|
|
|
Comment |
Sorted by
Date Written |
Thanks (Reply to this comment)
by jsquarejj
for a very thought provoking critique.
We do have some real disagreements, but I think our opinions jointly point out the need for a greatly improved payments system, with the goal of lower overall cost to consumers and merchants.
I think it's possible to do this while maintaining or even improving fraud protection.
|
Aug 25 '01
9:20 am PDT
|
|
I don't fully agree with you... (Reply to this comment)
by Arthur.Rubin
but my differences are mostly matters of opinion, so I still find this Very Helpful.
Myth: The use of credit cards reduces transaction costs for merchants.
Well, compared to debit cards, I agree with you (in part). Merchant's cost for handling checks, on the whole, is much higher, though. I have further comments on debit cards and untrustworthy merchants, later.
Myth: Using Credit Cards Saves Money for Consumers
You're absolutely correct for the amount of money that could be saved by the deferral of payment -- I get about 1.8 times that number, but I may be charging more than you assume or assuming a higher money-market interest rate, but....in the case of business expenses -- businesses would likely be unwilling to have corporate debit cards, so that, in the absence of credit cards, the employee would probably have to use his/her own funds and get reimbursement later. This is a minor problem.
Myth: Rewards Like Frequent Flyer Miles and Cash Back are Free
The airlines figure frequent flyer miles on their balance sheets at 2¢ per mile, and the cashback is often 1%, so, you, as consumer, are only getting back some of the money that is being withheld from the merchants. Of course it's not free, but it does benefit the consumer.
Myth: Credit cards are vital for many industries that provide online or telephone booking and/or purchases.
Your Reality: The airline, rental car, hotel, online merchants would all be better off if they accepted only debit cards.
True (if your next myth is truly made mythical) -- except for current payment for future services where the exact cost is unknown at the time of booking. This includes hotels (to the extent you can charge services to your room, such as long distance phone calls), and rentals (including rental cars and move-it-yourself companies such as U-Haul). I see only two options, from the merchant's point of view:
1. You give the merchant a "blank check" (pre-filled debit authorization with the amount left blank). If you keep track of the services you use, you can allocate funds appropriately, as you do when you write checks -- provided that you trust the merchant. If you don't trust the merchant, then debit cards are unusable without the consumer's ability to create limited subaccounts on the fly -- which most merchants would probably not consider acceptable.
2. The merchant puts a large hold on your account. Holds on credit cards don't hurt you unless you're near your limit, but holds on debit cards CAN unless you leave a large reserve in the corresponding deposit account.
Myth: Credit cards have inherently higher security and fraud protection than debit cards.
Your Reality: At the moment, credit cards have a greater degree of fraud protection than debit cards, but there's nothing inherent in these two methods of payment that prevents an equivalent level of protection for debit card transactions. It's just a matter of passing laws that require appropriate protections.
Actually, I disagree with this. Industry insiders help me on this, but I think it's the delay in crediting the merchant's account, and reduction of the amount credited, which allow for credit companies to be able to provide protections against improper charges. If it weren't for the delay and reduction, there would be no credit cards. The same applies to debit cards -- if they were granted the same protections, then the merchant charges would go up, or they would no longer be issued.
As a further question, how DO you use a debit card on the phone or Internet. Use of a debit card as debit card requires entering the PIN. Many debit cards can be used as credit cards (from the point of view of the merchant), but that does not benefit either the merchant or the consumer.
|
Aug 24 '01
11:21 am PDT
|
|
Re: you speak the truth.... (Reply to this comment)
by jsquarejj
Thanks!
|
Aug 23 '01
6:36 pm PDT
|
|
you speak the truth.... (Reply to this comment)
by Tibullus
As someone who has been burned in the past by excessive use of credit cards (we won't go into the details), I would have to agree with you and urge people not to use them!!! I found that once I got an ATM/Debit card, my spending was curtailed quite a bit... so I guess my major problem was the that it was easier to use the card then to use other means of payment (which doesn't excuse me anymore).... alas, I'm pulling my self out now, but its taken some time...
Thanks for the great review on the fallacies of the credit card!!!
marc
|
Aug 23 '01
6:34 pm PDT
|
|
|
|
