[HN Gopher] Anatomy of a credit card rewards program
___________________________________________________________________
Anatomy of a credit card rewards program
Author : disgruntledphd2
Score : 768 points
Date : 2024-04-04 10:35 UTC (12 hours ago)
(HTM) web link (www.bitsaboutmoney.com)
(TXT) w3m dump (www.bitsaboutmoney.com)
| isodev wrote:
| The AI generated cover image was kind of distracting to be
| honest. If having a full-screen image to go with the post was so
| important, one would have contracted a designer or just purchased
| something cool.
|
| The post was informative though.
| madeofpalk wrote:
| in 2013 we had generic unsplash bokeh-rich images for blog
| posts. Now, we have generic AI generated images. There's not
| _that_ much different. I agree - in both cases they 're fairly
| distracting.
| ghaff wrote:
| The common wisdom among a number of publications I've written
| for is that you need some sort of graphic, even if generic,
| mostly for reasons of social media sharing (and, these days,
| because a lot of blog templates assume a post has an image).
|
| Those publications usually had a contract with some provider
| of public domain or CC-licensed fairly generic graphics.
| Waterluvian wrote:
| You don't like the upgraded variety of kings or the brand new
| bishopknoght that can move in a W shape?
| pcl wrote:
| The bishopknight beast is my favorite for sure!
| vinni2 wrote:
| I also wonder if in future search engines would rank pages
| containing AI generated images or content lower.
| vouaobrasil wrote:
| It would be great if they were not ranked at all and
| discarded.
| add-sub-mul-div wrote:
| The search engine companies are the ones shoving AI down our
| throats the hardest because they're the ones set up to profit
| most from it.
| supertrope wrote:
| Google cites the problem of LLM powered SEO spam. They were
| very careful to avoid saying "AI" or to mention who developed
| this new technology.
| https://arstechnica.com/gadgets/2024/03/google-wants-to-
| clos...
| MOARDONGZPLZ wrote:
| The image content and size is annoying, agreed, but I imagine
| that, like myself, they would go without an image if it meant
| contacting a designer and spending time negotiating rates,
| ideating on designs, and waiting on project completion. It
| takes seconds and is free to generate a neat image with AI that
| can be very additive to something like this, but unless you're
| NY Times or WSJ doing a long form article, it's probably
| unreasonable to expect anyone to get something explicitly
| designed and paid for in this context.
| isodev wrote:
| Well, in that case I'd say it's better to publish a post
| without a cover image. There are plenty of websites that
| offer the choices between high-quality, royalty-free images
| or make it easy to buy one.
| ggpsv wrote:
| I believe the parent was hinting at the other possibility:
| not use an image at all.
|
| When I see these AI-generated cover images in posts I'm left
| with a bad taste in my mouth. They look "ok" when glanced but
| pay more than a second of attention and they're terrible and
| uncanny.
|
| If you truly care about the image's place in relation to the
| post, you'd go through the process that you mention and most
| likely you will end with a chess board and piece set that
| make sense, as opposed to whatever the image in the OP
| actually represents.
|
| I agree with the folks behind iA Writer on this:
|
| > Average AI images drag down everything around them. An AI
| hero image is a comedian opening the show with a knock-knock
| joke. Good images enrich your article, bad images steal its
| soul.
|
| [0]: https://ia.net/topics/ai-art-is-the-new-stock-image
| pavel_lishin wrote:
| > _it's probably unreasonable to expect anyone to get
| something explicitly designed and paid for in this context._
|
| Besides the obvious answer of "then don't use an image", they
| could also use a stock image.
| wavemode wrote:
| It also takes seconds, and is free, to Google for copyright-
| free photographs.
|
| What do you think people were doing before Dall-E came along
| lmao
| nkurz wrote:
| An interesting article, but it doesn't sufficiently emphasize the
| lede: When you use a reward card, the merchant is charged a
| higher fee than if you used a "normal" card. Simply by putting a
| different branding on the plastic you pay with, the credit card
| issuer gets more money from each transaction.
|
| The article goes on to ask the question "Why isn't every card a
| rewards card?", meaning why doesn't every card pay cash back, but
| I think the more interesting question is why every card isn't
| branded in a way that makes the issuer more money. Why do they
| bother to issue cards where they get paid less? Why not brand
| every card as a "Signature Preferred" and then pocket the money
| instead of giving it to the less discerning customers?
|
| And the most interesting question only gets a handwave: "The
| basic intuition underlying rewards cards as a product is that
| highly desirable customers have options in how they spend their
| money." But how far does this go in explaining why merchants
| "choose" to participate in this program. The obvious answer would
| seem to be that they get no benefit from the system as it exists
| but have no real choice, but maybe there is a better answer?
|
| I liked the topic, but wished the author could have given more
| insight on what's happening behind the scenes to produce the
| outcome we see.
| twoodfin wrote:
| The answer is that the system doesn't work if a 3%-fee card
| isn't held by a low-risk, high-spend rich person. Indeed if
| that weren't the case, merchants would reject the tiered fee
| structure.
|
| (This is also the answer as to why in the absence of
| regulation, exchange fees aren't higher than they already are.)
| ptero wrote:
| Sorry, can you explain why the high spend is important? What
| is the benefit of a low risk buyer having a single card vs
| three different cards?
|
| Low risk is clear -- the lower the risk the more money is
| left, after handling problems, for the rebates and profits.
| kasey_junk wrote:
| Interchange. The fees go directly to the issuer not the
| network (which collects much smaller scheme fees). If you
| have 3 cards they'd almost certainly be for 3 different
| issuers so they'd split the interchange. Making you less
| valuable.
| robertlagrant wrote:
| > for the rebates and profits
|
| And salaries and pensions, etc.
| twoodfin wrote:
| In this context, it's important to the merchants: They want
| these customers, so they grit their teeth on the higher
| interchange fees demanded by the banks. If the banks
| started handing out these cards to everyone, the merchants
| would revolt.
| nordsieck wrote:
| > the system doesn't work if a 3%-fee card isn't held by a
| low-risk, high-spend rich person
|
| There's many rewards cards that require an annual fee (which
| encourages a high spend to recoup the fee with rewards). But
| there are plenty of 1.5%-2% cards with no annual fee. You
| just need a good credit score.
| scarface_74 wrote:
| Almost every card with an annual fee has enough credits and
| perks to offset the annual fee without spending any money.
|
| The second and third tier Delta cards come with a $250 and
| $650 Annual fee.
|
| The second tier card (Delta Platinum) has an annual fee of
| $350. But it comes with a $150 Delta Stays credit for
| hotels and one round trip an economy companion pass -
| basically buy one get one free - for any place in the US,
| Mexico, Central America or the Caribbean.
|
| The higher end Delta Reserve comes with similar benefits.
| But a first class companion pass. If you never use either
| card except for the credit, the benefits more than offset
| the annual fee. The Reserve also comes with airport lounge
| access
|
| I have three Delta cards just for those benefits.
|
| I could explain the Amex Platinum, Gold, Green, every
| cobranded hotel card, the high end Capital One cards the
| same way.
|
| The credit card companies as the article says are betting
| that the typical customer will use credit cards in a
| suboptimal manner. They are banking on most credit card
| users not to be like the typical r/creditcards users who
| carry 6-8 credit cards including "sock drawer" cards that
| are just held for the outsized benefits to annual fees and
| aren't their primary cards.
|
| My wife and I travel a lot and yes I have nine cards and
| $2700 worth of annual fees. Most of those cards are "sock
| drawer" cards that are just used because the "coupons" make
| travel cheaper.
| ghaff wrote:
| You need the right spending pattern and you need to
| manage the card rewards. When my travel went way down, I
| dropped a couple cards though I keep a pretty low-cost
| United cobranded card to basically keep me with some
| semblance of status. But things like airline club
| membership just weren't worth it any longer.
| scarface_74 wrote:
| I agree completely and I didn't even discuss the entire
| "churning" strategy where there is an entire cottage
| industry, a subreddit and a flowchart discussing how to
| get sign up bonuses and how to get the best return.
|
| (I am not affiliated with this site in any way)
|
| https://www.offeroptimist.com/
| bombcar wrote:
| At some point the maintenance becomes too complex and
| people just either use the card or eat the fee.
|
| They know exactly how many do this. The people who churn
| are just free advertising for them.
| scarface_74 wrote:
| Is it worth it for someone who likes to travel, and wants
| to save for retirement and never wants to "work for a
| FAANG" (again) like in my case? I would say so.
|
| Just from the cash savings of my card setup, I would say
| it's worth $3500 that offsets the $2700 in annual fees.
|
| Then take into account the points I earn from everyday
| spend is worth another $3000-$5000 depending on how I
| choose to redeem them (see r/awardtravel).
|
| Then take into account sign up bonuses and churning, I'm
| planning on doing over the next year worth around $5000.
|
| It's the only way that I can balance our travel hobbies
| with my goals of maxing out my 401k including catch up
| contributions (I turn 50 this year), max out my HSA and
| not use it and "retire my wife" so she can enjoy her
| hobbies.
|
| This hobby isn't just for people with above average
| incomes. If you are steeped in the culture, you can lean
| more toward churning and legal manufactured spending
|
| https://frequentmiler.com/manufactured-spending-complete-
| gui...
| bombcar wrote:
| Ah, for the era of buying dollar coins and flooding your
| bank with them. Brings back memories.
| brewdad wrote:
| The other benefit the Delta AmEx (and I presume other
| AmEx cards) gives are the various merchant discounts. In
| the past year I've gotten statement credits totaling
| about $600 by using the card to pay for various streaming
| services, shoes and clothes, certain restaurants and even
| my utility bill. The offers rotate every few months but I
| make sure to scan them when I login to view my statements
| and activate any of them I think I might use.
|
| All of these things were items I was already using or
| would have purchased anyway and the discounts stack on
| top of any available merchant coupons too since they are
| credits coming straight from AmEx.
| jasode wrote:
| _> But how far does this go in explaining why merchants
| "choose" to participate in this program. The obvious answer
| would seem to be that they get no benefit from the system as it
| exists but have no real choice, _
|
| Some merchants like Amazon, Target, Home Depot etc do want the
| ability to refuse the "rewards cards" with higher fees but
| can't because of the current contracts they have for credit-
| card acceptance. If a merchant signs a contract to accept VISA
| cards, they _must accept all VISA cards_ and therefore can 't
| selectively choose to reject some VISA cards because of higher
| swipe fees.
|
| https://thepointsguy.com/news/retailers-want-to-reject-rewar...
|
| https://www.google.com/search?q=merchants+want+to+refuse+rew...
| kasey_junk wrote:
| Large merchants also pay much less for interchange generally.
| bombcar wrote:
| Small merchants negotiate with Stripe for a flat fee to
| accept all cards. Big merchants negotiate with the networks
| and pay varying prices for varying rewards amounts (or
| however they get the deal structured).
| scarby2 wrote:
| Interestingly my flat fee with stripe is less than my
| reward rate on my credit card for some categories. It
| obviously is against the contract terms and probably
| considered fraud but I could theoretically make about
| 1.4-3 cents on the dollar (depending how you value
| points) by charging myself money.
| ska wrote:
| This comes up in the article.
| illusive4080 wrote:
| If only Walmart would take contactless payments.
| jen20 wrote:
| Presumably they do not because they want to track you via
| your credit card number, and permitting Apple Pay (maybe
| others too) would hinder that.
| illusive4080 wrote:
| I presume the same.
| c0wb0yc0d3r wrote:
| I always rate my experience 1 star when checking out at
| Walmart because of this. Probably won't change anything,
| but I feel I can't just stop going to Walmart because
| then Amazon is the only place left. Which is also fucked
| up but let's stay on topic.
| vel0city wrote:
| It's more that they want to try and convince people to
| pay with Walmart's own lower-cost (to them) app if you
| want to do contactless payments from your phone. If they
| made it easier to use Apple Pay, why would anyone ever
| use their app?
| tzs wrote:
| Why would paying with the Walmart app be lower cost to
| Walmart? Both the Walmart app and Apple Pay are
| essentially, as far as payments go, just digital wallets
| that you can store credit card information in.
|
| When you use them it is still a charge to one of those
| credit cards.
|
| It might actually cost Walmart more in my case, because
| the card I have on file has larger rewards for online
| purchases than it does for in-store purchases, and the
| Walmart app processes purchases as online even when made
| in-store. If I pay with the physical card it is processed
| as in-store.
| bombcar wrote:
| Apple Pay is just as traceable if they want it to be.
|
| They're just stubborn and want people to use their option
| (and card, if possible).
|
| As it is you can load any credit card into the Walmart
| app and pay by pointing the "check price" barcode camera
| at the screen.
| jen20 wrote:
| > Apple Pay is just as traceable if they want it to be.
|
| [Citation Needed].
|
| On the other hand, stores like that probably already do
| facial recognition on customers, so it really is just
| intransigence to not allow contactless payments.
| andrewaylett wrote:
| Apple Pay and Google Pay have their own virtual numbers,
| rather than using your regular card number, but the
| number doesn't rotate.
|
| For example, our local bus company can quite happily
| offer capped daily and weekly fares when folk use the
| same device to pay.
| jen20 wrote:
| Your local bus company isn't trying to correlate your
| activity across multiple retailers to try to squeeze an
| extra few cents of value from you, though.
| supertrope wrote:
| The device account number does not rotate with every
| transaction. You have to unlink your device from your
| credit account and re-enroll to do that.
| bombcar wrote:
| See https://birchtree.me/blog/digital-wallets-and-the-
| only-apple... - the DPAN stays the same at a particular
| merchant, so Walmart sees all but can't necessarily
| directly "know" what you're buying at other stores.
| yoshamano wrote:
| It has more to do with making Walmart Pay the only
| contactless option to drive adoption of their mobile app.
| ghaff wrote:
| I confess that I don't understand what the big deal is. It
| takes 5 seconds to slide the card into the machine.
| Personally, I find fumbling with my phone takes longer as
| does figuring out where the reader wants to tap the card if
| I'm not familiar with that particular store's system.
| aembleton wrote:
| It means you've got to take the card with you.
| ghaff wrote:
| Some of it may be that if I'm in a store, I've almost
| certainly driven there so I probably have my (small)
| wallet with me.
| wincy wrote:
| I use Walmart pay with their app. But then again we've
| totally given up buying off Amazon and do grocery pickup
| or delivery from Walmart. For 90% of items this is faster
| than we'd get it from Amazon.
| brewdad wrote:
| How often do you find yourself somewhere with your phone
| but not your wallet?
| sofixa wrote:
| > I don't understand what the big deal is. It takes 5
| seconds to slide the card into the machine
|
| For most people, there's the time to get their wallet or
| equivalent out of pockets or purses, fiddle to get the
| card, put it the correct way and swipe (but not too fast
| or too slow!). Vs a phone/watch tap which is usually much
| more convenient.
| ghaff wrote:
| I guess it's what you're used to. I have a small wallet I
| carry in a front pocket, haven't had to _swipe_ a card in
| ages, and it takes 5 seconds to insert the card.
|
| Maybe if I wore my Apple Watch more, I'd get used to
| using it but the card just seems more straightforward in
| general. Maybe I'll insert and maybe I'll tap. I'm pretty
| indifferent.
| kingrazor wrote:
| It would take me just as long to get my phone out of my
| pocket as it would to get my wallet out. Plus a lot of
| machines have tap pay now if your card supports it.
| lolinder wrote:
| > Personally, I find fumbling with my phone takes longer
| as does figuring out where the reader wants to tap the
| card if I'm not familiar with that particular store's
| system.
|
| Aren't both of these just symptoms of unfamiliarity with
| the tech?
|
| I resisted phone payments for a while, until one day I
| forgot my wallet and quickly added a few cards to my
| phone. Now I'm severely tempted to use it more often--my
| phone has a wallet button on the lock screen that jumps
| me straight there ready to pay with my default card. I've
| definitely experienced some friction the two times I've
| used it, but it seems pretty clear that that friction is
| temporary while I'm still becoming familiar with it.
| seanw444 wrote:
| Even then, I can tap with the card, which tends to
| register faster than inserting too. No garbage
| proprietary software required to be installed on my
| phone, and I still get contactless.
| tcmart14 wrote:
| I like contactless just because for some reason, my cards
| always get beat up and the chips become problematic on my
| cards after about a year. They just sit in my wallet. But
| half the time I go to pay with my card, I have to dip
| twice because the first time, the chip reader always says
| it is unable to read the chip.
|
| I've also had issues at Walmart where I know some lanes
| to flat out avoid because the chip readers will always
| reject my card for unable to read the chip. With my
| phone, this isn't an issue. Even if I get a new card,
| wait 8-12 months and its the same problem again.
| lupire wrote:
| You can do contactless on your card.
| tcmart14 wrote:
| If your bank issues you a card with it. I got a new card
| about 6 months ago, doesn't support contactless.
|
| But I am aware that the cards exist and I am not opposed
| to it. With contactless I am fine with it being on my
| phone or card. But I gotta have a card that has
| contactless to be able to use it.
| turtsmcgerts wrote:
| You know what would be more durable - a 4'' solid
| aluminum emv chip shaped coaster. Check us out at
| aluminum.finance pw 'aluminum' and let me know what you
| think!
| illusive4080 wrote:
| I use it on my watch. Double click the side button even
| when my watch is under a jacket and just hold it in the
| vicinity of the reader. It's very easy once you get used
| to it.
| mdaniel wrote:
| > It takes 5 seconds to slide the card into the machine.
|
| It sure does, and then 45 seconds while the machine ...
| thinks about life, and then 15 seconds for it to say
| "chip read error, reinsert card" and then another 45
| seconds for it to reconsider the nature of reality, and
| then listening to a fire alarm sound that they chose for
| the _success_ alarm. Excellent UX, no notes
| StevePerkins wrote:
| Same, and I note that the OVERWHELMING majority of other
| customers that I see at the grocery store or Target are
| still inserting plastic credit cards into the readers (I
| do think swiping is going extinct though, as the readers
| push you to insert instead).
|
| However, this is HN and not at all typical of the U.S. or
| world overall. Even though we frequently lose sight of
| that.
| TimPC wrote:
| This is actually the reason lower fee cards exist. If every
| card had a 5% transaction cost no merchant would sign up for
| that card brand. If the merchant is convinced their average
| transaction cost will be lower because some of the cards will
| be cheaper you can get away with some expensive cards.
| ajdude wrote:
| And this is why many small businesses in my area don't
| accept American Express cards full stop. Some don't even
| accept Discover.
| Iulioh wrote:
| Here in Europe I see AE accepted only for digital goods,
| high margin stuff or international (read American)chains
| sofixa wrote:
| American Express has really targeted the French market,
| there are all sorts of small stores (like bakeries,
| pharmacies (not American pharmacies - only medicine and
| very closely related stuff like creams and diapers) and
| similar size) with proud "Amex accepted here" signs.
| There was even an Amex program a few years back giving
| 5euros back on transactions of more than 20 euros in
| small shops like that.
| i80and wrote:
| This is interestingly regional: in the part of NJ where I
| live, every small business has an Amex "shop local"
| sticker on their front window
| brewdad wrote:
| AmEx has worked hard to keep their home turf around New
| York City friendly to their cards.
| mym1990 wrote:
| I thought(maybe ignorantly) that a lot of merchants
| didn't like Amex because it was so easy for customers to
| dispute transactions.
| JKCalhoun wrote:
| Are they bound by contract not to offer a discount for casher
| buyers?
|
| I ask because when I was in Germany (and, granted, this was a
| few decades ago) you got some percent off the price if you
| paid cash. Merchants there seemed pretty credit-card averse.
| gtirloni wrote:
| Where I live it'd used to be possible to get a discount if
| you paid cash but it was deemed discriminatory against card
| holders and so it was banned. It's the same price
| regardless of payment method.
| posix86 wrote:
| It removes the incentive for clients to use cash if a
| card option is available, makes them more used to paying
| by card, and hence decreases the competitiveness of
| merchants that don't offer card at all - until cards
| become so wide spread that many merchants don't even
| accept cash at all, like where I live.
|
| A bit hostile towards merchants, but very nice for
| consumers imo.
| oarsinsync wrote:
| > A bit hostile towards merchants, but very nice for
| consumers imo.
|
| It's nice for consumers who prefer to pay by card. It's
| hostile towards consumers who prefer to pay in cash.
| red-iron-pine wrote:
| That's still a thing in Canada and the US in various
| places, generally "mom and pop" run business.
|
| Credit card fees for small orgs are like 1-2% so for a
| small biz that could pinch. Cash also lets you, uh, "fudge"
| your numbers for tax purposes.
| i80and wrote:
| There's a good sushi place near me that gives a _10%_
| discount for cash. I 'm fascinated by this.
|
| (I still use a card because life is short)
| Tijdreiziger wrote:
| That may just be good old-fashioned tax evasion.
|
| (If you pay cash, the business owner can just pocket the
| money without ever recording the transaction. For digital
| payments, this is much harder to do undetected.)
| lupire wrote:
| It's tax evasion.
