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unhappycamper

(60,364 posts)
Sun Feb 16, 2014, 08:47 AM Feb 2014

Usurious Returns on Phantom Money: The Credit Card Gravy Train

http://www.opednews.com/articles/Usurious-Returns-on-Phanto-by-Ellen-Brown-Credit-Cards_Public-Banks_Public-Banks_Usury-140215-822.html



Usurious Returns on Phantom Money: The Credit Card Gravy Train
By Ellen Brown
OpEdNews Op Eds 2/15/2014 at 13:36:01

The credit card business is now the most lucrative part of the banking industry, and it's not just from the interest. It's the hidden fees.

You pay off your credit card balance every month, thinking you are taking advantage of the "interest-free grace period" and getting free credit. You may even use your credit card when you could have used cash, just to get the free frequent flier or cash-back rewards. But those popular features are misleading. Even when the balance is paid on time every month, credit card use imposes a huge hidden cost on users--hidden because the cost is deducted from what the merchant receives, then passed on to you in the form of higher prices.

Visa and MasterCard charge merchants about 2% of the value of every credit card transaction, and American Express charges even more. That may not sound like much. But consider that for balances that are paid off monthly (meaning most of them), the banks make 2% or more on a loan averaging only about 25 days (depending on when in the month the charge was made and when in the grace period it was paid). Two percent interest for 25 days works out to a 33.5% return annually (1.02^(365/25) -- 1), and that figure may be conservative .

Merchant fees were originally designed as a way to avoid usury and Truth-in-Lending laws. Visa and MasterCard are independent entities, but they were set up by big Wall Street banks, and the card-issuing banks get about 80% of the fees. The annual returns not only fall in the usurious category, but they are returns on other people's money -- usually the borrower's own money! Here is how it works . . . .
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Usurious Returns on Phantom Money: The Credit Card Gravy Train (Original Post) unhappycamper Feb 2014 OP
Until the widespread adoption.. sendero Feb 2014 #1
I don't have to carry cash Lefty Thinker Feb 2014 #2

sendero

(28,552 posts)
1. Until the widespread adoption..
Sun Feb 16, 2014, 06:37 PM
Feb 2014

... of cash discounts at retail (i.e. cash payers pay 2% less than CC payers) this dude has no point whatsoever.

I know that 2% is added in. But there is nothing I can do about it except recoup at last half of it in cashback rebates by using a CC.

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