patrick.net

@DS,

I don't know if you get the same TV commercials in Oz, but that's one of the GEICO cavemen.

Except that the transaction fees go to the transaction network provider, and the issuing bank is left with annual fees and interest + penalties.

Then why the heck do the banks direct-mail market me so aggressively? I've had credit cards since the 1970's and have never paid any interest. If they lose money on me, why don't they just stop sending me enticing offers to cards? I was a BofA customer since forever, and dropped their Visa card, which at the time had an $18 annual fee, for compeditors' cards. BofA knew all the details of my history...I had paid no interest on their old card for over a decade....but they kept sending me adverts in the mail until I took them up on their offer. Did they think I would become less frugal with age?

* * * *

I have a dumb question for the gang. This has been driving me nuts. There's a lot of talk about FB's getting a 1099 after a short-sale and owing the IRS big bucks. This confuses me.

Say FB bought a house for $400K, and had to short sell it for $300K. The lender gives him a 1099 for $100 capital gains. BUT the FB can document a $100 capital LOSS on the sale of his house, so why isn't this a wash as far as the FB is concerned? It's actually fair, otherwise the FB would have a non-offset capital loss to play with in his future taxes.

HARM

But of course. And so long as I'm in charge of setting the minimum ethical code, I'd include a prohibition on anything referred to (oxymoronically) as "American Cheese".

Sir Randall,

I hereby appoint you my Deputy Minister of Economic Morality and Fiscal Responsibility.

BUT the FB can document a $100 capital LOSS on the sale of his house, so why isn’t this a wash as far as the FB is concerned?

I don't think you can claim that capital loss, at least not personally. If you're running a real estate investment business, and your business owns the home, then you might be able to get away with it.

As to the "why" banks still market ccards to you, there are a number of explanations:

* They are unorganized. You'd be surprised at how such sausage is made.

* They are regulated. Once upon a time, they couldn't use your historical data freely; departments were firewalled off from one another.

* They have calculated that enough "free riders" can be converted and/or make occasional mistakes and suffer penalties. How many out there who pay in full like me haven't at least once paid a day or two late due to simple disorganization or forgetfulness? If you cycle huge amounts of $ per month, like many pay-in-fullers, then you get slammed with penalties in that one month which goes a long way towards covering your free-ride.

Dennis,

I've heard in banking parlance that you and I would be referred to as "Dead Beats" by never paying interest on the credit cards.

Paul

Customers who do not pay in full the amount owed on their monthly statement (the "balance") by the due date (that is, at the end of the "grace period") and are not in a promotional period owe interest ("finance charges") are known in the industry as "revolvers." Those who pay in full (pay the entire balance) are known in the industry as "transactors," "convenience users," or "deadbeats." Those that shift usage of their credit cards or transfer balances frequently are known in the industry as "rate surfers", "rate tarts" or "gamers."

Now all we need is for Congress to create a new Department of Economic Morality and build a Taliban-style Basij (morality police). They will patrol the streets and Tazer any subprime broker attempting to hawk NINJAs to clueless borrowers. Bond & hedge fund managers attempting to pass off Alt-A toxic waste as "safe" will be shot on site.

Just kidding (sort of...).

I put that credit card article paraphrase in as an example of the absurd. I do not think anyone really believes that paying off credit cards every month is immoral.

The original article was most likely written by a credit card industry shill who was attempting:

1. to increase business by convincing people to spend a little extra and maybe leave a balance

2. make the people who habitially leave a balance take pride in thinking of themselves as the backbone of economic prosperity, rather than as undisiplned bags of appetite who can't manage to spent less than they earn

I still don't quite understand the logic in merchants & CC companies viewing people who pay off each month as 'free riders'.

Whenever you pay by CC, you save the retail merchant time/labor in having to physically store & deposit cash or verify & process a check. Time is money, and convenience benefits both parties --customer & merchant.

Whenever you pay by CC, you generate fees for the CC company. So regardless of whether or not you pay in full each month, you are *still* a profit center for them. Not as much profit as the revolving debtor, but still not a 100% "free rider".

I admit using credit card "transactors" as a straw man argument of sorts. But I think I made a reasonable case that since 1/3 of all credit users pay in full, yet the other 2/3 are those who can least afford to pay the burden for those (us) moral elitists. If we're really so concerned about being ethical we would all stop using credit cards completely and/or insist upon the elimination of credit cards entirely.

At best we're arbitraging the system; at worst we're free riding on the backs of the poor, ignorant, stupid, uneducated, and financially existential.

I still don’t quite understand the logic in merchants & CC companies viewing people who pay off each month as ‘free riders’.

I don't care what they think. If they don't like me paying off my balance every month they can charge me a fee.

