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I bank at a small Japanese bank in the middle of nowhere. One day, I visited a small hospital, also in the middle of nowhere. As it happened, I did not have cash on me to pay the fee. I told the nurse to please wait for a moment while I went next door to use the ATM.
Next door is a gambling establishment, with an ATM outside of it. I tried getting cash and the ATM refused my card.
So I ended up walking three blocks (small town, luckily) and found myself a bank branch, which took my card. I returned to the hospital, paid the bill, and went on with my day.
Some time later I mentioned to my bank manager "By the way, I think my card is bugged -- it got rejected by a reader the other day." And I told him the circumstances.
"Sir, do you remember when we gave you your credit card that you promised not to gamble with it?"
"Yes, of course. I don't gamble, ever."
"We appreciate that, sir. Neither does the bank. Nor will we permit our customers to hurt themselves by gambling. Accordingly, we do not site any of our ATMs by gambling establishments."
"Oh, I can respect that. Of course, your competitors do, and that makes them money."
"Our real competitors do not. We have an understanding with them on this issue: no honorable bank in $SMALL_TOWN_JAPAN will countenance our customers losing their livelihoods while our eyes are still white. [Japanese idiom, means "while we still draw breath"]"
"But there really is an ATM in front of it?"
"It is from a Tokyo bank, and a disreputable Tokyo bank at that. And let them put an ATM there. They have no branch in this town, nor will they ever."
"But they don't need a branch, do they?"
"No. Bank A, Bank B, Bank C, and ourselves have enough branches to have 98% share of deposit accounts in this town. A, B, and C share our understanding of the importance of protecting this community."
"Wait, so NOBODY can use that ATM?"
"Maybe they can soak some tourists. wry smile Its a free market, you know."
I've got to say, the capitalist in me thinks "Oh crikey, cartelization". The rest of me really, really likes my bank.
[Edit: I just looked in my dictionary and it says that the actual idiom is "While my eyes are still black". I guess that means my memory is faulty. Wouldn't be the first time. Take note, students of the language.]
I think you could argue that part of capitalism is guaranteeing quality service, and that cartelization in this case is an effort to treat you with more respect. That's a fascinating story.
It may be fascinating, but it is also entirely anecdotal and says nothing about the country as a whole.
In the middle of Kyoto, and in downtown Tokyo I have repeatedly seen branches of major japanese banks that have lottery ticket vending booths built into their exterior walls. Talk about "disreputable"!
I don't think "cartelization" at all. Businesses have to honour the values of the society where they operate; if they don't their customers get hostile against them. Big corporations in general are not flexible enough to fit well in every local community, so there is some tension around them.
From this point of view the story is about local community enforcing their values effectively, not cartelization.
What other understandings do they have? Gamblers can also walk 3 blocks, this attitude might end up doing more harm than good. I've heard a few things about Japan.
It's surprising how something as seemingly trivial as having to walk 3 blocks can change human behavior.
Well at least it let's them do some sports... plus, in 3 blocks they have the time to think about how much money they wasted in that one hour of pachinko...
"The Middle of Nowhere'ってどこでしょう。。。
I'm a bit disappointed in all this "bah humbug, I can manage my credit cards" attitude.
That site is specifically for people who are struggling to manage their finances. I'm not really sold that their reasons for not accepting credit cards make sense (lack of fraud protection is the biggest problem). But it makes some psychological sense. You don't see a lot of AA meetings held in bars.
Also, complaining that the average yokel can't manage their credit is like complaining that users can't deal with a command-line interface. Sure the discipline to learn it would pay off, but most people aren't wired that way. Furthermore the credit system as we have it now is designed, by very talented professionals, to prey on common flaws in the human mammal's ability to assess risk and future obligation.
Everybody has something that they're irrational about. Don't make me ask you how much time you've spent on WoW this month.
Lastly, those of us on this board are probably lucky to have relatively high-paying jobs, even if we were less-than-perfect students or tried startup life for a while. The demand is just that great. But software is a huge anomaly in the North American economy. Wages for most people have been flat, relative to inflation, for decades. And furthermore, the risk of sudden and prolonged drops in income has been much higher since 1970 or so. For hackers that means okay, okay, I'll take the stupid J2EE job. For the average North American worker, it might mean accepting some stupid low wage service job.
