Originally Posted By: HemiHawk
I use my CC (chase actually) exclusively for the added protection over using debit/cash. But, I saw an interesting thing about all these "reward points". Not sure if exactly true, but maybe not far off?
Basically... Businesses are charged per transaction using credit cards. Thats why some smaller places will say "$10" minimum to justify the CC charge. So really, The business is paying for letting us use the CC. So what would most businesses do? Factor this into their price. So in the end the consumer is paying more... and the CC companies give us a little back to make us think we are getting something.
It is 100% true.
Banks use your saving account as capital, let’s just say 10K to make understanding the math simple, and give you 1% interest on said saving account . Then the bank loans out YOUR capital, back you, or some other poor slob, in the form of consumer debt, let’s just say at 15% interest to keep understanding the math simple. Then the bank charges vendors 2-3% for the privilege for being able to process said consumer debt (credit cards.) All the while, giving YOU 1% back” in “rewards” on your own capital, from the aforementioned saving account... And to make it even more complicated, the banks are required to also pays insurance (FDIC) to back your saving account $$$ from being lost in their 3-card Monty....
Now, I hold no ill will towards the banks, but I do not walk around pretending I’m the winner in this game when handed a participation trophy...
I use my CC (chase actually) exclusively for the added protection over using debit/cash. But, I saw an interesting thing about all these "reward points". Not sure if exactly true, but maybe not far off?
Basically... Businesses are charged per transaction using credit cards. Thats why some smaller places will say "$10" minimum to justify the CC charge. So really, The business is paying for letting us use the CC. So what would most businesses do? Factor this into their price. So in the end the consumer is paying more... and the CC companies give us a little back to make us think we are getting something.
It is 100% true.
Banks use your saving account as capital, let’s just say 10K to make understanding the math simple, and give you 1% interest on said saving account . Then the bank loans out YOUR capital, back you, or some other poor slob, in the form of consumer debt, let’s just say at 15% interest to keep understanding the math simple. Then the bank charges vendors 2-3% for the privilege for being able to process said consumer debt (credit cards.) All the while, giving YOU 1% back” in “rewards” on your own capital, from the aforementioned saving account... And to make it even more complicated, the banks are required to also pays insurance (FDIC) to back your saving account $$$ from being lost in their 3-card Monty....
Now, I hold no ill will towards the banks, but I do not walk around pretending I’m the winner in this game when handed a participation trophy...
