A few weeks back I was invited to join a number of bloggers who would be writing for a new web site Currency, by American Express.
I was very happy to be part of such a group as I was familiar with many of the others who would be writing. I have to say, I have a soft spot in my heart for AMEX. While I was still in school, my godfather trusted me with a Gold American Express Card which I was welcome to use as needed and I could pay him when the bill came in. This was my first experience with credit and at the time, the AMEX card did not have credit you could carry month to month. The bill was due within a few weeks of receipt. Period.
I’ve always felt that credit is a tool which can be used wisely or foolishly. In and of itself, it neither good or bad. Whenever I run into the “credit cards are evil” type, I remind them that I get rewards at no expense to me, whether it be the miles on my Citibank AMEX card (getting American Airline miles) or the American Express Open card that gives my 5% at office supply stores and 3% on gas purchases. My first post at Currency is Understanding Marginal Tax Cuts. Take a look and let my friends at American Express know what you think.
FTC disclaimer – I am paid for blog posts I author for the currency site. This post was not compensated.
Joe
Thanks for the shout-out, Joe, and we’re glad to feature your writing on Currency! We’ve got a wealth of good information, adding more each day, and just thrilled to race out of the gate with so much great material. Thanks for being part of it.
I see your point. We both walk into a Staples, looking to buy a $200 monitor. You choose to pay cash. They give you no discount. I use my card, get $10 rebate right to the statement, and a free year’s extra warranty including accidental breakage. How am I worse off for having used the card?
In the very big picture, I understand and agree with you. Until merchants offer a cash discount (some do) and manufacturers extend their warranties, I’m hard pressed to see where you are to the better having paid cash.
Note – My view on “grab the rewards” hasn’t changed. If I were a “credit cards are evil” person, I’d have an issue writing for AMEX.
You’re wrong. There is an expense to you for the credit card rewards you receive. The merchant pays to accept credit cards, and of course, passes the fee on to you.
Which prompts one question – If you put a sign in your window – “Cash only, all prices now 1% lower” or not to be so radical – “Now Discounting 1% for cash buyers” do you think your sales would rise, fall, or stay the same?
Well, you’re not worse off. I don’t pay cash. I pay for the monitor with a credit card and I earn the same points you do. I also use credit cards for business purchases and earn thousands of points every month, which I redeem in cash.
Of course the cash I receive in personal and business “rewards” doesn’t nearly offset the thousands of dollars my business pays every year in merchant fees… Merchant fees which we pass to the customer by increasing the cost of what they are purchasing.
In the very big picture, the credit card companies have us all by the balls. We cycle our money though them in various ways, and they get to keep a little of it with each transaction.
As a matter-of-fact, according to my P&L, I’ve paid $14,122 in merchant fees so far this year – 20% of that to AmEx, the rest to V/MC/Discover.
I think most consumers don’t realize the extent of the credit card processing fees that are built into the price of goods.