Anyway, the point is, most families have been making up the difference with credit cards. They're not living extravagantly and still they're falling behind. See this lecture by Elizabeth Warren, "The Coming Collapse of the Middle Class". (http://www.youtube.com/watch?v=akVL7QY0S8A) that punctures some of the myths with hard stats.
"Also, complaining that the average yokel can't manage their credit is like complaining that users can't deal with a command-line interface. Sure the discipline to learn it would pay off, but most people aren't wired that way."
That is a very, very scary statement. Basically it implies that most people are doomed to live a live in dependency and slavery, because they will always depend on the goodwill of other people to not screw them over. Maybe it even implies that in the long run communism is the only workable system. I can't imagine that the majority of people is THAT bad at maths :-/ I mean it is just basic addition and substraction. Even if you can only count to 5, you could get a rough idea of the state of your credit (number on bank account has less digits than number on credit card debt == bad).
We don't need communism. Just basic protection from loan sharks, con artists, and the worst dishonest business practices.
Libertarians may hate it, but consumer protections make the lives of most people simpler, safer, and more free. They also reward honest businesspeople, rather than rewarding the con artists who are the least detectable.
Just a note, this idea that wages have been flat relative to inflation is true. But that doesn't mean quite what you think it means. Inflation (at least CPI inflation) measures the cost of a basket of goods in dollars. But that basket of goods has grown over time! So the same wage now buys more stuff.
Incidentally, Elizabeth Warren is a propaganda artist. She has "hard stats", but they often don't mean what you think they mean. Read Todd Zywicki's debunking of her to get a flavor for how she works:
http://volokh.com/posts/1108558247.shtml
http://volokh.com/archives/archive_2008_04_27-2008_05_03.sht...
I'm not claiming the video you cite is right or wrong (it's 57 minutes long, I'd rather just skim the paper), just suggesting that she deserves Michael Moore levels of skepticism.
If you travel internationally, or spend money in places you don't trust 100%, or want 1-5% cashback, or in any way want the protection that comes from calling your credit card company and saying the magic words "That is a fraudulent charge" and not spending 6 weeks proving it, then you're an idiot for using a debit card.
I'm confused, can I use my debit card as credit? Whenever I try to use it, people ask "debit or credit" and it'll work as credit.
Retailers get charged about 20 cents per 100$ for debit transactions and $1.48 per 100$ for credit. If you say credit with your debit card you are giving your bank that larger cut and getting none of the protections associated with a credit card. Except you probably don't have to enter your pin number which may be important to you.
http://redtape.msnbc.com/2007/09/paper-or-plasti.html
Maybe it's different in your country, but in the UK if you pay on credit card and the supplier fails to deliver your credit card company has to refund you, it's then upto the credit card company to get their money back from the supplier.
In the case of debit cards you don't have any of that protection, so if you want to get your money back you have to get it back from the supplier (which if they've gone bankrupt/disappeared is near impossible for an individual).
Yeah, that works, but oftentimes the protection isn't as good. For example, with many credit cards at this point you are liable for $0 worth of fraud, but with the debit as credit you are liable for the first $50.
Either way deducts money from your checking account in the same method, but using it as debit requires your PIN and using it as credit requires your signature.
A better approach would be to teach people how to use a credit card properly.
I've setup my credit card to be paid off in full on the due date each month so I pay no interest. My savings account is offset against my mortgage, so it's generally better to pay by credit card as that defers savings account withdrawals (thus saving mortgage interest) by up to 45 days.
The card fee is paid by reward points on the card and there's enough extra points per year for between $200 & $400 in store vouchers.
So combining the mortgage interest savings, the rewards payouts and the fact I pay no interest or annual fees, I'd guess the card saves me ~$1000 a year.
As a debit card is just as easy to use as a credit card, the argument that I'm likely to spend more with a credit card is bogus as well.
I suspect the fees Dave Ramsey would have to pay on credit card transactions may be higher than on debit cards though...
As a debit card is just as easy to use as a credit card, the argument that I'm likely to spend more with a credit card is bogus as well.
Except for the credit card continuing to work even if you don't have the funds right now?
Unfortunately, so will be the debit card (til all the charges go through, at least). Then you get the wonderful luxury of paying multiple $35 overdraft fees on top of your bills, which is exactly what you need when you're hurting. Cash only is probably the best policy for these people.
