The Credit Card Conspiracy

The Credit Card Conspiracy

So is the government really taking all of your money? Not really. Let's look at some financial statistics (if I made any math errors forgive me, these are very big numbers to work with).

Almost 6 trillion of credit card transactions were charged in 2010.

www.nerdwallet.com...

The average credit card processing fee charged on transactions is around 2%.

www.nerdwallet.com...

That means that credit card companies are raking in around 120 Billion dollars worldwide just off of credit transaction processing fees to merchants every year.

Then there’s all the interest we pay. In one year, American Express earned almost 6 billion dollars in interest income. Mastercard has almost three times the volume of American Express and Visa does around 4.5 times their volume, so that equates to a rough total of 51 billion in interest income per year for the three of them.

www.thesimpledollar.com...

Mortgage interest is another huge boon to the banks. I couldn’t find any information online on average or total of interest paid but I did find one hypothetical example of a 30 year mortgage on a 100,000 dollar home. If you make the minimum payment for 30 years then you would be looking at paying $127,545.20 strictly in interest. Given that the current average price of a new home is almost $190,000, obviously most US homeowners will be paying more than that in their lifetime. And, given that The United States has 86,985,872 homeowners as of 2012, that’s a whopping total of 11 trillion the banks make from Americans in mortgage interest every 30 years, or roughly 366 billion a year. Even adjusting for the 20% of homes which are paid off, that’s still around 300 billion dollars a year.

www.thetruthaboutmortgage.com...
www.huffingtonpost.com...
fivethirtyeight.com...

Of course most car loans have interest as well. If you buy a new car today for $27,000 over 6 years you will be paying roughly $330 per year just in interest.

www.nerdwallet.com...

Of course student loans are another huge factor to consider. There is currently an estimated total of 1.2 trillion dollars of student loans in America alone.

www.marketwatch.com...

Finally, if you add in the penalties, annual fees and investments made with our money you begin to get the picture of the staggering volume of wealth that financial sector exacts from the people of the world. The typical American consumer will fork over an average of $279,002 in interest payments during the course of his or her lifetime.

time.com...

The average American pays about $5000 a year in income taxes. If you add up all the interest and fees from your bank accounts and loans, it’s likely that you pay just as much to the banks as to the government. So the next time you hear someone crying that the government is impoverishing the American people with taxes, you might point out that the banksters take just as much out of your wallet, but whereas you can point to benefits like highways and parks from your tax dollars, it’s hard to think of any benefit to paying $127,000 in mortgage interest.

originally posted by: CB328
So the next time you hear someone crying that the government is impoverishing the American people with taxes, you might point out that the banksters take just as much out of your wallet, but whereas you can point to benefits like highways and parks from your tax dollars, it’s hard to think of any benefit to paying $127,000 in mortgage interest.

So providing credit to consumers produces no benefit?

M'kay.

And even if one concedes there are significant abuses in the credit system, your argument is we should then ignore the most obvious abuses of the tax system?

Discuss predatory lending and middle-income and small business taxes, then you'll have my full attention.

a reply to: CB328

I have a choice as to whether or not I engage with a financial institution.

I have no choice as to whether or not I engage with the IRS or State/Local tax agencies.

I cut up all my credit cards long ago. I hate being in debt to anyone, for anything and it was always fees, fees and more fees. The only debt I have now, is my house. 3 more years and I will be financially free. Then, I sell this one and move to the other, larger house in Kentucky on 5 acres in the country and tell the world to bugger off.

The problem is if you don't believe in credit cards your credit rating will be down below 600.

I am 65 and have never had a credit card.
And with no negative credit reports my credit rating is off the bottom of the scale.

I don't owe anyone money and have never went bankrupt always pay my bills on time and have money in the bank yet i have a bad credit rating.

The whole system is a scam.

a reply to: ANNED

I understand where you are coming from but a credit rating is a way for a potential lender to try and make an educated guess as to how risky you, the borrower, are. How likely is it that you will pay back what you borrow?

While I agree with the general notion that if you have lived for 65 years and never went to collections or had utilities cut, that should mean something, purchasing something on credit is much different that paying as you go in the conventional sense.

I have a choice as to whether or not I engage with a financial institution

Not really. Can you buy a house without going through a bank? Most people have to, they have no choice, just like most people can't buy a car with cash, they have to get a loan.

originally posted by: CB328

Not really. Can you buy a house without going through a bank? Most people have to, they have no choice, just like most people can't buy a car with cash, they have to get a loan.

There are still many 0% finance deals for automobiles.

