How much does Capital One deserve for providing me the financing needed for the start-up costs to open my business?

[Axulus]

I am the owner of a recreational retail cannabis shop. There was absolutely no traditional bank financing available for my start-up business expenses. However, one thing I did have was good personal credit. As a result, I qualified for approximately $30,000 total credit limit with credit cards, the bulk of which was made available by Capital One. I have been a customer of Capital One for about 10 years. Despite my credit trends worsening as I nearly maxed out my limits and made only the absolute minimum payments, not once did they question my borrowing and payment habits or threaten to reduce my credit.

When I first signed up for additional cards about a year and a half ago, they offered me interest free financing for 12 months. I was able to take full advantage of that generous offer to afford all the expenses that go into opening up a retail business in this industry. I am now being charged average interest rates of 20.9% on my outstanding balances, but the income I am generating is allowing me to pay off the credit cards rapidly. I'll be credit card debt free probably around sometime in April or May. Capital One deserves every penny of interest they have charged me. Without their generous credit offer it would not have been possible to start my business, which has dramatically improved my happiness and financial situation. They were willing to stick with me, and the income I am now generating more than makes up for the financing terms they offered.

Not only that, but previously I earned a lot of cash back rewards and never payed a dime of interest. I will be going back into that situation soon where I am the one getting paid to use their credit cards.

Is the interest that Captial One charging me fair? I absolutely think so. Let's not forget that the average interest rate is quite a bit lower given the 12 months of free financing they provided. I am so grateful to them for the offer and opportunity they have provided me.

 

[fast]

Walking into a pit of dangerous snakes oblivious to the dangers and escaping unharmed does not mean it's a good idea to do it again.

 

[Valjean]

Seems high to me, but what do I know about credit rates. Did you consider venture capital? Might that have been cheaper?

 

[Arctish]

Is the interest that Captial One charging me fair?

If that's the rate they quoted you and you agreed to pay, then it's fair. It could even be higher, and still be fair if you agreed beforehand to pay a higher rate when you borrowed the money.

I had a balance on a credit card back in 2006. When I signed up for the card, the quoted rate and the one I agreed to pay was 8.9%. One month, shortly after the housing market went into freefall, the interest rate on the card nearly tripled to 24.9%. This was done with no warning and without me having done anything to affect the implied contract between me and the lender.

Was that fair?

 

[fast]

Is the interest that Captial One charging me fair?

If that's the rate they quoted you and you agreed to pay, then it's fair. It could even be higher, and still be fair if you agreed beforehand to pay a higher rate when you borrowed the money.

I had a balance on a credit card back in 2006. When I signed up for the card, the quoted rate and the one I agreed to pay was 8.9%. One month, shortly after the housing market went into freefall, the interest rate on the card nearly tripled to 24.9%. This was done with no warning and without me having done anything to affect the implied contract between me and the lender.

Was that fair?

Fair, most likely. Right, that depends. Wrong doesn't imply unfair.

 

[Will Wiley]

Without their generous credit offer .

Now I know they are a "person" but this is taking it a little far

 

[Nice Squirrel]

Is the interest that Captial One charging me fair?

What is the interest?

How do you believe you are being paid to use their credit cards?

 

[fast]

Is the interest that Captial One charging me fair?

What is the interest?

How do you believe you are being paid to use their credit cards?

20.9% on average. He said, "I am now being charged [...]."

The net effect of being paid cash back rewards and paying no interest.

I think I've reconciled the discrepancy. It's tricky.

 

[Nice Squirrel]

What is the interest?

How do you believe you are being paid to use their credit cards?

20.9% on average. He said, "I am now being charged [...]."

The net effect of being paid cash back rewards and paying no interest.

I think I've reconciled the discrepancy. It's tricky.

Oh yes, the card companies will still make money by charging merchants even if they pay out some of that money to card users.

 

[TV and credit cards]

Entering this new industry, you are hardly their average credit card customer. Had you been opening up a new restaurant, you might be singing a different tune and I doubt you'd be paying anything off in April/May.
I don't think I've ever been at a disadvantage with the one and only credit card I've had my entire adult life. With a 12% interest, no fees, and reward points, it was only in the first year that I carried any interest charges. But, for every one of me, every one of you, there are probably hundreds of people at the other end of the spectrum making a lifetime of minimum payments on multiple cards. They may not be getting their pound of flesh out of you but they are getting it.

 

[Axulus]

Seems high to me, but what do I know about credit rates. Did you consider venture capital? Might that have been cheaper?

It would've been possible to bring in an outside investor, but I already have a business partner and we didn't want to dilute our ownership stake. The cost over time of diluting the ownership stake, especially over the long run (as we have plans to open more locations down the road) would be orders of magnitude greater than the interest from these credit cards.

 

[Axulus]

Walking into a pit of dangerous snakes oblivious to the dangers and escaping unharmed does not mean it's a good idea to do it again.