| 725686 wrote:
| First comment I see that addresses this. This is a big
| part of accepting and paying cash. Tax evation. From both
| sides.
| photonbeam wrote:
| Unrecorded cash payment makes it much easier to pay
| undocumented staff
| JosephGuerra wrote:
| Yeah I often see small print on the fuel cost per gallon
| as "cash price" .. I assume this happens mostly on low-
| margin products.
| consp wrote:
| Which is the reason the cut is now capped and card
| acceptance is higher, even for credit cards (0.3% for cc,
| 0.2% for dc). Though low-margin businesses like grocery
| store still don't accept them (credit cards) due to the
| marginally higher fees in some countries.
| bombcar wrote:
| They used to be but the law was changed to make it illegal
| for the card companies to demand that they don't offer a
| cash discount (or charge more for credit). Smaller
| businesses are doing that more and more since the pandemic
| to try to hold to their prices as long as they can.
|
| Big companies do a similar thing by offering you a store
| card. Costco likely makes _more_ money from you when you
| pay with your Costco card than if you pay cash, because
| they get the interchange fee very very low and have to pay
| to handle cash. Rumor was AMEX was eating the interchange
| fee AND paying them ... because they more than made it up
| by the customers who made the card Top Card.
| joshuaissac wrote:
| In the EU, the opposite of this happened: the EU
| directive PSD2 made it illegal for merchants to apply
| surcharges on purchases using consumer credit and debit
| cards from early 2018.
| graemep wrote:
| I thought this was a UK govt being stupid thing. So it
| was the EU to blame!
|
| Given what this article says, it sounds as though not
| only are cash buyers cross-subsidising card buyers, but
| non-rewards card buyers are cross subsidising rewards
| card buyers.
|
| So much for free markets.
| Spooky23 wrote:
| They can do it now. In the past you had to offer same
| prices, although you could negotiate.
|
| It's usually motivated more by mom and pops skimming taxes
| than 3% credit card fees. If you do any kind of volume,
| there isn't a ton of savings as cash management ain't free.
|
| The electronic equivalent is people who take personal Venmo
| at retail.
| mminer237 wrote:
| They used to but got sued over it, and in 2012 settled it
| partially by ending the practice:
| https://www.barclaydamon.com/alerts/What-the-Credit-Card-
| Set...
| brk wrote:
| All the CC contracts I have ever seen only prevented you
| from discriminating against a particular card/brand if you
| took credit cards. You could offer a cash discount as a
| policy, but you couldn't charge AMEX holders an extra 1%,
| as an example.
| alexchamberlain wrote:
| It's pretty expensive to take cash. First, you have to keep
| a float of money for change. Then you have to secure the
| cash until you deposit it in the bank. Then sink some time
| into counting and depositing it, before being charged by
| your bank for depositing cash. That must very quickly add
| up to a percentage point or 2.
| ensignavenger wrote:
| What I want to do is pass on the exact processing fee to my
| customers, then they can choose their payment method based on
| how much it is going to cost them. I might then choose to
| cover a portion of the fee for electronic transactions,
| because they mean I save money vs processing cash. But the
| customer would pay the excess.
|
| I would need a system that can display to the customer what
| fee they would be charged with their selected payment method,
| and be given an option to switch to a less expensive payment
| method.
| i80and wrote:
| Some donation platforms do this! They show and add on the
| processing fee for VISA/MC and Amex separately, and Amex is
| a little higher.
| ensignavenger wrote:
| Do they account for the different interchange rates on
| different classes of cards within a processing network?
| Not every merchant will want to be that granular, but I
| think it is worth it for big ticket items.
| tzs wrote:
| I don't think most merchants have the option to be that
| granular. I believe that most payment processors only
| provide a simplified view of interchange rates (and other
| fees) to all but very large merchants.
|
| For example Braintree is 2.59% + $0.49/transaction, plus
| 1% if non-USD and 1% if the card was issued outside the
| US.
|
| They used to split transactions into two tiers, based on
| how much the actual interchange and other fees were, and
| you monthly bill as a merchant would show charges for
| each tier. Within each tier the charge to the merchant
| was a fixed percentage and a fixed transaction fee. There
| was no good way for the merchant to know ahead of time
| which tier a given charge would fall under, although they
| could guess that a high rewards card was more likely to
| fall into the higher fee tier.
| briandear wrote:
| They should A/B test this. My theory is that this creates
| some amount of friction. I was all set to donate $100,
| but now I have to go find my debit card or figure out
| some bank transfer nonsense and by the time I get back
| (if I get back) my motivation to donate has diminished.
|
| Donation platforms ought to do some analytics on this. If
| I'm giving money, I want it to be simple without
| requiring me to second guess.
|
| If a donation platform takes Apple Pay, the friction is
| even less. I don't want to fill out your stupid long
| form, create a password, share my address or whatever.
|
| But, I'm one person -- this might be an interesting
| Masters thesis topic to study the behavioral economics of
| donation platforms.
| astura wrote:
| What I've personally seen is a checkbox, you put in your
| donation amount and then you can check/uncheck "cover
| processing fees."
|
| Found an example - https://donorbox.org/nonprofit-
| blog/donors-to-cover-processi...
| ryandrake wrote:
| It's already impossible in the USA to know what you're
| going to pay for something until you get to the checkout
| line. This just makes it worse.
|
| Why not go even further? Itemize the marginal cost of
| maintaining your property's parking lot for those customers
| who visit your business by car? Charge customers a "store
| heating fee" in the winter? Customer support fee if they
| talk to anyone? Just as ridiculous. Processing credit cards
| is just one of many costs of doing business that you need
| to account for when you price your products.
| ensignavenger wrote:
| I can give discounts to customers however I want to,
| thank you. As long as the customer knows what card they
| are going to use, they know exactly what the cost will
| be. I am all for posting sales tax rates as well as any
| transaction processing fees at the door, too, though.
| zoky wrote:
| No thanks, I'm just gonna go to the grocery store down
| the street where they don't make me do linear algebra
| just to buy a box of Froot Loops.
| miki123211 wrote:
| > Itemize the marginal cost of maintaining your
| property's parking lot for those customers who visit your
| business by car
|
| This isn't that uncommon, quite a few places in Europe do
| this actually.
|
| Usually there's a barrier at the parking lot entrance.
| You get a ticket when entering, which you then have to
| put in a machine when leaving. The machine calculates
| your fee based on how long your car was parked. Modern
| systems are far more automated and use license plate
| readers instead.
| lupire wrote:
| They eliminates your ability to advertise prices honestly,
| without overwhelming your customers with detail that will
| distract them.
| quasse wrote:
| ... So just like US sales tax already does? I'm not
| saying it's a good system, but I'm already paying some
| random amount on top of the sticker price for everything
| I buy, depending on what state, county, and city I'm in
| at the time.
| ensignavenger wrote:
| I will clearly state which payment methods are free and
| which ones the customer will pay a conveniance fee or
| recieve a discount if they use. I will clearly show the
| customer at checkout what their total is with their
| chosen payment and shipping (if applicable) options would
| be, and give them the opportunity to change their
| selection. It is about customer choice and convenience.
| You are welcome to shop somewhere else that bundles these
| expenses into the price of the item and givea you no
| choice in avoiding them.
| brewdad wrote:
| I can only speak for me, but if I have to do that much
| mental math to figure out the best options to pay or see
| a bunch of random (to me) fees and adjustments at
| checkout, I'm leaving and going somewhere else. It feels
| scammy even if your goals are noble.
| AnthonyMouse wrote:
| If the sign said you pay 5% for AmEx, 4% for Visa and 0%
| for cash, you don't have to do any arithmetic to see
| which number is smaller.
| ThunderSizzle wrote:
| What's the fee for counterfeit cash? Or illegally gained
| cash?
|
| What's the fee for cash the requires quite a bit of
| change? What's the fee for cash that is composed of very
| small values (e.g. quarters and dimes for a tv)?
|
| It's interesting that all of these complications are
| ignored entirely when pricing payment methods. Handling
| cash isn't free and carries risk.
| AnthonyMouse wrote:
| > What's the fee for counterfeit cash? Or illegally
| gained cash?
|
| What's the fee for credit card chargebacks from stolen
| cards, or chargeback fraud from customers who receive a
| product and then dispute the charge anyway?
|
| > What's the fee for cash the requires quite a bit of
| change?
|
| There are machines that count coins and issue exact
| change. If you do a lot of cash business, you buy one.
| For example, the self-checkout machines at Walmart do
| this.
|
| The largest denomination still issued for US cash is
| $100, so no cash transaction will require more change
| than this, and some merchants don't accept large bills
| for small transactions.
|
| > What's the fee for cash that is composed of very small
| values (e.g. quarters and dimes for a tv)?
|
| How often do you think that actually happens?
|
| Also, how are costs like this to be avoided unless you
| stop accepting cash whatsoever, and thereby lose
| business? Just eating the credit card fees instead of
| passing them on isn't going to stop someone with a jug
| full of nickels from wanting to spend them.
|
| > Handling cash isn't free and carries risk.
|
| Nothing is free. How about the time value of money for
| the time it takes for the credit card companies to pay
| you, as opposed to cash which you can immediately spend
| or deposit and begin collecting interest on?
|
| The issue is that credit card companies have the usual
| set of costs and then on top of that charge significant
| transaction fees and shift the cost of various types of
| fraud to the merchant even though they're the ones who
| designed the system that makes it easy to carry out.
| briandear wrote:
| Or just make your prices have the credit card fees built
| in just like normal businesses. Your system is a ton of
| work for very little benefit to anyone and it's probably
| lowering your revenue and it's as annoying as places that
| charge for takeout containers -- missing the point that
| takeout containers encourage people to buy more food.
|
| It's an unsophisticated approach to business. That's why
| it's common in mom and pop places -- mom didn't go to
| business school and pop is tripping over dollars to save
| a nickle -- they see the "expense" but they can't see the
| revenue that aren't getting.
|
| There is a reason most small restaurants fail -- they
| don't know how to be more profitable. So they start to
| add on these little fees when they begin to struggle and
| don't realize that they're making the problem worse. In
| other words, most people that start restaurants don't
| know what they're doing in the back office even if
| they're great in the kitchen. Restaurants fail for many
| reasons, but not controlling costs is the biggest --
| however, they're naively choosing to control the wrong
| costs.
|
| One of my good friends owns a chain of 30 Tex-Mex
| restaurants in Texas. After several burglaries of the
| safe at several locations, they went cashless at some
| locations. The cashless locations, without exception, saw
| sales increase by over 12%. He quickly made all of his
| stores cashless and sales increased among all stores. My
| anecdote isn't data -- but there is plenty of data out
| there.
|
| The credit card surcharge scheme is endemic among small
| business owners who actually haven't done the math. Or,
| more accurately, they're doing the wrong math.
|
| Credit card users spend more than cash users. So you make
| up for the "savings" with lower sales volume. And credit
| card users that have to pay higher prices will go
| elsewhere. Or, if they pull out cash, they'll spend less
| of it.
|
| https://www.nature.com/articles/s41598-021-83488-3
| AnthonyMouse wrote:
| > Your system is a ton of work for very little benefit to
| anyone
|
| It has the obvious benefit of discouraging people from
| increasing your costs with rewards cards. Keep in mind
| that businesses often have net margins in the vicinity of
| 5% of revenue. Paying 3% of revenue or more to the credit
| card company is heinous.
|
| And what work is there to do? The calculation is done by
| a computer. If your attitude is "just price in the cost"
| well then there you go, you can pay the true cost of the
| card you have without even looking at the alternatives.
| Whereas if you want to get the lowest price then you have
| to figure out which card has the lowest price. Removing
| your option to do this is not going to save you money,
| it's just going to cause you to pay the higher price at
| all times, which you still have the choice to do.
|
| > they see the "expense" but they can't see the revenue
| that aren't getting.
|
| Increasing sales by e.g. 15% while decreasing net profit
| by up to 60% is often not a fantastic business decision.
|
| > Credit card users spend more than cash users.
|
| Which is why you accept them but provide a discount for
| the people who don't use them and thereby don't expose
| you to their fees.
|
| > And credit card users that have to pay higher prices
| will go elsewhere.
|
| But they're not higher prices. Restaurant A charges
| however much to everyone. Restaurant B charges exactly
| the same amount to people who use credit cards and a few
| percent less to people who pay cash. The people who
| insist on using credit cards can go to either place and
| pay the same amount, anyone willing to pay cash can get a
| discount at Restaurant B.
| carlosjobim wrote:
| Do you actually want to do that? When a customer wants to
| make a purchase, I think it is best to get the hell out of
| their way and not go stand between their wallet and your
| wallet, blocking their money and yapping about fees or some
| other completely unimportant stuff.
| CydeWeys wrote:
| Can't you just print up a sign for this?
|
| I've seen signs that say stuff like "Prices listed are for
| cash, 3% surcharge for credit cards."
|
| How many different fee tiers are you as a retailer really
| trying to charge?
| morpheuskafka wrote:
| That would cause a massive customer support and frustration
| problem as regular customers don't know or care how their
| card is classified and would complaint that it doesn't work.
| This would affect both the merchant and the issuer
| negatively.
| matthewdgreen wrote:
| The only thing I would add to your comment is that _merchants_
| aren't the ones being forced to pay these stupid fees, it's
| their customers (and primarily their poorer and often non-card
| using ones) who are being quite heavily taxed to fund a
| marketing scheme for rich customers. Most competitive
| businesses can't afford to fund such an elaborate targeted
| marketing campaign directly out of their fees without some
| competitive pushback: hence the actual question you should ask
| is why the entire system exists, and the answer has to do with
| a pile of inefficiency and rent collection based on regulatory
| capture.
| gosub100 wrote:
| While we're in this topic: why is unsecured credit card debt
| NOT tax deductible but secured debt like HELOC is?
|
| Fwiw I don't really care what the technical reason is, it's a
| rhetorical question to add to the ways the credit system
| holds back the poor.
| gruez wrote:
| > While we're in this topic: why is unsecured credit card
| debt NOT tax deductible but secured debt like HELOC is?
|
| AFAIK it's a carve out specifically for houses. Car loan
| interest isn't deductible despite being "secured".
| judge2020 wrote:
| It's a bargaining chip to get votes. If one party
| promises a larger tax saving on homes, then homeowners
| are more likely to vote for them.
| dboreham wrote:
| Besides that, there _may_ be some societal benefits to
| increased home ownership.
| ghaff wrote:
| As I understand it, mortgage interest deductibility was
| originally basically social policy (rightly or wrongly).
| And you can't take a benefit like that away--even if the
| government kind of did for most people by increasing the
| standard deduction. (Which was probably not a terrible
| way of doing so.)
| lotsofpulp wrote:
| The population likely to use HELOCs votes more and/or is
| more populous, so they have more votes.
|
| Same reason Medicare (old people) pays healthcare providers
| more than Medicaid (young and poor people).
| scarface_74 wrote:
| The real estate lobby is the largest lobby in the US.
| robertlagrant wrote:
| > the ways the credit system holds back the poor
|
| It would be good to understand this better. Doesn't
| everyone use a credit card? Not just the poor? Who are the
| poor in this case? Are tax deduction rules anything to do
| with the credit system?
| gosub100 wrote:
| Are you aware that merchants charge more for goods and
| services so they can offset CC merchant fees? Even a cash
| paying poor person who cannot get a CC is paying for
| this.
|
| My comment is to show another way this is perpetrated.
| People saddled with CC debt could dig themselves out
| faster if they could write off interest.
| NovemberWhiskey wrote:
| People who are encumbered by credit card debt are usually
| people who would still be better off taking the standard
| deduction these days.
| bombcar wrote:
| Exactly. It sounds harsh but those encumbered with
| usurious credit card debt would be better served by being
| forbidden from having it at all; but that's a position
| strongly fought against on all sides.
| robertlagrant wrote:
| > Are you aware that merchants charge more for goods and
| services so they can offset CC merchant fees?
|
| Well, some places add on a fee, but yes, agreed, some
| places apply a blanket charge. I don't see how this
| relates to the tax deduction.
|
| > Even a cash paying poor person who cannot get a CC is
| paying for this
|
| This is about a tax deduction. Are you saying someone who
| can't get a credit card is going to be meaningfully
| affected by a tax deduction?
|
| > People saddled with CC debt could dig themselves out
| faster if they could write off interest.
|
| This is true, but also the giant number of people who
| just chose to get into credit card debt would be paying
| less tax. If you want to make credit cards into
| effectively interest-free loans then that might cause
| issues.
| gosub100 wrote:
| > but yes, agreed, some places apply a blanket charge. I
| don't see how this relates to the tax deduction.
|
| Earlier you asked me to explain how credit cards harm the
| poor. I showed you, and now you complain that it doesn't
| pertain to a tax deduction. It's not about a singular
| thing. The singular thing was one token example of a
| larger theme that for some reason you refuse to
| acknowledge.
| nfriedly wrote:
| Granting a tax credit for something encourages that thing.
| So, from that perspective, I think it makes some sense to
| grant a tax credit for mortgage interest but not credit
| card debt.
| edwr wrote:
| Tax credit for mortgage interest encourages speculative
| investment in the housing market. Tax credit for credit
| card debt encourages consumer economic activity.
| red-iron-pine wrote:
| you have to live somewhere.
|
| maybe you rent, but renters DGAF about the local
| community the way that homeowners do.
|
| home (property) taxes also fund a lot local services,
| schools, etc. you want prices higher and stable, and not
| dominated too heavily by mega-corps that will weasel out
| of paying said taxes.
| i80and wrote:
| I've rented in my town for ten years, and I care about it
| a lot thank you very much.
|
| Renters absolutely care about the local community.
| mwexler wrote:
| Though one can write off losses from gambling in the US.
|
| I wish the tax code had more a more positive slant per
| your point, but lobbying seems to be a bigger driver.
| ScottEvtuch wrote:
| Pretty sure you can only write off gambling losses to
| offset gambling winnings, which entirely makes sense.
| That way you only pay taxes on your net winnings for the
| year.
| gosub100 wrote:
| I can confirm this.
| keltex wrote:
| You used to be able to deduct any consumer debt. But that
| stopped in 1986. The reason was "Congress believed
| deductions for personal interest encouraged people to
| consume and stifle savings."
|
| https://www.telegram.com/story/news/local/worcester/2007/03
| /...
| toyg wrote:
| Which is kinda stupid, when the economy is based on
| _people consuming_.
|
| I guess Reagan's friends at that point wanted more money
| for Wall Street to gamble.
| ghaff wrote:
| There used to be mostly piddling deductions for all sorts
| of things that you don't have today. It's probably mostly
| a positive to not keep track of things like sales tax in
| order to minimize your income tax.
| bombcar wrote:
| Deductions also cause people to go temporarily insane -
| it's fine paying 5% unnecessarily because I get 2% back
| on my taxes! Ignore the 3% that is gone forever ...
| lupire wrote:
| Sales tax deduction still exists. 2017 law temporarily
| lowered but didn't eliminate it.
| brewdad wrote:
| IF you itemize. 90% don't. Also, you can only deduct
| sales tax OR state and local income taxes but not both.
| bombcar wrote:
| Even then I'm not sure how much it affected the poorer
| people, since you still had to overcome the standard
| deduction (lower, sure).
|
| The deduction on mortgage interest now mostly only
| affects the well-off because the standard deduction for
| married filing jointly is so high.
| bonton89 wrote:
| The the 1980s the deduction for mortgage interest would
| have been significant, I suspect most people itemized
| then. And the huge standard deductions we have now are a
| fairly recent tax change.
| bombcar wrote:
| It was 3400 for a married couple in 1980, but yes, many
| more people deducted mortgage interest until 2018 when
| the standard deduction nearly doubled.
|
| Many people didn't math the interest deduction correctly
| - _only_ the amount over the standard deduction should be
| counted, as you 'd get the standard deduction anyway. Can
| vary depending on SALT and charity donations.
| bonton89 wrote:
| Yes, real estate tips always seemed full of self serving
| nonsense to me and usually talked big about the tax
| savings. But with my modest house and mortgage I
| calculated that even at the start of my mortgage I saved
| a whopping $800/yr on taxes with deductions versus the
| standard deduction. I spent well more than that on
| furnishings and repairs every year. And that tax
| advantage (for me) disappeared entirely after maybe 5
| years or something.
|
| For a long time I would read money saving tips articles
| and a tip that frequently came up in these and in pro
| real estate pieces was that paying a single extra
| mortgage payment per year would let you pay your mortgage
| off 12-15 years early.
|
| When you did the math you realized it was bogus. As near
| as I can tell, this actually was true for one brief
| period in the 1980s when mortgage rates were at their
| zenith. Articles were written about this amazing tip well
| into the 1990s before the BS was transcribed to the
| internet and then repeated well into the super low
| interest rate era where it wasn't even close to being
| true.
|
| Of course it wasn't even really true in the 1980s either.
| Once interest rates went down you'd have been wise to
| refinance at the newer lower rates instead of prepaying
| the mortgage as it would improve your cash flow and lock
| in the savings. So in reality, it would have only made
| sense if interest rates had stayed at that same high rate
| for the whole length of the mortgage!