I don't see it as a "conspiracy." There's no mystery here. If you borrow money, you pay interest. If you don't want to pay interest, live within your means. I agree it's very difficult to NOT have a credit and/or debit card these days. You can't rent a car, for example, and buying online is pretty well impossible, But the fact is, if you pay off your card at the end of every month, you pay ZERO interest. Is the credit card system integrated into our financial system? Sure, There is no doubt. But if you get yourself into unsustainable debt, it's your own fault.

Get rid of credit cards. I do not have ANY I hate them. Yes, please do get a 30 year mortgage , mine's over and done, 15 year paid off at 13 and a half years. I hate mortgages too. Families need to support their children and teach them to save money, teach them about interest and the hole they will be in taking loans. My kiddo understands full well by now what to do.

Pay yourself first, i.e. 401k, putting money up into IRA's so that you will not be taxed so much.


Stop giving your money away!!!!

a reply to: schuyler
You're very wise.

originally posted by: CB328

I have a choice as to whether or not I engage with a financial institution

Not really. Can you buy a house without going through a bank? Most people have to, they have no choice, just like most people can't buy a car with cash, they have to get a loan.

Do you "have to" purchase a house?
Of course not. I know plenty of people that have spent their entire life renting and have no problem doing so for the rest of their days. (I would point out though, in the government vs private financial side.... even if a person rents a property they are forced to pay the property taxes because landlords factor that into the rent.... so again... a choice not to engage with a financial institution but no choice but to deal with the government).

Do you "have to" purchase a new, late model car?
Most definitely not. The first several cars I owned in my younger years were used automobiles and paid for with cash. It was later on, as my wife and I started to make progress on our financial situation that we DECIDED to finance.
(I would point out that whether or not we financed or purchased a car with cash, the government still wanted their sales tax and registration fees).

The metaphor in the Matrix of the human plugged in a pod to exist as a battery to supply power the the Matrix while all the time asleep and dreaming; is really our situation, isn't it?

a reply to: CB328

I can think of a benefit to paying mortgage interest: I didn't have $232,000 when I bought my house, and my income (as well as the cost of things including houses) goes up by now than 3.25% per year.

It's as if the banks are allowing me to have more money by lending me money to buy my house up front. Because, well, they are. If I was renting my house, it would cost slightly more per month from the start, and the rent would increase annually. My mortgage payment stays the same. Eventually, my mortgage payment will be half what it would cost to rent the same house, and further down the road, I'll o only be paying property taxes.

Thank you evil banks for lending me $232,000 at such a low interest rate!

originally posted by: ANNED
The problem is if you don't believe in credit cards your credit rating will be down below 600.

I am 65 and have never had a credit card.
And with no negative credit reports my credit rating is off the bottom of the scale.

I don't owe anyone money and have never went bankrupt always pay my bills on time and have money in the bank yet i have a bad credit rating.

The whole system is a scam.

Your credit score is based on several factors.
Debt to income.
Job history.
And a very important factor. Loan payment history.
You have no loan history so there is nothing to base you reliability on.

The conspiracy is the amount of credit card/bank fraud that doesn't get mentioned.
Where's that money come from and why doesn't it affect the banks in any noticeable way?

Ugh credit cards . . . When I was working sales for a local firm the management would spend hours ranting about how much we hated the flat 2% rate for each transaction.

Anyways, the interest is not nearly all that the credit cards collect. They are some of the originators of "big data."

What Does Your Credit-Card Company Know About You?

(NYTimes)
Just a little more than two decades ago, the credit-card business was a quiet, slightly boring industry dominated by banks looking for easy revenue. Card issuers made money by collecting annual dues and interest payments from cardholders as well as fees from merchants each time a customer used a card. Then the math whizzes arrived. They emphasized that the biggest profits didn’t come from people who always paid off their bills but rather from less-responsible clients who never paid their entire balance, and thus could be milked through silently skyrocketing interest rates, late fees and other penalties. Since 1995, the percentage of the industry’s income from cardholder fees has more than doubled to 40 percent.

Not only are they using data to target the most vulnerable, but they are recording every purchase a cardholder makes. This information is personalized and can be sold to governments and other interested parties.

When and Where To Buy Consumer Data (And 12 Companies Who Sell It)
(Forbes)
Credit scores don't even scratch the surface of what can be revealed by mining years of purchase history in concert with social media (rather easily automated or provided by another vendor). As mentioned in the previous article psychologists and market researchers have developed rather refined tools for determining the mental state of large swathes of "consumers" (also known as human beings, friends and family).