The danger was that something would happen to where I couldn't open up the business or the business failed and, as a result, I wouldn't be able to pay back the credit cards. I would have to declare bankruptcy but, even then, I wouldn't be completely ruined. I have a marketable skill to earn money if that happened (I'm a CPA and my skills are very much in demand).

The upside was that this allowed me to afford all the expenses for the business and still have enough to cover living expenses while we got things ready, allowing us to open and a chance for a much more rewarding job and better financial position than before.

 

[Axulus]

Is the interest that Captial One charging me fair?

If that's the rate they quoted you and you agreed to pay, then it's fair. It could even be higher, and still be fair if you agreed beforehand to pay a higher rate when you borrowed the money.

I probably would've been willing to pay 30%-40% if I really had to, if it meant the difference between being able to buy the things I needed to start the business and not being able to open at all (or to have to reduce my ownership stake in the business).

I'm glad it didn't have to be that extreme.

I had a balance on a credit card back in 2006. When I signed up for the card, the quoted rate and the one I agreed to pay was 8.9%. One month, shortly after the housing market went into freefall, the interest rate on the card nearly tripled to 24.9%. This was done with no warning and without me having done anything to affect the implied contract between me and the lender.

Was that fair?

If it was unexpected and it was unclear/confusing that this would happen when you signed up for the card, then no, that isn't fair. The most important thing about any contract is that there is a "meeting of the minds" - both sides understand the terms and they voluntarily enter into those agreed upon terms. Nothing happens that wildly differs from expectations.

- - - Updated - - -

Is the interest that Captial One charging me fair?

What is the interest?

How do you believe you are being paid to use their credit cards?

When I don't carry a balance on the cards, I get a cash back reward (2% on one of the cards I have) and pay no interest.

While the stated interest is 20.9%, it will end up being significantly less given that the first 12 months of balance on the cards were interest free. Over the lifetime of the card balance, it will probably average out to about 10%.

 

[Axulus]

Entering this new industry, you are hardly their average credit card customer. Had you been opening up a new restaurant, you might be singing a different tune and I doubt you'd be paying anything off in April/May.

True, but then my expectations on what I could expect to earn from the business and when I might break even would be significantly different, and those expectations would alter my financing decisions. I would be giving up less if I brought in a new owner and I would also have more traditional financing options at lower rates available.

I don't think I've ever been at a disadvantage with the one and only credit card I've had my entire adult life. With a 12% interest, no fees, and reward points, it was only in the first year that I carried any interest charges. But, for every one of me, every one of you, there are probably hundreds of people at the other end of the spectrum making a lifetime of minimum payments on multiple cards. They may not be getting their pound of flesh out of you but they are getting it.

Regardless, maintaining good credit allowed me to borrow much more in my time of need. They had little expectation that I'd suddenly gone crazy and would maintain a long-term balance over many years and could therefore earn a bunch of money from me because of that.

 

[fast]

Walking into a pit of dangerous snakes oblivious to the dangers and escaping unharmed does not mean it's a good idea to do it again.

The danger was that something would happen to where I couldn't open up the business or the business failed and, as a result, I wouldn't be able to pay back the credit cards. I would have to declare bankruptcy but, even then, I wouldn't be completely ruined. I have a marketable skill to earn money if that happened (I'm a CPA and my skills are very much in demand).

The upside was that this allowed me to afford all the expenses for the business and still have enough to cover living expenses while we got things ready, allowing us to open and a chance for a much more rewarding job and better financial position than before.

How can you be so cavalier about the danger of risk, and you speak of bankruptcy as if it's just a potential choir in case things don't go well. What ever happened to working to save capital--and starting small and building up to where you want to be? The risk isn't just financial ... it can pour over into relationships. The stress of living beyond your immediate means by relying on debt has the potential of bringing toxicity in ways not so easily understood until one has lived it. Also, the attitude (that unfortunately others share) about the benefits of credit cards without a clear understanding of why it's very seldom that typical credit card users actually come out ahead gives people an unhealthy minimized view of the impact risk has.

Dave Ramsey would not be proud.

 

[Axulus]

The danger was that something would happen to where I couldn't open up the business or the business failed and, as a result, I wouldn't be able to pay back the credit cards. I would have to declare bankruptcy but, even then, I wouldn't be completely ruined. I have a marketable skill to earn money if that happened (I'm a CPA and my skills are very much in demand).

The upside was that this allowed me to afford all the expenses for the business and still have enough to cover living expenses while we got things ready, allowing us to open and a chance for a much more rewarding job and better financial position than before.

How can you be so cavalier about the danger of risk, and you speak of bankruptcy as if it's just a potential choir in case things don't go well. What ever happened to working to save capital--and starting small and building up to where you want to be? The risk isn't just financial ... it can pour over into relationships. The stress of living beyond your immediate means by relying on debt has the potential of bringing toxicity in ways not so easily understood until one has lived it. Also, the attitude (that unfortunately others share) about the benefits of credit cards without a clear understanding of why it's very seldom that typical credit card users actually come out ahead gives people an unhealthy minimized view of the impact risk has.

