How can credit card companies POSSIBLY be losing money????

[HopeHoops]

This is an industry that charges between 12.5% and 37% interest, imposes a $35 or so fee if a payment is 2 minutes late, can hide money offshore so they don't pay taxes, and can rewrite the terms of the agreement whenever they want without challenge.

How can you lose money with THAT kind of arrangement?

:shrug: :grr: :mad: :puke:

[Skinner]

1. In a word:

"Karma"

[blueworld]

9. My two cents plus finance charge

In addition to all the other great points, I would add "major incompetence". I've had my credit card number hacked off servers twice over the last year and both times were for purchases under $50 so the credit card company had to eat it. In one case, I had the UPS tracking info to prove who bought stuff & where they shipped it & who signed for it, for jeebus sakes! The credit card company harassed ME, mailed stuff, phone calls etc. until I threatened legal action against them & canceled my card.

They don't spend money protecting our info, they're being thrashed by rings of people who hack the servers & sell the info to folks who then purchase small amounts so the credit card companies won't bother going after them....it's a freakin' racket.

Greed & incompetence & stupidity. Oh yeah, those all important corporate jets.

[AndyA]

2. Their executives are sucking huge salaries, bonuses and perks out of the company.

They spend a fortune in advertising to make sure everyone knows how wonderful it is to carry their card.

They have lush offices that have the latest decor.

They have extended too much credit to people who weren't credit worthy, and are now defaulting on those balances.

They have lost many good customers by charging excessive interest and fees. My credit cards are all at $0.00, and I'm not using them at all unless I can pay it off before any interest accrues. And that means I'm not using them very much, so the credit card companies don't even get their merchant fees for the charge.

They are greedy idiots who don't really know how to run a profitable business, and they are failing now that there isn't an endless supply of credit available.

[Blue_Tires]

6. they also spend millions on lobbying congress...

[AndyA]

8. Of course. How could I forget that? One of the most corrupt aspects of the industry.

Congress never met a financial institution they didn't like. The fact that so much was handed over to them with little accountability last fall proves this point. The auto makers sure didn't get such a cozy deal. :(

[valerief]

21. Nowadays million of dollars is chump change. nt

[Ignis]

22. This.

An obligation to the shareholders? Fuggedaboudit!

[backscatter712]

3. Bad management.

Solution: LET THEM BURN!!!

[JoDog]

4. Charge Offs

It may be because of an increasing number of people not making payments because of the vile conditions being imposed by the companies themselves.

These people go into charge off status, where usually one of 2 things can happen: 1. The customer and the bank agree to a settlement, where only a portion of the debt is paid and the account is closed, or 2. Bankruptcy. If the customer successfully files chapter 7, the bank gets nothing. In chapter 13, the bank may only get a portion of the debt paid back.

JoDog--now 12 days and counting 'til chapter 7 discharge.

[hobbit709]

7. Third option

Customer says fuck it and walks off. That's what I did 12 years ago. They tried threatening me but credit card debt is unsecured debt, so here in TX they are SOL.

[jbnow]

23. I agree their own actions contribute greatly. Strangely they

have been jumping the interest rate on a certain group even if they have not been late, It's people who have a high debt that they have had for some time and are slowly paying off. These people who pay every month are who they make the most money from!
But then they change the terms from either a special rate like 4.99 (supposedly for the life of the loan) or from a normal rate under 10% and a 2% +interest minimum payment to a rate between 18% and 29& and also hiking the minimum balance percent due each month.

Now it's good to pay more of balance but they aren't doing it to help, especially not when they are hiking interest. People might have been paying 200-300 month and managing fine but when the minimum hikes up closer to 1,000 they can't pay and are soon forced into default.

They have also been lowering credit limits...by mail...that often arrives weeks after the change...so in the mean time some people go over that limit and get big fines and hiked interest too.

Anyway it's like they are forcing long term faithfully paying customers into default. Maybe they have credit default swaps on these bundled card securities and make a lot more money faster by forcing them to default (ruining the person's credit). Money making if the hedge funds they own also have multiple CDS on them...

[hobbit709]

5. Creative accounting

The same way Hollywood says a blockbuster lost money.

[pnutbutr]

10. if people

don't have the money to pay them then they get no money including interest.

[CTyankee]

14. I refuse to pay interest and I only have credit cards that give me something back.

I charge only what I can afford to pay off in w/i the grace period. One card gives me coupons toward free clothes, free shipping/returns. The other gives me $ on gas. Clothes on my back and gas in my modest, 10 yr old Altima. That's how I roll...

[sinkingfeeling]

11. Maybe because they're seeing the highest default rates in over 20 years?

http://www.reuters.com/article/hotStocksNews/idUSTRE52F75620090316

"Analysts estimate credit card chargeoffs could climb to between 9 and 10 percent this year from 6 to 7 percent at the end of 2008. In that scenario, such losses could total $70 billion to $75 billion in 2009."

[NeedleCast]

13. A condition they pretty much brought on themselves, don't you think?

[sinkingfeeling]

18. Not necessarily. There's a recession in this country and many folks have lost their jobs. And

there's a group of DUers who seem to believe that not paying credit card bills is a form of 'protest'.

