Ignorance Is Not Cheap

Your ignorance is costing you big bucks. Yes, I said it and would shout it from the roof top; your ignorance is not cheap. My ignorance cost me big, but we will keep that between the two of us. Think about this, in the stock market, if a party is making money another party is losing it. So also with credit cards. Which side are you on, losing or winning? Let’s see, I have not heard of you before but I have heard of Master, Visa, American Express and Discover. Let’s make something clear before I continue to write and you read. You are using the service so there are fees you have to pay, but certain fees and the cost of certain items must be avoided. To ensure you are not freely giving away money, let’s look at the way credit card companies make money. Finding out how the company makes money informs you of ways you could be overcharged.

There are two major ways credit card makes money:

Fees - I will only touch on two of these, interest rates and annual fees. For more information on other fees read Fees of Credit Cards. I was going through my credit card statements one month and I saw a $20.00 charge. I can not remember what the charge was written up as, but I remember I did not understand it. I reached for the phone, dialed my credit card company, and hassled with the automated service before I was finally put through live. Here is how the conversation went.

Lady – Hi my name is Apple (lets say). Can I get your account number?
Me – Hi Miss Apple, the number is 0000 0000 0000 0000
Lady – Can you verify your birthday and last 4 digits of your social.
Me – Sure Miss Apple, it is 00/0000 and 0000.
Lady – Thank you, how may I help you today?
Me – Well, Miss Apple, I do hope you can help me.
Lady – Well, let us see what we can do.
Me – Miss Apple, I was going through my statement and saw a charge of $20.00 and I do not know where it came from.
Lady – That is the annual fee.
Me – Oh! (A long oh!) Well, can we waive that fee?
Lady – Sure! We charge a fee if you do not call in and update your records.
Me – I did not know that? (I really did not know that. Verification was done.) Well, thank you Miss. Apple, you have been very helpful.
Lady – You are welcome, have a nice day.
Me – You too.

When I got off the phone with her, a million questions ran through my head, the first, how many times had I been suckered out of $20.00? I had called in millions of times, why was I never told about this? Why was a letter not sent out informing card holders about this development? I specifically remember the card I applied for said no annual fees. But in their defense, this was not your typical annual fee. This was an annual fee with a twist – annual verification fee. Wow! They really reinvented the wheel there. So imagine that the company has 50,000 clients and charged them this annual verification fee. That is an easy $1,000,000 they just made. Now if you take the real number of users which would be in the millions, imagine the number of zeros. Zeros never looked so good. I learnt a valuable lesson that day, well, a couple. Treat your dealings with any company or anyone especially if it involves money as a business. Track all records. Read more at Tracking your records.

The other, under fees is the interest rates. Some of interest rates that credit card companies charge, I call ASK interest rates. ASK is an acronym for A Suckers Knowledge. You see credit card companies divide their clients who pay interest into two categories the ASK and the others. People in the ASK category are charged huge interest rates, and they get away with it because people in this category are limited in knowledge to the whip, swipe and pay action of credit cards. Those in the ASK are who they are proud to call their customers. If you call on the phone, they are glad to speak to you, answer your questions and even waive a $20.00 fee. Yes, I used to be in the ASK category.Here I thought I was playing the game, applying psychology, building in a short time a personal relationship between Miss or Mr. Apples by repeating their names so as to make chances of them denying my requests slim to none, and I was the one being played. You see, sometimes we forget who we are playing against. I underestimated my opponent and did little research or planning when I called the company up for different reasons. My game was with the representatives not the company. I only asked for a small piece of the pie and that was all I was given. What I failed to see or understand was that there was much more pie I could have had but left and walked away due to ignorance. I thought I was satisfied but failed to really stop and ask myself, am I truly satisfied. Maybe if I had taken the time out to observe my reactions when I got my statements, I would have taken leaps long before this. Well, we live and learn. It is never too late. Anyway, I bet they laughed all the way to the bank. I am laughing now, no more am I in the ASK category. Actually, I am no more in the interest bearing category. You can read how I got out of the interest bearing category in Negotiate it.

The second major way the industry makes money is from the merchant. You are not the only one using credit card services, the lady or guy behind the counter who accepts your credit card is also using their service. Nothing is free, both parties have to pay. Merchants have fees also and they vary, but the major one is a percentage of what you purchase. For example you purchase an item for $100 on your credit card; the credit card company may charge the merchant 10% of the sale which is $10. This cuts into the profit margin of the merchant. If the merchant requires a certain profit margin to keep the business afloat and line his pockets also (I mean, can you blame the merchant), he looks at two groups, I call them the Enders. The producers of the products who are at one end and the final users at the other end. So at one end we have the subjugation of people in other countries to work in horrifying conditions at wages you and I would not consider in a million years, to the hike in prices at the consumer end. Now before you go pointing fingers, ask yourself what role do I play in subjugating people in other countries to harsh conditions? If you have thought about it and do not see how, think again.