You are not Dave Ramsey's target market.
I suppose a good middle ground might be to request a card with a very low credit limit. Most card companies will lower your limit if requested, and it's presumably easier to resist requesting a credit increase than it is to resist spending a little more on a higher-limit card.
OK, I get the "debt is bad" angle here.
But just so you know - the $50 limit on fraud that you're protected by if someone steals your credit card? It's not there if you use a check card. If you want to shop online, use a real credit card. If you want to shop offline, use a regular ATM card + PIN identification.
Yeah, so, I think this might have been true in 1997, when this article was written. And it may technically still be true based on the law --- I haven't checked. But it's certainly not true in practice: every major bank guarantees accounts against fraud with $0 liability, a service I have availed myself of repeatedly with Bank of America. If they suddenly decided not to honor that pledge, they'd be civilly liable.
I'm calling "urban myth" on this debit card liability thing, and eagerly await my comeuppance.
If you've been victim of debit card fraud, how long did it take you to notice, and how quickly did BofA return cash to your account?
I know debit card loss limits at major banks have become similar to credit card loss limits (as a competitive matter), but there are still practical differences.
Debit fraud means your bank account is empty right now -- and until you discover the fraud -- meaning payments of other expenses may fail unexpectedly.
The worst that can happen with credit card fraud is that one card gets denied. You are never short of cash unless you pay the bill without reviewing/disputing it, weeks later. Your liquidity is under your control, not the thief's or the bank's.
Here's his full policy as stated on his website: http://www.daveramsey.com/etc/cms/debit_card_policy_32.htmlc
Note the bit at the bottom about not actually being able to tell a debit card from a credit card. This is really just a philosophical position. He can't enforce it online due to how the card processors work. I believe he tries to enforce it at his live shows, though, by simply not taking any cards that appear to obviously be credit-only.
If you can't manage your own spending habits, use a debit card. If you treat your credit card spending like you would a debit card and pay off the balance in full, there are slew of benefits.
Here's a great credit card offer I recently found: http://www.schwab.com/public/schwab/banking_lending/credit_c...
2% CASH BACK ON EVERY PURCHASE, automatically deposited into an interest bearing account at the end of the month, which has an optional checking option providing free checks and full ATM reimbursements, no fees.
If instead you used a lousy BOA debit card, you'd have no cash back, a bunch of fees, and a hell of time fighting any illegitimate charges.
You think that the point of that offer is to make YOU money? No, it's to make the bank money by convincing enough people to use credit cards. If everyone would follow your system, that offer would not exist.
So these 'benefits' you tout are just marketing.
The point of the offer is for the bank to signup new customers. I make money from cashback and save money on ATM fees. The bank won't make much if any money on me, but I'm not the average customer.
Many of the new customers will carry a balance, transfer a balance, and/or invest & trade with them. This makes the bank money. Now if everyone paid their balance in full, this offer wouldn't exist, but of course this doesn't happen.
Seriously? This is going to get voted up? Don't even try passing that- he should "practice what he preaches" crap on me to justify why he should do this.
For the record, I'm personally against credit cards too. I only keep an AMEX, for emergency use, which has a zero balance every month.
We're all usability fanatics here, and adding friction like this is asinine. If anything, give people a discount for not using a credit card or use this as an opportunity to preach to them.
I'd also be able to at least empathize with this nutjob if he said it was because of the fees. These fees are why some small businesses are still cash only or credit card above a certain amount.
Funny, because I pay for every possible purchase with a CC and have no debt. And the one time I paid for something with my Debit card, I was overcharged and essentially had no recourse. When someone got a hold of my CC number somehow and started making charges, I called AMEX, gave them nothing beyond the amounts of the charges and they charged everyone back for me.
Oh, and I have over 40,000 Points on that card right now which means, since I've never paid any interest, AMEX is paying me to use their card. This guy is right, CCs are the Devil. When I die, they'll take that money out of my soul I suppose.
I don't know Dave Ramsey, but he apparently puts his money where his mouth is. And this should be honored.
Whether you agree with his opinion on credit cards is another story.
Actually, he's asking you to put your money where his mouth is - and without any credit card protection.
A cynic would also point out that that by not accepting credit cards he also avoids losing the cutr of the transaction that they charge and so makes more money.
I'm not a cynic of course. Personally, my credit card is paid of automatically each month in full.
