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Monday, November 25, 2013

Paying to give them money

This is a fascinating example of the potential consequences of American bank depositors failing to understand what their bank deposits are:
Leading US banks have warned that they could start charging companies and consumers for deposits if the US Federal Reserve cuts the interest it pays on bank reserves. Depositors already have to cope with near-zero interest rates, but paying just to leave money in the bank would be highly unusual and unwelcome for companies and households.
This is akin to the credit card company paying you for the privilege of borrowing their money. It should also eliminate any last vestige of belief in the idea that the Federal Reserve, the Congress, or the banks have any capacity for putting either the economy or the American people before their own short-term pecuniary interests.

Just to make it clear, your bank deposit is a loan you make to the bank. It is an unsecured loan that the bank can utilize in any way it pleases, and since it is unsecured, if the bank happens to lose the money by making bad investments or spending it on cocaine and expensive hookers, you have no legal recourse. This is why John Corzine is not only not in jail, but hasn't even been charged with a crime; he didn't commit one.

It's not stealing if you're dumb enough to give them the money in return for an unsecured promise to pay it back so long as you ask for it before they don't have it on hand.

And note that this is bank industry opposition to a rate cut, not the much-feared rate increase.

Labels:

83 Comments:

Anonymous WinstonWebb November 25, 2013 1:04 PM  

...banks have warned that they could start charging companies and consumers for deposits...

If they are TRYING to create a run on banks, that's a hell of a good way to go about it.

Anonymous AlteredFate November 25, 2013 1:06 PM  

This is where those rumored laws which would limit withdrawals during a bank run will come into play.

Blogger David Mendosa November 25, 2013 1:11 PM  

A question for the regulars that read and post here -- what is the alternative? If you don't park your wealth in a bank or plow it into equities, where do you put it?

I ask this as a serious question. How are readers really using this information and if you decide that an unsecured loan to a bank is unsavory, what kind of actions are long-time readers legitimately taking?

Anonymous Gen. Kong November 25, 2013 1:13 PM  

Banksta Banana Republick - 100 years and counting. (tick, tick, tick)

Blogger JartStar November 25, 2013 1:16 PM  

The next Lehman Brothers event will likely bring down the system as they've doubled down and failure will be too big to bail out. I expect the next bust to make the S&P mirror the Nikkei index after 1990. It's not like the companies won't exist, or that nobody will be employed. Instead long term capital loses, completely nationalized banks, and zero interest rates for decades with a lot of lingering misery.

OpenID errhead November 25, 2013 1:16 PM  

I was holding some money in my free savings account for my stepfather
While it was there, they implemented a minimum balance charge, and the account that had been free since '93
After I gave my stepdad his money back, they dinged me 5 bux a month, so the 39 dollars I had left in there went negative this month.
Is 60 dollars a year in any way reasonable when it earns far less in interest?
Closed the account. and got 1 of the 5 dollar fees refunded.

Blogger Nate November 25, 2013 1:18 PM  

Banks threatening to charge for deposits... FED officials talking about new strategies to deal with bank runs...

All signs of a healthy economy. No question.

Blogger JartStar November 25, 2013 1:21 PM  

I ask this as a serious question. How are readers really using this information and if you decide that an unsecured loan to a bank is unsavory, what kind of actions are long-time readers legitimately taking?

1. Use local credit unions, their balance sheets are almost universally better than the banks.
2. Look into the Permanent Portfolio by Harry Browne. I recommend this book for actual implementation. Amazon.com: The Permanent Portfolio: Harry Browne's Long-Term Investment Strategy eBook: Craig Rowland, J. M. Lawson

Ultimately there's no magic bullet so expect some loses regardless of what you do if there is a serious downturn. I think it goes without saying to get out of debt, and stay out of debt.

Anonymous Brother Thomas November 25, 2013 1:22 PM  

@David Mendosa November 25, 2013 1:11 PM "A question for the regulars that read and post here -- what is the alternative? If you don't park your wealth in a bank or plow it into equities, where do you put it? I ask this as a serious question. How are readers really using this information and if you decide that an unsecured loan to a bank is unsavory, what kind of actions are long-time readers legitimately taking?"