| gottorf wrote:
| > encouraged people to consume and stifle savings
|
| Ironic in hindsight; every monetary and fiscal policy as
| of late seems to be designed to punish savers and reward
| debtors.
| kevin_thibedeau wrote:
| Hard to extract profit from the fiscally responsible.
| Spooky23 wrote:
| It was! Auto leases were deductible too which was a big
| subsidy for the auto industry.
|
| Once rich people figured out how to get poor people to be
| angry about things like higher marginal tax rates for rich
| people and "death taxes", we raised taxes on the suckers to
| benefit the richer people.
| scarface_74 wrote:
| To a first approximation, no one actually takes advantage
| of the mortgage tax deduction any more because the standard
| deduction is so high and the cap on state tax/property
| taxes is so low that most people don't itemize.
|
| Only about 10% itemize.
|
| https://www.taxpolicycenter.org/briefing-book/what-are-
| itemi....
| ghaff wrote:
| And the majority of those make more than $500K. The
| deductions are probably mostly some combination of
| mortgages on very expensive properties or very large
| charitable contributions, probably often tax-shielded in
| some manner.
| mcguirep wrote:
| You can't deduct interest on personal income tax for
| mortgages over $750,000, so it seems somewhat unlikely
| that such deductions make up any significant amount of
| the deductions: https://www.irs.gov/publications/p936#en_
| US_2023_publink1000...
| junar wrote:
| The $750,000 amounts to a cap on the deduction. If your
| mortgage is in excess of that amount, you would pro-rate
| the deductible interest accordingly.
|
| I think it's reasonable to say that the folks with the
| largest mortgages are the ones most likely to itemize
| mortgage interest, even if they are capped.
| sgerenser wrote:
| HELOC debt is (since 2017 TCJA) now only deductible if used
| to purchase or upgrade/repair the house. And now the vast
| majority of people are not going to be deducting any
| mortgage or HELOC debt anyway, since the standard deduction
| is so high now.
| jjav wrote:
| > While we're in this topic: why is unsecured credit card
| debt NOT tax deductible but secured debt like HELOC is?
|
| HELOC interest is rarely deductible either. First, you now
| must be able to itemize deductions, which the recent tax
| changes have made very unlikely. Less than 12% of tax
| returns are able to itemize:
|
| https://www.irs.gov/pub/irs-soi/soi-a-inpre-id2303.pdf
|
| In addition, even if you are in that ~11% who can itemize,
| HELOC interest is only deductible if you use it to work on
| the same house being used to get the LOC. Any other use is
| not deductible.
| judge2020 wrote:
| > The only thing I would add to your comment is that
| merchants aren't the ones being forced to pay these stupid
| fees, it's their customers (and primarily their poorer and
| often non-card using ones) who are being quite heavily taxed
| to fund a marketing scheme for rich customers.
|
| Counterpoint: i will pay you $500 if any of the big retailers
| (>2k stores) lowers prices now and cites "lower credit card
| fees means we can charge less".
| bombcar wrote:
| Do you think prices would remain the same if interchange
| fees doubled?
| ryandrake wrote:
| If the company _could_ profitably charge more for their
| products, they already would be, regardless of what
| interchange fees (or other costs) were.
| watwut wrote:
| Raising costs means they need to charge more somewhere or
| lower transaction. Unless in monopoly situation, price
| pressure goes both ways.
|
| If competitors can lower prices, whole market eventually
| ends up having to do that.
| rqtwteye wrote:
| During the current inflation companies have used
| inflation as excuse to raise their prices way above
| inflation. It may be the same here. Publicly state that
| interchange fees are the reason for the increase but
| raise the price by way more than the increase in fees.
| supertrope wrote:
| Because of the stickiness of prices, passing through of
| cost savings usually manifest as slower inflation. Costco
| is rumored to have negotiated 0.3% from Visa in exchange
| for exclusivity. This is part of how they are able to sell
| goods at thin markups. Aldi USA used to only take debit
| cards. They caved and now take credit cards. Travelers
| Insurance offers two prices on every quote: by bank account
| or a higher one by credit card.
|
| http://www.bloomberg.com/features/2015-how-amex-lost-
| costco/
| judge2020 wrote:
| Most insurances do charge lower fees for direct deposit -
| Allstate does it at well.
| rqtwteye wrote:
| Comcast too. I get five dollars off per month for direct
| deposit. I believe it's less about fees but more about
| avoiding chargebacks.
| miroljub wrote:
| It's the legislation that disallows vendors to have different
| pricing based on the payment system that disaligns the
| incentives.
|
| If I have a card that gives back 2% to me, back causes 5% fees
| to the vendor, both of us would be better off if I used a card
| with 1% fee, and the vendor gives me 2% discount.
| Unfortunately, not allowed.
| kasey_junk wrote:
| It's been mostly legal to charge credit card surcharge fees
| since 2013. https://www.lexology.com/library/detail.aspx?g=5c
| 6e1264-42a8...
|
| The real reason that most merchants don't charge surcharges
| is that they don't want to lose the sale, calculating the
| actual interchange is wildly complex and in general they
| prefer cards to cash.
| pkaeding wrote:
| There are definitely a good number of small businesses
| around me (cafes, and similar places) that offer a cash
| discount. They don't have a sign offering it, but when I
| pull out cash, they revise the price down.
| bombcar wrote:
| More and more small places around here are explicitly
| offering the discount either with a "3% less if you pay
| cash" but more commonly now a "listed prices are cash or
| debit, credit pays more".
|
| It's a noticeable fee for them.
| Danjoe4 wrote:
| It is against VISA ToS. Small businesses can risk it but
| large businesses would get sued and VISA would refuse to do
| business with them
| sgerenser wrote:
| Nope, not against VISA ToS. Post you're replying to
| indicates it's no longer "illegal" but it was never
| actually illegal to charge a surcharge, it was just
| disallowed by ToS. This is no longer the case as of 2013
| and retailers are now free to charge a surcharge if they
| so choose.
| bluGill wrote:
| Is it legislation or the contract with the credit card? My
| understanding is the contract to take ie VISA has terms that
| you cannot apply a discount for customers using other payment
| methods (ie cash or someone else's card). There are a few
| places that don't have those terms (mostly government where
| often a card does cost more to use).
|
| What people forget about these fees is a credit card is
| cheaper to take for the merchant. The credit card is never
| counterfeit money. The clerk never takes money from the
| credit cards, nor does the manager counting it (I wasn't in
| retail long but I saw both). You never have a robber come in
| to take your credit card money. Even when all goes well, you
| don't pay the clerk and manager by the hour to count all the
| cash twice. You do have some risk of taking a stolen credit
| card, but overall it is cheaper for the merchant to take
| credit cards and that savings should be what pays for the
| card costs (I have no idea how to count the different costs
| to see if that is true)
| bombcar wrote:
| The real advantage for merchants is to take debit (assuming
| the payment is high enough). Much of the benefits of credit
| without the hassle of cash.
| anovikov wrote:
| Simply because these customers are likely to buy more and at
| premium prices and not be a pain in terms of refunds etc. They
| are willing to pay more in commission knowing they are dealing
| with richer people.
| empath-nirvana wrote:
| Rewards cards should be illegal and basically are privately
| levied tax on the poor and a subsidy to the wealthy.
| smallmancontrov wrote:
| > privately levied tax on the poor and a subsidy to the
| wealthy
|
| That's 2/3s of capitalism. Hold enough MA and V -- directly
| or through just having enough net worth in an index -- and
| you'll start to see this as a feature, not a bug.
| realwitt wrote:
| What's MA and V? Moving Average and Volatility? (genuinely
| don't know and unsuccessfully tried to google it)
| frogstomp19 wrote:
| MasterCard and Visa's stock ticker symbols
| agloe_dreams wrote:
| Boy are you going to be shocked when Walmart, target, Amazon
| brag about the X% income increase when that happens and while
| prices continue to rise.
|
| Zero, zero companies will discount the sales price when the
| rewards cards are gone.
|
| There is a strong argument that discontinuing rewards cards
| actually helps the extremely wealthy by taking from the
| middle class and giving it to the Uber rich shareholders and
| big business owners.
| abalone wrote:
| _> But how far does this go in explaining why merchants
| "choose" to participate in this program. The obvious answer
| would seem to be that they get no benefit from the system as it
| exists but have no real choice, but maybe there is a better
| answer?_
|
| The simple reason why issuers don't make every card a signature
| rewards card is that merchants would revolt.
|
| The interchange fee schedule[1] is fascinating. Dozens of
| categories of merchants with different rates. There is no
| technical reason for this. Fraud costs are borne by merchants
| and to some extent processors, but not the issuer banks that
| receive the interchange fee.
|
| The fee schedule reflects a kind of battle for customers. It's
| worth repeating that most of interchange for these higher end
| cards is passed back to the customer in the form of rewards.
| Essentially, merchants are willing to pay higher fees to
| support the cards that higher spending customers prefer.
|
| But there is a limit. We can observe that not all merchants
| accept AmEx, which has some of the highest interchange rates.
| If every visa/MC card were a signature card, more merchants
| would push back.
|
| [1]
| https://usa.visa.com/content/dam/VCOM/download/merchants/vis...
| sofixa wrote:
| > There is no technical reason for this
|
| Point in case, there's an interchange fee cap of 0.3% for
| credit and 0.2% for debit cards in the EU. And there are
| entire countries moving to cashless, so obviously everyone is
| happy with it.
| dboreham wrote:
| I went to Stockholm last week for a couple of days, worried
| that I didn't have any local currency. It turned out that
| _nobody_ takes cash, so everything worked out fine.
| ghaff wrote:
| Europe varies a lot from largely cashless to you will
| probably need cash if you want to have a beer.
| whimsicalism wrote:
| it's even more intense in China
| mym1990 wrote:
| What is more intense than nobody taking cash, punishment
| for even having it?
| toomuchtodo wrote:
| Your ability to make purchases turned off, with no other
| means to transact.
|
| https://en.wikipedia.org/wiki/Social_Credit_System
| lupire wrote:
| "point in case" is a funny term. Are you a mathematician or
| programmer, using "case" in the sense of "branch of a
| proof", not "matter to be settled"?
| iacvlvs wrote:
| I assume it's a simple accidental transposition of "case
| in point", an instance or example that supports, or is
| relevant or pertinent to, what is being discussed.
|
| https://www.merriam-webster.com/wordplay/usage-of-case-
| in-po...
| notpushkin wrote:
| That's interesting: I've _only_ seen "point in case"
| being used, never "case in point" (although it does make
| a lot more sense, now that I think of it).
| whimsicalism wrote:
| you must not be a native speaker, i have never heard
| 'point in case' before this conversation. but fwiw,
| neither really make much sense to me
| 1letterunixname wrote:
| Pedantic language shaming is uncool and other people's
| experiences are different from your own. Get over it.
| maxcoder4 wrote:
| As a non-native speaker I appreciate comments like GP,
| because they let me improve my English and speak better.
| It's not pedantic if the "shamer" is obviously right
| (I've consulted internet and it looks like he is). I
| think correcting other people speech is valuable because
| it lets us all understand each other better.
| nsomaru wrote:
| The idiomatic equivalent is "case in point"
| abalone wrote:
| I wouldn't assume everyone is happy with it. Consumers are
| going to prefer rewards programs over no rewards programs.
| And before you say it results in higher prices, that's not
| necessarily true. Australia regulated away interchange and
| it didn't result in lowering prices. Merchants kept the
| profit.
|
| A lot of times these regulations are pitched as helping
| consumers, but it's really merchants pushing for them. You
| could make a similar observation about the EU regulatory
| fight with Apple et al right now. It's actually Spotify
| fighting for it, and they have different interests than
| consumers.
| andruby wrote:
| > I wouldn't assume everyone is happy with it. Consumers
| are going to prefer rewards programs over no rewards
| programs.
|
| Personally, I would disagree. I prefer no rewards and a
| simple landscape where I don't have to compare credit
| cards.
|
| I lived in both EU and US, and didn't like the work
| needed to compare (and keep comparing) all the credit
| card offerings. In the EU, you just the credit card from
| your bank and don't feel like you're missing out.
| alibarber wrote:
| I my part of the EU I'd certainly feel like I'm missing
| out if I just kept on paying the ~EUR5 a month fee for a
| bank account and didn't look for a card that gave me some
| kind of return on my spend every month...
|
| (It's Finland btw, and you need a Finnish, not "anywhere-
| in-SEPA", bank account in order to practically function
| in society here with the strong online authentication
| service)
| oezi wrote:
| The return you get is just taken from you without you
| knowing it. The rewards programs is taking your money and
| giving you back a part of it.
| willseth wrote:
| No, it's taking the merchants' money and giving you back
| part of it. How much do merchants eat it vs passing on
| the cost? I don't think that's an easy question to answer
| and probably varies a lot by merchant type and product,
| but I think we can assume the answer is not _always_
| passes on 100% of the cost, so owners of the high end
| rewards cards are winning to some degree. You could argue
| that non-rewards cards are absorbing costs of rewards
| cards in the case where merchants do pass through costs,
| though.
| AnthonyMouse wrote:
| Except that 100% of the cost isn't being transferred to
| the cardholder, either. You might have a 1% cash back
| card while the merchant is paying 3%. If only half of the
| cost is being passed on, you're still losing money. And
| price isn't the only variable. Even if the merchant ate
| the entire 3%, that might require them to cut costs in
| some way so you receive a lower quality product, or drive
| some competitors out of business and thereby _allow_ the
| remaining companies to reduce quality without lowering
| prices because the company providing a better product for
| the same price was eliminated by the fees.
| willseth wrote:
| Right, but the interesting part of TFA is about how the
| rates paid by merchants are higher for the top 10% of
| cards. Your example assumes the same rate paid by
| everyone. Because only a small portion of transactions
| incur the high rate/high reward, it seems far less likely
| that the split between pass-through vs eat-it still won't
| benefit high end cardholders.
| AnthonyMouse wrote:
| That still depends on what the split is. If the average
| fee is 3% and the high-end customer is getting 2% back,
| the merchant could be passing on e.g. 2.1% and causing
| you to come out behind while still passing on only 70% of
| the cost.
|
| And for anyone getting less cash back the math is even
| worse, which from the same premise will be the majority
| of people or else the merchant's costs (and so the amount
| they pass on) would be even higher.
| willseth wrote:
| > If the average fee is 3% and the high-end customer is
| getting 2% back ...
|
| You're not picking realistic numbers. The fees range from
| around 1.5% to ~3%, and the 2.5%-3%+ fees are limited to
| ~10% of customers. An average fee of 3% doesn't make
| sense. Very basic napkin math would be 0.9 _((1.5+2.5)
| /2)+0.1_((2.5+3)/2) = ~2.1% _average_. So only in the
| 100% passthrough case does the high end cardholder
| actually lose. That 's not likely.
|
| And if you look at the chart, if 740 is 10%, there are
| probably far fewer than 10% of transactions averaging
| 2.75%, so this is likely still way overestimating.
| AnthonyMouse wrote:
| > The fees range from around 1.5% to ~3%, and the
| 2.5%-3%+ fees are limited to ~10% of customers. An
| average fee of 3% doesn't make sense.
|
| That's just the interchange fee, not what merchants are
| actually paying. Stripe charges a flat 2.9% + $0.30 and
| this is considered competitive:
|
| https://stripe.com/pricing
|
| For a $20 transaction, that's _4.4%_ , and that's for
| everybody, not just the people with rewards cards.
| abalone wrote:
| _> and this is considered competitive_
|
| Stripe is hella expensive! But they are easy to get
| started with.
|
| Competitive rates depend on the type of business, i.e.
| their volume and their fraud risk. The most transparent
| form of pricing is called "interchange plus" where it's a
| flat markup on the interchange schedule. High volume
| merchants should be able to find a markup in the
| fractions of a percent.
|
| It is my understanding that the big Stripe customers
| negotiate lower rates with them as they scale.
| AnthonyMouse wrote:
| > High volume merchants should be able to find a markup
| in the fractions of a percent.
|
| And this is why small businesses are more likely to offer
| cash discounts than larger ones.
| pbhjpbhj wrote:
| 5 years ago HSBC were charging us, a micro-business (2
| employees, not software) about the same for cash handling
| as we paid for debit card processing.
|
| If small businesses give discounts for cash it's because
| they're committing tax fraud, I presume.
| willseth wrote:
| > That's just the interchange fee, not what merchants are
| actually paying.
|
| What you pay Stripe is for the _combination_ of
| interchange fees + Stripe 's own service fees. The Stripe
| service component of the fee would be charged regardless.
| Whatever markup a merchant makes for Stripe's fees are
| not recoverable and irrelevant to the comparison.
| AnthonyMouse wrote:
| By comparison, Stripe charges 0.8% + $0.00 for ACH, which
| includes any costs they might be paying to the bank, so
| the upper bound on the cost of their services is 0.8%.
| 4.4% - 0.8% is 3.6%.
|
| Identify a payment processor that a small business making
| e.g. $60,000/year in $20 credit card transactions can use
| that would charge lower fees, if you can.
| willseth wrote:
| You're making a huge assumption that their markup is the
| same for credit card transactions! You're also making
| broad oversimplified assumptions about the what merchants
| do in response to transaction fees. Multiple implausible
| things need to be true for high end card users to be
| losing out on this scheme. Most likely the high end users
| come out at least slightly ahead and most of the cost is
| borne by lower end users and merchants.
| mumblemumble wrote:
| "Lower prices" doesn't necessarily mean they just
| suddenly and immediately drop. That's no surprise;
| dropping prices purely out of the goodness of your heart
| isn't terribly good business practice. Also, for a lot of
| retail, MSRP is MSRP, and that's a pretty big anchor
| point.
|
| What I'd expect instead, based on my having taken exactly
| one class in economics as an undergraduate, is subtler
| effects that play out over time. Maybe the general growth
| in prices over time slows down a titch until a new
| equilibrium point is met. Maybe wages rise a little bit
| because retailers can afford to pay their employees more.
| Maybe life gets easier for smaller businesses that have
| less negotiation power than the multinational behemoths.
| Maybe some bank executive somewhere decides not to buy
| that third luxury car at the same time as ten thousand
| restaurant owners decide that, just today, they will
| treat themselves to an espresso drink from the coffee
| shop instead of making drip coffee at home. That kind of
| thing.
|
| I think maybe that last example is most interesting to
| me, because it calls attention to how merchant/consumer
| is a false dichotomy and things are always a bit more
| subtle than how the news likes to make us think they are.
| fallingknife wrote:
| Yeah that's kind of how the system operates in the US.
| The CC duopoly fleeces merchants and gives out a share of
| the monopoly profits as rewards to consumers to make any
| antitrust action against them politically unpopular. It's
| a shakedown, and yes, getting rid of it would be bad for
| consumers, at least in the beginning. But it should be
| done anyway.
| abalone wrote:
| I agree except for the part about monopoly. There are in
| fact competing card networks.
|
| The bitter pill to swallow is that consumer preferences
| played a role in evolving this system. Card networks are
| managing a two sided market, and that means offering
| value to both the merchant _and_ the consumer. Reward
| programs are examples of consumer value. If Visa decided
| to kill its "signature" interchange tier, those customers
| would move to MasterCard.
| oezi wrote:
| Rewards programs are stupid for consumers. They cause
| higher prices for everyone (even for the rewards
| recipients). I am fine with merchants keeping the profit,
| because for most categories of products that I buy there
| are working markets and every % of profit is turned to
| lower prices in the end.
| abalone wrote:
| Why do you say they cause higher prices for rewards
| recipients? Is there evidence of this?
| LastTrain wrote:
| > Consumers are going to prefer rewards programs over no
| rewards programs.
|
| I believe that you believe. Rewards programs are
| ultimately bad for consumers and merchants, but great for
| rent-seeking banks. As a consumer I'd prefer an EU style
| cap and not have to spend my time working to scrape back
| some of that money.
| abalone wrote:
| What do you mean by "spending time working to scrape back
| money"? Cashback rewards are fairly automatic. Maybe some
| have a simple redemption step. Apple Card's is 100%
| automatic.
| madeofpalk wrote:
| Apple Card doesn't seem like a particularly good
| business, so much so that the issuer is trying to ditch
| it
|
| https://www.wsj.com/articles/goldman-is-looking-for-a-
| way-ou... https://archive.is/bkoBG
| astura wrote:
| As much as I like taking advantage of rewards programs as
| a consumer (and boy I do), if given the choice I would
| actually prefer merchants paid very low fees and I got no
| rewards.
|
| That's just my personal preference. It seems like a much
| fairer system. I just don't like that middlemen take an
| unfair share, even if that middleman is me.
| brazzy wrote:
| >I wouldn't assume everyone is happy with it. Consumers
| are going to prefer rewards programs over no rewards
| programs>
|
| Absolutely not. Fuck rewards programs. I don't want to
| waste a single second thinking about how to optimize my
| card usage and spending habits to get "rewards".
