An IOU is a written, informal, and non-legally-binding promise to do something for someone or give someone something.
In the business world, an IOU is usually a precursor to a more formal agreement, like a contract; the IOU acts as kind of a placeholder until the parties involve can get back to their desks and put all the formal business stuff together.
So...what do they look like? What do they say? Well, it varies. There’s no IOU standard or anything.
Say, for example, that we promised to knit 25 pineapple sweaters (sweaters with pineapples on them, not sweaters made of pineapples, to clarify) to sell at our friend’s charity fundraiser. When we get to the hall where the fundraiser will be, we realize we only have 20 sweaters. Five of them have disappeared. So we leave the 20 sweaters and scribble a note that says something like, “IOU five pineapple sweaters. Will return by noon with the goods.” Then we scramble home and search for the missing items...but in the meantime, our friend knows we didn’t just short her five sweaters and disappear into the night.
In that example, we probably don’t need to follow up with a formal written contract. We just need to deliver the sweaters by noon or risk seriously disappointing our friend. But let’s say that, instead of being a lone knitter trying to help out a friend, we actually operate a high-volume pineapple sweater manufacturing facility. And let’s say that, instead of making them for a charity fundraiser, we’re producing them for a major department store chain. And now let’s say that we’re not five sweaters short on an order, but five thousand sweaters short. That’s a problem. And we can go ahead and scribble an IOU on a crusty napkin somewhere, but there’s a good chance our buyer is going to want something a little more formal in writing to make sure they get the sweaters they’re owed in a timely fashion.
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Finance: How Do Credit Card Companies Wo...116 Views
finance a la shmoop. how do credit card companies work? you could write a
book on this but don't. it'll hurt instead think about a credit card [man carries huge book and grimaces]
company is kind of twisted moneylender who really makes money in two ways.
well first they make money from the people who take your credit cards like
when you use your credit card to lovingly pay shmoop 20 bucks a month for our
awesome content. thank you very much. that $20 charge carries about a 1% hit. from
the credit card company that is the hard-working elves here at shmoop only
keep about nineteen dollars and 80 cents from that twenty you just paid. credit [equation]
card companies need to pay for their jets right? well that one transaction was
just 20 cents but there are gujilion's of them so the dough adds up to billions
and billions really fast. unless do you think the job of being a credit card
company is easy, note that every few thousand transactions is done by some
bad actor like no different kind of bad actor. you know meaning of theif someone
behaving badly they've stolen your card and if race to Best Buy [man runs out of store carrying TV]
hoping to abscond with ten flat screens to sell on the street corner and make a
fast buck. while the credit card company is generally responsible for those
frauds against mankind and have to hunt down the bad guys .so that's one way
they make money. the other way credit card companies get paid is that they get
money from consumers who use them either directly or indirectly directly. means
something like an annual fee. and then there are charges well you know that is
if you don't pay off your credit card bill each month you carry what is called [credit card rates listed]
a balance. and on those amounts you pay huge interest. like for many buyers on
credit the fee is 15 to 20 percent per year these days and sometimes more. so if
you bought a thousand dollar television set with your 20% credit card and didn't
pay it off for three years you'd have paid $200 a year in interest for three
years or $600. do you think Visa Mastercard or Amex pay 20% interest for
the money they borrow to lend to you? hardly they pay very very low interest
rates like just a few percent in there so on the [visa employees pictured]
20% they charge you an interest to punish you for not paying off your
credit card their cost is more like 2% I either making like an 18% spread or
profit margin on that money. the 600 bucks you paid for renting the grand for
3 years from the kindly loving people at visa
Oh made visa over 500 bucks on that money nice. work if you can get it and [equation]
you know a really nice jet.
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