That's the $64,000 question (remember when $64,000 was a lot of money?). I've put some into precious metals, some into equities and some I've spent sooner than originally intended on home repairs (e.g. new furnace, sump pump etc.).

We do not have capitalism. What's termed "money", the US dollar, is no longer a store of value. If anyone has an idea on how to accumulate capital and store value, I'm all ears.

Anonymous Slightly worried November 25, 2013 1:22 PM  

Curious to hear Vox (or one of the Ilk who is knowledgable) discuss the comparative value of credit unions as a substitute for banks.

Anonymous Cryan Ryan November 25, 2013 1:23 PM  

It may take me a few minutes to grasp the concept of negative compound interest....

Okay...would this be like X = P - (-i - .01) to the nth power?

Are they trying to prevent people from having a savings account? You know...to get them to spend it instead of saving it... and thus "kick start" the economy?

Whenever I think of "kickstarting" the economy I remember watching this biker dude back in the 60's trying to start his old oil dripping chopper.

He must have kicked the starter 30 or more times. Finally he went back into the bar.

Blogger Nate November 25, 2013 1:24 PM  

'Curious to hear Vox (or one of the Ilk who is knowledgable) discuss the comparative value of credit unions as a substitute for banks."

Imagine Wells Fargo being the whore on the corner down town...

that would make your local credit union... the whore that advertises on craigslist.

They're both whores.

Anonymous Gen. Kong November 25, 2013 1:25 PM  

Nate:
Banks threatening to charge for deposits... FED officials talking about new strategies to deal with bank runs...

All signs of a healthy economy. No question.


Boom times!

Blogger swiftfoxmark2 November 25, 2013 1:25 PM  

Recall that Suntrust and Bank of America tried to do this a few years ago (technically, I think it was a charge for holding a debit card, but the same idea really). I had an account with them at the time and I immediately switched to a local bank. Then, on the day that the fees were going to be implemented, the CEO decided against it. After losing customers.

The banking industry isn't run by geniuses, just sociopaths. And they aren't very good at being a sociopath either.

Blogger JartStar November 25, 2013 1:27 PM  

They may both be whores, but the one downtown has HIV and the local girl might just give you a nasty itch.

Anonymous Rantor November 25, 2013 1:27 PM  

Credit Unions will face the same problem, they have to pay insurance on deposits too. Their non-profit/tax exempt status may keep them from having to charge depostors as soon, or as much as the banks though.

Anonymous Josh November 25, 2013 1:28 PM  

Curious to hear Vox (or one of the Ilk who is knowledgable) discuss the comparative value of credit unions as a substitute for banks.

Most credit unions have, as JartStar said, much healthier balance sheets than banks. Small credit unions function the way that banks used to function: they make money on the spread between deposit rates and loan rates. There isn't the same incentive to use massive leverage to make the bank bigger.

Anonymous Rantor November 25, 2013 1:29 PM  

As for rumors of a healthy economy, John Williams Shadowstats indicates that we've been in over 8 years of recession. No positive GDP by his measure!

Anonymous Alexander November 25, 2013 1:31 PM  

The train is okay!

Blogger James Dixon November 25, 2013 1:32 PM  

> If you don't park your wealth in a bank or plow it into equities, where do you put it?

Well, first, what Jartstar said.

Second, you don't have to put it into US money. You can always hold foreign money or bonds.

As for options in the US, ignoring government bonds, there are corporate bonds, land, precious metals, privately owned businesses. Those are off the top of my head and assume the current system stays intact. If we're talking preparations for TEOTWAWKI, then you'll want land/housing, a water supply, food, guns and ammo, and possibly gold/silver coins.

Anonymous Slightly worried November 25, 2013 1:33 PM  

This is good information. Questions: where do I examine the credit union's balance sheet? Is there a publication that will collect the information, as Morningstar does mutual funds? And what numbers beyond the obvious ones should I pay attention to? Thanks.