| ajkjk wrote:
| It only means that they haven't managed to improve it yet.
| fallingknife wrote:
| There is a government to government payment fee category in
| there. Why on earth would two government agencies ever need
| to use a CC to pay each other and lose over 1% in fees?
| granzymes wrote:
| > Fraud costs are borne by merchants and to some extent
| processors, but not the issuer banks that receive the
| interchange fee.
|
| _Merchant_ fraud and merchant credit risk is borne by
| acquirers (although, if they went under the issuing baking is
| ultimately on the hook). But fraud by the cardholder and
| cardholder credit risk is borne by the issuer.
| abalone wrote:
| Yes, merchant fraud is what I was referring to with "to
| some extent." And you're correct that card-present fraud is
| more likely to be borne by the bank these days (this was
| not always the case). But typical e-commerce fraud is
| usually eaten by the merchant.
| dwighttk wrote:
| Credit card processors actually provide a service for both
| their cardholders and the people who accept their cards...
|
| Yes there is the downside for businesses when the processors
| reverse charges but if this was big enough of a downside then
| people would stop accepting the card.
|
| Yes sometimes people get their number stolen and are out the
| money for a while during an investigation, but again if this
| downside were big enough people wouldn't use that card anymore.
|
| Yes there are new types of fraud enabled by the technology.
|
| The big benefit is you don't have to have liquid cash sitting
| around where people can grab it and disappear.
|
| Some merchants don't accept some cards... they've decided that
| the cost outweighs the benefit. My grocery store fought against
| accepting Apple Pay and they do now. Walmart doesn't.
| insane_dreamer wrote:
| Some merchants reject cards with higher fees; i.e., Amex is not
| accepted at some merchants with lower margins (i.e., grocery
| stores).
|
| It would be impractical for merchants to accept some branded
| cards and not others. Imagine "we accept "Chase Premium One"
| card, but not "Chase American Airlines" card." Very confusing
| for consumers. If it's a whole category, like Amex, it's easier
| to refuse it (besides, low income consumers are unlikely to
| have an Amex card).
| kindawinda wrote:
| Wow you thought of something the author didnt cover and think
| the whole article should be about your post.
| supertrope wrote:
| Citibank reissued my credit card well before the expiration
| date to upgrade it to a "World Elite Mastercard" with attendant
| higher interchange.
| gumby wrote:
| The merchant doesn't generally have much choice. I have some
| friends who ran a restaurant, and they stopped accepting Amex
| because the fee was too high. They sold the restaurant to an
| employee and he immediately started accepting Amex again. Too
| many high spending clients use it and he didn't want to miss
| out.
|
| Also, even though Costco only accepts a single brand of card
| (used to be Amex, now Visa), despite their size and market
| power they accept any Visa card a customer presents.
| ugh123 wrote:
| > you use a reward card, the merchant is charged a higher fee
| than if you used a "normal" card
|
| That seems absolutely ridiculous. The FTC doesn't think this is
| a problem?
| twoodfin wrote:
| Probably going against the grain here, but I think it's great
| that at least a modest fraction of the benefits of highly risk-
| optimized revolving credit and low-friction electronic payments
| are feeding back to the consumer, vs. having all the value
| derived from that technology captured by the banks and merchants.
|
| In a world where these high-exchange-fee / high-reward cards were
| outlawed, merchants would pay less in aggregate in fees. But
| almost surely they'd lose out net from a drop in overall consumer
| spending.
|
| That affiliate programs inspire gamification for consumers to
| optimize their spending patterns to "win prizes" seems like a
| neat bit of competitive market pressure: It's obviously a win for
| all involved or they wouldn't be so popular.
| gruez wrote:
| >low-friction electronic payments are feeding back to the
| consumer, vs. having all the value derived from that technology
| captured by the banks and merchants.
|
| Are you talking about the cash back? Isn't that just a shell
| game? If the consumer is getting 2% cashback, but the merchant
| is charging consumers 2% more to pay for it as well, how is it
| "feeding back to the consumer"?
| nordsieck wrote:
| > Are you talking about the cash back? Isn't that just a
| shell game? If the consumer is getting 2% cashback, but the
| merchant is charging consumers 2% more to pay for it as well,
| how is it "feeding back to the consumer"?
|
| One of the issues is that the cash back rate is not evenly
| distributed across the buying population.
| bombcar wrote:
| The benefit for the customer is getting 2% back when prices
| are only 1.5% higher than they would be "otherwise" because
| of cash and debit payments.
|
| The disadvantage to the customer is increased spending
| because of how easy it is, which probably far outweighs the
| 2%.
| TheDong wrote:
| The other disadvantage to the customer who gets that
| extra 0.5% is that they know they're profiting off the
| misery of those worse off than them, that they enjoy
| rewards while those with low credit scores, struggling to
| feed their family, face 1.5% higher prices.
|
| I would hope the tarnish on your immortal soul and
| realization that you're profiting directly off other's
| misery would be a bigger downside.
| bombcar wrote:
| If you start seriously considering all the misery
| required to bring us cheap iPhones and all we ravenously
| consume, you'll quickly end up in a shack in the woods
| sending packages USPS.
| nkurz wrote:
| > It's obviously a win for all involved or they wouldn't be so
| popular.
|
| Why is it obvious that it's "a win for all involved", as
| opposed to some big powerful financial companies taking
| advantage of a bunch of less organized merchants while
| providing benefit to some subset of cardholders? Obviously the
| merchants benefit overall from accepting credit cards, but I
| don't think it's anywhere near obvious that they benefit from
| funding the rewards programs. If there was any way for them to
| opt out, I feel a lot of them would. And it's hard to see how
| the non-rewards cards customers are benefitting from the
| current system---would any of them choose the current system if
| given a choice?
|
| I definitely agree that someone is winning from the current
| system, but I don't think it's obvious that it's everyone.
| bluGill wrote:
| As the article says, those who get rewards are richer people
| who spend more money. so merchants are indirectly rewarding
| their customers who spend the most money.
| ptero wrote:
| My problem with the system is the fact that merchants are
| prohibited from handling different cards differently, for
| example by passing reward fees to the consumers.
|
| If that were not the case I would be happy and let the market
| pick the preferred way. My 2c.
| stevesimmons wrote:
| > It's obviously a win for all involved or they wouldn't be so
| popular.
|
| Definitely not a win for consumers, who in aggregate lose out.
| The margins to make the system work are built into the prices
| you pay at the checkout.
|
| Other markets like Europe and Australia capped interchange and
| made it cheaper for retailers and consumers.
|
| This forced banks to redesign their products/rewards/pricing to
| give consumers a real choice of whether to play or not.
|
| Some consumers decide to fund more of the rewards cost
| themselves (via cards with annual fees). Some keep high rewards
| by using new bank-issued Amex (but pay surcharges at the
| checkout). Some keep much of the gains for themselves (via no
| rewards/low cost cards, with lower costs for the retailer).
|
| So now, consumers who don't want to pay the overhead of
| interchange-funded rewards for everyone else don't have to.
|
| (Disclosure: I ran portfolio management/cross
| sell/profitability/customer retention for an Australian credit
| card issuer during the period that interchange there was capped
| and progressively forced down. Later, I was the Netherlands
| representative on one of the card schemes' European advisory
| committee.)
| bluGill wrote:
| > Definitely not a win for consumers, who in aggregate lose
| out. The margins to make the system work are built into the
| prices you pay at the checkout.
|
| While not wrong don't forget that cash also has costs that
| are built into the system - there are a number of theft ways
| to lose money with cash that don't apply to cards. Even when
| everyone is honest there is the time cost to count all that
| cash. Somewhere between the two is mistakes in counting.
| twoodfin wrote:
| _Definitely not a win for consumers, who in aggregate lose
| out. The margins to make the system work are built into the
| prices you pay at the checkout._
|
| Prices are a function of supply and demand. Higher
| interchange fees hit supply (costs more to produce and sell
| the same quantity of goods) but they also spur demand, or no
| merchant would accept the cards with these fees. And indeed
| some large merchants have (for example) excluded American
| Express or Discover from their available payment methods for
| just this reason.
| jacobgkau wrote:
| > That affiliate programs inspire gamification... It's
| obviously a win for all involved or they wouldn't be so
| popular.
|
| It's not a win for consumers having to spend their time
| learning the "game" in order to not be left behind and
| essentially lose money.
|
| I use basically a single credit card with a simple, universal
| cash-back scheme. I do some extremely simple and low-touch
| investing on the side. I choose not to waste my time attempting
| to do a billion other things that everyone else is doing to
| extract more value from the system, but I'm well aware that I'm
| probably coming out behind a lot of people as a result. That's
| not a "win," it's a race to the bottom that I've partially
| conceded.
| time0ut wrote:
| Well written and pretty interesting. Somewhat obvious I suppose.
|
| I was hoping he would go into detail on how programs like Citi
| double cash work. In that program you get the normal 1% back at
| purchase and then 1% at payment. I assume the latter is
| subsidized from interest payments, but what about card holders
| that never pay interest? Are they subsidized by those that do?
| toomuchtodo wrote:
| Yes. Rewards are subsidized by anyone paying a fee for their
| card, and by everyone with higher prices. Reward programs
| incentive consumers to make that card "top of wallet" and
| prioritize spend on it, which is why the entire rewards system
| is afraid of interchange cram down and free instant payments in
| general.
|
| (Work at a fintech, I see the financials but those I cannot
| share)
| mwexler wrote:
| Yes and note that from a marketing pov, Citi looks like a "good
| player" by incentivising payback. But if everyone paid back in
| the grace period, the care would fail as transaction fees can't
| offset the costs of managing the process (payouts, fraud,
| chargebacks, limit management, etc). Interest and "nuisance"
| charges are the real money makers.
|
| So, you pick a balance of how much to return assuming that you
| get a mix of revolvers (borrowers) and transactors, and
| recognize that if you hit it right, some folks will skip the
| "best outcome" (for most) option of grace-period payback and
| faster rewards, due to choice or need (running low on cash,
| etc). And that's how you get the 1 and 1: folks love to spend,
| and Citi estimates that the 1 on payback sounds good but can be
| spread out as folks still pay the minimum to revolve, garnering
| interest and fees along the way.
|
| It's illegal in the US to reward for debt directly (you can't
| incentivize folks to revolve instead of paying in full), and
| this card is at least a step in the right direction of doing
| the opposite. But if they really incentivized best behavior for
| consumers, we'd see all the % rewards focused on payback (and
| none for spend), with a reduced reward for payback on revolving
| debt, to incentivize reducing avoidable debt where it makes
| sense.
|
| But that card would fail as a business for most banks and fin
| companies. While the early trans fees would be great, it would
| self-select responsible payback folks who never generate
| interest or nuisance fees. Such a card would need a massive
| annual fee or have to be tied to some other profit driving
| product, at least in most companies I've seen.
|
| But maybe somebody will figure a clever way to make it work.
| squaresmile wrote:
| Citi DC is also a mastercard world elite which charges a higher
| fee for merchants. Afaik most (all?) 2% card are visa signature
| or mc word elite.
| treyfitty wrote:
| Pretty verbose article that can be summarized as "Credit cards
| charge merchants a fee, sometimes more when co-branded, to entice
| customers to use their credit card in favor over others."
| triceratops wrote:
| Agreed. I read it hoping to learn something I didn't already
| know. He kept teasing us with the promise of some inside
| baseball but didn't really deliver.
| _benj wrote:
| What a fascinating article. Probably an unsophisticated model but
| the way I approach my credit card rewards program is as a "forced
| savings" deal. I'm aware that they are subsidized, I'm also aware
| that I'll pay the same thing if I were to pay with cash (at least
| in all the places I buy).
|
| Would we be better off by having capped swipe fees? Idk. Would
| merchants actually lower their prices instead of keeping the
| extra revenue that everybody is now used to pay? Idk either. I
| don't trust in the goodness of the heart of merchants or credit
| cards issuers.
|
| But, would I have an unexpected 3 or even 4 figures "unexpected"
| rewards at the end of the year that I can only use for vacations?
| I don't think so. I could possibly set up something with my bank,
| but I don't need to think or plan rewards... they just happen.
| joshstrange wrote:
| > gibbering madness
|
| If there is a better name for the table of rates (or the list of
| rates on a monthly CC transaction table for your business) I
| don't know it. It's absolute madness and near impossible to make
| sense of.
|
| Often I feel like they exist only to confuse the merchant into
| just throwing up their hands and saying "I mean, I guess it's
| right". It also means that almost none of them can tell you how
| much they're paying for credit card transactions. All they know
| is the sales person said "I can get you the best rates" which may
| or may not be true, those people will lie to you and tell you
| anything that you want to hear, I know this from personal
| experience. These people are snakes and dealing with them makes
| my skin crawl.
|
| I'm aware that there's a chance that I'm leaving money on the
| table, but this is one of the main reasons I use Stripe. I prefer
| predictability an inscrutable of data that may or may not show
| that I'm saving a little bit more. It's also why I normally avoid
| credit cards that have rotating categories or this or like. I
| prefer a flat, easy to understand rate that I can compare to
| other cards instead of having to keep track of which card I'm
| using which month. Again, this means I'm leaving money on the
| table, but I do it for my own sanity.
| alberth wrote:
| > In industry, we sometimes distinguish interchange--which mostly
| goes to the issuing bank--and scheme fees--which mostly go to the
| credit card brand itself--but as interchange is much larger,
| let's just call them both interchange for simplicity.
|
| It's frustrating to read an article that acknowledges
| (indirectly) that payment networks don't earn revenue from
| interchange nor have anything to do with reward programs, but
| then goes on to say that for simplicity they will refer to it as
| if it did.
| dsco wrote:
| I find it odd that a person who understands the madness of our
| current financial system so well, still is violently opposed of
| anything blockchain related.
| resolutebat wrote:
| Remind me again, what concrete, non-criminal financial problem
| does blockchain solve better than the alternatives?
| loughnane wrote:
| Not op, but I want to make private payments through the
| internet in the same way I can privately use cash in the real
| world.
|
| I'm not enamored with crypto per se, but as far as I know
| only crypto in general (and Monero in particular) are working
| on solving that problem.
| criddell wrote:
| The banks are also working on that problem through things
| like Venmo and Zelle. Tech companies like Apple and Google
| and PayPal have payment services too.
| loughnane wrote:
| But those aren't private, right? There's an entity in the
| middle that can see all the purchases I make.
| criddell wrote:
| If I use one of those to send you $500 right now, the
| entity in the middle can see that I sent you $500 but
| nothing more.
| loughnane wrote:
| That's too much for me. It adds up to that entity having
| a record of all my transactions, who they're with, and
| how much they are. Def not private like cash.
| criddell wrote:
| Is it just the principle of it, or would fully private
| transactions solve an actual non-criminal financial
| problem?
| loughnane wrote:
| A product that's a violates my principles _is_ a problem.
|
| More practically, being surveilled creates a data store
| about my life that can last forever, theoretically. It's
| hard to conceive how that could be used if (when) that
| data gets mishandled. Might as well not leave a trail.
| hx833001 wrote:
| Yes, I hope the tech world gets very involved in this.
| Bitcoin is a horrible product for a cash replacement, since
| it is not private and the price fluctuates dramatically. We
| really should have a digital dollar or some gold, etc
| backed digital currency but it is absolutely essential that
| it is as or even more private than cash.
| someguydave wrote:
| It solves the same problem gold does, except it is easier to
| transport and exchange.
| cherryteastain wrote:
| Say you are from a third world country. Your family back home
| needs money, but a bunch of red tape and fees in the
| traditional finance system (sending money to a third world
| country often raises KYC/AML questions and wire transfer fees
| are high) make it difficult and expensive. Moreover, in some
| countries with unstable currencies such as Lebanon and
| Argentina, the banks have to offer government mandated
| exchange rates that are wildly off the effective rates; there
| have even been cases where FX deposits were forcibly
| converted to the local currencies at these unrealistic rates.
| Rather than go through all this, you can just send BTC and
| sidestep all the issues.
| GuB-42 wrote:
| Blockchains are costly and don't solve these problems.
|
| It is as evidenced by the way blockchains are used now.
| Cryptocurrencies are the most important applications, and few
| people actually own them, and by "owning" I mean being able to
| make a blockchain transaction. In most cases, they have an
| account with a third party who does the blockchain stuff. In
| other words, a bank. In fact, it may be an actual bank, which
| is probably for the best because actual banks are highly
| regulated and are less likely to just take your money and
| disappear.
|
| Cryptocurrencies quickly became just another financial product
| that is being integrated in our current system. And for the
| other ways cryptocurrencies are used, these are mostly illegal
| (drug trade, ransoms, scams, tax evasion, etc...) and
| governments are working on that.
|
| Other prominent applications of blockchains: NFT, DAO, etc...
| are even crazier than cryptocurrencies. All the madness of our
| current financial system without the regulations that make it
| somewhat usable to grownups.
| wlindley wrote:
| Bottom line: Pay cash if you want to support your local shops.
| Use credit cards if you love enriching your local
| megacorporation.
| kasey_junk wrote:
| This is mostly not true of the local shops near me. They've
| stopped taking cash because costs of cash are higher than
| cards.
| jjice wrote:
| My experience lines up with yours. I love paying with cash
| when I can, but even in my smaller city, so many places won't
| accept cash. My assumption is that handling cash is a cost
| they'd rather not deal with.
|
| For food, most places will accept cash here. Hell, even a
| bookstore near me won't accept cash anymore.
| jowea wrote:
| Debit cards?
| cmurf wrote:
| It seems some common vendors still charge their standard
| merchant fee even when the customer uses a debit card. I
| don't know why this is permitted. It seems contrary to
| federal law.
| bombcar wrote:
| All debit cards can be run as credit (if they have a
| visa/mc logo on them at least) and many
| merchants/customers don't know/don't care.
| ajdude wrote:
| I used to love debit cards but one time a business
| overcharged me and that was money out of my actual bank
| account that I had to wait several business days to have
| back.
|
| I also saw that places like gas stations "pre pay" if I
| select debit, trying to hold $60-$100 from my bank account
| until the final transaction comes back.
|
| While this hasn't happened to me, I've read that if your
| debit card is compromised or if a charge back is required,
| you would have to fight your bank to get your money back
| and it's a bit easier with credit cards.
| SL61 wrote:
| There seems to be a split in my area with small businesses,
| mostly along generational lines.
|
| The ones run by younger people are very credit-card-first,
| love not dealing with cash, etc. They usually have one of
| those Stripe iPad things. If you _do_ pay with cash, they 'll
| get a bit flustered because it breaks their flow.
|
| The ones run by older people are either cash-only or try hard
| to disincentivize customers from using credit cards,
| sometimes with signs guilting customers about how much money
| card companies take from businesses.
|
| It really feels like a generational thing depending on what
| people are used to. The older shop owners remember when cards
| were a lot more rare, and they've seen their swipe fee
| expenditure go up over the years. While the younger owners
| have only ever lived in a credit card oriented world and just
| bake the swipe fees into their prices from the beginning.
| JoeAltmaier wrote:
| How do they get around the rules regarding cash? E.g. "This
| note is legal tender for all debts, public and private"?
| kasey_junk wrote:
| I'm not a legal expert on this topic but it's my
| understanding that you've not incurred a debt at the cash
| register. You just haven't made any transaction at all.
|
| If the store was extending you credit (ie leave now with
| the goods and in the future pay us back) they'd be required
| to accept cash at that point.
| ghaff wrote:
| That's my understanding as well.
|
| That said, there are laws in some jurisdictions against
| card-only payment policies. I suspect they're not widely
| enforced for smaller places.
| crims0n wrote:
| Kinda hard to incentivize when a responsible credit card user
| will come out ahead financially by using a rewards card. I get
| roughly 2k a year in rewards for doing nothing more than
| swiping.
| agloe_dreams wrote:
| This is actually a lie.
|
| Using a credit card is always cheaper to the merchant, maybe
| the merchant doesnt realize it but cash is a bad deal like Uber
| is a bad deal - They money is up front so you never realize the
| costs. In the case of user, it is fuel, vehicle wear and tear,
| and shifting demand.
|
| In the case of cash, it is the cost of counting and keeping the
| drawer, security, deposits, change, and internal
| training/theft. Most estimates show it to be ~10-20% of income
| of a business is wasted. Always less than the cost of credit.
|
| Well...that is...if you didn't do what maybe 50% of small
| businesses do: Screw the taxpayer. Sure, these credit card
| companies take 3%. Many small businesses take cash so they can
| do cash accounting and keep "money in" away from the IRS. They
| dont report it, they pay workers with it under the table and
| you, the customer and tax payer, may pay less, but you are
| getting screwed.
| JoeAltmaier wrote:
| Only from some indignant-irate viewpoint. Paying less is a
| win. Taxes are a fraction of what you would pay (in th other
| imaginary scenario) - a percentage of the margins on the
| transaction. If those are apparently reduced to zero through
| some chicanery as suggested, you still pay less than what
| those 'missing tax dollars' would have been. You participate
| in the savings.