Dave Ramsey would not be proud.

I wasn't living beyond my means. I was investing in my future and it turned out about as best as I had hoped. Was it guaranteed to turn out that way? Obviously not, but sometimes we have to seize the opportunities and use the means we have available lest the opportunity pass us by. If I had waited to build up a larger savings, I would've had to work my miserable job at least another 2-3 years and live in an area that I didn't really care to live and there would've been no guarantee a similar opportunity would've presented itself any time soon. My business partner would've moved on and the opportunity to join up with him would be gone.

 

[Loren Pechtel]

How can you be so cavalier about the danger of risk, and you speak of bankruptcy as if it's just a potential choir in case things don't go well. What ever happened to working to save capital--and starting small and building up to where you want to be? The risk isn't just financial ... it can pour over into relationships. The stress of living beyond your immediate means by relying on debt has the potential of bringing toxicity in ways not so easily understood until one has lived it. Also, the attitude (that unfortunately others share) about the benefits of credit cards without a clear understanding of why it's very seldom that typical credit card users actually come out ahead gives people an unhealthy minimized view of the impact risk has.

Dave Ramsey would not be proud.

While Dave Ramsey would not be proud of his actions that doesn't mean it wasn't a reasonable risk to take.

 

[SLD]

How can you be so cavalier about the danger of risk, and you speak of bankruptcy as if it's just a potential choir in case things don't go well. What ever happened to working to save capital--and starting small and building up to where you want to be? The risk isn't just financial ... it can pour over into relationships. The stress of living beyond your immediate means by relying on debt has the potential of bringing toxicity in ways not so easily understood until one has lived it. Also, the attitude (that unfortunately others share) about the benefits of credit cards without a clear understanding of why it's very seldom that typical credit card users actually come out ahead gives people an unhealthy minimized view of the impact risk has.

Dave Ramsey would not be proud.

While Dave Ramsey would not be proud of his actions that doesn't mean it wasn't a reasonable risk to take.

dave Ramsey is a full of shit moron who knows nothing about finance. Anyone who listens to his stupid advice deserves to remain a loser. You need capital. Borrowing is the easiest and cheapest way to do so. To suggest that you have to work first and save it up is insane. Business opportunities don't wait around.

As for the OP, you don't owe Capital One anything more than what you've agreed to by contract. And if the contract doesn't prohibit it, you should see about other alternatives to pay it off at cheaper rates from other cards. You're a businessman, not a charity for banks who are nice to you. There are hundreds of ways to seriously reduce your interest exposure and you should do so.

SLD

 

[fast]

How can you be so cavalier about the danger of risk, and you speak of bankruptcy as if it's just a potential choir in case things don't go well. What ever happened to working to save capital--and starting small and building up to where you want to be? The risk isn't just financial ... it can pour over into relationships. The stress of living beyond your immediate means by relying on debt has the potential of bringing toxicity in ways not so easily understood until one has lived it. Also, the attitude (that unfortunately others share) about the benefits of credit cards without a clear understanding of why it's very seldom that typical credit card users actually come out ahead gives people an unhealthy minimized view of the impact risk has.

Dave Ramsey would not be proud.

I wasn't living beyond my means. I was investing in my future and it turned out about as best as I had hoped. Was it guaranteed to turn out that way? Obviously not, but sometimes we have to seize the opportunities and use the means we have available lest the opportunity pass us by. If I had waited to build up a larger savings, I would've had to work my miserable job at least another 2-3 years and live in an area that I didn't really care to live and there would've been no guarantee a similar opportunity would've presented itself any time soon. My business partner would've moved on and the opportunity to join up with him would be gone.

Well, it does speed things up.

On another note, I've become leery (past that point actually) of time-sensitive opportunities. Good deals that seem unlikely that'll come around soon are rarely not right around the corner.

 

[Axulus]

While Dave Ramsey would not be proud of his actions that doesn't mean it wasn't a reasonable risk to take.

dave Ramsey is a full of shit moron who knows nothing about finance. Anyone who listens to his stupid advice deserves to remain a loser. You need capital. Borrowing is the easiest and cheapest way to do so. To suggest that you have to work first and save it up is insane. Business opportunities don't wait around.

As for the OP, you don't owe Capital One anything more than what you've agreed to by contract. And if the contract doesn't prohibit it, you should see about other alternatives to pay it off at cheaper rates from other cards. You're a businessman, not a charity for banks who are nice to you. There are hundreds of ways to seriously reduce your interest exposure and you should do so.

SLD

I shopped around and Capital One offered the best deals - the interest rates I qualified for got worse as I opened additional cards, but the 12 months free interest means the average rate I pay overall isn't that bad. The 2% cash back card is the one I will continue to use regularly and pay off at the end of every month. This is the best cash back deal I have found. I'm just really glad this option was available when I needed it.

I have no intention of paying them any kind of bonus other than perhaps giving the company a good review.