It was recently stated here that I would give up my Visa card rather than begin paying a $15 per year "membership fee" for it.
Countless phone calls and letters of agreement poured in, many of them quite irate and vehement.
One letter agreed only partially, one politely disagreed. That one was from Richard F. Bytnar, senior vice president of Surburban Trust's Visa Card Department, who wrote:
"In the interests of accuracy, the merchant discount rate is not an interest rate or finance charge. It is a fee per dollar of sales. You do not multiply it by 12 to reach the annual rate, as you do with a monthly interest rate."
I must disagree. I think banks "turn over" their credit card capital about 10 times a year -- at an average of 2.4 percent per turn.
It works like this: Let's say you are a merchant and your customers charge $10,000 a month to their Visa cards. Suburban Trust doesn't make you wait a month for your money. It pays you within a few days, and charges you 2.4 percent of $10,000 for that service.
In a few weeks the bills go out. Those cardholders who pay promptly are not charged interest because they replenish Suburban Trust's $10,000 bankroll. The bank can lend it out again the following month and again collect a 2.4 percent fee on it.
By the end of the year, that $10,000 has been loaned out and repaid and loaned out again many times, and it has earned 2.4 percent for each round trip. Because there is a grace period for paying without interest, the $10,000 can't turn over 12 times a year, but you can be sure it is kept busy at all times. I'd be willing to bet that over the course of a year, the funds advanced by the bank cost merchants closer to 20 percent of their average monthly credit "float" than 2.4 percent.
The "dubious" letter was from S. L. Cooper of Great Cacapon, W.Va., who also dislikes paying for a Visa card but concedes that it is useful to him. He travels a lot and doesn't think it wise to carry large amounts of cash. He has considered the alternative of using traveler's checks, but they usually cost a tidy sum. So what's a fellow to do?
Well, it seems to me that a fellow who travels a lot, whether for business or pleasure, needs a credit card and ought to be willing to pay for it.
On domestic trips, I used to do quite well with no cards except free ones issued by hotel chains. I'd carry a modest amount of cash and a checkbook. Most motels and hotels accepted checks for the exact price of the room. If I encountered one that didn't, I paid in cash and later used a hotel card to cash a check and replenish my funds.
In recent years, however, hotels have become increasingly reluctant to accept checks. Those that do usually ask the customer to show a major credit card for identification.
To test them, I occasionally offer ID from the Metropolitan Police Department, the White House, the Congress, The Washington Post -- all bearing my picture, of course. These are not acceptable. Cashiers ask for a driver's license (which can be easily faked) and a credit card (which may be stolen, and in any case does not even carry the cardholder's address or picture).
So it is obvious that for those who travel, a credit card can be useful.
My point was that millions of cardholders seldom travel and prefer not to run up charge accounts. They use credit cards only when merchants won't accept their checks. And they simply will not pay a membership fee for a piece of ID.
The topic of many calls and letters was, "Can I switch my Visa card from Surburban Trust to United Virginia Bank?" Scores of readers told me that:
United Virginia Bank welcomes applications for cards.
Refuses applications for cards.
Accepts applications only from Virginia residents.
One reader called Suburban Trust, canceled her Visa card there, and said she would get a new one at United Virginia. A woman at Suburban Trust snapped, "That won't do you any good. They've got their letters ready to mail announcing an $18 a year charge."
To get the facts, I called Jack Fox, senior vice president of United Virginia Bank in Richmond. He spoke plainly and came through as an honest and sincere man. He said:
"When the new credit restrictions were announced on March 14, it became necessary for us to stop accepting new credit card applications except from customers of the bank -- people who do their banking business with us. Virginia residency is not a factor. When the government restrictions are lifted, we will probably welcome all new applications, as we did before. We do not charge a membership fee now. We have no present plans to do so. But obviously we can't state that we will never charge a fee because we can't foretell what the future holds in store. One thing won't change, I can assure you: We will continue to try to be fair to our customers."