| agloe_dreams wrote:
| I mean, if you only think from the scale of 'only I exist
| on earth and nobody else' then yes, but if you consider the
| grand scale of tax evasion, the cost in your taxes from all
| of this is vastly greater than any credit card fee.
| quantumwoke wrote:
| Good article, I wondered about the details of card rewards
| schemes as a kind of meta commentary on the financial system.
| Interesting to see that patio11 has left stripe now to work
| (seemingly) on this newsletter full time. I do miss the days when
| the articles were technical; there's a deep software and writing
| skillset that we've lost to the financial system which isn't
| nearly as fun.
| hnthrow289570 wrote:
| >Redditors are frequently sophisticated with their spreadsheets;
| many of them could clearly earn three orders of magnitude more
| from the financial industry if they stopped thinking that the
| right way to monetize spreadsheet skill was in gaming credit card
| signup bonuses.
|
| It's a pretty decent outlet for having something complicated to
| work on. Another would be EVE Online with the added bonus that
| it's also an actual game. My guess is most of those people are
| just trying to min-max what the companies allow them, rather than
| trying to find an exploit in the system that prints money per
| spreadsheet CPU cycle.
|
| I am suspicious that anyone can get a job in finance with only
| churning (or EVE) spreadsheet skills. I have rarely found "well
| if you can do that hobbyist but seemingly proximal activity, you
| can walk into a decent-paying job" to be true in tech and I
| suspect it's true for finance too.
|
| Maybe the finance bros just need a leetcode-for-spreadsheets
| website to run their technical interviews to open the floodgates
| though.
| hnuser123456 wrote:
| Microsoft Excel World Championship 2023 - Finals:
| https://www.youtube.com/watch?v=UDGdPE_C9u8
| ghaff wrote:
| At the end of the day, it's mostly a hobby and you either find
| keeping track of everything and making effective use of rewards
| worth it or not. Personally, I have a few cards for targeted
| use but mostly I just take 2% cash back on a free card and
| figure that's close enough.
| sam2426679 wrote:
| I was also intrigued by that quote and find it rather dubious.
| Coincidentally today, I and 5 other family members are boarding
| business class international flights worth ~$60k cash, paid for
| with signup bonus points. This doesn't even include the other
| tens of $thousands of redemptions we're doing on both this trip
| and the rest of the year. This is also just side hustle/hobby-
| that-pays-for-itself "money," in addition to the (not) "three
| orders of magnitude" faang income.
|
| This was otherwise an interesting article.
| DrammBA wrote:
| I find it hard to believe you're getting almost 6 figures of
| value out of signup bonus points and other card reward
| redemptions in a year.
| bombcar wrote:
| Those $60k flights are almost certainly list/last minute
| pricing.
|
| It's even mentioned in the article that the airlines love
| flight miles because they can play with the redemptions to
| sell unused capacity for what the customer sees as real
| money. It also encourages loyalty.
| MattGaiser wrote:
| A lot of that depends on how you value the flights (a lot
| of the benefit comes from being able to do international
| business class one way with points very easily, but those
| tickets being very expensive in cash), but it is pretty
| straightforward if you both optimize the earning, optimize
| the spend, and optimize the points programs.
|
| To give you an example, a business class ticket from
| Seattle to Taipei with EVA (a very nice airline) is about
| $8000 round trip or $6000 one way. You can book it for
| 75,000 Aeroplan points one way. That is 1-2 credit card
| signups.
|
| But Aeroplan also lets you have a stopover in the middle of
| a trip and lets you string together up to 6 flights and
| only pay based on the distance.
|
| So you could do Seattle, do a layover in Taipei, have a
| stopover in Manila, stay a day in Singapore, and then land
| in Darwin Australia for 92,500. Which is closer to 2 credit
| cards, but still easily achievable in a month or two. But
| the value of that trip when I did something similar was
| closer to $12,000. Prices out at around $9000 for my test
| dates for the flights I did.
|
| Now, you need to take many trips a year to do that as a
| single individual (which I am), but the referral streams
| for credit card signups are also very powerful, so get a
| Player 2 as it is called, and you can easily get 20-30%
| more on your signup bonuses and each person can also do the
| bonus.
|
| And that is just business class. Once you start getting
| into First Class redemptions (hard to do, but the serious
| people manage it), the value can easily be the equivalent
| of a 12K for a simple round trip, yet alone stacking First
| Class products as many programs let you do.
|
| Some of the pricing is also probably last minute. Points
| costs fall last minute, but cash prices rise. That boosts
| your cost per point, or CPP as we call it.
| ghaff wrote:
| The value of points is sort of hard to determine.
|
| I'm guessing (but could be wrong) that you would not actually
| have paid $60K for business class seats for your family had
| you not had points that would cover. (I have gotten really
| good deals using points for something I'd have paid for
| anyway--but it's been rare.)
| margalabargala wrote:
| Only sometimes. Depends how you use them.
|
| If you have some specific flight that you pay for
| regularly, e.g. to visit family, then replacing that
| flight's average cost with points gives a concrete number
| on point value.
|
| If you are using points to fly first class on a trip you
| would not be taking at all but for the point redemption,
| then the value gets a lot more muddled.
| ghaff wrote:
| Absolutely. If you use points for something you'd pay
| cash for otherwise, they're typically worth something
| like 1 to 2 cents per point. But a lot of people (and
| I've done this myself with upgrades now and then) treat
| them as more of less "free" money. Presumably the upgrade
| or whatever has some incremental value but we wouldn't
| have paid for it out of pocket.
| woobar wrote:
| Is $60K cash split between these 6 people? Then it is not
| that impressive.
|
| If you want higher ROI on spreadsheet hobby start using it
| for your own financial/retirement planning. Playing with
| numbers in that field can change outcomes by hundreds of
| thousands dollars.
| MattGaiser wrote:
| I am pretty deep into the credit card hobby and most of the
| people in it are high-earning professionals already. The last
| meetup I went to consisted of half of software engineers.
|
| So we already have jobs that pay well for optimizing things.
| wil421 wrote:
| How does one get deeper into the credit card hobby? I
| optimize for cash back on gas and groceries but not much
| else.
| MattGaiser wrote:
| /r/churning is a good place to start. Lots of people doing
| cash back churning too, so even if you don't want plane
| tickets, there is plenty for you.
| k8svet wrote:
| How much do you estimate you make off of it? It feels
| like the intersection of marginals gains and a high level
| of attention you need to pay to sniff out good deals, not
| hurt your credit score, remember how to balance charges
| across cards. I feel like it would need to be a fair
| amount to be worth the "time".
| yeknoda wrote:
| I wish stripe or some company would create a zero fee credit card
| that is truly equivalent to using cash. The wealth transfer from
| cash payers, merchants, and some card users to other card users
| and the cc companies is one of those gross injustices, a small
| and persistent leech on society. Surely there's a way to do cc
| transactions for near zero? What is the point of all this tech
| otherwise?
| smallmancontrov wrote:
| The leech is the point, there is no "otherwise."
| ansible wrote:
| There's still fraud detection / prevention, card terminals, and
| other various infrastructure to pay for. Someone's going to pay
| for it, somehow.
|
| Also, suppose Stripe did offer a low / zero transaction cost
| card. What's the incentive for me (a customer) to get it? It
| isn't any better than the other no-monthly-fee CCs, and is
| strictly inferior to a rewards card.
|
| For merchants, yes, they are incentivized to accept Stripe's
| new card. But they can't stop accepting the other ones until
| Stripe has a significant share of the transactions. And may not
| be able to do so even then.
|
| And meanwhile Stripe is eating the cost of running this new
| zero fee card system, which effectively takes away money that
| they could invest in their own business.
|
| Sounds like a lose, lose, lose all around.
|
| The real solution is to have a law that caps the CC transaction
| fee. Or allow merchants to add a surcharge for rewards CCs.
| melenaboija wrote:
| Agree but maintaining the infrastructure has a cost someone has
| to pay and I as a customer won't see any benefit.
|
| I think it would be healthy to be able to have options with
| near zero cost but I guess this would only happen with strong
| regulations, which seems almost impossible in this space (in
| the US)
| klabb3 wrote:
| > Agree but maintaining the infrastructure has a cost someone
| has to pay
|
| The bank? Keeping money in your account allows the bank to
| take out credit. Providing digital payments sounds like a
| reasonable service for a bank to provide. As well as fraud
| prevention. This is how it works in Europe, most people have
| debit cards. The insanity is having to take out a loan you
| don't need to prove that you're responsible.
| makeitdouble wrote:
| One side of this is cash isn't zero fee.
|
| It has to be minted and circulated, we see it as "free" but in
| practice the gov foots the bill. And, for cards it would be
| issuers footing the bill.
|
| Then moving cash isn't free either. Merchants handling a lot of
| cash also pay to get their cash moved, processed, exchanged
| etc. It's an aspect where card could be lower, but zero is also
| an impossoble goal.
| knallfrosch wrote:
| Just ask your parliament to limit the fee? It's 0.3% for credit
| cards and 0.2% for debit cards in the European Union:
|
| https://www.consilium.europa.eu/en/press/press-releases/2015...
| rockostrich wrote:
| They already started trying. The Credit Card Competition Act
| was introduced last year [1]. It doesn't explicitly limit
| interchange fees though. Instead it allows merchants to
| choose the payment network that payments go through which
| legislators hope would create a race to the bottom.
|
| [1] https://www.congress.gov/bill/118th-congress/senate-
| bill/183...
| phyphy wrote:
| We have something similar in India.
|
| [below text is from google search results]
|
| To facilitate the penetration and usage of RuPay Credit Cards
| on UPI, there will be no charge for transactions up to
| [?]2,000, an NPCI circular said. For transactions upwards of
| [?]2000, the applicable MDR amount will be borne by merchants
| and no additional charges will be levied upon the customers.
|
| Disadvantages of Rupay Cards Limited International Acceptance:
| One of the main disadvantages of RuPay cards is their limited
| acceptance outside of India. ... Restricted Usage: RuPay cards
| are primarily designed for domestic use within India.
| dboreham wrote:
| Isn't that called a debit card?
| bombcar wrote:
| I wonder why no bank offers a debit-network-processed card
| that is backed by a line of credit.
|
| Probably because there's no money in it.
| kevincox wrote:
| What would be the appeal of this to the customer? It is
| basically a prisoners dilemma. It is globally optimal to
| stop rewarding people for using credit cards but for each
| individual they lose if they don't do it. This is why in
| the EU regulation was passed to stop this nonsense.
| mdaniel wrote:
| Fun fact: there are plenty of "credit card as a service"
| platforms nowadays so you could start one:
| https://www.getpliant.com/en/cards-as-a-service/
| euix wrote:
| Often times you will find cash only businesses, especially in
| Chinatown and restaurants that will give you a discount on the
| final bill if you pay in cash. I have been to some mid-range
| restaurants that will knock 10% off my bill if I pay in cash
| instead of credit. This is the merchant fighting back using their
| own stratagems.
|
| In many cases in my experience the vendors who can successfully
| pull off this strategy have a high quality, high value product
| and operate in a no-frills store front and are often family
| owned, maybe a generation or two already. There is a Vietnamese
| banh mi sandwich vendor where I live who has been around for 30
| years only accepts cash - they have the history and patronage to
| pull this off.
| coddle-hark wrote:
| Fun fact, this is actually illegal here in Sweden! That is,
| merchants aren't allowed to adjust prices based on payment
| method. Not sure what the reasoning is.
| liotier wrote:
| Because the main purpose of cash payments in small businesses
| is tax evasion - not just VAT but also paying family members
| in cash and thus dodging even more.
| luisgvv wrote:
| In Costa Rica this is illegal too but going through the
| hassle of reporting it to the local authorities is a pain and
| you won't gain much, just annoy the dealership.
|
| Usually the POS rate is around 2% so at the end of the day
| you'll split it evenly and get a 3% discount. A few years
| back it was even highter and I bought several home appliances
| and saved around $100 so it's worth for both parties.
|
| Now imagine people that deal with ranges from 10K to 100K -
| It's definitely worth it shaving a few bucks here and there
| inanutshellus wrote:
| Fun fact, credit card merchants successfully made it illegal
| in the USA too, but that legislation expired and now it is
| legal to charge more for credit card usage (though credit
| card companies prefer that you offer a "cash discount" than
| an equivalent "credit card fee").
| temporallobe wrote:
| And then there are plenty of other merchants that are 100%
| cashless, presumably because they don't want the hassle (and
| perhaps cost) of handing, exchanging, storing, and transporting
| paper cash and coins to and from a bank.
| brazzy wrote:
| > I have been to some mid-range restaurants that will knock 10%
| off my bill if I pay in cash instead of credit. This is the
| merchant fighting back using their own stratagems.
|
| Not sure how things are in the USA, but in Germany, that has
| nothing to do with "fighting back" and everything with dodging
| VAT.
| neither_color wrote:
| Cynically that's probably often the case but if you're
| offering <$10 food items at a mom & pop shop the credit card
| fees are non-trivial so there probably is a very legitimate
| incentive to take cash. There's also benefits to getting
| immediate cash that you can put in the bank for expenses at
| the end of the day vs waiting a day or two for credit card
| money.
| brazzy wrote:
| > if you're offering <$10 food items at a mom & pop shop
| the credit card fees are non-trivial so there probably is a
| very legitimate incentive to take cash.
|
| Yeah, but not a 10% incentive, especially given that
| depositing cash isn't free either, for commercial accounts.
|
| > There's also benefits to getting immediate cash that you
| can put in the bank for expenses at the end of the day vs
| waiting a day or two for credit card money.
|
| > There's also benefits to getting immediate cash that you
| can put in the bank for expenses at the end of the day vs
| waiting a day or two for credit card money.
|
| patio11 actually argues that it's the opposite which
| explains why stores offer you to take out cash along with
| your purchase when you pay by debit card) in another
| article at https://www.bitsaboutmoney.com/archive/the-
| infrastructure-be... - "And so, getting magical paper out
| of the till and into your wallet without it first visiting
| the bank saves the retailer money. It can also,
| potentially, earn the retailer a small amount of float.
| Cash in its tills is dead money and may not be deposited
| until e.g. the end of the week or later, but selling that
| paper to a customer for real money results in it arriving
| in their bank account faster than physically walking it to
| the bank."
|
| It _might_ be different for a small mom &pop store that
| actually deposits their cash every day, of course.
| greedo wrote:
| My local restaurant instituted a surcharge for card users. Kind
| of irritating but I understand why, considering the margins in
| the restaurant industry.
| mdaniel wrote:
| It used to be a violation of their merchant agreement but it
| seems a 2013 court case made it that as long as it's
| disclosed in a certain way, it seems to be ok. About 4 states
| still outlaw it, based on some digging, but none of the card
| rules that I could dig up allowed applying that fee to
| _debit_ cards containing the logo (e.g.
| https://www.mastercard.us/en-
| us/business/overview/support/me... )
| xyzelement wrote:
| The sort of obvious thing is that taking cash doesn't just save
| the merchant credit card fees but enables them to play games
| with the income they report for tax. Same with like repairmen
| that will give you a much better deal if you pay cash - it's
| not just CC fees they are avoiding.
| jmuguy wrote:
| I am really interested in the content of this post, and I assume
| other posts from the author. But his writing style is extremely
| long winded.
|
| For instance, this is somehow only two sentences.
| It is a fee, ultimately paid by the card-accepting business,
| which gets sliced up between various parties in the credit card
| ecosystem to incentivize them to put their logos in the wallets
| and on the phones of well-heeled customers and increase the
| amount they spend and the frequency with which they spend it. (In
| industry, we sometimes distinguish interchange--which mostly goes
| to the issuing bank--and scheme fees--which mostly go to the
| credit card brand itself--but as interchange is much larger,
| let's just call them both interchange for simplicity.)
| sxg wrote:
| Agreed. Lots of parentheticals that distract from the main
| point.
| abhayhegde wrote:
| Agreed. I thought I was having a bad day unable to comprehend
| the content, but the style is off putting.
| ErrantX wrote:
| - In the EU the main reason Rewards cards have declined is that
| the regulator capped interchange to a very small amount in 2015.
| The US will follow suit at some point (as noted debit cards have
| gone that way) but I guess not as low
|
| - I think the simple answer to nkurz's point on why don't all
| cards charge the maximum in interchange is - it's just market
| forces. It's not worth enough money to long-term piss off the
| bigger merchants (i.e. Amazon). When you have a 30% APR card non-
| rewards card, the 3% interchange is small beans. Also the
| acquiring bank would probably want a bigger piece of the pie if
| it were more widespread
|
| - Credit Card economics is _radically_ different across different
| countries (for all sorts of reasons). So for example, a third of
| card users in the US explicitly seek the rewards and another
| third have it for the various protections /security vs. debit
| cards. In the UK only 12% seek rewards, with the two biggest use
| cases being to spread costs of big transactions or to improve
| their credit score. (so for that reason it's sort of hard to have
| a global view of this problem)
| dkjaudyeqooe wrote:
| A fun fact is that most US reward cards with up to 5% rewards
| work fine in the EU.
|
| I have noticed some strange behavior with some cards at certain
| supermarkets. That may be them trying to fight back against the
| US interchange fees, but there are workarounds.
| jplrssn wrote:
| Reading the description of the interchange fee cap, it sounds
| like the cap should apply also for US-issued cards used in
| the EU [0]:
|
| > ... the capping of interchange fees should result in lower
| fees charged by banks to retailers for processing card
| payments.
|
| If users of US cards still get 5% rewards when using their
| cards in the EU, I'm curious about who pays for the 4.7%
| shortfall.
|
| [0] https://ec.europa.eu/commission/presscorner/detail/en/MEM
| O_1...
| sofixa wrote:
| The card issuer and potentially the consumer via atrocious
| fees and a terrible exchange rate? I have a French-based
| American Express and their exchange rate + commission on
| any foreign currency transaction is flat out absurd (I'm
| talking like 50 euros commission on a 1k USD transaction, +
| a very bad course resulting in a total ~100+ euro
| difference than if I pay with a Revolut/N26/BoursoBank no-
| fee foreign currency payment card).
| rockostrich wrote:
| Pretty much all Amex cards with an annual fee have no
| foreign transaction fees as a benefit. The issue is that
| a lot of small business merchants outside of the US don't
| accept Amex (or will at least say they don't to avoid the
| higher interchange fee).
| sofixa wrote:
| Not in France - I have an Amex Platinum and with it I get
| the above described absurd fees and bad exchange rates.
|
| Funnily I've gotten notified a couple of times by Amex,
| as per ECB regulations, that the course they've used is
| significantly worse than the official one.
| renhanxue wrote:
| I don't think that's the case outside the US. Sweden
| here; all of the Amex cards available locally charge a 2%
| currency exchange fee.
| dkjaudyeqooe wrote:
| I only use cards without FX or other fees. The amount is
| charged to the US card in Euros and Visa or Mastercard
| take a 50 basis point commission on the currency
| conversion, but since their settlement is not real time
| (end of day in US or something) often this can be a
| exchange rate win depending on your luck.
| woobar wrote:
| Interesting. Europe has stricter regulations that cap
| interchange. As a result not a lot of rewards cards and
| less competition in that space. In US no caps, but much
| more players in the rewards cards space. I've checked
| recent foreign transactions and it looks like both of
| popular travel cards make some money on exchange rates,
| but not as much as in France.
|
| Amex Plat did not charge foreign fee, but exchange rate
| is 1% less favorable according xe.com
|
| Chase Sapphire Reserve also no fees, exchange rate is
| 0.3% different from xe.com
| bombcar wrote:
| It's uncommon enough that the credit card processors just
| eat the fee difference. Probably the issuing bank and not
| VISA/MC.
|
| The number of people who can effectively use/abuse this
| consistently is probably pretty low.
| dkjaudyeqooe wrote:
| > abuse
|
| Yes using the card as designed and promoted I don't know
| how I live with myself.
| jacobgkau wrote:
| "Abuse" in this context would probably mean intentionally
| getting a credit card in the US and then making a bunch
| of purchases in the EU with the specific intention of
| screwing over your bank/card company with the interchange
| fee difference, which obviously not many people are going
| to have the will, time, or money to do, especially not
| "consistently."
|
| Even just using the word "use," US cards are designed for
| and promoted to people who live in the US, and are likely
| to do most (if not all) of their shopping in the US.
| Absolutely, there's nothing morally wrong with getting a
| US card and using it a bunch in the EU, but the point is
| that the number of people doing that is low enough for
| the banks/card companies to just subsidize the fees.
| rahimnathwani wrote:
| It's not worth enough money to long-term piss off the bigger
| merchants (i.e. Amazon)
|
| But most individual issuers (excluding Chase and maybe 1-2
| others) have a small impact on the overall mix, so why wouldn't
| they issue exclusively the top tier (highest interchange)
| cards?
| cmurf wrote:
| I'm seeing restaurants charge a credit card fee as a line item on
| receipts like a tax, with a percentage. I wish there were real
| time information what a particular card will cost the merchant,
| and that fee is what's charged. The idea most people should
| subsidize other people's kickback is obscene.
