DOTHAN, AL, November 30, 2012 —The biggest winners from Cyber Monday were not the retailers, but the credit card companies. Consumers racked up an estimated $1.9 billion in online sales, and every sale generated fees of 3% to 6% charged by the card companies to retailers. The actual cost of processing credit sales is just pennies per transaction so profit margins are very high. Nice work if you can get it.
I’m one of those people who never balances a checkbook and escorts paper bills directly to the circular file without a fair trial. Some time ago I switched all bill paying to online with my bank, which lets me see immediately how fast my account is depleted without having to wait for paper checks to clear. It’s convenient, fast and I save on the cost of stamps, which currently cost around $27.00 to mail a first class letter. That’s why any mail I send out is low class.
I also have bills sent directly to my bank, but one credit card company refused to do that. I discovered it was because they want you to use their online service for an extra convenience fee. We’ll discuss convenience fees another time. I’m still puzzled about who they are supposed to be convenient for, certainly not for me.
Recently I decided to check what was inside the paper bills that I had been tossing in the trash without opening. What I discovered was a total shock. Apparently, one credit card company I won’t name unless you discover it for yourself, had apparently been taken over by the Russian mafia and was charging me a 30% interest rate on the balance.
The last I knew I had a $12.95 balance for buying a can opener a year and half earlier, and I’d not used the card since. I was making regular payments of around $100 a month and still, I discovered, the balance had grown to nearly $3,000. The bill thanked me for my business and urged me to discover how I could use the card for all my purchases.
I called the company to discover what the story was. After three hours of punching in my social security number, zip code and blood type, talking to everyone in their Mongolian office, and casting a voodoo spell on the company, I was finally put through to some guy named Igor in the “Hardship Department.” The conversation went something like this:
Igor: How may I be helping for you today?
Me: I’d like to know why I’m paying a 30% interest rate.
Igor: You are having a problem with this?
Me: Yes of course. It’s supposed to be a credit card not a street loan with vig.
Igor: There is difference?
Me: Yes! Now why is my interest rate so high?
Igor: Shows here you have best rate.
Me: 30% is “best” rate? What’s the worst?
Igor: You want I should change you to that?
Me: No, no, no…I want a lower rate. Why is this so high?
Igor: Just a moment…ah, here it is. You made late payment last year.
Me: What?!! I pay online, how late was it?
Igor: Hmm…twenty minutes. You fail to meet cutoff time. So sorry.
Me: Well I need that to be adjusted. That’s not fair.
Igor: Yes, I know. Life is dark. You like Dostoyevsky? Chekhov?
Me: No. So what about my rate?
Igor: Today for you I can make big deal. Reduce rate to just 28.99%? Is good no?
Me: No. That’s terrible. What if I pay it all off?
Igor: Is your choice. We have convenience fee for pay early.
Me: That’s not convenient for ME. How much is the fee?
Igor: Is depend on mood for Goldman Sachs that day.
Me: Oh cripes. So what are my options?
Igor: Option is keep paying. We have counselor visit you to advise payment strategy.
Me: Counselor? Huh? I don’t need a counselor I need a lower interest rate!
Igor: Okay, you say you agree. We send to you Vlad Impaler, he is best credit counselor. He be there between 10pm and 3am. Please be leaving door unlocked to avoid convenience fee to open door.
Me: What? I don’t want a counselor or visitor or…..
Igor: Am thanking you much for business. Good-bye. (Click).
So here I am at midnight waiting for some guy named Vlad to show up to help me discover how to never, ever make a late payment again. I also am now at a 42% interest rate since they made some adjustments after my call. The can opener is long gone, it wore out in a month. I would have returned it but there was a $55 convenience and restocking fee. I’m told I’ll have it paid off by 2017 if I keep up the payments.
I now open cans with my teeth, and pay cash to the dentist. I discovered it’s a lot cheaper than using a credit card.
Endnote: Statistics on credit card debt are staggering. According to the Federal Reserve, Americans carry an average credit card debt of $15,328 ($852 billion total), making it the third largest debt behind mortgages ($149,782) and student loans ($34,703). Over 36% of consumers do not know what interest rates they are paying on their cards and 93% of cards issued have terms that allow the issuer to raise interest rates simply by amending the agreement. Card companies collect over $20 billion a year in penalty fees alone.
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