Friday, January 30, 2009

I hate credit cards and credit card companies

So my financial situation is a mess. I don't mean how much money I have or do not have. I just have too many bank accounts and too many credit cards. All my rate chasing and rewards hopping just earns me headaches in the end. Generally, I pay everything on time. I never (intentionally) carry a balance and it all works out. But with so many account numbers and logins and passwords and remembering who automates what - its a big mess and I can't seem to extricate myself. And the economic situation seems to be making credit card companies even stingier and meaner than usual.

So my latest wave of irritation began this fall when Bank of America inexplicably switched me from ebills to paper bills right around the time I was off enjoying the remainder of my summer vacation. (read - not in town checking my mailbox) And then charged me up the wazoo with finance charges and late fees for noticing this after the due date. Despite the fact that I had been using the card nearly exclusively for 5 years and charged god knows how many dollars on it they refused to refund the fees. Fine. Adios, BoA. (I'd been looking for a good reason to drop the card ever since they acquired MBNA who I got the card with in the first place and had fantastic customer service.) I turned to one of my trusty back up cards

So I start using this new card (Chase) and decide in November to switch from paper to ebills. Somehow I missed (never received?) my email bill reminder at the end of December (around the holidays, of course) and didn't realize until today that I was way past due. And, of course, they refuse to reimburse any of the fees.

Every time this happens I get so unreasonably angry. (Chatting with my friendly Chase reps has left me too bitter to do homework.) And although I can easily turn to one of my other unused back up cards, it occurred to me that perhaps it was time to turn to a debit/cash economy. I'll finally get all my money in one bank and use my ATM card and be rid of all these ridiculous headaches. With interest rates so bloody low, the float on delayed bill paying doesn't really do me much good anyway. Why bother?

Partly, I'm unreasonably angry because I am an unrepentant penny pincher. But mostly because I hate credit card companies. I hate their fees and their fine print and their predatory lending and the fact that they crush small businesses into submission and squeeze every last penny that they can steal. They make way too much fucking money to begin with so when they refuse to give me back $39 just once after I've made them thousands, it pisses me off. I am tired of supporting them. And maybe it's time to do something about it.

Or maybe its time for me to start a credit card company ...

Btw - if you want more details on how much credit card companies make from your spending habits, some fellow GSB (Booth) students created a really fascinating little tool that puts this into perspective based on your specific card.


paragon2pieces said...

My boyfriend had the same problem when he started ebilling with his Chase card. I sometimes wonder whether they systematically do things like that to wrack up a bunch of late fees.

Thanks for posting the link to truecostofcredit. Very interesting!

Anonymous said...

First off let me say that I'm an avid reader of your blog, and I have one quick solution for you:

1. Change your credit card billing dates so they all occur on the same day. That way you always know your bills are due on the same day of the month.

Also, another thing regarding the true cost of credit. Actually, the merchants pay nothing for the credit card processing. The purchaser pays all of the fees when they buy the product/service. Also, they pay for the convenience of not having to go to the bank to get cash for every purchase. Do you remember what that was like? Also, think of the competitive disadvantage one merchant is at if they choose not to accept credit cards? So nowadays, it's really a requirement.

MaybeMBA said...

Anonymous - that's a good idea actually. Once upon a time (before Netbank went bust) I just set up everything on auto-pay and it was easy. This might be my next best solution.

However, I am puzzled about why you say that merchants pay nothing for credit card processing. They actually pay somewhere around 1-3% of every transaction to the credit card processors (who in turn pay the banks and Visa/MC etc.). Google "credit card processing fees" to see some of what I mean: or just ask your local business :)

Btw - did you know that rewards cards cost merchants more than non-rewards cards? So who is paying for all those "rewards"? Not the credit card issuers! No - you are. Depending on the elasticity of demand, merchants pass on some of those costs to you and me.

I agree that credit cards are very useful and I use mine heavily. But the fees are outrageous and there is far too little transparency and competition in the system. Consumers are generating enormous profits for credit card issuers/procesors/Visa/MC at their own and merchant's expense. Yes, there needs to be fees to compensate providers but the fees seem excessive.

Anonymous said...

@previous anonymous

It's actually the opposite - the merchant pays for the cost (the fees and interest on missed payment is gravy).

That's why a lot credit card companies offer 1% to 1.5% cash back as an incentive for customers to use their cards.

As long as you don't miss payments and pick a card with cash-back + no annual fees, you can make money using credit cards instead of debit cards.

MaybeMBA said...

Ok, I think we're saying the same thing actually :) The merchant pays fees per transaction when you use your card. (you originally said "the merchants pay nothing for the credit card processing") And they pay even more when you use a rewards card (more than the credit card co passes back to you, of course.)

You're absolutely right. (and this is why I have all these damn rewards cards.) Technically you make money but it can be very easy to miss a payment depending on how your credit card company enables payments/delivers bills and then you easily are looking at $100 in fees and finance charges. This easily wipes away a good chunk of any rewards earned.

In the aggregate, I still think credit card companies win and we (merchants and consumers) lose. Credit card co's perform a valuable service but take a big chunk out of the middle disproportionate to the value that they create. In my humble opinion :)