|
| Also, I'm confused about the federal law flat rate fee on debit
| cards. I know merchants using Square and report that they're
| charged the same fee for debit and credit cards, no discounted
| rate. For small businesses, I'd like to use my debit card, but
| not if the payment processor is going to pocket the difference
| between the discount debit fee and their fee to the merchant, and
| thus me.
| jtchang wrote:
| If you take a look here you can see how this type of tiering
| system works out:
|
| https://usa.visa.com/content/dam/VCOM/download/merchants/vis...
|
| Some of the tiers for Visa cards:
|
| Visa Infinite Spend Qualified Visa Infinite Spend Not Qualified
| Visa Signature Preferred Visa Signature Traditional Rewards All
| Other Products
| ismokedoinks wrote:
| While this focuses mainly on the consumer-credit card company
| relationship, I wanted to add this interesting study on the
| relationship between consumers across socioeconomic strata:
|
| ``` Since retailers usually charge the same price regardless of
| payment method, payment card rewards programs with different
| levels of rewards effectively cause some customers to subsidize
| the consumption of others. The research presented confirms that
| households with income less than $75,000 per year collectively
| transfer over $3.5 billion to those making more than $75,000 per
| year. Furthermore, the cost of interchange fees to retailers can
| be significant, especially in competitive sectors such as
| gasoline and groceries. This study demonstrates that interchange
| costs are typically about 17 to 19 percent of retailer profit.
| Variance in these costs may induce risk-averse retailers to set
| higher prices, thus generating additional economic inefficiencies
| and hurting retail consumers. Negative impacts on low income and
| minority households and small businesses have become "entrenched"
| and are likely to get worse as interchange fees continue to
| increase. This economic inefficiency will not change unless there
| is a "sufficiently large shock" in the form of policy or
| technology to change the dynamics of the monopolies holding sway
| over the credit card system. ```
|
| https://hispanicleadershipfund.org/wp-content/uploads/2022/0...
| abalone wrote:
| A valid interpretation but not the only way to describe it. If
| a merchant offers a 10% discount for spending $1000 or more,
| are they making lower-spending customers subsidize the
| purchases of higher-spending ones? Are they transferring wealth
| from poor to rich?
|
| Technically yes. But what would the impact be of outlawing the
| practice of volume discounts through a "policy change"?
| abalone wrote:
| Fun fact: this is why crypto never took off as a replacement for
| credit cards. Too many entrepreneurs focused on "lower fees" as
| if it were some technical property. But it was never about the
| technology.
|
| Interchange fees primarily fund consumer rewards programs and
| benefits. To become an appealing choice for consumers, any new
| payment method has to offer competitive benefits. Those benefits
| are funded by the fees.
|
| Visa/MC/AmEx have essentially created a system whereby higher-
| spending customers are able to wrench more value from merchants
| in the form of higher fees. This is reflected in the fee
| schedules that slice and dice merchants by category and customers
| by card tier.
|
| If you want to build a new payment system it is important to
| understand that it's not just a negotiation between merchants and
| issuers. It's a two-sided market where customers also leverage
| their spending power, directly or indirectly.
| ninepoints wrote:
| Surely that isn't the _only_ reason
| MrSkyNet wrote:
| The complexity of crypto is probably the biggest.
|
| The second biggest is the missing need: Most people don't
| have any advantage of using crypto. They go to work, get a
| salary, buy/sell things and thats it.
|
| If you don't need to buy something illegal or really believe
| that there is still a soviety left to take some crypto in
| worst case scenario, fiat is great.
| twosdai wrote:
| I have this pet theory that the idea of decentralized
| currency is a bit ahead of its time, and the best consumer
| use case is for frequent travelers since you could more
| easily sidestep foreign exchange issues, and hassles.
|
| There's a bunch of backend and b2b use cases to be explored
| but those also take time.
|
| All this assumes the volatility issue is solved.
| BizarroLand wrote:
| Ahead of its time. Not a bad call.
|
| In a quasicapitalist utopia, crypto would be a very
| convenient way to enable the government to set a stock
| value for a universal cryptocredit and make that credit
| its default method of value transfer.
|
| They could do something like pin the value to 1 credit =
| 1 hour of unskilled menial labor, and strictly control
| the supply.
|
| With appropriate software monitoring and a lack of other
| methods of direct wealth transfer, it would make it
| impossible to not properly pay your taxes and vastly more
| difficult to exchange wealth without government
| oversight, and make money crimes vastly more difficult,
| from hiring criminals to do crimes to purchasing drugs
| and weapons for illicit purposes.
|
| It's the perfect system for a dictatorship as well.
| howeyc wrote:
| Also doesn't need to be decentralized or an existing
| crypto currency to solve those issues.
|
| For example, central banks are exploring smart contracts
| for international payments.
| https://www.bis.org/press/p240403.htm
| organsnyder wrote:
| > frequent travelers since you could more easily sidestep
| foreign exchange issues
|
| I don't travel internationally very frequently, but
| whenever I do my credit card handles currency exchange
| for me automatically. Perhaps I'm not getting the best
| exchange rate, but the difference is minimal enough that
| looking into alternatives isn't worth the hassle.
| margalabargala wrote:
| Amother huge piece is that it (Bitcoin and most other major
| cryptos) is by design a deflationary money system.
|
| Why would you spend crypto when you could get more for it
| if you wait a week?
|
| You wouldn't.
|
| And people don't.
| max51 wrote:
| >Why would you spend crypto when you could get more for
| it if you wait a week?
|
| that never stopped capitalist from spending their money
| even if they make profit from their investment. If your
| logic was true, no one who has access to investment
| opportunities (eg. the stock market) would ever spend any
| money.
| margalabargala wrote:
| > If your logic was true...
|
| I think you're taking a stronger interpretation than what
| I wrote.
|
| I'm not saying no one ever spent any crypto.
|
| I'm saying that because it was deflationary, people
| tended to spend less than otherwise. This was so bad with
| bitcoin that it failed to be usable as a currency.
|
| If my logic were true, then when interest rates were
| higher and people could make more money doing nothing,
| then people with access to investment opportunities would
| _tend_ to spend _less_ money.
|
| Which is exactly what we are currently seeing.
| missedthecue wrote:
| Crypto is complex but I don't think very many people could
| explain how Visa's merchant payment network functions. It
| just does, and no one has to think about it.
| albrewer wrote:
| 15-60 minute settlement times early on certainly didn't help
| mindcandy wrote:
| Visa/Mastercard have settlement times of over 24 hours.
|
| Meanwhile, for over a decade now, Litecoin has had a
| settlement time of 2.5 minutes. And, for tiny (sub $100)
| transactions, it's totally reasonable to just look up the
| wallet's holdings in an instant.
|
| For online transactions, you can always let the customer go
| immediately. Just wait 3 minutes before you ship :P
| ThrowawayTestr wrote:
| >this is why crypto never took off as a replacement for credit
| cards
|
| I thought it was because transactions take minutes instead of
| seconds.
| SketchySeaBeast wrote:
| And because it's uncompelling. I have a bunch of consumer
| protections around my credit card, why would I want to use
| crypto instead? Especially when it's a wildly fluctuating
| speculative asset and the burger I buy for $15 worth of coins
| today will be $60 dollars of coins tomorrow.
| tcmart14 wrote:
| That is almost certainly one reason and an important one. But
| as the other commenter to your comment shows, there is a lot
| more. Protections is a big one. I also personally side that,
| you need a way for people to interface with their crypto like
| they do with their current bank and as simple as possible.
| Normal people don't want to have to juggle around keys. Hell,
| Im a software engineer and I hate having to keep track of
| keys. So every time I get a new machine, I create fresh new
| SSH keys. My SSH keys are disposable to me.
| Obi_Juan_Kenobi wrote:
| They can take either; waiting for confirmations is only a
| matter of reducing double-spend risk.
|
| In practice, seconds after a transaction has been signed and
| broadcast, it is already very unlikely to double-spend. Miner
| incentives are such that the first-seen transaction is the
| most likely to be used. A delay of a couple seconds is
| sufficient to account for network-propagation lag.
|
| You wouldn't do this for high-value transactions, but there's
| some threshold where real-world risk is lower than the
| convenience of a fast transaction, and that threshold is
| reasonably high.
| objclxt wrote:
| > this is why crypto never took off as a replacement for credit
| cards
|
| If this were true you would expect crypto to have taken off in
| countries with low interchange rates. Europe, for example, has
| far less of a rewards and points culture for payment, and
| (compared to the US) much lower interchange.
|
| Crypto never took off as a replacement for credit cards for
| many reasons - the biggest coins out there are simply too
| volatile to be usable as a currency, they lack the consumer
| protections you get paying with a credit card, and they're
| simply too complex for an average person to understand.
| abalone wrote:
| Interchange is regulated in Europe. You would likely run into
| legal issues if you tried to jack up merchant fees via a
| novel payment method.
|
| However, even if it were legal, I don't think this would
| counter my claim. I'm merely saying that you'd need to match
| _existing_ rewards schemes in markets where they are
| established. Introducing them into a new market is an
| entirely different matter. The system we have today evolved
| through many decades of negotiation and deal making among
| merchants, issuers and card networks.
|
| You're right about consumer protections --- it would be very
| expensive for a crypto-based system to provide those without
| an intermediary that can adjudicate and reverse transactions
| (chargebacks).
| throwaway918274 wrote:
| This is where a lot of tech folks fail. It's almost never about
| the technology. Most of the time all you need is a spreadsheet.
| bombcar wrote:
| Most tech things are various forms of spreadsheet.
|
| Blockchain is a distributed and complicated one.
| mdaniel wrote:
| I had high hopes for https://www.prnewswire.com/news-
| releases/ternio-blockcard-wi... but it was just too much hassle
| to keep transferring in money
|
| While looking up a representative link for that, I also saw
| that it appears Venmo is in that game, too:
| https://www.cryptovantage.com/best-crypto-credit-cards/venmo...
| Sohcahtoa82 wrote:
| > Fun fact: this is why crypto never took off as a replacement
| for credit cards. Too many entrepreneurs focused on "lower
| fees" as if it were some technical property.
|
| I always thought the big problem with crypto was that the fees
| were _atrocious_ for any small transaction.
|
| And the fees only get higher as the network gets busier. You
| can choose to have a send some money with a small fee, but the
| miners will never confirm your transaction, as each block is
| limited.
| mattdesl wrote:
| Not quite the case anymore--rollup fees are often below $0.05
| per transaction.[1]
|
| [1] https://www.gasfees.io/
| skrbjc wrote:
| It's not just crypto it's any alternative payment system.
| Multiple payment vendors have tried to up-end the credit card
| companies by focusing on lower fees for merchants, but
| customers have no incentive to use that new system if they have
| a benefit to using their credit card, at least in the US.
|
| It's why, though, there are a bunch of payments companies that
| have popped up in places throughout Asia that aren't competing
| with rewards systems off the back of interchange.
| k8svet wrote:
| Funny, because I would pay twice the CC fee for credit card
| transactions to be as painless as crypto. I'd rather scan a
| barcode and wait two minutes, compared to typing my address,
| handing over my phone number, confirming my zip, waiting for my
| CC's TOTP to arrive. Only for it to still fail 5% of the time
| for who knows what reason.
| abalone wrote:
| You should try Apple Pay (or maybe Google Pay?) It addresses
| all those pain points and more, while still giving you the
| consumer protections and fast transactions of cards.
| k8svet wrote:
| I'm not interested in giving more parties access to my
| financial data, certainly not an ad company. And I'm not
| about to buy an iPhone to use it. Also, merchant support
| for it is abysmal. But, appreciate the tip all the same.
| ReptileMan wrote:
| >In Europe, card acceptance is cheap by regulatory fiat and so
| rewards are far less common (or commonly lucrative) than in the
| U.S.
|
| Once is while the EU does something right.
| thundergolfer wrote:
| The Acquired podcast did an episode on the history of Visa that
| covers a _lot_ of how the credit card industry works.
|
| As another commenter noted, this article doesn't pull out clearly
| how this whole credit card reward scheme actually works. The
| Acquired episode does, by the end.
|
| It works like this: the 'luxury' credit card providers,
| partnering with Visa, take money away from merchants in order to
| extract profit for themselves while keeping the credit card
| consumers happy. The merchants are pissed about this, and
| regularly make lawsuits to regulate interchange. The money
| extracted by the credit card companies and Visa causes merchants
| to raise prices for _everyone_ regardless of whether they have a
| rewards card or use a credit card at all.
|
| This creates in effect a massive money transfer from the poor,
| who do not use rewards cards, to the rich consumers who do. The
| Acquired podcast provides specific numbers on just how much worse
| off poor consumers are given this system, and how much the
| richest consumers benefit.
|
| I come from Australia where interchange fee regulation tamps down
| on the kind of credit card mania and fetishism seen in the USA.
| humansareok1 wrote:
| Theres a net gain between credit card rewards and higher prices
| for reward card users?
| Retric wrote:
| Yes because they are required to charge non reward customers
| the same amount and competitive markets forced prices down.
|
| Suppose the reward is 2% so someone is paying 98% of the
| listed price. Now if everyone was a rewards customer the
| price just moves to 102.04$ from 100$, in effect nothing
| changes. However not everyone uses a rewards card, and the
| prices stay the same.
|
| Net result with an even split would be that 98% discount
| applies to 101$ and Bob an unrelated customer is stuck paying
| the extra 1% to give the reward customer their 1% savings.
|
| However, it's not split 50/50 so rewards cards sometimes have
| more victims funding their rewards and other times few
| victims and it's effectively just a marketing gimmick.
| scarface_74 wrote:
| It's much more nuanced than that. True a 2% cash back card
| costs the company 2%.
|
| But a 4% card that gives you credit card points doesn't
| cost the card issuer 4%.
|
| If you transfer 4 Amex points for 4 Delta Skymiles. Amex
| isn't paying Delta 1 cents per Skymile.
|
| On the other hand, you can then replace a $1 you would
| spend on Delta with 0.86 Skymiles (ie 1 Skymile is worth
| 1.4 cents). It's also not costing Delta 1.4 cents to fly
| you.
|
| If you use your credit card points to buy on a credit card
| run travel portal, the credit card company is getting a
| kickback from airlines and hotels.
|
| It's turtles all of the way down.
| Retric wrote:
| > a 4% card that gives you credit card points...
|
| Sure, plenty of cars just lie about how valuable the
| rewards are. That's a completely different game.
| scarface_74 wrote:
| I'm not saying it's a lie. 4 Amex Membership Rewards
| points are worth around 6% if I transfer them to Delta
| instead of spending cash on the same ticket.
|
| If I transfer those same points to Flying Blue/KLM (a
| Netherlands airline), since they are a partner with
| Delta, I can buy a domestic round trip flight in the US
| on Delta through them where the cash price to fly into my
| parents small regional airport is $508.
|
| The price in points is 17K. That makes those same 4
| points worth 12% back per dollar.
|
| This isn't about "only the rich get value". It's about
| the well informed.
|
| 4 points per dollar is what you get back on the Amex Gold
| for groceries.
|
| You could never buy points as cheaply as Amex. For all
| intents and purposes, credit card users are collectively
| buying miles in bulk
| lotsofpulp wrote:
| > The money extracted by the credit card companies and Visa
| causes merchants to raise prices for everyone regardless of
| whether they have a rewards card or use a credit card at all.
|
| There has been nothing stopping US merchants from offering cash
| and/or debit card payers a discount since Oct 2011.
|
| https://www.ftc.gov/business-guidance/resources/new-rules-el...
|
| Most merchants are betting that people paying with credit cards
| are willing to buy sufficiently more or buy at sufficiently
| higher prices such that credit card transaction costs are more
| than offset.
|
| That is the only reason why a cash/debit card discount would
| not be advertised.
|
| Edit to respond to below:
|
| I don't buy that. Merchants of all types already engage in
| myriad types of discounts and promotions to price discriminate
| customers all the time.
|
| A simple sign saying "x% discount for paying cash/debit" is of
| negligible complexity.
| stuart73547373 wrote:
| yes there is. that's an enormous added pricing and
| communication complexity for businesses. which we know has a
| high cost because of all the businesses who have decided it
| would be higher than just stomaching the credit card fees.
| massysett wrote:
| Would a 1 percent cash or debit discount be an enormous
| burden? Some merchants already programmed their terminals
| to prod debit customers into entering their PIN rather than
| charging it as credit, so would offering a discount really
| be that much harder?
| ghaff wrote:
| One answer is: It's just annoying. I normally use a
| credit card. Yes, I can use my debit card and enter a
| PIN. If it's a discount specifically for cash, I may not
| have any on me and don't want the change anyway. In any
| case, it's adding mental overhead to just paying.
|
| (It's usually more like 3% delta which I almost get in
| cashback anyway but still annoying.)
| mason55 wrote:
| Does accepting cash really save a business that much money?
| I've heard arguments in the past that it ends up being a
| negligible difference once you account for all costs of
| processing cash (someone has to take it to the bank, it can
| get stolen in a robbery, employees can skim, you have to
| count it, you need a safe, you need cash deliveries, etc).
|
| I have no numbers, so it could be totally off-base, but it
| feels not-impossible that it costs a percentage or two to
| process all your cash anyway, so the difference between cash
| & credit cards isn't actually that big. It's just that the
| interchange fees show up as one big chunk whereas the cash
| processing is lots of little bites, or even accounting for
| things that didn't happen (like skimming).
|
| I guess this only applies if you're legitimately reporting
| all your cash take, if the business itself is skimming for
| tax reasons then the savings on cash would be substantial.
| astura wrote:
| >It's just that the interchange fees show up as one big
| chunk whereas the cash processing is lots of little bites,
| or even accounting for things that didn't happen (like
| skimming).
|
| Not just skimming, but lost business for cash-only
| establishments is huge. The amount probably varies by type
| of business, but I sometimes go to a bar that's cash-only
| and I've seen so many people walk in, try to order, and
| walk out and never come back once they find out it's cash-
| only. Even groups of 15-20 people. That's a significant
| cost (in lost revenue) even if it doesn't directly show up
| as a line item.
|
| Even I admit to choosing a different place from time to
| time I think "I could go to the cash only bar, but then I'd
| have to go to the ATM first or I could just go to the other
| place that doesn't require an extra trip to the ATM. I
| should probably just go to the ATM so I could have some
| cash on me anyways, but traffic is heavy or it's
| cold/rainy/dark/late."
| holden_nelson wrote:
| I don't disagree with your point; I do want to point out,
| though, that whether it's "the merchants have to raise their
| prices" or "the merchants benefit too and are complicit", the
| end result is still that it's still the poor who lose.
| stvltvs wrote:
| Here's the Acquired episode mentioned.
|
| https://www.acquired.fm/episodes/visa
| duxup wrote:
| >This creates in effect a massive money transfer from the poor
|
| I'm always a little confused on exactly HOW this plays out. I
| could see someone with terrible credit being denied, but most
| cash back cards I use are hardly gated / limited to "rich folks
| only".
|
| I feel like the reasons / the way it plays out are more complex
| than the results. And really if someone is poor, struggling to
| pay their card, that's a larger issue than the type of card
| they use.
|
| I'm just not sure reward cards = "This creates in effect a
| massive money transfer from the poor" as simply as stated.
| whoisburbansky wrote:
| It plays out this way because anything anyone buys with a
| credit card, reward card or not, ends up costing 2-3% more
| than it would otherwise have, because of interchange fees. If
| you have a rewards card, the CC issuer turns around and gives
| you, say, half of that back (1% cashback on everything) and
| keeps the rest. It's kind of like a tax break that you only
| qualify for if your credit score is above a certain
| threshold, but you have to pay into regardless of
| income/credit score.
| woobar wrote:
| > ends up costing 2-3% more than it would otherwise
|
| This is a very simplified view. Cash handling is not free.
| Fraud levels with cash are different. Overall
| attractiveness of a small but cash-only business is
| different.
| TheDong wrote:
| The alternative to credit cards that charge 2-3% fees
| shouldn't be cash, but rather debit cards with close to
| zero fees.
|
| Cash handling isn't free, but a digital transfer that
| doesn't have rewards is obviously cheaper than a credit
| card.
| chii wrote:
| if the credit card merchant was able to extract 2-3% for
| using their network, what makes you think that a free
| debit card with low/zero cost wouldn't also be owned by
| the same credit card merchants and force the same fees to
| maintain their monopoly?
| dhosek wrote:
| Because right now debit card purchases don't have a
| transaction fee while credit cards do. I just had two
| recent purchases where the vendor charged a 3% surcharge
| for credit cards but would do the transaction by debit
| card free.
| woobar wrote:
| It is an example that greed is everywhere. Not only among
| card issuers but also among merchants. The moment
| merchant find a socially accepted way to extract extra
| they will do it. Similar to tip screens on square
| terminals in all takeout places. Costs nothing to ask,
| generates some additional revenue.