I am not bothered by labels.

HARM

Whenever you pay by CC, you generate fees for the CC company.

The CC Company != The Bank issuing the CCard.

Visa is a transaction processing network. They get your 2.x% fee, paid by the merchant, price partially passed on to you.

Wachovia is the issuing bank. They survive off of member fees, late charges, penalties, and of course fat interest.

Note Wahcovia is a bank with other operations, so ostensibly they benefit by having use of the working capital, by being able to cross sell their other services, and by trying to use their CC offerings as a way to poach customers away from other banks.

At best we’re arbitraging the system; at worst we’re free riding on the backs of the poor, ignorant, stupid, uneducated, and financially existential.

Either case, I feel good enough to have sushi. :)

Headset,

I agree with you completely. I wasn't aiming at the messenger, sorry if you had to duck.

Randy,

Every time I go to the store and pay cash *I* *pay* the credit card industry out of my own pocket in the form of the higher prices that merchants charge in order to cover the 2-4% credit card private tax that they have effectively been imposed upon me. In practice I have no choice other than to pay the tax. I think that is plenty to pay for a service that I am not using.

Now, for me to avoid to pay still more interest and penalties on top of the transaction tax, makes me a "free rider" ? One who "does not shoulder my fair share of the cost of production", of a product that I don't even want to use, for the most part.

I don't think so.

PS: I don't mind paying $0,25 to use the ATM card at a gas station. That's fair and square.

And now I, and other freeloaders, are also moral elitists :-). That feels good :-).

Seriously, Randy, thanks for acknowledging that the argument was a bit of a strawman
(note how I avoided using the loaded word "adm*tt*ng" :-))

If one freely incures a debt for a home, car, or other consideration, then refuses to pay that debt, than that person is a welsher. A moral issue.

The fact that the law provides various renegging tools does not change the welsher's moral stance. The welsher is acting within the law, but not morally. Harm's payment is full (a difficult task, involving personal sacrifice, as are most real moral issues) puts him morally ahead of the "clever" character who buys a home with the intent of abamdoning the loan.

I also think there is a problem with any rent seeking activity, regardless of ones political or economic influence. Also, since it is a given that people will act in their own best interest, using that fact that seems strange license to brush off morality concerning such issues.

"At best we’re arbitraging the system; at worst we’re free riding on the backs of the poor, ignorant, stupid, uneducated, and financially existential."

Gee, that sounds like you are talking about state lotteries.

And because a blogger named "justme" has declared it so, all men and women in the right shall henceforth be declared moral whence they use credit cards of which they are eternally paid-in-full.

If you're going to aggregate, then you have to deduct from your moral outrage of paying the 2-4% "private tax" the operational efficiencies realized through credit cards enabling electronic payments, the increased velocity of the money supply (thereby increasing multiplier efficiency), and of course the fact that more rightful taxes are collected because of decreased avoidance of taxes paid on cash which is persistently easy to hide from the government.

What % is left for you to be outraged about?

"What % is left for you to be outraged about?"

That we can no longer float checks for nearly a week?

Anyone see this piece?

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/08/28/BA87RQV63.DTL&tsp=1

ALAMEDA COUNTY - An Alameda County rape victim pretended to befriend her attacker - going so far as to set up a job interview for him - as part of a ploy to seek revenge, but later decided against vigilante justice and settled for arranging his arrest, authorities said today.

When the 47-year-old woman's alleged assailant showed up at a coffee shop the day after the attack for his job interview, sheriff's deputies took him into custody.

Howard Moore, 24, of San Leandro, was arrested on suspicion of rape, sheriff's Sgt. J.D. Nelson said.

The woman, who works as a real-estate agent, was showing a home in Alameda County to a prospective buyer Aug. 16 when the prospective buyer attacked her, Nelson said. He declined to say where the incident happened because that could identify the victim.

The assailant choked the woman, raped and robbed her, Nelson said.

During the attack, the woman started to befriend him "in attempt to gain his trust," Nelson said.

She told him she wasn't going to call the police and would try to help him, Nelson said. She even went as far as to promise to arrange a job interview for a security or bodyguard position for the man the following day, Nelson said.

The woman later told investigators that she had set up the interview so "she could exact vigilante justice on him," Nelson said. "The victim was afraid the suspect would not be sent to prison for the crime."

She ultimately decided to call the sheriff at the urging of a relative who used to work as a police officer, Nelson said.

When he showed up for the supposed job interview at a Starbucks in Hayward, Moore was met by sheriff's deputies, Nelson said.

we’re free riding on the backs of the poor, ignorant, stupid, uneducated, and financially existential.

Makes you PROUD to be an American!! ;)

I don’t mind paying $0,25 to use the ATM card at a gas station. That’s fair and square.

