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"But can anyone convince me that credit card companies produce wealth by charging exorbitant interests to people who use the money to buy beer and chips?" How

"But can anyone convince me that credit card companies produce wealth by charging exorbitant interests to people who use the money to buy beer and chips?" How using my credit card to buy beer and chips produces wealth: 1) My rewards program immediately reduces the price by 1%. 2) If the chips are moldy and the vendor won't let me return them, I can cancel the payment. 3) I pay no interest. The credit card bill is paid in full every month.

billybob 15y ago
He's not talking about you, then. <quote>Economists who expect people to be rational won’t believe in usury. Surely, people borrow money to be better off. Yet the average credit card debt per household is over $15,000 in the USA (and it grows all the time, of course). Does anyone believe that these $15,000 are invested in highly profitable ventures? (They would need to be highly profitable since credit cards often charge over 15% for loans.)</quote>
- hugh3 15y ago
  I take issue with that $15,000 number. According to: http://www.indexcreditcards.com/creditcarddebt/ http://www.indexcreditcards.com/creditcarddebt/ revolving consumer debt (of which credit card debt is a large but strict subset) was only $7400 per household in November 2010 and I doubt it's doubled since then. Indeed, http://www.federalreserve.gov/releases/g19/Current/ http://www.federalreserve.gov/releases/g19/Current/ suggests it has gone down somewhat since then. Still crazy high, of course. I can imagine how an emergency situation might cause someone to have to spend more money on a credit card than they have in their savings account. I can't imagine how the average person manages to get into that situation, though.
  - jmaygarden 15y ago
    I worked at a credit counseling service in high school (circa 1995), and numbers in that range would not surprise me at all. This is a navy town, and I couldn't count the number of young enlisted sailors that would come in with wife, kids and over $50k in unsecured credit card debt. Also, it mostly wasn't on normal credit cards. They would typically have a card for a dozen or more different retailers (e.g. Sears, Express, Limited, Target, etc.) all maxed out.
oconnore 15y ago
#3 is not true for the type of person he is talking about. If everyone used credit cards like you do, the credit card companies would not be in business.
- yaks_hairbrush 15y ago
  Sure they would. They'd probably be smaller than they are now, but they'd still get a 2% transaction fee on each purchase.

billybob 15y ago

He's not talking about you, then. <quote>Economists who expect people to be rational won’t believe in usury. Surely, people borrow money to be better off. Yet the average credit card debt per household is over $15,000 in the USA (and it grows all the time, of course). Does anyone believe that these $15,000 are invested in highly profitable ventures? (They would need to be highly profitable since credit cards often charge over 15% for loans.)</quote>

hugh3 15y ago
I take issue with that $15,000 number. According to: http://www.indexcreditcards.com/creditcarddebt/ http://www.indexcreditcards.com/creditcarddebt/ revolving consumer debt (of which credit card debt is a large but strict subset) was only $7400 per household in November 2010 and I doubt it's doubled since then. Indeed, http://www.federalreserve.gov/releases/g19/Current/ http://www.federalreserve.gov/releases/g19/Current/ suggests it has gone down somewhat since then. Still crazy high, of course. I can imagine how an emergency situation might cause someone to have to spend more money on a credit card than they have in their savings account. I can't imagine how the average person manages to get into that situation, though.
- jmaygarden 15y ago
  I worked at a credit counseling service in high school (circa 1995), and numbers in that range would not surprise me at all. This is a navy town, and I couldn't count the number of young enlisted sailors that would come in with wife, kids and over $50k in unsecured credit card debt. Also, it mostly wasn't on normal credit cards. They would typically have a card for a dozen or more different retailers (e.g. Sears, Express, Limited, Target, etc.) all maxed out.

oconnore 15y ago

#3 is not true for the type of person he is talking about. If everyone used credit cards like you do, the credit card companies would not be in business.

yaks_hairbrush 15y ago
Sure they would. They'd probably be smaller than they are now, but they'd still get a 2% transaction fee on each purchase.