Anonymous Josh November 25, 2013 1:35 PM  

This is good information. Questions: where do I examine the credit union's balance sheet? Is there a publication that will collect the information, as Morningstar does mutual funds? And what numbers beyond the obvious ones should I pay attention to? Thanks.

NCUA. It's the FDIC for credit unions. Look at their capital ratios.

Blogger James Dixon November 25, 2013 1:38 PM  

> ... where do I examine the credit union's balance sheet?

Credit Unions are normally owned by the depositors. As a depositor, they should send you a yearly statement.

Anonymous Slightly less worried November 25, 2013 1:43 PM  

Excellent, thanks!

Anonymous Susan November 25, 2013 1:46 PM  

That is exactly correct James D. And as a former employee of one, I can tell you that as a depositor, you are called a member, not a customer.

Since CU's are by their nature smaller and don't have the pressures that big banks do, they can also control their membership just a little more closely than banks do. Helps to minimize risks a bit.

Blogger JartStar November 25, 2013 1:46 PM  

US treasuries will continue to have value, remember that theoretically bond owners get paid first in the event of a "default". I use the word in quotes as we can currently pay our debt, just not our future promises like SS. Also, if the US literally cannot pay its debt at all, then the worst case has arrived and almost anything financial will have already been wiped out.

Anonymous Susan November 25, 2013 1:48 PM  

Another thing about CU's too, is that membership gets to elect the board members that oversees the credit union. As a member, you have a bit more input into your financial institution than at a faceless bank.

Blogger James Dixon November 25, 2013 1:50 PM  

> Also, if the US literally cannot pay its debt at all, then the worst case has arrived and almost anything financial will have already been wiped out.

We'll default long before we can't pay it at all. And who gets paid what will be decided entirely on a political basis. I'd love to be wrong on this, but I don't think I am.

Anonymous Noah B. November 25, 2013 1:51 PM  

US treasuries will continue to have value, remember that theoretically bond owners get paid first in the event of a "default".

Quite a plan. Buy worthless bonds so that, if you're lucky enough to be repaid, you'll be repaid in worthless numbers in an electronic ledger. The only meaningful difference between the current economy and an insane asylum is that in the asylum, they serve jello on Tuesdays.

Anonymous Adm. Ackbar, Rebel Alliance, Ret. November 25, 2013 1:55 PM  

You know what this is.

Blogger RobertT November 25, 2013 1:56 PM  

This is a great idea. Let's see the big banks give this a try. That will open up a tremendous competitive advantage for smaller and local banks that have the infrastructure to handle massive amounts of money and transactions. In this day and age, if they don't have it in-house, they can outsource it. This is what comes from bubble heads thinking in a bubble. And this also points out the significance of competition. Thank God for capitalism and competition.

Anonymous Faith No More November 25, 2013 1:56 PM  

What is it?

Anonymous Noah B. November 25, 2013 2:09 PM  

This could also be disinformation to convince people that if they aren't being charged for the privilege of lending to their bank, they're getting a good deal.

Anonymous patrick kelly November 25, 2013 2:12 PM  

Sorry, you can't have it.....

Anonymous Third Monkey November 25, 2013 2:15 PM  

@David Mendoza
I only have enough in my bank account to cover the bills, and moved away from paper assets a couple of years ago. Have a good chunk of cash around to cover emergencies. When the SHTF, I have silver coin in small denominations for buying and a few thousand rounds of ammo, a couple of cases of whiskey, a few cartons of cigarettes for bartering. If you have some wealth to invest, look into farm/ranchland. Start and/or invest in a small local business. Learn how to do something with your hands, like welding, carpentry, plumbing, etc. Plant a garden and learn how to raise your own food. These things will be of much greater value than being the Diversity Coordinator in the HR department.

I'm not so much worried about when the banks fail. It's when the trucks stop running is when it will get real western.

