Actually, they do. The banking system takes about 2% off every transaction you make with your credit card and keeps it. Whoever you used your credit card to pay is out that money. The right to a 2% tax on such a massive flow of transactions is a big money maker.

They are more scared of the people who pay of their balance every month. If they start to lent it is often because they have been let go which isn’t a good position to be paying back loans

You should get something in return for lining Visa or AMEX’s coffers.

For most businesses, it wouldn’t make sense to encourage customers to pay cash. The 1% fee you pay to the credit card companies is less than the internal and external theft you have to deal with when you deal in cash.

The only real reason to deal in cash is to skim and avoid paying taxes on the income.

My understanding is that merchants are (or at least were) forbidden from giving a discount for cash.

Still, Menno’s point is valid: cardholders who don’t incur interest charges, and especially if they don’t use their cards much, are unattractive customers from the card bank’s perspective.

And Menno, I not only endorse your attitude regarding credit cards, I mainly use my Discover card that provides a little rebate. I actually make a few bucks off Discover every year.

Actually, credit card companies make a surprisingly large amount of profit from charging customers “late fees” and other assorted “miscellaneous fees.” They shorten billing cycles and hope their customers won’t notice, making it more likely that a payment will be received late.

MSN Money columnist, Liz Pulliam Weston, in her column today http://articles.moneycentral.msn.com/SavingandDebt/ManageDebt/6-steps-to-dumping-toxic-debt.aspx writes about how Chase Bank is now charging a $10 a month fee on customers who carry a balance but don’t make new charges on their account.

“How does a credit card bankster make money? Charging interest.”

And charging merchants fees for processing charges. Even if everyone paid off their balances in full every month, credit card companies would still make money.

I’m very careful with my money, having always been in a position to “have” to be until the last few years (i.e. until our kids moved out, we had far less money to go around than we do now).

While I do have some credit cards, believe it or not, I pay them all OFF as in ZERO BALANCE, not just once I feel like it, but EVERY MONTH.

So on one hand, while my FICA score is 805 or whatever (i.e. “excellent”) and I have not trouble asking for important loans (like a car loan or lease, or mortgage), I’m also one of those folks who don’t make a penny for the credit card banksters.

Here’s why.

How does a credit card bankster make money? Charging interest. What happens if month after month, year after year, Menno (and others like me) pay off their balances EVERY MONTH ON TIME and don’t get the “privilege” of getting dinged on interest charges?

They don’t make money on us.

Which is far better than losing money on the folks who max out card after card after card and then default, of course.

But the “happy medium” where credit card banksters make money – folks who for whatever reason lack the willpower to say no to themselves and get an ongoing, but manageable (in their minds) balance on credit cards – are the only way that the credit card banksters make their lucre.

Now that many of those folks are now being laid off, and tipping towards the point where they can’t or won’t ever pay off these cards, well, to paraphrase the old musical song “we got trouble right here in everystreet USA”.

I can see where the banksters will simply shut down credit lines on their credit cards, wholesale, across the board. Obviously, if they are losing money on the cards, they’ll simply shut them down. Perhaps they’ll send out debit cards and “invite” customers to send along monies to put into a “bank” account to then have a safer method of buying online, or renting cars, etc. I dunno…

As for car loans, well, I’ve heard/read in several places that if you are financing a US branded car (whether made in the USA, Canada, Mexico, South Korea or wherever), “good luck with that” and some banksters are shying away from lending the money AT ALL; conversely, the exact same customer and bank but the deal being on a Non-US brand, major automaker (whether the car is built in the US, Canada, Mexico or other country) is far more likely to get a loan.

Interestingly enough, the ONLY Pontiacs available on lease right now in my area, are the Vibe, which most of the TTAC B&B know, is nothing more than a reskinned Toyota Matrix.

But yeah, retailers’ captive finance arms (or Household Bank, as is most commonly the cash-float partner), are seeing massive defaults.

And now, even worse than those big screen tv and love seat payments going bad…

Credit card defaults are up 45% already this year, according to the WashPost.

Seems that when your variable rate mortgage goes from getyoudone to welcometoreallife, you use the credit card for…everything. Until it’s maxed. And then you get another. And another. Again and again, till you can’t.

The big banks are looking on in horror. The credit card default tsunami on the horizon makes the housing crisis look positively positive.

So what’s in Capital One’s wallet? A lot of debt that won’t get repaid. Ever.

If the NADA’s Keneysian cheerleader is using some faint-glimmer housing recovery as some sort of economic indicator for happy times ahead, well, sorry. For every statistic that casts a ray of economic hope, there’s another stormcloud that says more pain is on the way. (Cue pillaging Vikings and Biker Dudes now…)

The bit which sticks in my throat (insert your own dirty joke here) is this:

The way the United States and the United Kingdom are going about solving this problem is to throw money at the issues, rather than letting economic nature take its course.

Don’t get me wrong, I feel for every single person who loses their job (especially due to the incompetence of upper management) I was a victim of the credit crisis and was made redundant recently; but it would just delay the inevitable if we subsidised these jobs.

Peter Schiff was right; the market was long overdue for a correction and this is it. Throwing money at the problem will delay it for about 3 to 5 years before we have to go through this all over again. Giving money to banks to “free up credit” and let people carry on buying things they don’t need with money they don’t have (Copyright Tyler Durden) will solve nothing.

The market needs this painful correction so the car sales figures will be more sustainable. Freeing up credit won’t fix this. We need people to start saving money and buying things WITH THEIR OWN MONEY rather than on credit.

The house is burning and the only people who have been saved are the arsonists who started it (i.e the bankers).

If true the situation is going to get worse, not better.

Now, in terms of the number of housing starts, it might take a bit longer. Also, I don’t see things climbing out of the bottom for awhile-just it will stop going down further.

In any case, 10.3 or 10.5 million yearly sales is really low for the full year. 12.7 might be optimistic, though. Let’s split the difference and say 11.5-12ish.

Today on the BBC I heard speculation of another credit crunch coming. All those big screen TVs, home appliances, furniture and the like sold “interest free” or “no repayment until” etc by Circuit, Best Buy etc are coming due…. The numbers are staggering.