Somethin for Nuthin

A great post at Credit Slips about the "Business Model" of the credit card issuers. In a national 'doh' moment, it has occured to a lot of us that the banks are not TRYING to lend to people who can reasonably be expected to pay back their loans. They are LOOKING for people right on the edge, desperate enough to pay whatever fees, charges or rates they can cook up until it's all gone and they are crushed like bugs.

I don't know if i can describe it, but they are on to something that is getting so pervasive in modern american life that hardly a day goes by without another smack in the head by one of these schemes. Maybe we can start by just listing a few of them that small businesses run into:

1. credit card machines. they are ludicrously expensive to buy upfront. In an age when you can get a decent computer from Dell for under 400, the little machine that hasn't really changed in a decade is an easy $1000. No worries...they will 'lease' it to you, forever, so that you will pay many times the value of the machine in just a couple of years. This scheme doesn't work if the machines were priced right in the first place.

2. The leases that never end. So a small business goes to dell and leases computers and buys them for a $1.00 at the end. Except they never end. They know that harried small business owners will pay on that lease for years after it's over, and they are more than happy to keep sending you bills, even though they know you don't owe them any money.

3. Everything costs double as soon as they know you are a 'business'. Phones, cable, internet connections, refrigerators. A blender from Costgo for $50.00 works fine for years (even in commercial use) but buy a blender from a restaurant supply place and expect to pay a minimum of $600.

4. Checking accounts. Make it 'corporate' and they start charging you when you deposit CASH. How DARE you deposit cash into a checking account?

5. Cascading bounced check charges. This one is a doozy. You write 5 checks, 4 of them for $10 and one for $1000. The four for $10 show up on your online account on tuesday as dutifully paid. On wednesday, the $1000 one shows up and you are overdrawn. The 4 from the previous day are MIRACULOUSLY now 'pending', the big one is cleared first, and you now have fees for bouncing 5 checks at $30 each. They call it 'batching'.

6. Health insurance. You are covered until you get sick. Then you're not. It works for them.

7. Homeowners insurance. This one is even better. You are covered unless you need it. Then you can't get it again.