charge tens of thousands of dollars each month and pay it off? Of course not."

It does not matter whether there are or not; I was responding to the statement that Credit Card companies want people to carry a balance. This is not true, the credit card companies want to make money, and the preferred method is through interchange fees because it allows issuing banks to play highly profitable games with the math; charging people interest does not allow them to do that.

I only mentioned the most obvious game, but this game works even better when there are multiple people. Let me show what happens when there are two people involved.

Let's say you are a credit card company with $1,500 to lend. You have two customers, each spends $1,000 and pays it off in full every month. You can do this because they do not spend it all at once, they spend it over the month, so by the 15th day of their period they each owe $500. But their payment dates are staggared, Person A is billed on the 1st, Person B is billed on the 16th. So they each go round and round, one is borrowing while the other is paying back, so together they only owe $1500 at anytime during the month, which means each dollar gets loaned out more than once each month. ($2000 was loaned out each month of only $1500 available). As such, of the $1500 the company is loaning out, it collects $50 in interchange fees each month (assuming a low 2.5%), or $600 a year, earning a return of 40% on its investment ($1,500 loaned for a full year). The more people you have doing this, the better it works, getting closer and closer to 2. Had both people simply borrowed the max and never paid it back, the company would have needed $2000 to operate, and only earned a return of 29.99% (using your worst case interest rates, most people carry a balance at a far lower rate, and assuming they paid it back, which they might not).

6/29/2007 5:42:49 PM

Quote :

"I have already demonstrated mathematically that they make more money by having you pay it off each month. "

Yes, you demonstrated mathematically if someone spends 12K a year the credit card company will make more off that person vs a person that spends 1K a year. You can spend all day long making up random numbers.

Look at the average debt for credit card users. Even with assuming an average percentage much lower than 29.99%, it’s very clear that these people who do not pay off their debt earn the credit card companies much more money than those who do.

6/29/2007 6:10:45 PM

David, are you trying to be dense? Both individuals spent $12k that year, and neither ever borrowed more than $1k. What I don't get is why you are trying so hard to ignore the facts. If I demonstrate that credit card companies prefer people to use the card than carry a balance, that does not negate your argument that credit is evil and we are all going to die. I am not arguing that credit is good, merely explaining why the credit card companies punish people so harshly for carrying a balance and reward you so lavishly for paying it off every month.

I get my statement on the 4th, if I pay it on the following 3rd I pay nothing. If I pay on the following 4th I am charged 2% of my balance. That is a strong incentive to pay on the 3rd.

6/29/2007 10:54:52 PM

Watched "Maxed Out", a high up bank exec told a Harvard law professor that the highest risk customers make the most money for them.

Also this from PBS:
http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/

6/29/2007 11:31:32 PM

Quote :

"David, are you trying to be dense? Both individuals spent $12k that year"

Are you retarded? One spent 1K to max out his card according to your example. How the hell do you not understand the basic variables of your own example???

Quote :

"If I demonstrate that credit card companies prefer people to use the card than carry a balance, that does not negate your argument that credit is evil and we are all going to die."

When did I say such a statement? If credit card companies preferred people to use the card than carry a balance, then why do they keep the minimum payments so damn low? You know why? Because they make $$$ when people carry a balance.

6/30/2007 12:39:14 AM

If you are planning to buy a house within a year, getting a credit card right now is not going to help your credit very much anyways.

Credit cards are not bad, the people who use them for stuff they cannot afford are just idiots.

6/30/2007 8:44:36 AM

Quote :

"then why do they keep the minimum payments so damn low? You know why? Because they make $$$ when people carry a balance."

Gee, you must be wondering why they have minimums at all! They could just tack on the interest to the principle, and then charge interest on that! Gee, how stupid they must be to make people pay any of it off when carrying a balance is so much more profitable (/sarcasm)

Quote :

"Are you retarded? One spent 1K to max out his card according to your example. How the hell do you not understand the basic variables of your own example???"

No, both spent $12k. One was able to spend $12k using his credit card because he paid it off every month, the other was forced to use his debit card for $11k of it (to the detriment of the credit card company).

But, like I said, with a high enough interest rate, from the credit card company's perspective it is a wash. It is just instead of getting rich off the back of merchants, they are getting rich off your back.

6/30/2007 9:18:05 AM

Quote :

"Gee, you must be wondering why they have minimums at all! They could just tack on the interest to the principle, and then charge interest on that! Gee, how stupid they must be to make people pay any of it off when carrying a balance is so much more profitable (/sarcasm)"

You could, except that would piss of the federal banking regulators.

Quote :

"No, both spent $12k. One was able to spend $12k using his credit card because he paid it off every month, the other was forced to use his debit card for $11k of it (to the detriment of the credit card company)."

What kind of fairy tale world do you live? Are you saying guy B has a $1000 maxed out credit card, but yet he has the resources to pay for $11,000 of purchases throughout the year using cash from his bank account?

6/30/2007 11:43:52 AM

Quote :

"What kind of fairy tale world do you live? Are you saying guy B has a $1000 maxed out credit card, but yet he has the resources to pay for $11,000 of purchases throughout the year using cash from his bank account?"

There are plenty of people who max out their credit cards and only pay the minimum payments so they can continue spending all of their available cash.

6/30/2007 12:24:28 PM

I'm guessing those people have way more than one $1000 maxed out card.

6/30/2007 1:14:57 PM

And people who max out one $1,000 card and pay it off every month generally have way more than one card. But this was a simplistic example to demonstrate the relative profitabilities of two different mechanisms of credit use.

7/2/2007 8:58:41 AM

I find that highly unlikely.

7/2/2007 9:14:33 AM

just one card is not enough to get good credit. you need to get a couple cards at least and USE them or you will still have credit problems getting a house!

7/2/2007 10:36:10 PM

Lonesharks example (of how the credit card company makes profit) works assuming the person uses the total limit on the card and then never uses the card after he gets the first bill.

Yes they make profit from me paying my bill in full, but the money comes from the merchant not me (in fact I get 2% to 5% back). When you carry a balance you're the one bankrolling there profit.

Nevertheless, most people who go into credit card debt don't operate this way. Most spend a large proportion of their limit then can't pay it off, so they are hit with interest fees. You won't believe how many people don't know that when you continue to charge stuff after you carry a balance your hit with your high interest rate immediately. (When I pay my card off every month they may make 1% from the store, but someone who has a balance and uses their card, well they make 1% percent and then the interest rate on the entire balance.

7/3/2007 5:48:45 AM

Quote :

"you should never use Cap One"

capital one is a shitty company, but you can score some pretty good deals w/ them. they made the mistake of offering me a 3.9% fixed rate on cash advances just before the rates went up...

7/5/2007 6:08:34 AM

how the hell are you going to buy a house if you dont have a credit card?

7/5/2007 9:30:00 AM

8/4/2007 4:56:43 PM