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March 08, 2005


Jim Glass

".. credit card companies now make half their profits from penalties and late fees ... banks collected $14.8 billion in penalty fees last year, or 10.9 percent of revenue..."

See, this is how dumbass badly managed these card companies are: only 10.9% of revenue produces 50% of profits, while their other 89.1% of revenue produces no more!

So why the heck are they wasting so much of their resources producing that other 89.1% of revenue to drag their profit margin down?

If they just shucked the stupid lending business and concentrated on collecting penalties and fees, they wouldn't waste all that expensive labor and capital it consumes -- and think how high their profit margin would zoom!

Instead of Drum complaining about how high those penalties and fees are, he should be thankful that the credit card companies are so dumb as to run the other 89% of their business for so dang little return.

If they couldn't collect such penalties and fees, no doubt they would continue to do so. Hey, there's an idea for a new law!


Eh. I get at least two credit card come-ons in my mailbox every day, and I would seem to be a less-than-ideal customer: I almost always pay my entire balance each month. But I guess it must be those retailer fees that are getting them some moolah. I haven't paid much in interest charges in the past 10 years, and I don't remember being late, ever.

I think they just go scattershot. They try to get =everybody= to get the cards.


What's the saying? Stupid is as stupid does.

I'm a fan of mocking KDrum, and his knowledge of things economic/financial is often demonstrated as juvenile, at best.

The media almost never gets it correct when discussing concepts such as revenue and income and profits--and often interchangably using income and revenue to mean the same thing in the same article, while simultaneously doing the same thing with profits and income, or net income. I'd go on with examples, but the bottom line is KDrum sees a storyline or a stat that fits his world view, he uses it. Debunking him is as shooting fish in a barrel. KDrum has no shame in the dishonesty he presents.


The bottom line is, he doesn't really know the difference between the top line, revenue, and the bottom line, income.

John Anderson

Credit card companies are making money on - *GASP* - credit cards?!?

I do think the interest rates on the cards are ridiculous after 15% or so, and the various fees and other charges are even more so.

------ RANT ------
But then, my bank charges me $25 if I overdraw my checking account and $5 per day [after five days, covered by the instant $25] until I cover the full amount. This despite my not getting "overdraft protection" because, as I explicitly stated, I did not want them to cover overdrafts. So, they screw up by paying out too much money, and I am penalized!

OR, my mortgage. I overpaid a couple of times, until I found the extra was being put against interest - not due for up to 30 years! - instead of balance. So, when I later sold the house and paid off the balance, those overpayments just disappeared.



Need to read the fine print. My mortgage thru Chase had a specific spot on the payment coupon marked "Extra Principal Payment" and that's where it went. I just refinanced thru Quicken, and they also got asked: Can I pay principal early? The answer was yes, and their coupons also have a clearly labeled principal payment.


Fed-up with high interest credit cards?

Against "usury?"

Here's the solution.




Also, anyone consider that sub-prime lenders can lose money and go bankrupt? It's not as if they are "predatory" when in fact their "prey" can kill them off:


"All this is easier to describe than to do, especially when the economy slows. After the bursting of the technology bubble in 2000, several sub-prime credit-card providers failed. According to the Federal Deposit Insurance Corporation, an American bank regulator, in December 2000 there were 156 lenders specialising in the sub-prime market (including mortgage lenders and car-loan companies as well as credit-card issuers). Now there are only around 100, of which nine issue credit cards. Survivors such as Metris and Providian, two of the bigger sub-prime card companies, have become choosier about their customers' credit histories."

Read the entire article. They often only lend US$ 500. So, I doubt they are really socking it to the poor folks.


A lot of expert here.. So no comments from me except that we will be safe using credit cards as long as we can pay the monthly bills accordingly, so that least fee and charge would be applied into our credit cards.

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