Of course, if this were implemented, credit cards would stop being free.
People who don't rack up interest on credit cards freeload off those who do.
Edit: today's SMBC is relevant. http://www.smbc-comics.com/index.php?id=4150
People who don't rack up interest on credit cards freeload off those who do.
Edit: today's SMBC is relevant. http://www.smbc-comics.com/index.php?id=4150
Instead of large chunks of their income going to credit card companies (via interest), it could instead be spread out among more stores.
For me, the "free" service of a credit card is not worth my neighbors being saddled with debt.
edit: That cartoon bothers me more the longer I think about it; I know it's supposed to be humorous, but does the author really think that lottery tickets are driving the economy?
While that seems true it's messier than that. In your scenario people have to postpone consumption until they accumulate the cost of goods which would have a huge negative effect on the overall economy. The entire concept of interest rates is to smooth out this issue, rewarding those who can postpone consumption.
No. The joke in most SMBC comics involves taking some faulty logic and driving it to absurd conclusions.
Well, Wall Street is pretty much a giant casino, so it's not too much of a stretch to say that gambling defines a large portion of our economy.
Fine. But that means you'll pay an average of 2-3% more for items.
>Instead of large chunks of their income going to credit card companies (via interest), it could instead be spread out among more stores.
Yes. They would gain under a new system. People who are responsible now would lose under that system. It's a transfer , with credit card companies taking a cut.
I don't think better education about how badly it harms them would help much. We see present upside much more strongly than long-term future downside (see: procrastination), even if we are familiar with the nature of that downside.
Emergency funds probably would.
You also need to take into account the bank's cost of funds, the cost of administering the account, the cost of fraud, cost of disputes (do you ever do a chargeback?)
The marginal cost of servicing another person when they already have a consumer base of people with debt is very small (close to zero). I'm trying to say it's still profitable, but not where they make the bulk of the revenue.
Also I remember spending around a month learning about interest and finance-related math somewhere around 8th grade, so at least in some us schools it was being taught over a decade ago.