You must go to the wrong gas stations.

Visa is a transaction processing network. They get your 2.x% fee, paid by the merchant, price partially passed on to you.

Wachovia is the issuing bank. They survive off of member fees, late charges, penalties, and of course fat interest.

i have a friend who works in visa. he had told me some time back visa would get around 1.5% and wachovia would get around 1%. not sure about the exact %age, but they do get a cut.

The fact that the law provides various renegging tools does not change the welsher’s moral stance. The welsher is acting within the law, but not morally.

Hey! You are using an ethnic slur against people of Welsh heritage, like me.

Palo Alto observation: saw an open house announcement on Saturday (on Amarillo). Today, I noticed that the house was sold, and a sign upfront instructed "Open House Cancelled. House Sold".

The listing price was $1.2 million, and it was a 1600 sq-ft "charming" Eichler (i.e small and unattractive!).

And a friend who rented an apartment in Sunnyvale recently said how it was crazy, and stuff that appeared on Craigslist in the morning was gone by afternoon.

I don't understand anything anymore.

"Hey! You are using an ethnic slur against people of Welsh heritage, like me."

That is how "welsh" is defined in my old dictionary. I'm too scotch to buy a new one!

During the attack, the woman started to befriend him “in attempt to gain his trust,” Nelson said. She told him she wasn’t going to call the police and would try to help him, Nelson said. She even went as far as to promise to arrange a job interview for a security or bodyguard position for the man the following day, Nelson said.

Isn't that telling you something right there about trusting realtors and used car salesmen?

I don’t mind paying $0,25 to use the ATM card at a gas station. That’s fair and square.

You must go to the wrong gas stations.

By the way, justme, the merchant usually pays a "private tax" of 1.2% for debit or ATM transactions. So when they charge you that $0.25 they are double dipping and you're paying two "private taxes". I don't see their gas being listed 1.2% lower than the guys across the street.

I don’t know if you get the same TV commercials in Oz, but that’s one of the GEICO cavemen.

I was going to ask how you got the pic of my next door neighbour, must be off a dating site...

what's a geico, is it like a gecko?

GEICO is a US insurance company, who in fact has adopted a CGI gecko as a corporate "spokesman"...err..."spokeslizard". www.geico.com

eburbed,

Thanks for sharing the realtor rape story -- they should understand that this is an hazordous profession!

renter_paloalto Says:

I don’t understand anything anymore.

Maybe that's because you are a pea-brained dumb-ass fucking troll.

Did anyone notice a subtle change in the SJMN Sunday Realty section?

The Sunday Realty section often prints transactions of the week (with time lag of course) in San Mateo and Santa Clara counties. This week, they went with a slightly larger font and a slightly wider space in between the lines. Why?

Because for example, the entire Palo Alto had only 3 transactions, the entire Cupertino had only 7 transactions. To give you a starker example, Morgan Hill, a neighborhood with 387 listings (per ziprealty) has had only 6 transactions. More telling is the highest $ transactions of the week. Typically, each County has ~5 highest $ sales listed. This week, you still get the usual $3M houses listed at the top, but the list started to comprise very ordinary homes in $1.2-1.4M range which would have never made it into the list in the middle of the summer!

If you haven't thrown out your Sunday papers, check this part out.

RE: realtor rape story

Now, now, let's not let our dislike of the REIC's abuses override our humanity. Nothing funny about that.

OO:

I've been reading the transactions section in Saturday real estate section almost every week since the late 1970's. No kidding.

During the recent housing bubble, SJMN added a new feature to the section: in addition to showing the sales price, it also shows the year and amount of the last time that the property was sold.

But earlier this year, some of the "previous sale" info is omitted. Even on properties in my neighborhood that I know have changed hands a few times. Remarkably, every single transaction where "previous transaction" is not omitted, shows a gain for the seller.

sybrib,

I think in a few years, the million dollar homes will have a good chance of populating the "highest sales of the week" column of SJMN constantly.

The sales records quoted in the paper of last couple of weeks only reflect the trend dating back at least 2 weeks ago, so they are quoting transactions that happened before the jumbo loan was yanked. I am very, very intrigued to see what this section will look like in the next 2-3 weeks.

Can't wait.

There's a great book called "Credit Card Nation".

If you don't have time to read it you can listen to an NPR interview with the author:

http://www.npr.org/templates/story/story.php?storyId=952566

OO

This week, they went with a slightly larger font and a slightly wider space in between the lines. Why?

Same thing happend to the lenders classifieds in the same section a few months ago, with lenders dropping like flies, the point/font size for the remaining lenders were increased, I'm sure they didn't have to pay for that.