Blogger JartStar November 25, 2013 2:16 PM  

Noah,

Like I said if dollars are worthless and the ledger of the US government isn't worth the paper its printed on, then the whole system is long gone. If one is of the opinion that all asset classes which depend upon dollars will be wiped out in the coming downturn then everything but PM, food, and survival gear will have no value for many, many years. This is the Fallout 4 Live! scenario. We might even get to see some nukes fly if this happens.

Anonymous RedJack November 25, 2013 2:16 PM  

This will only work if hard cash is illegal to hold.

Which it is after a certain amount. It is called "Drug Money".

Blogger James Higham November 25, 2013 2:50 PM  

Really does seem like a death wish.

Anonymous Matt November 25, 2013 2:50 PM  

If you don't park your wealth in a bank or plow it into equities, where do you put it?

Gold if you're an optimist, canned goods and ammo if you're a pessimist.

Blogger Serge_Tomiko November 25, 2013 2:52 PM  

Once again, Vox shows he is absolutely clueless about how banking functions.

Deposits are NOT loans to the bank. Banks do not in any way require deposits. It is a service they provide.

Banks create money by the authority of the government, which is given to entities in exchange for interest payments. They do not lend money.

In this case, the banks are being perfectly honest. It doesn't matter in the slightest whether or not they have deposits. In fact, this kind of policy is intended to discourage deposits.

Blogger Serge_Tomiko November 25, 2013 2:58 PM  

"Like I said if dollars are worthless and the ledger of the US government isn't worth the paper its printed on, then the whole system is long gone. "

How can anyone possibly make such an absurd statement?

Anonymous AlteredFate November 25, 2013 2:58 PM  

In the state in which I live there have been several instances when the local credit unions I belong to were forced to modify their operations because of the lobbying efforts of banks. If there were a larger move by the public to abandon the banks and open accounts with the CUs you would soon see the law modified to create a much more economically hostile environment for them.

Anonymous Josh November 25, 2013 3:02 PM  

Deposits are NOT loans to the bank. Banks do not in any way require deposits. It is a service they provide.

1) if they are not loans to the bank, what are they?
2) if banks do not require deposits, explain bank runs.
3) if banks do not require deposits, why would deposits be at risk, and why would the fdic insure those deposits?

Anonymous TWS November 25, 2013 3:05 PM  

I take it back. Banks are showing their hands now.

Nate, why did you describe the US as the 'worm in the guts of the chicken'? What's the chicken? What is the 800 lb gorilla if not the US?

Blogger Brad Andrews November 25, 2013 3:10 PM  

One credit union I belong to is playing a message when you call in about opposing some current legislation, so the legislation may already be on the way.

Anonymous Noah B. November 25, 2013 3:24 PM  

Only 5 more days until Healthcare.gov gets fixed and we all get free health care as an early Christmas present!!

Blogger JartStar November 25, 2013 3:43 PM  

How can anyone possibly make such an absurd statement?

Please point out the absurdity instead of pontificating.

Anonymous John Regan November 25, 2013 3:43 PM  

I seem to recall this issue - the interest the Fed pays banks to park their "reserves" at the Fed - came up a few years ago. Maybe with Shedlock. I don't think they pay much interest anyway, but whatever it is it's more than the banks pay their depositors so it's another interest rate spread they can play.


Not like, of course, when regular people play a spread. Bankster spreads are a sure thing.

There was a time when banks DID charge to hold your money. In fact I think that was common as late as the 1950's. They differentiated between "demand deposits" and "time deposits". They charged the former; they paid interest on the latter.

It was a leftover from when there was no central bank and the dollar was not a fiat.

Anonymous VD November 25, 2013 3:44 PM  

Deposits are NOT loans to the bank. Banks do not in any way require deposits. It is a service they provide.

Serge_Tomiko, I humiliated you the last time you tried to correct me. Fair warning: I'm going to prison-rape you on this one, brutally, if you don't retract this.

You have until tomorrow to think this over.

