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Why Cheap Might Be Better Than Free

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https://thereformedbroker.com/2018/12/27/why-cheap-is-better-than-free/

 

Article on similar same topic different source

There is a basic, fundamental foundation upon which all of economics is built: everything has a cost. The effort to get around this concept is described informally by the phrase "there's no free lunch.”What is a free lunch? The notion historically springs from the offer by saloon owners of a free meal to customers. Of course, the price of the lunch is included -- hidden if you will -- in the cost of the drinks.Which brings us to today’s discussion of "cheap” versus “free.”

https://www.fa-mag.com/news/cheap-is-great--but-free-will-cost-you-41416.html?print

 

 

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That was interesting.  Thanks for posting.  I've always been skeptical of anything that's totally free.

It's not exactly the same thing, but I've had disagreements with people about credit card rewards.  Sure, if you are diligent as a consumer, you can make credit card rewards work to your benefit, for awhile, until you forget to make a payment or buy things you wouldn't have otherwise.  The banks wouldn't offer cash back or other rewards if they weren't making a profit from it.  Same is true with investment firms.

 

 

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16 hours ago, MNGopher said:

The banks wouldn't offer cash back or other rewards if they weren't making a profit from it.  Same is true with investment firms.

 

Funny you should bring that up. Wife and I recently decided to funnel all payments /purchases through a credit card that pays good rewards plus no annual fees.. Of course, I pay it off every month without a second thought so I'm not the right kind of card owner. Unfortunately, these cards entice people with these rewards well aware that many folks will be late with payments so they will collect a hefty late fee-35.00-40.00 dollars negating the benefit. They also are aware not all folks will pay off their balance each month since many  Americans according to statistics can't come up with 500 dollars to pay for a sudden emergency and there will be many emergencies. So they will often make minimum payments and accrue interest charges. I would say 90% of my students had no idea how a credit card worked. I am sure many adults don't either. 

If you understand the dynamic behind credits you can have them work in your favor but would these cards exist if they were not making huge profits?

It probably won't be long before a 403b insurance company starts promoting no cost mutual funds and once they bait you with it they will switch you to expensive products.

 

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