[Kylie]

I was watching Frontline on PBS and if you want, you can watch it yourself if you want to by clicking on the link below.


Watching this made me wonder about a point that was raised in this documentary?


Should people, and this particular case, Americans, know that if you just pay your minimum balance on credit cards, that you could be trying to pay it off for years at a time?

Secondly, I'm also curious as to how credit cards work in other countries? Do they have the same problems as we do in the US with credit cards.

I'll respond with my answers, but I'm just curious as to what you all think about the question I raised, and the questions they raised in this documentary.


Also, if you don't want to watch it, I believe you can find transcripts at this link as well.


here's the link
http://www.pbs.org/wgbh/pages/frontline/shows/credit/

[Comrade Ogilvy]

It's too easy to get credit in general.

That's why so many people have debts on loans, credit cards, etc.

[Kylie]

Why do you think that is?


A theory I have, which is rather extreme, but I think it has some truth to it, is this: I believe it may be easy for anyone to get credit cards because they can make more money if you just pay the minimum payment per month and charge late fees out the wazoo.

It has already been stated in this documentary that credit card companies make a lot more money than they used to make in late fees and other penalties, too much money in my opinion. I think a way to do this is by targeting people with marginal to low credit; it's a hell of a lot easier to charge the late fees for someone who can't make their payments per month.

Also, there's a little place called FDIC that helps if a customer doesn't pay at all.

[Boondock Saint]

Getting and usign credit cards was and is the worst mistake I have ever made.

The only time I like to use a credit card is when its time to fill up on gas for my car. You swipe the card and then pump the gas until the pump turns off. No need to figure out if you need 10 gallons 10.1 gallons 10.6 gallons or how much it will cost and blah blah blah ... just swipe and go. Of course when i get home I check my bill online and pay it right away, no interest, no exta charges ...

The problem however is that most of my cards are in masive debt. I put school ... large purchases and so on on them ... worst mistake ever.

Now I am paying 8k for spending 2k ... at one point I was paying $100 a month on a credit card and the interest was $92 a month added on. I realized that the number of owed debt was only going down by $8 yet I was losing $100 each month.

Imagine that ... you spend $100 a month yet only actually get credited for $8 a month because you are charged interest ...

I will never use credit cards again save in absolute empergencies.

[Garibaldi]

I'm never goingto get a credit card. Think of them this way; They pay for you, you pay them back. How is a corporation supposed to make money if they just charge you what you paid? Shit, you didn't even need them. They have to charge you more money to make a profit, which is a new reason the earth is doomed.

[Jim G]

How is a corporation supposed to make money if they just charge you what you paid? Shit, you didn't even need them. They have to charge you more money to make a profit, which is a new reason the earth is doomed.

This is not entirely accurate. Credit card companies make money by charging 'service fees' to the businesses that offer credit payment (i.e. department stores, retaurants, etc.). So, for every purchase, a restaurant or store has to pay the credit card company a percentage, usually around .5%-2%, of the revenue from the item/service. As you can imagine, this adds up to billions of dollars, and this is most likely how credit card companies make the bulk of their profits.

It is for this reason that you see so many stores offering their own credit cards nowadays--so they don't have to pay 1% of their sales to the credit card company.

Thus, a credit card company can and does make money just by charging you what you paid.

[Comrade Ogilvy]

I saw that Frontline program, and it severely annoyed me. It portrayed credit card companies as the bad guys (though in a sober, scholarly tone) and clamored for restrictions. And why? To protect people from themselves. I have no sympathy for idiots who unnecessarily get themselves into credit card debt. As to those who have no choice, I do feel great sympathy. But look at it this way. How would they have survived prior to the existence of credit cards? In all likelihood, in the absence of credit cards, such people likely would've defaulted on mortgage payments and missed utility bills.

In any case, the extension of credit is too easy--credit is artificially cheap. This is why all Anglo-Saxon countries (barring Canada) have very low savings rates. In other OECD nations, credit is also artificially cheap, but a series of regulatory barriers on the extension of credit bar consumers from heavy lending. The solution is not to emulate continental Europe and Japan. Rather, the solution is to eliminate the constant excess liquidity at its source. Governments must stop their constant increasing of the money supply. This financial leverage is what makes credit artificially cheap. Eliminate the money supply growth and the credit card problem will disappear.