| nkurz wrote:
| Because in the US we already have laws that cap the fees
| on most debit cards:
| https://www.ftc.gov/system/files/documents/plain-
| language/bu...
|
| There's even a proposal to drop these fees even lower:
| https://www.reuters.com/markets/us/us-fed-set-revise-
| debit-c...
|
| Europe has similar laws capping the fees on both credit
| cards and debit cards. We could do the same and it would
| work better for everyone except the credit card
| companies.
| woobar wrote:
| Debit txs are not free. For big ($10B in assets)
| regulated issuers they are pretty low, but for everyone
| else they are close to 1.9%
|
| [1] https://usa.visa.com/content/dam/VCOM/download/mercha
| nts/vis...
| kevin_thibedeau wrote:
| Debit cards get arbitrarily rejected. Some gas stations
| won't process them. The IRS ID verification for Covid
| stimulus wouldn't work with debit.
| brewdad wrote:
| There is a reason every concert and sports venue near me
| has gone cashless. It's not because they enjoy giving
| away 2-3% of their revenues but rather those places
| aren't active every evening and tend to turn over
| employees quickly. Handling cash is expensive and risky
| in that environment.
| astura wrote:
| In a concert and sports venue concessions environment
| you're also prioritizing throughput much more than most
| businesses. Being cashless helps with throughput a lot -
| the employees don't have to wait for people to count
| their money, then recount it, and spend time making
| change.
| driscoll42 wrote:
| There was a study by the Federal Reserve that came to the
| conclusion last year that rewards cards is basically a money
| transfer of ~$15 billion from poor to rich per year.
| Discussion on Hacker News about it:
| https://news.ycombinator.com/item?id=34492502
| duxup wrote:
| Gotta be honest that I'm not reading 60 pages at this
| moment.
|
| But that reads like they're talking about the net effect
| measuring across FICO scores, but it's not clear that
| they're talking about the overall cause / if this is a case
| where some of the poor could in fact choose to use these
| cards.
|
| Being poor is complex, just not having time (two jobs, etc)
| often means they don't have time for a lot of things,
| including shopping for credit cards. I wonder if things
| like THAT are playing a part.
|
| I don't disagree with the math on the end result, I do
| think the reason is larger than just say rewards cards, and
| has to be approached careful.
| 11101010001100 wrote:
| If these 'luxury' credit card companies wanted poor
| customers, you think they would have found them by now?
| bakhlawa wrote:
| I think the Grandfather was making a different point.
| That because rewards cards = higher interchange fee for
| the merchant, this results in the merchant increasing
| fees on everyone (the payment networks prohibit charging
| a higher fee to only those paying with a credit card).
|
| >>>The money extracted by the credit card companies and
| Visa causes merchants to raise prices for everyone
| regardless of whether they have a rewards card or use a
| credit card at all.
|
| >>>This creates in effect a massive money transfer from
| the poor, who do not use rewards cards, to the rich
| consumers who do.
| duxup wrote:
| The pricing point is such complicated one too. Demand
| creates pricing changes, supply chains, etc...
|
| If say the poor used these cards at a higher volume,
| wouldn't they then to be passing on the changes to other
| poor?
| wyre wrote:
| The poor/low-FICO scorers are either A) not getting
| accepted into credit card programs, B) paying higher
| interest rates, or C)not able to make their payments in
| full each month.
|
| Compared to another individual that can put all their
| purchases on a rewards card and pay off their balance
| every month.
|
| The pricing point isn't that complicated either. Nearly
| every business accepts credit card and can't avoid the
| higher credit card fees that pay out to reward programs.
| WaitWaitWha wrote:
| That is exactly the opposite what the study states. https:/
| /www.federalreserve.gov/econres/feds/files/2023007pap...
|
| In the abstract:
|
| > sophisticated individuals profit from reward credit cards
| at the expense of na"ive consumers.
|
| Then in the study:
|
| > Next, we study whether the redistribution across FICO
| scores is driven by differences in cardholders' income,
| suggesting a transfer from poor to rich consumers. Indeed,
| We adopt the following terminology: "Reward cards" are
| credit cards that earn either cash back, miles, or points;
| "classic cards" are credit cards that are do not earn any
| form of rewards. credit card rewards are often framed as a
| "reverse Robin Hood" mechanism in which the poor subsidize
| the rich. Our results, however, show that this explanation
| is at best incomplete. [...] Thus, high-income consumers
| with high FICO scores benefit from reward credit cards
| largely at the expense of high-income consumers with low
| FICO scores.
| TehCorwiz wrote:
| Also from the abstract: "We estimate an aggregate annual
| redistribution of $15 billion from less to more educated,
| poorer to richer, and high to low minority areas,
| widening existing disparities"
| Kranar wrote:
| The Fed is very careful to differentiate between income
| and wealth. You can be wealthy with little income and you
| can have a lot of income but not be wealthy.
|
| While the study points out that high income, high FICO
| consumers benefit at the expense of high income low FICO
| consumers, which strictly controls for income as opposed
| to wealth, ultimately the study concludes what OP said it
| does, that reward programs transfer wealth from the poor
| to the rich, and I quote:
|
| >Credit card rewards transfer income from less to more
| educated, from poorer to richer, and from high- to low
| minority areas, thereby widening existing spatial
| disparities.
| 0xbadcafebee wrote:
| At the end of the quote you excluded this:
|
| _" We find a redistribution from low- to high-FICO
| consumers regardless of income."_
|
| Poor people have low FICO scores. There are also high-
| income people with poor FICO scores. Both are involved.
|
| _" Thus, high-income consumers with high FICO scores
| benefit from reward credit cards largely at the expense
| of high-income consumers with low FICO scores."_
|
| The high-income people have much more money, thus have
| more to contribute to the pool of money going to high-
| income high-FICO people.
|
| But poor people, who already don't have much money, are
| also contributing to this pool of money going to high-
| income high FICO people. And more to the point, it
| impacts poor people much more, because... they're poor.
|
| So it's not completely the opposite, it's just
| inaccurate. The poor are subsidizing the rich, _and_ the
| rich are subsidizing the rich. The difference is, there
| is a much larger _effect_ on the poor, because... they
| 're poor. They have less access to credit and that lack
| of access affects them more. A small amount of money lost
| has a larger impact.
|
| In addition to all this, people of color also have lower
| FICO scores, so not only is it a burden on the poor, it's
| a burden on people of color (and the young in general).
| https://finmasters.com/average-credit-score/
| https://www.cnbc.com/2021/01/28/black-and-hispanic-
| americans...
| skrbjc wrote:
| Are any of these people required to open a credit card?
| If you're poor and low FICO, then you shouldn't have a
| credit card in the first place, just a debit card. And if
| you're poor and high FICO, then a credit card will
| provide you benefits.
|
| It seems like the proposal is to take away rewards for
| everyone because there's a group of people that can't
| help themselves. Why not just be more strict about who
| gets a credit card.
| daveoc64 wrote:
| People without a credit card are still subsidising those
| with reward cards, as the high interchange fees are
| spread out across all of a store's transactions.
| Kranar wrote:
| I don't see any proposal put forth. I see a study that is
| observing human behavior.
|
| The behavior being observed is merchants increasing their
| prices for all consumers to accommodate a subset of
| consumers who use reward cards, where reward cards end up
| being a form of income for their holders.
|
| The distribution of consumers who gain the most income
| from reward cards are those who are more wealthy. The
| distribution of consumers who lose the most money as a
| consequence of having to pay higher prices due to said
| reward cards are the less wealthy. The end result is a
| transfer of wealth from those less wealthy to those more
| wealthy.
|
| That is an observation, not a proposal or a judgement.
| You are welcome to make a judgement or put forth a
| proposal from that observation but the study itself did
| not do so.
| TehCorwiz wrote:
| These programs operate by placing the burden on the
| vendor who inflates prices and thus even people who pay
| in cash pay for the programs indirectly. So even if you
| don't want a card, or can't get one you still pay for it.
| 0xbadcafebee wrote:
| > If you're poor and low FICO, then you shouldn't have a
| credit card in the first place
|
| The poor _need_ credit cards. Having a credit card is one
| major way to improve your FICO.
|
| Credit is a critical part of everything from obtaining
| housing, to lower rates on auto and home loans and
| insurance, to the ability to pay for necessary life
| emergencies when you don't have savings (and the poor
| don't have savings). Having bad credit can even make it
| difficult to get a bank account, which you'd need for a
| debit card. People who don't have credit cards often
| resort to check-cashing stores to cover their expenses,
| which are predatory and charge exorbitant fees, keeping
| the poor poor.
|
| > there's a group of people that can't help themselves
|
| I don't know how to say this in a way that will make
| sense to you, but this idea that "they can't help
| themselves" or are just "irresponsible", and that's what
| led to their situation, is wrong. And the idea that they
| shouldn't get some form of assistance is wrong. It's kind
| of complicated, and I would need to be typing here for an
| hour to begin to explain it... There are tens of millions
| of people in the US alone that struggle every day because
| of a credit history that they are often not in control
| of, and predatory businesses that make it impossible to
| climb out of debt, and basic human livelihood
| restrictions that are tied to FICO. I really can't stress
| enough how important it is for the poor to be able to get
| access to credit and increase their score. Hopefully
| someone here can suggest a book or article that you can
| read that will explain it in depth.
| rrrrrrrrrrrryan wrote:
| Poor people, actual poor people who are just scraping by,
| usually have bad credit and cannot get credit cards.
| autoexec wrote:
| Poor people can always get credit cards. They get constant
| offers for them. The catch is that they are terrible cards
| with fees and insane rates. The credit industry is
| perfectly happy to let everyone get into massive debit.
| They'll give them to anyone
| (https://www.mymoneydesign.com/nine-year-old-daughter-
| credit-...)
| supertrope wrote:
| Credit cards for those with subprime credit often do not
| offer reward gimmicks and may even require a deposit
| and/or annual fee.
| neuronexmachina wrote:
| The median credit score for low-income Americans is 658 (US
| average is 714): https://www.fool.com/the-
| ascent/research/average-credit-scor...
|
| It looks like a number of decent rewards cards require a
| credit score over 670.
| insane_dreamer wrote:
| because poor people, typically: - do not quality for high-
| rewards cards (which have higher credit score thresholds) -
| if not savvy, carry a balance because they can't afford to
| pay off the amount in full, are subject to higher interest
| rates because those are the cards they qualify for, and
| thereby pay much more than than well off consumers
| (increasing the transfer of wealth) - if savvy, realize that
| having a credit card costs them more than not, and stick to
| cash - are more likely to be receiving payment for services
| in cash themselves and will just spend that rather than
| depositing and using a CC (if they even have a bank account)
|
| (update: 4.5% of US households are unbanked; these are mostly
| from the lower quantile)
| https://www.fdic.gov/analysis/household-survey/index.html
| dheera wrote:
| Rewards is only part of it.
|
| There's also everything required for the credit card company to
| operate, down to building leases, datacenters, hardware,
| employee pay. All of that is vastly funded by late payment fees
| and interest, which are almost exclusively funded by the poor.
|
| At one time I wanted to start an "ice bucket challenge" to
| start a snowball of rich people donating 100% of their credit
| card rewards to the poor in some capacity. I'd happily join if
| I could get the snowball going, but unfortunately, if the
| snowball doesn't happen with a bunch of multi-millionaires I'll
| just end up indirectly giving my money (not poor, not rich) to
| the actually rich and I don't want that either.
| lupire wrote:
| Merchants pay 3%. Cardholders borrow from banks, not card
| payment networks. Rich people can donate to poor people
| regardless of the credit card situation.
| dheera wrote:
| The cost of running the credit card company plus rewards is
| a lot more than that 3%. Money is fungible. So your rewards
| comes 85% from interest payments in the case of Capital One
| or 71% in the case of Chase.
|
| https://www.valuepenguin.com/how-do-credit-card-companies-
| ma...
|
| > Rich people can donate to poor people regardless of the
| credit card situation.
|
| While this is true my idea was more of a wide scale protest
| or behavioral art to make people _aware_ of how bad the
| credit card system is for the poor. I know it isn 't going
| to solve poverty but it might raise awareness about
| something not everyone knows about.
| morpheuskafka wrote:
| That's a one sided view of it. Credit cards increase customer
| spending behavior which benefits merchants. For low end
| customers, the appeal is access to credit, either long-term or
| just in between paychecks. For high end customers, the appeal
| is the rewards and perks they get, and the convenience and
| safety of payments.
|
| This is why you are most likely to see credit card surcharges
| for tax payments, court costs, and other non-discretionary
| charges. Anything that either is optional to pay, or isn't but
| they really want you to pay now (ex. a debt collector) has
| every incentive to subsidize the card acceptance fee as it will
| increase their sales.
| lostlogin wrote:
| > This is why you are most likely to see credit card
| surcharges for tax payments, court costs, and other non-
| discretionary charges.
|
| This will vary depending on where you are.
|
| Most retailers here in New Zealand pass the fee on to
| customers. Even paywave gets the percentage fee.
| Spivak wrote:
| The other side is also that this is great for card users
| because we're the price sensitive side of the transaction. I
| feel like this dynamic is rarely talked about when it comes
| to two sided transactions. Businesses can't "just pass it to
| the consumer" is a lot of cases and just have to eat it
| because businesses don't have that kind of pricing power.
|
| This is how Doordash works on the restaurant side, they can't
| charge you the customer 20-30% of gross on orders, everyone
| would stop ordering. So mostly they just have to eat it or
| lose those sales. Some places choose to lose, some choose to
| raise prices on DD if they can but mostly they eat it.
| ghaff wrote:
| I think the other thing that happens is that governments
| outsource electronic payment collection to a third party
| which imposes a surcharge for its collection and remits the
| full nominal amount to the government.
|
| Which can lead to seemingly ludicrous results somethings. I
| paid a "convenience" fee for parking the other night because
| presumably collecting a bunch of quarters from a meter was
| cheaper for the municipality than getting a bit less money
| transferred from the parking app people?
| TRDRVR wrote:
| A _huge_ aspect people ignore is how _expensive_ it is to
| handle cash. From storage, administration, transportation,
| loss, etc. it 's usually a little more expensive to take
| _cash_ vs. card.
|
| This is why your grocery store partners with an ATM network
| to let you take out extra cash at the POS. As long as you're
| paying the fee, they'll do _whatever they can_ to trade you
| cash for a digital deposit into their bank account.
| aeyes wrote:
| I worked at several small businesses and we always
| preferred cash, we even accepted multiple currencies. The
| handling was no problem but I admit that it must be more
| difficult for larger businesses.
|
| Card payments made the price of the service more expensive
| for all customers because we weren't allowed to have a card
| payment fee.
| TRDRVR wrote:
| >we even accepted multiple currencies
|
| You accepted multiple currencies without taking a spread
| on Forex? How did you convert it for free? Not even
| _actual forex_ businesses can do that...
| thaumasiotes wrote:
| > How did you convert it for free? Not even _actual
| forex_ businesses can do that...
|
| Actual forex businesses convert currency at negative
| cost. That's what it means to be a forex business.
| a_vanderbilt wrote:
| Plenty of places in the world accept currencies besides
| the local ones because they are more stable or just worth
| more in general. Depending on the business, they might
| handle currency the same way too.
| maxcoder4 wrote:
| I usually see this only in tourist traps, where the
| EUR/USD price is 120% or more of the "local" price.
| Scoundreller wrote:
| When I sold on eBay and they allowed cash/bank draft
| payments, I accepted local currency, but also major
| currencies like US$ (in cash or bank draft because I had
| a US$ account too) and other major currencies in cash
| (like EUR and GBP) because they were cheaper to convert
| with when travelling (or I could use directly). Without a
| spread.
|
| Used the EUR in Cuba when a buyer mailed me cash.
| ses1984 wrote:
| Small businesses put in sweat equity to handle cash
| payments, like the owner going to the bank to make a
| deposit. If they had to pay an hourly employee to do
| that, it might even out with credit card processing fees.
| Also small businesses can fudge numbers with cash
| payments in a way that's a lot harder to do when some
| other company keeps a record of all of your cc
| transactions.
| ta1243 wrote:
| Yup, cash handling costs are significant when done as a
| service, they can be cheaper if you don't account for the
| time and risk (of both theft and forgery). Banks in the
| UK typically charge about 0.6-0.8% to pay cash in for
| large companies, and even more for small ones, and very
| few locations will take cash.
|
| However nothing beats that sweet sweet tax evasion that
| cash allows.
| Kranar wrote:
| I also worked at small businesses and they absolutely
| preferred cash but not because it was easy to handle but
| because, you know... taxes, _wink_ _wink_.
| whatsthenews wrote:
| many such cases. imo it's a skill issue but understand
| the thought process and why it's so prevalent
| sgerenser wrote:
| From the other side, my wife owns a small business where
| 90% of her sales are on credit cards. She has no desire
| to encourage cash as we honestly report all income
| regardless of source (and cash is a hassle and increases
| theft risk). The ~3% credit card fee is also more than
| made up for by the higher spend of credit card buyers.
|
| From talking to other business owners, though, the lure
| of "tax free" cash is definitely a factor.
| ransom1538 wrote:
| "we weren't allowed to have a card payment fee. "
|
| BTW. Good luck catching that. In SF, that is how many
| businesses work. You want to use a card? Ok, one extra
| dollar. Nothing enrages visa more, but, the merchant
| should have this right.
| dhosek wrote:
| I think the restrictions on this have loosened over the
| last (not sure how many) years.
| 01HNNWZ0MV43FF wrote:
| I think the law should be that you state the maximum
| price for a given transaction and then discount down.
|
| So you can have a cash discount but it's okay to say no
| credit card fees. These are the "junk fees" that came up
| in political discourse in the last year or two. Credit
| card vendors shouldn't be allowed to restrict cash
| discounts. I know this isn't libertarian, but I want it
| to be a pre-negotiated thing simply for the sake of
| keeping cash alive, like how minimum wage is a pre-
| negotiated wage to avoid the overhead of getting the
| whole nation into a labor union.
|
| That's why I like free shipping on Amazon. I know it's
| not literally free, I just want to see what you're
| _actually_ gonna charge me, it cuts off an avenue of
| bullshit.
| devman0 wrote:
| In a properly working market, every consumer would pay
| their exact interchange fee and it would be printed on
| the receipt as a pass-through cost.
|
| This would actively drive interchange fees lower when
| consumers have to choose to pay 3% on an Amex swipe vs
| 1.6% no frills MasterCard swipe, or .05% for a debit
| swipe.
|
| The reasons there is no downward pressure today is
| because there is because there is no transparency, and no
| incentive for consumers to choose a lower cost card.
| j45 wrote:
| One of the best marketing phrases I've seen to charge a
| fee to use a credit card:
|
| Convenience Fee.
| hx833001 wrote:
| Massachusetts and Connecticut are the two states that
| have laws banning credit card surcharges. Massachusetts
| also has a law requiring acceptance of cash.
| steelframe wrote:
| Between the Massachusetts Right to Repair Act and
| requirement to accept cash (Part III, Title IV, Chapter
| 255D, Section 10A), that state is looking more and more
| like the right kind of place for me to land once I'm done
| doing the FAANG thing. Convince me otherwise.
| dhosek wrote:
| Back when I was publishing a magazine in the 90s, I
| preferred credit card payments over checks in the mail
| because while there was the 3% vig for the merchant
| account on the credit cards, taking piles of checks to
| the bank was a pain and there was always the risk of a
| check bouncing (yes, there was also the chance of a
| charge being reversed, but in the whole time I did this,
| that only happened once--selling subscriptions for a
| print product is a good hedge against fraudulent use of
| cards and the one time I got stung it was someone who
| bought a big pile of back issues and had them shipped to
| Hungary). Add in that credit card orders could be handled
| by phone or internet while checks had to come in the mail
| and it was a clear win. And that's ignoring the multiple
| studies that show that credit card purchasers at brick
| and mortar retail tend to spend more money than cash
| purchasers.
| Scoundreller wrote:
| Meanwhile eBay forces payments by debit/credit card/Paypal,
| because they have arrangements with a (formerly owned)
| processor, even though I, as a seller, would be happy to
| accept cash/drafts/cheques/COD/whatever to keep that ~3%.
| watwut wrote:
| You do not need credit card for that. Debit card is enough.
| whartung wrote:
| I was just thinking about the other day how much cash used
| to flow through grocery stores.
|
| The routine was to show up at the store with your paycheck,
| cash it, pay for your groceries, and keep the change.
|
| Our store used to have the safe up front next to the bags
| of charcoal.
| resource_waste wrote:
| My wife takes big payments at her company.
|
| I'm pretty sure lots of people are putting these on credit
| and... might not ever pay it back.
|
| She literally couldnt get cash from these people.
|
| (US medical btw)
| reaperducer wrote:
| _This is why your grocery store partners with an ATM
| network to let you take out extra cash at the POS. As long
| as you 're paying the fee, they'll do whatever they can to
| trade you cash for a digital deposit into their bank
| account._
|
| This is not universal.