Anonymous Noah B. November 25, 2013 3:49 PM  

"If one is of the opinion that all asset classes which depend upon dollars will be wiped out in the coming downturn then everything but PM, food, and survival gear will have no value for many, many years. This is the Fallout 4 Live! scenario. We might even get to see some nukes fly if this happens."

Perhaps it's baseless optimism, but it seems possible to have a peaceful transition to a new monetary system without total chaos breaking out. Not highly likely, but possible.

Blogger Eric November 25, 2013 4:03 PM  

This is where those rumored laws which would limit withdrawals during a bank run will come into play.

They don't need any new laws. During a banking crisis regulators can pretty much do whatever they feel is necessary.

Anonymous QuestionForJartStar November 25, 2013 4:04 PM  

JartStar, what is PM you refer to?

"...If one is of the opinion that all asset classes which depend upon dollars will be wiped out in the coming downturn then everything but PM, food, and survival gear will have no value for many, many years. ..."


Anonymous patrick kelly November 25, 2013 4:10 PM  

PM = precious metals

Blogger Nate November 25, 2013 4:12 PM  

"
Nate, why did you describe the US as the 'worm in the guts of the chicken'? What's the chicken? What is the 800 lb gorilla if not the US?"

The chicken is the Global Economy.

I called the US the worms in the guts because the US economy is hurting the world economy though its idiotic shenanigans. We bitch about chinese currency manipulation... but we do it just as bad if not worse. A huge portion of the world debt is on the US.

As for the 800 pound gorilla... there isn't one. A few years from now... it will be Russia.

Blogger swiftfoxmark2 November 25, 2013 4:25 PM  

Serge_Tomiko, I humiliated you the last time you tried to correct me. Fair warning: I'm going to prison-rape you on this one, brutally, if you don't retract this.

Is is weird that I don't want Serge to retract his statements?

Anonymous Huckleberry - est. 1977 November 25, 2013 4:29 PM  

Serge --
In what way does this statement:

Banks do not in any way require deposits

invalidate this statement:

Deposits are loans to the bank

Blogger Eric November 25, 2013 4:33 PM  

As for the 800 pound gorilla... there isn't one. A few years from now... it will be Russia.

Russia? I'm surprised to see someone say that. What is your reasoning?

OpenID cailcorishev November 25, 2013 4:41 PM  

This will only work if hard cash is illegal to hold.

Yeah, I feel like I'm missing something. Most people don't have much money deposited with banks anyway, right? What little savings they have is in their 401k or whatever. I think Dave Ramsey reported that the average American family has less than one paycheck in emergency savings, or something like that. It's not like it wouldn't all fit under the mattress.

So do they think people are so attached to their debit cards and auto-bill-pay stuff that they'll pay banks for those services rather than carrying cash? I'd be thrilled if more of my customers paid with cash. I don't see the downside -- unless hyper-inflation, but bank deposits will be equally affected by that, if not worse.

Anonymous scoobius dubious November 25, 2013 4:48 PM  

"As for the 800 pound gorilla... there isn't one. A few years from now... it will be Russia."

This is possible, but not a given. And it will only be possible, if Russia is wise enough to adopt the Long-Range Scooby Plan.

Anonymous patrick kelly November 25, 2013 4:52 PM  

Will there be Scooby snax?

Blogger JCclimber November 25, 2013 5:20 PM  

I think the 800 lb gorilla will be America. Not because we are healthy, not by a long shot.

Because as history shows, empires do not fade quietly away. They do not go peacefully. They go down fighting, maybe effectively for a time, maybe not. But fight they will do. And America still has the largest Navy, a well-equipped and trained army, plenty of air force. Subs. Missiles. Guns, lots of guns. Tech.

Can we afford to pay for all these toys long-term? No. But we have them now, and I highly doubt our elites will refuse to use them to try and stay on top just a little longer.

Anonymous patrick kelly November 25, 2013 5:23 PM  

" we have them now, and I highly doubt our elites will refuse to use them to try and stay on top just a little longer."