You know, those of us who travel internationally find it much more convenient to carry a CC then a debit card.
Also, putting business expenses on a CC is just plain common sense, especially if you work for someone else. Why should I lose interest waiting for reimbursement?
I don't know much about Dave Ramsey, and he seems somewhat legitimate so far, but I'm pretty nervous about spending money with a debit card instead of a credit card. I want something with more fraud protection than a credit card.
Yes, even though Ramsey apparently advises debit card users to opt for "credit" rather than "debit", his hardline stance might create a problem if you're accustomed to using credit cards for major purchases.
There's just no way I'm entering my debit card details online. If a crook gets a hold of those details somehow, they'll be spending directly from your bank account.
I think that is just patronizing. Thank you, I can decide for myself whether I want to use credit cards or not.
"Never mind that credit cards are basically the only safe way to spend money on the internet! Give us your debit card so we can really inconvenience you when our database is stolen!"
Credit cards are terrible if you abuse them, and the whole credit system is mucked up. But they are otherwise very pro-consumer, because you have no liability when you are defrauded.
Why does an article entitled "Why We Don't Take Credit Cards" not explain why the person concerned does not take credit cards?
What is it that makes it so hard for people to come up with a headline that vaguely resembles what they have written about?
Does Dave Ramsey's company pay all of its suppliers with cash, debit card or equivalent? That would really be practicing what you preach.
Yes he does. He doesn't use any credit at all. Ever.
Twice I've had fraudulent charges on credit cards. Needless to say, I lost exactly zero dollars in the process--in most cases, the merchant sinks the cost to keep Mastercard happy. That, and the fees, are probably the real reasons why this person doesn't want credit cards.
GAAAHHHH!!! Enough with this credit cards are bad BS.
Cons with CCs: If you don't manage your funds well, you git hit with a 20%+ interest rate and will never likely climb out of that hole. Solution: learn to manage debt. Seriously, most CC companies now allow direct account transfers. If you are that scared, whenever you make a purchase, go home, log in to your bank's website (every major bank has one, if yours doesn't, open an account with one that does), and pay off the card immediately. Its not rocket science, just basic financial management.
Pros with CCs: Fraud protection. Easily one of the biggest plus points of CCs. Concerned that there is a charge on you statement that you didn't approve? Just call the company and tell them that it is a fraudulent charge and then its their problem. If nothing else, this easily makes credit cards worth the time it takes to manage them. After this, we have the easy record of all transactions, cash back, convenience, safety from the fact that you don't have a giant wad of cash with you, and last but not least, a credit history which can be used to reduce interest rates on long term loans.
Seriously, this anti-debt attitude is in general ridiculous. Is excessive and badly-managed debt bad? Absolutely, its one of the worst situations to be in but there is a simple way to avoid it: manage your finances. Swearing off all debt is foolish and inefficient.
Keep in mind the context of the link. It's Merlin Mann posting a screenshot of Dave Ramsey's site. Mann isn't anti-credit card, he is pointing out that Ramsey does the rare act of taking an unpopular position, yet follows through on it completely, even to the point of potential lost revenue.
He's pointing out Ramsey's integrity here, not the position.
It's ridiculous for those who are good at managing your money and debt, of which this site's audience probably has a decent percentage who can. As Entrepreneur's it's a necessary skill.
But the fact is that we're a minority and the majority of people are bad at managing money.
And so long as you're anything less than good at managing your money, a credit card represents risk. And so for those who don't pay off the debt, the risk grows.
I like Ramsey, he goes balls to the wall and is over the top, as the site mentions he can get repetitive painful at times. And the NO-Debt approach, as you are noting, is a bit crazy but for those who have proven they can't be trusted with debt, then this is the safe choice.
Your response is fine, but I think you're approaching it from a normal, well balanced and money conscious individual. There are people who call into his show with literally $250,000+ in debt between their house, car, boat, property lots, and they've got a sliver of that as income. These are the people he's marketing towards. Not you.
Telling people they should completely abstain from something when you know they won't (be it alcohol, sex, or credit cards) is just plain stupid. Telling them how to use it responsibly is always much better.
Not using a credit card costs you a ton when you go to get a mortgage. Building a solid credit history is well worth it.
Anyone who doesn't take credit cards is "nuts". This is total nonsense.