Secret History of the Credit Card
Posted: March 2, 2008 at 8:01 pm by admin in MoneyTags: banks, credit cards
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A PBS special by Frontline - Secret History of the Credit Card
Its almost an hour in length but a good watch.
I am also a ‘dead beat’ like Ben Stein paying off the one credit card I use, weekly.
What most people don’t know is that credit card companies make money even off us deadbeats, from merchant fees.
Stores that accept credit cards pay fees to the banks for credit card transactions.
An example…
Lets say you buy that new 1TB drive from NewEgg for $239.99.
You pay Newegg the $239.99. Now NewEgg might owe $5.70 for the credit card transaction, 2.25% + $0.30 (transactions fees vary). American Express or Discover would probably add a bit more, maybe another 30 cents.
Might also be a monthly service fee, maybe $10. Depending on the bank and gateway there could be some other nickel and dime fees stores have to pay.
So essentially Newegg is getting $234.29 from you. Merchant fees definitely cut into business’s profit margin and also increases prices.
My biggest beef with the credit card companies, the large ones is the interest rate change. No matter what interest rate a card starts out with, even if it is a ‘for life’ rate, within a year it will go up. I have seen it go up for absolutely no reason. The large companies have it built in after x amount of months the interest rate goes up by y. Its a given.
My suggestion is if you want/need to carry a card get one from your bank or credit union. From my experience my local bank and credit union dont play the interest rate game with their customers.
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