Elites != USA. They have no allegiance, they don't need "America" to fight for anything.

Blogger Nate November 25, 2013 5:26 PM  

"Russia? I'm surprised to see someone say that. What is your reasoning?"

1) Russia has gone from an oil importer to an oil exporter.

2) Russia provides europe with ALL of its natural gas.

3) Russia has a leader with a razor sharp mind and giant brass balls that desperately wants it to be strong.

4) Russia doesn't apologize for being Russian.

5) Everyone else is in WAY worse economic shape than Russia is.

Anonymous praetorian November 25, 2013 6:00 PM  

http://lolfed.com/wp-content/uploads/tarpta.jpg

Anonymous scoobius dubious November 25, 2013 6:02 PM  

"I highly doubt our elites will refuse to use them to try and stay on top just a little longer."

Oh, our elites will use them all right -- but against "domestic terrrsts" (read American white people), not against outsiders. Remember: our elites are no longer American, and they are no longer white. And they really, really, really wanna kill them some white folks.

"Will there be Scooby snax?"

Oh, there will be many, many snacks, of a mind-boggling variety.

Anonymous TWS November 25, 2013 7:34 PM  

Thanks, Nate.

Anonymous p-dawg November 25, 2013 7:43 PM  

@Matt: All of the above if you're a pragmatist. Silver is a better buy than gold though.

Anonymous 11B November 25, 2013 8:56 PM  

Because as history shows, empires do not fade quietly away. They do not go peacefully. They go down fighting, maybe effectively for a time, maybe not. But fight they will do

The USSR went down pretty peacefully, all things considered.

Blogger Nate November 25, 2013 9:06 PM  

"The USSR went down pretty peacefully, all things considered."

So did England.

Anonymous cherub's revenge November 25, 2013 9:19 PM  

We bitch about chinese currency manipulation... but we do it just as bad if not worse.

Shouldn't it be the default belief of any sane man, that if the US Government is lecturing foreigners on bad behavior Y, the USG is engaging in Y x 10? *

*protectionist trade policy and minimal immigration actually being good behavior of which USG is completely innocent of

Anonymous scoobius dubious November 25, 2013 9:31 PM  

"So did England."

So did the USA, while we're discussing it. Hell, America folded so quietly, nobody's even talking about it yet.

Wait... you don't mean to tell me you still think there's a USA, do you?

Blogger mmaier2112 November 25, 2013 9:45 PM  

VD November 25, 2013 3:44 PM

Deposits are NOT loans to the bank. Banks do not in any way require deposits. It is a service they provide.

Serge_Tomiko, I humiliated you the last time you tried to correct me. Fair warning: I'm going to prison-rape you on this one, brutally, if you don't retract this.

You have until tomorrow to think this over.


PLEASE don't retract.... Come on, man... stick to your guns.

Blogger Serge_Tomiko November 25, 2013 10:57 PM  

What more can one say? It should be blatantly obvious. How could banks charge negative interest rates if their lending was at all dependent upon deposits?

This is a complicated issue, but Vox has it completely wrong.

This would a good, recent work that not only demolishes Vox's common, yet ill informed idea of banking, it explains the origin of his error. Will he read it? I doubt it.

http://www.opendemocracy.net/ourkingdom/keith-fisher/frankensteins-bankers-tale-every-taxpayer-should-know

Blogger Serge_Tomiko November 25, 2013 11:04 PM  

"1) if they are not loans to the bank, what are they?"

Technically, the money is no longer yours once you give it to the bank. The bank doesn't even have an obligation to pay it back.

It is a service, and one that banks are obviously trying to get out of by having punitive charges like this.

"2) if banks do not require deposits, explain bank runs."

Bank runs do not happen in a modern banking system. Or, they do not have to happen. If they do, which is rare, it is part of a system of social control.

"3) if banks do not require deposits, why would deposits be at risk, and why would the fdic insure those deposits?"