And now other large industries are looking to get in on the action, surely this will work out well . . .

Hospitals Are Mining Patients' Credit Card Data to Predict Who Will Get Sick
(Bloomberg)
Good outline OP.

-FBB

originally posted by: Bluntone22

originally posted by: ANNED
The problem is if you don't believe in credit cards your credit rating will be down below 600.

I am 65 and have never had a credit card.
And with no negative credit reports my credit rating is off the bottom of the scale.

I don't owe anyone money and have never went bankrupt always pay my bills on time and have money in the bank yet i have a bad credit rating.

The whole system is a scam.

Your credit score is based on several factors.
Debt to income.
Job history.
And a very important factor. Loan payment history.
You have no loan history so there is nothing to base you reliability on.

This is true - well, job history is part of credit decisioning, not actually part of the credit score, but the rest is dead on.

Credit scores are predictive models. They take a retroactive look at what others with similar credit history 2 years ago did with their accounts in the 2 years to follow. The score is indicative of the relative risk (proportion of people with similar credit history who had accounts "go bad.")

The thing is, it's not "wrong" or a scam - it's just the best predictor the market has come up with so far. Lenders know that by not lending to people like ANNED, they're missing out on a lot of "good" loans, as even at the absolute worst risk scores, at least 5% of those people won't have a single late payment in the next 2 years. The risk scores help improve performance of the overall lending portfolio, and have proven to be more accurate than purely human interpretation of credit risk.

The goal of improving and developing risk models is to push as many "bads" to the bottom of the score range as possible, while reducing the number of "goods" in the lower score ranges as possible. The banks would LOVE it if they could avoid declining loans to people who are actually good credit risks.

I'm going to declare bankruptcy as soon as Trump takes office. So is everyone with a lick of sense. LOL

a reply to: Deplorable

Are ANY of your jokes the least bit funny?
(Second time I've asked this thus far tonight).

originally posted by: CB328
The Credit Card Conspiracy

So is the government really taking all of your money? Not really. Let's look at some financial statistics (if I made any math errors forgive me, these are very big numbers to work with).

Almost 6 trillion of credit card transactions were charged in 2010.

www.nerdwallet.com...

The average credit card processing fee charged on transactions is around 2%.

www.nerdwallet.com...

That means that credit card companies are raking in around 120 Billion dollars worldwide just off of credit transaction processing fees to merchants every year.

Then there’s all the interest we pay. In one year, American Express earned almost 6 billion dollars in interest income. Mastercard has almost three times the volume of American Express and Visa does around 4.5 times their volume, so that equates to a rough total of 51 billion in interest income per year for the three of them.

www.thesimpledollar.com...

Mortgage interest is another huge boon to the banks. I couldn’t find any information online on average or total of interest paid but I did find one hypothetical example of a 30 year mortgage on a 100,000 dollar home. If you make the minimum payment for 30 years then you would be looking at paying $127,545.20 strictly in interest. Given that the current average price of a new home is almost $190,000, obviously most US homeowners will be paying more than that in their lifetime. And, given that The United States has 86,985,872 homeowners as of 2012, that’s a whopping total of 11 trillion the banks make from Americans in mortgage interest every 30 years, or roughly 366 billion a year. Even adjusting for the 20% of homes which are paid off, that’s still around 300 billion dollars a year.

www.thetruthaboutmortgage.com...
www.huffingtonpost.com...
fivethirtyeight.com...

Of course most car loans have interest as well. If you buy a new car today for $27,000 over 6 years you will be paying roughly $330 per year just in interest.

www.nerdwallet.com...

Of course student loans are another huge factor to consider. There is currently an estimated total of 1.2 trillion dollars of student loans in America alone.

www.marketwatch.com...

Finally, if you add in the penalties, annual fees and investments made with our money you begin to get the picture of the staggering volume of wealth that financial sector exacts from the people of the world. The typical American consumer will fork over an average of $279,002 in interest payments during the course of his or her lifetime.

time.com...

The average American pays about $5000 a year in income taxes. If you add up all the interest and fees from your bank accounts and loans, it’s likely that you pay just as much to the banks as to the government. So the next time you hear someone crying that the government is impoverishing the American people with taxes, you might point out that the banksters take just as much out of your wallet, but whereas you can point to benefits like highways and parks from your tax dollars, it’s hard to think of any benefit to paying $127,000 in mortgage interest.

You need to take a basic Finance 101 course. By all means, please go lend your own money to strangers at 0% interest rates and skip evaluating their credit histories and let's see how you do as a bank.