[NeedleCast]

19. A recession brought on by...the follies of lending companies

I know that's not the entire picture but they bear a heavy load of the burden of recession. Had lending agencies not gone on a free for all we could have avoided a large part of this mess. I understand what you're saying...not paying CC bills as a form of protest is very much cutting off your nose to spite your face. At the same time, I can more than understand why people are outraged at their creditors right now, in light of some of the things they've been doing to shore up profits and remain stable.

[NeedleCast]

12. Terrible Management and Business Practices

That have become the norm in large US corporations (many of them anyway).

[Vidar]

15. Because they've forced so many people to default.

[JackRiddler]

16. You said it yourself...

"... can hide money offshore so they don't pay taxes..."

Creative accounting of that kind would would be one reason, no?

And nowadays all financials have a high incentive to show losses, thanks to the Paulson-Geithner plan to keep bailing them out until the printing press breaks. Appearing to lose money is a very lucrative business. If you're a bank, that is.

But like with mortgages, they also bundled accounts into fancy bonds and derivatives. Then they paid "independent" "ratings agencies" to stamp the bogus "AAA" on these papers, sight unseen. Then they sold this perfumed junk to suckers, erm investors. And then no doubt they leveraged all proceeds as assets and bet into multiples on credit-default swaps and other derivatives.

But never mind, it's all really the fault of seventeen thousand welfare queens who bought plasma TVs and got late on their card payments in Cleveland and Arizona, you know?

Why should the executives and principles at the big banks care? These institutions long ago degenerated into throw-away vehicles with the sole function of funneling as much money as possible from all people possible (even if it turns them into slaves or kills them - fuck the people) as quickly as possible into the decision-makers' own accounts. They funnel as much as possible offshore and to other friends (like the AIG to Goldman scam with the credit-default swaps) and then mark up a loss so that they can turn around and hit up the Treasury for more trillions in the form of "bailouts."

They won't stop, either. The conditioning and the ideology command the bankers to go all the way. They won't stop until they are stopped, either
a) by the rest of the world refusing to buy cheapened dollars
or
b) by the people marching on the Fed, Treasury and Wall Street (since the government won't regulate jack shit until then - and yeah, I know, ha ha pretty fucken' likely)
or
c) by the biosphere support for humanity collapsing as a consequence of the capitalist eat-all cancer.

Until then, there is no limit. If they could legalize killing yourself to have your organs harvested as a means to pay off your debts, they would do it. (Even if some of them ended up doing that themselves!)

Never mind:

Let's give them another trillion this week! Otherwise terrible disasters will follow and EVERYONE EVERYWHERE WILL LOSE THEIR JOBS AND STARVE!!! We must keep them afloat, because banks are the only source of sunshine and life on the planet. Let's pray they can recover enough to "start lending again," because that's what the people need: more debt to buy more junk.

[napi21]

17. All the reasons cited in the above posts are all affecting their

profitability. The other thing that has come back to bite them is that they spent a lot of years giving out credit cards to millions of people with no justification to the max credit limits.

I'm still dumbfounded when I hear the average person has SEVEN cr. cards in their wallet! What in the world is the total of their cr limit on all those cards? How many of them have maxed out on all 7?

I listed to Clark Howard on Headline News channel each weekend. He's a consumer advocate who also has a daily radio show. Hundreds of people call him for advice on how to pay off $30,000-$50,000 cr card balances, and the majority of them admit they got that much in debt through sheer negligence. Eating out at nice restaurants, impluse buying of "stuff" they wanted but really didn't need.

The damn CC Co's are now flipping out when you have one late payment on something, but paid absolutely no attention to how much unsecured credit they were giving to all these people for years! NOW they're paying the price!

[valerief]

20. The muckymucks can't build their own personal kingdoms on 500K a year!

:grr:

[Recursion]

24. "Losing money" doesn't mean what it does to normal people

When a large company says they are "losing money", they mean that they are making less profit this year than last year. I'm not kidding. In some cases it's even worse: they mean the rate by which their profit is increasing is less than it was last year.

[ColbertWatcher]

25. Kick and rec for a damn good question. n/t

[NNN0LHI]

26. I can only speak for myself but I went to cash a few years ago

I had a bad feeling about something.

Still got cards but I don't use them anymore.

And I used to use them for everything. I bet I am not alone.

Don

[xchrom]

27. recommend

[dugaresa]

28. because they pile too much straw on the camel (consumer's) back

it is one thing to loan people money and charge a reasonable amount of interest, tis another thing to just keep screwing with your customers until their back is broken and you end up getting nothing back

[melm00se]

29. lenders

don't make money when one (or more) of the following apply:

1) people don't pay: a $3500 credit card write off requires someone to carry an average $23,000 balance for a 12 month period with an interest rate of 15%(ish) to break even (not including the collection costs). have enough of the former and not enough of the latter and you have an issue.

2) slow pay: it costs money to make those calls, send those letters and man in house collections/customer service depts (it's surprisingly expensive)

3) poor lending decisions (which drive #'s 1 and 2)

4) poor management decisions (which drive #s 1, 2 and 3).