This is largely a relic of banking myths. This is why the negative interest rates are being issued, as the interest rates being dictated by the government are no longer sufficient to cover FDIC insurance. The negative interest rate basically covers the FDIC insurance.

Blogger The Deuce November 26, 2013 12:35 AM  

LOL @ Serge_Tomiko insisting that fractional reserve banking doesn't exist. This should be a fun vivisection-without-anesthesia to watch.

One of the fun things about learning just a bit about economics and the monetary system is that you come to appreciate the way some people assert utter gobbledy-gook that isn't even wrong, all while feigning a faux-elitist tone of absolute confidence.

Anonymous Roundtine November 26, 2013 1:55 AM  

Banks loan money first and seek out deposits later to fulfill regulatory requirements. Many American banks borrow overnight from the Fed or other banks to meet requirements. Fractional reserve lending is not how the system works, it's how the system is regulated, to the extent it is regulated at all. Since there are ways around the restrictions, banks can pretty much lend at will. And in Canada, there is no reserve requirement.

Deposits are a sign of the health of the financial institution. If no one is willing to lend a leveraged financial institution money, it is immediately insolvent. A refusal to deposit money in a bank, or a demand for deposits, destroys the institution. (Lehman Brothers)

Anonymous Rex Little November 26, 2013 3:22 AM  

This is akin to the credit card company paying you for the privilege of borrowing their money.

Some of them do, it's called "cash back." The card I have charges no annual fee, no interest if I pay the full balance on time, and gives me 1% of my balance back (sometimes more on certain types of purchases).

Blogger Outlaw X November 26, 2013 4:29 AM  

Some of them do, it's called "cash back." The card I have charges no annual fee, no interest if I pay the full balance on time, and gives me 1% of my balance back (sometimes more on certain types of purchases).

Until you realize that the cards charge the retailer 3-4 percent on every purchase. Who do you think is paying for that? As a business owner at a restaurant and a friend once told me our prices on the menu consider credit card charges in the prices and the people paying cash don't realize the credit cards drive up my prices.

Blogger James Dixon November 26, 2013 8:57 AM  

> As a business owner at a restaurant and a friend once told me our prices on the menu consider credit card charges in the prices and the people paying cash don't realize the credit cards drive up my prices.

Well, some of them don't. :)

Since that's the case, though, it only makes sens to take advantage of the system and use a credit card that does give you some type of reward.

Anonymous Michael Maier November 26, 2013 11:42 AM  

Outlaw X, I learned that pretty early. Drum Center of Indinapolis used to charge a cash price and a higher percentage for credit cards. I would just write checks there, they considered that cash too.

Then someone blabbed to the card company and they stopped. But they still seemed to discount more for cash, strangely enough...

Anonymous 11B November 26, 2013 1:28 PM  

Until you realize that the cards charge the retailer 3-4 percent on every purchase. Who do you think is paying for that? As a business owner at a restaurant and a friend once told me our prices on the menu consider credit card charges in the prices and the people paying cash don't realize the credit cards drive up my prices.

As an ISP we gladly paid the 2 to 3 percent discount fee to accept credit cards. In fact we waived setup fees, back when there were such fees, for users who signed up for auto billing. Trying to consistently collect subscription payments in the form of cash or checks was a huge hassle. I can see the restaurant being different since they want payment immediately. But for businesses with a recurring revenue model, credit cards are better, even with the discount fees.

Anonymous Geoff November 26, 2013 10:11 PM  

@Nate,

Concur with Russia, with Scooby's caveat if they allow the camels into the tent. What's your risk assessment (and Vox', if he's listening) on nuke usage and potential targets?

Anonymous Mule December 01, 2013 7:44 PM  

A question for the regulars that read and post here -- what is the alternative? If you don't park your wealth in a bank or plow it into equities, where do you put it?

I ask this as a serious question. How are readers really using this information and if you decide that an unsecured loan to a bank is unsavory, what kind of actions are long-time readers legitimately taking?

Try banking in another country that pays interest and buy land in other countries that are doing well. Start a business elsewhere.

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