Even I have a hard time envisioning that our market place without credit but I hope. For me the benefits of it are too expensive to society/marketplace.

Wife and I choose not to use our credit card and limit how I even use the debit card. Paying cash I do pay more because of credit being extended to others.

In the real world, 0% cards are cheaper. I am not charged more for the same goods whether I pay with cash or credit. Thus, I am saving the 2% rebate the credit card offers making the product 2% cheaper than my cash-paying counterparts. Also you mush factor in any other benefits the credit card issuer is offering, such as price protection, extended manufacturer warranty, travel and rental insurance and theft protection.

$.02

As for coolhappy’s notion that a lack of cash discounts is a retailers stamp of approval to higher operating costs… well there are so many things wrong with that statement.

Retailers DO offer their own credit! It’s hard to shop at retail and NOT get an offer for credit. Some, like Sears, end up making more money off of the lines of credit than the actually merchandise. That’s the seal of approval.

Yes, many gas stations offer discounts for cash, but there are also plenty of small businesses that don’t take plastic at all. Sure they risk losing customers who don’t carry cash, but obviously one that they are willing to take.

Last, we have the anything but modest fee that somehow magically lowers the cost of doing business???

So you’re joined at the hip to your credit card, fine. But don’t make stuff up.

As far as merchants offering discounts for cash, I haven’t seen it often, but I do know of a gas station that offers a discount for using cash… Maybe GHolmes owns it

I wrote to Bob because I saw quite a few pf blogs talking about credit as a tool. They argue about self discipline, Dave Ramsey’s stance on credit, and tracking benefits. What I haven’t seen is the cost to use credit discussed.

In the blog’s example the bank makes $967, the merchant makes $267 and customer is out in increased cost of goods. The example is very simplistic to show that there is a cost even to folks that pay their balance off each month that there is a cost.

My theory is that even if you pay off your credit cards each month and discipline not to buy more it is still an expensive tool. Not free.

For one thing, what alternative does the retailer have? He could lose sales to the competition that DOES offer credit cards. Decreased revenues in this case probably do not compensate for credit card fee “savings.”

The merchant could offer in-house credit. In this case, he will extend credit to customers rather than using VISA\MasterCard system. He will have to maintain another set of books, perhaps hire a bookeeper, and could risk very significant credit losses by deadbeat accounts. Furthermore, he is directing company resources to this activity rather than concentrating on core activities that will sell his product. In this case, his expenses will INCREASE by eliminating credit cards.

So, we have a situation in which VISA\MasterCard takes this on for a modest 3.29%. This sounds like a good deal to me! Furthermore, if the merchant’s profit margins are threatened by this amount, he is a marginal player and he will probably succumb to more efficient competition anyway.

Also, I don’t see very many merchants offering discounts for customers that pay in cash. To me, this seems like a merchant’s stamp of approval for the use of credit cards!

Merchants make money that is why we dont ask for ID when you present your credit card. Banks make money that is why they issue to practically anyone.

How far can we keep leveraging our economy with credit?