|
| Where I currently live, and where I lived five years ago,
| supermarkets charge a fee (50C/ here, 25C/ where I used to
| live) to take out cash at the POS, because the card
| transaction cost more than handling cash.
|
| There was a lot of "Are you sure?" prompts on the screen
| because the supermarkets (both big chains) didn't want the
| burden of the plastic transaction.
|
| I've seen it stated a lot in technology forums that "cash
| is more expensive for merchants than cards," but I've never
| seen that spelled out from any source other than the card
| companies.
|
| Every low-margin business I patronize, from the garden
| centers, to the convenience stores, to the antique stores
| all either offer a discount for cash, or charge a fee to
| use plastic.
|
| Just last week, a woman who's run an antiques store for 35
| years told me that card fees were going to put her out of
| business, and she practically begged me to go down the
| street to my bank to get cash for my purchase.
| gnopgnip wrote:
| A lot of businesses have a few percent cash discount to
| offset credit card costs, so they make the same amount
| either way. An antique store that would go out of
| business unless you pay in cash is either because they
| aren't paying consigners honestly, or they aren't paying
| taxes.
| reaperducer wrote:
| I hope you don't mind if I take the word of a woman who's
| been running her business for 35 years and is a staple in
| the community over some rando on the internet who doesn't
| know her business, hasn't seen her financial records, has
| zero information about how much the fees actually cost
| her, and may not even be in the same hemisphere?
| mateo1 wrote:
| I agree, which is why merchants should be allowed to charge
| different prices for different card operators and for cash.
| insane_dreamer wrote:
| A large segment (in the US) that does _not_ subsidize credit
| card fees are gas stations, where, for the most part, the
| price for paying in cash is lower than with credit, or there
| is a per transaction surcharge for using a credit or debit
| card.
|
| Car-centric as it is, gas prices are arguably the commodity
| that US consumers are most price sensitive to (and which is
| also most commonly evoked in politics). So this shows that
| consumers would prefer to discriminate between card and no-
| card purchases if given the option, except that the vast
| majority of retail outlets do not give them that option.
| panzagl wrote:
| Is this still true somewhere? I thought this went out
| decades ago, except maybe for a few Mom and Pop places.
| yyhhsj0521 wrote:
| Still true even for bigger brands like Shell or BP. They
| usually have two numbers on their price display, one is
| often about 5 cents higher than the other per gallon
| (guess which is credit/cash). It's interesting that the
| number for credit is usually way larger than the number
| for cash, implying most people use credit cards.
| jabroni_salad wrote:
| I only see it for diesel in my area, and the fee is
| probably worth it for truckers as opposed to carrying
| cash.
| adrr wrote:
| I see interchange is capped at 0.20%. How do credit card
| companies not lose money by giving a 60 day interest free loan
| to customers? That is what interchange fee covers. BNPL
| providers charge 4% for 90 days interest free loans to the
| merchant.
| milesskorpen wrote:
| Interchange is not capped at 0.2%
| supertrope wrote:
| In jurisdictions that cap interchange banks cut the fat. No
| rewards programs, and ending perks like price protection and
| extended warranties. On the revenue side they are more likely
| to charge an annual fee. Some customers carry balances at
| 29.99%.
| thaumasiotes wrote:
| > The money extracted by the credit card companies and Visa
| causes merchants to raise prices for everyone regardless of
| whether they have a rewards card or use a credit card at all.
|
| This creates in effect a massive money transfer from the poor,
| who do not use rewards cards, to the rich consumers who do.
|
| Not quite. Credit card companies obligate merchants to charge
| the same prices regardless of whether you pay with a card, but
| merchants frequently don't honor that obligation. And there are
| also merchants who only take cash.
|
| The poorest customers are likely to patronize these merchants.
| They're also likely to be given discounts that aren't card-
| related; the whole idea of price discrimination is that,
| because impoverished customers have low willingness to pay, you
| charge them less.
|
| In a voluntary system, money transfers are always going to end
| up being much smaller than they looked like they would be when
| you thought about their effects, because people adjust their
| behavior to avoid them.
| sunshowers wrote:
| > Credit card companies obligate merchants to charge the same
| prices regardless of whether you pay with a card
|
| No longer true in most of the US, actually.
|
| https://www.lawpay.com/about/blog/credit-card-surcharge-
| rule...
| jollyllama wrote:
| It creates a massive money transfer from small businesses to
| credit card companies, transfer partners, and wealthy
| consumers.
| skrbjc wrote:
| Seems to make sense to transfer money from one group to
| another for a service that one group uses and the other
| provides.
| vishnugupta wrote:
| To add to your point; there's an IMF paper[1] backing this
| claim of "massive money transfer from the poor...to the rich".
|
| I'm quoting the summary below
|
| "We study credit card rewards as an ideal laboratory to
| quantify redistribution between consumers in retail financial
| markets. Comparing cards with and without rewards, we find
| that, regardless of income, sophisticated individuals profit
| from reward credit cards at the expense of naive consumers. To
| probe the underlying mechanisms, we exploit bank-initiated
| account limit increases at the card level and show that reward
| cards induce more spending, leaving naive consumers with higher
| unpaid balances. Naive consumers also follow a sub-optimal
| balance-matching heuristic when repaying their credit cards,
| incurring higher costs. Banks incentivize the use of reward
| cards by offering lower interest rates than on comparable cards
| without rewards. We estimate an aggregate annual redistribution
| of $15 billion from less to more educated, poorer to richer,
| and high to low minority areas, widening existing disparities."
|
| [1]
|
| https://www.imf.org/en/Publications/WP/Issues/2023/03/10/Who...
| vineyardmike wrote:
| Technically this paper doesn't say "poor to rich" it says
| "subprime borrowers to super-prime borrowers". Income-to-FICO
| score is only moderately correlated. Well, it says rich to
| poor in the abstract and conclusions, but not the actual
| writing.
|
| The paper says high-income borrowers who run balances "lose"
| the most in this transfer - because they spend more in
| absolute terms, and banks are better able to capture that
| through balance increase.
|
| To quote: "our findings are inconsistent with the reverse
| Robinhood hypothesis".
| cbdumas wrote:
| I don't read that paper as backing that claim. At best the
| paper finds that the mechanism is more complicated than
| "money transfer from the poor... to the rich". To quote the
| conclusion directly:
|
| "Notably, our results are not driven by income, as they hold
| within the sub-samples of low-, middle- and high-income
| individuals. In particular, high-FICO high-income consumers
| benefit the most from reward credit cards, but they do so at
| the expense of low-FICO high-income consumers. While credit
| card rewards are often framed as a "reverse Robin Hood"
| mechanism in which the poor subsidize the rich, our results
| show that this explanation is at best incomplete."
| thegrimmest wrote:
| Can't this be rewritten in plain English as "unsophisticated
| (dumb) people don't know how to use credit cards in their own
| interest?". Isn't that just the _free_ in _free market_?
|
| Why is a principled objection to a paternalistic state
| intervening to protect dumb people from making bad decisions
| seen as unethical? What entitles dumb people to such
| protection?
| benreesman wrote:
| What's dumb is the statement or implication, which is made
| constantly, that the typical person is dumb. I don't mean
| to pick on you personally, who I have no grievance with,
| but rather to heap scorn on an idea both illogical and
| presented in bad faith frequently, a practice I always
| aspire to.
|
| The typical person is the result of ruthless selection
| pressures over millions or billions of years depending on
| how one sets their watch, a chain of the fittest, savviest,
| toughest, and hardest to kill members of the most dangerous
| life form we know about.
|
| Most people, more than half, are unsophisticated by the
| definitions implied, which would make people of _above
| average intelligence_ "dumb". Dubious, to put it mildly.
|
| A much more plausible theory, and one not laden with all
| the trim and tackle of a bigoted agenda, is that the
| typical person receives a poor education, leaving them ill-
| equipped to outmaneuver operations research PhDs whose
| entire job is to use the very efficient frontier of
| mechanism design, dark patterns writ large, to outfox
| individuals who (in the typical case) didn't have wealthy
| parents or some other greased path into an advanced degree.
|
| And the real kicker to me, as someone who has spent serious
| time with seriously high-profile people in technology, is
| that for whatever combination of reasons (one watches out
| for post hoc ergo propter hoc type fallacies, cause and
| effect are nuanced in human affairs), I've found that the
| higher someone's station in life is, the less formidable
| they seem. I don't know if power corrodes the necessity to
| stay sharp, or if privileged positions emphasize some other
| set of traits at the expense of basic competencies, but if
| half the big shots I've met started from scratch in my
| neighborhood, they'd have been an easy mark for the
| unscrupulous and/or hungry.
|
| Being ill-served by an education system that is broken by
| design, and being outfoxed by fraudsters with sophisticated
| mathematics who all but write their own laws doesn't make
| someone stupid.
| thegrimmest wrote:
| > _that the typical person is dumb_
|
| The typical person is typical, and from the perspective
| of an atypically smart person that's dumb(er). I'm not
| saying I am such a person, only that they inevitably
| exist.
|
| > _is that the typical person receives a poor education_
|
| Uneducated, unsophisticated, and dumb are interchangeable
| for the purposes of this argument. People should navigate
| the world on their own merits, not have the state
| intervene on their behalf. That's the point of a _free_
| market and society.
|
| Whether or not you're of "above average intelligence", if
| you use your credit card like a bank account, you
| _deserve_ every bit of "wealth transfer" to people who
| know better that entails.
|
| Understanding the difference between borrowing and
| earning doesn't require any sophisticated mathematics.
| Neither does understanding compounding interest payments.
| The only skill required is basic arithmetic. I don't see
| why folks feel the need to defend plainly bad decisions
| made by others, or advocate that they be protected from
| the full extent of their obvious consequences.
| benreesman wrote:
| If you're not saying that you're an atypically smart
| person, then how would you know what such a person would
| think about this?
|
| Understanding modern finance at any level of
| sophistication sufficient to even speculate about the
| incentives and constraints and therefore the implied
| utility payoff structure for anyone requires a great deal
| more than simple arithmetic: even your example of
| calculating compound interest in the most charitable
| interpretation of how you could have meant that, which is
| a stationary risk-free return discounting a zero-coupon
| bond with neither default nor prepayment risk (because
| now we're into IO and PO strips and that's a TED talk all
| by itself) is a differential equation.
|
| Its big brother, the Black-Scholes-Merton equation, is
| wildly more complicated under any faux-realistic "risk
| neutral expectation": that's Ito calculus. And it's all
| but useless (arguably worse than useless in times of
| significant pressure in repo markets among other
| stresses): it's basically a security blanket that
| Mandelbrot had demolished conclusively in the 1970s, it
| was all but conclusively discredited in "interesting
| times" in markets the moment it was posed. And we can do
| VAR, and all that, I'll make time for this.
| thegrimmest wrote:
| > _what such a person would think about this?_
|
| I'm sure opinions of people in any category vary widely.
| I'm simply pointing out that the curse of
| knowledge/competence _exists_. If you 're an unusually
| capable _anything_ , the average person will be incapable
| by comparison.
|
| None of the deep understanding of finance you're
| postulating is required to make decisions adequate to
| avoid being taken advantage of by a credit card. Pay your
| bill every month in full and you'll be a net beneficiary.
|
| Trying to optimize your investment strategy is a full
| time profession. Simple, functional, strategies are
| readily available for unsophisticated (but not dumb)
| consumers (eg. buy and hold index funds). Stepping off
| the beaten path is always done at one's own risk, and
| over the proverbial corpses of your predecessors who
| thought they knew better. So much is true in all areas of
| life.
|
| You've not addressed my main question: Why defend
| obviously unconsidered, unsound, and plainly bad,
| decisions made by others?
| benreesman wrote:
| I have addressed your question: the realities of life in
| a financially precarious situation have utilitarian
| payoff structures and attendant mechanism design that
| consist of a basket of utilities that are often signed if
| not complex scalars even at course approximation.
|
| A trivial, tinker-toy reductio absurdium is that if
| someone believes they are likely to die soon (not an
| uncommon thing for the left behind in the 2020s, my
| brother drowned himself in a bathtub a few years ago
| under a level of crushing poverty that I would have
| subsidized dramatically more had I understood his
| situation, even being substantially tapped out myself)
| they have little if any incentive to worry about how a
| fucking credit card is going to look 20 years down the
| road.
|
| I speak from a lot of lived experience here: when I got a
| job in my late teens sufficient to arbitrary calories, I
| gained 30 pounds. I was 150 at 6'4" prior.
|
| I speak from experience on education: I have what rounds
| to none, and somehow discuss the nuances of complex
| derivatives pricing, which is tangential at best to my
| core expertise.
|
| I've addressed your argument: you can't easily dollarize
| all of the externalities, and even if you could, compound
| interest remains a differential equation.
|
| I'll kindly thank you to address the substantial points
| regarding mechanism design, semistable Nash equilibria,
| the role of open market operations in wage manipulation,
| the recurring socialization of losses and privatization
| of profits via a long discredited notion that anything in
| finance is long or even medium-run Gaussian distributed
| that I've raised before saying the word "dumb" again?
|
| I'd really appreciate it.
| thegrimmest wrote:
| So it sounds like you're saying that modern life is too
| complex to effectively navigate? There are many examples
| of rather simple people from humble beginnings navigating
| it successfully.
|
| Your straightforward example consists of someone who
| consciously makes a short-term decision on the basis they
| won't be around to deal with the consequences. In your
| specific example, why should we externalize their risk?
| Isn't it theirs to take, and aren't the consequences
| theirs to own? If their assumption turns out to be wrong,
| don't they already have more than enough to be happy
| about?
|
| You're basically suggesting we subsidize the short-term
| thinking of people who for whatever reason are not
| planning for their own future? What is the _moral_ reason
| that entities them so such a subsidy?
|
| I'm also speaking from lived experience. I was born into
| a single parent household of very poor recent immigrants.
| I'm also not a financial expert, but my thesis is you
| don't need to be to avoid falling into obvious debt
| traps.
|
| > _the left behind in the 2020_
|
| I am sorry about your brother. Do you think he was not
| personally, individually responsible for his decisions
| and actions? I've not met any employer who isn't
| clamouring for someone that will: 1) be sober 2) show up
| on time 3) work hard. Anyone who can do these three
| things can excel. There are countless instances of
| careers that span from entry level to executive. This is
| substantiated by research that shows "grit" as the key
| determining factor for economic success.
|
| > _I'll kindly thank you to address the substantial
| points_
|
| Your thesis is that not all individuals have the same
| capacity to manage risk due to systemic inequalities or
| immediate crises. I agree with that. I simply disagree
| that this is a morally unacceptable status quo. I see
| society as a liberal ecosystem, where organisms are
| continually succeeding and failing. The authority
| required to mount a collective response to these
| inequalities is too susceptible to corruption, and
| represent injustice in their departure from liberalism.
| Not to mention that well-meaning interventions by
| federated authority have an _abysmal_ track record.
| benreesman wrote:
| My brother was also cursed by epilepsy, which was likely
| in large part due to the lead poisoning all of us
| received living in a house that should be condemned as
| young children.
|
| I wish people like you faced anything like the
| consequences you so gleefully dole out for others.
|
| I'm going to forget your username. Make sure I don't have
| cause to remember it.
| thegrimmest wrote:
| As I said, I'm sorry about your brother, truly. That
| doesn't take away from the fact that all our curses and
| all our blessings are fundamentally ours to bear. I'm not
| doling out any consequences, just advocating for
| individualism and voluntary association. These are the
| principles that underpin our prosperity. I've lived
| through plenty of misfortune and suffering. All of that
| is _mine_ though. I would rather die screaming in agony
| than pry greedily into the pocket of an unwilling
| stranger. I 'm somewhat disappointed we cannot disagree
| about this in a friendly manner.
| pertymcpert wrote:
| Example of lack of sharpness? You could also work on
| being more concise.
| benreesman wrote:
| You put me in an awkward position because I'm describing
| an observed trend of people I've known personally, and
| while I'll call out flagrant malfeasance by name, I try
| to not just call people soft or incompetent by name
| without an adjacent example of serious wrongdoing.
|
| I don't think it takes hard hitting investigative
| journalism to find catastrophic fuckup after catastrophic
| fuckup among the elite in the last month alone.
|
| That's a Google search away, if your objection is made in
| good faith, Google it.
| jmilloy wrote:
| This is interesting. The study you cite and quote is about a
| transfer of money from "naive" credit card consumers to
| "sophisticated" credit card consumers, which correlates to
| "poor to rich", "less educated to more educated", etc. I'm
| even more interested in the transfer that occurs from both
| cash and non-reward-card consumers to specifically reward-
| card users.
| psadri wrote:
| This is an interesting flywheel. Once I realized that by not
| using a CC I was subsidizing everyone else, I decided to opt
| into using a high reward credit card myself.
| supertrope wrote:
| There are Prisoner's Dilemmas everywhere.
|
| Many jobs require a college degree as a blunt filter for
| employee quality. Now that more and more people have that so
| it's been devalued. You now need specific majors or to come
| out of an elite college to get the same advantage that used
| to be conferred by being a college grad. Colleges talk about
| affordability but many colleges spend big on recruiting star
| professors and new facilities to compete in the rankings and
| alumni donations arms race.
|
| Car traffic makes not driving dangerous so people are
| incentivize to drive. SUVs make driving a sedan more
| dangerous during crashes so people choose to buy bigger cars.
|
| Marketers race to the bottom on ever more annoying, numerous,
| and louder ads. People block or mentally tune out ads which
| feeds back into advertisers pushing the envelope to get
| noticed.
|
| If ransomware victims did not pay it would become
| unprofitable. But each business is rightfully concerned about
| mitigating its immediate business interruption.
| alberth wrote:
| > The money extracted by the credit card companies and Visa
| causes merchants to raise prices for everyone regardless of
| whether they have a rewards card or use a credit card at all.
|
| Case studies indicate otherwise.
|
| Dodd-Frank Act postulated what you stated, that higher fees
| result in higher prices for consumers ... and if you lowered
| the fees for the merchants, merchants would lower their prices
| (to pass along that savings back to the consumers).
|
| But studies have shown otherwise, and merchants did not lower
| fees.
|
| https://www.cutimes.com/2015/09/03/durbin-failing-to-lower-m...
| Devorlon wrote:
| > Two thirds of the merchants surveyed reported no change or
| didn't know the change in their debit costs post-regulation.
| One fourth actually reported an increase in debit costs
| abalone wrote:
| Also true for Australia! When they regulated interchange,
| merchants did not pass the savings on to consumers.[1]
|
| [1] https://laweconcenter.org/resources/the-effects-of-price-
| con...
| eltondegeneres wrote:
| That think tank is funded[1] by the anti-regulation Charles
| Koch Institute and the article should be read with that in
| mind.
|
| [1]: https://www.influencewatch.org/non-
| profit/international-poli...
| scarface_74 wrote:
| That may be true. But do you in your heart of hearts
| think that companies are going to pass those savings on
| to consumers?
| sf_rob wrote:
| Claiming that merchant fees result in higher prices is
| different from claiming that reducing merchant fees would
| directly, immediately, or measurably lower prices. Isn't a
| plausible explanation that companies are hesitant to lower
| prices for any reason?
|
| Let's consider the opposite scenario, if Visa raises their
| fees do merchants keep prices where they are? I suspect not.
| astura wrote:
| >Almost everybody writing about credit cards on the Internet
| receives some sort of spiff if you sign up after clicking through
| tagged links in their material.
|
| This is something that really can't be said loud enough. The vast
| majority of credit card content on the Internet is just shilling
| for referral money. Like almost all of it. There's so much money
| in this space, and most people have no idea.
|
| That's why Doctor of Credit is the only site I'll ever visit/use
| - https://www.doctorofcredit.com/were-removing-all-credit-card...
|
| About a decade ago I found some blog about credit card rewards
| and signed up for their mailing list. The owner of the blog
| emailed me directly saying how he's going to "guide me through
| the process" and was pushing me to sign up for certain credit
| cards for sign up bonuses and wanted to know if I had any
| questions. He was acting like he was a friend just trying to
| guide me. I was a little taken aback but replied I was going to
| spend a large amount of money soon and I wanted to earn a sign up
| bonus for it and I found a sign up bonus that was comparable to
| what he was pushing on me from Navy Federal. I asked what he
| thought of it. He said it was no good and I needed to use the
| cards he was pushing for XYZ reason, blah,blah,blah. It was so
| fucking sketchy, I stopped responding, unsubbed from the mailing
| list, and sent all his emails in the trash. Never visited the
| blog again.
|
| I didn't realize until later how much money he stood to earn from
| me using his sign up links and the only thing wrong with Navy
| Federal offer was it wouldn't earn him anything.
|
| I ended up becoming really familiar with the major credits after
| that.
| lastofthemojito wrote:
| So what's the deal with the Chase Sapphire Reserve card he
| mentions almost everyone having? I don't shop for credit cards
| often and when I Google it I see it's myriad of rules for points
| and perks, but nothing really jumped out at me as the killer
| feature that would lead to that sort of adoption.
| versuspinecone wrote:
| I think their point was that it was the first card of its kind
| outside of American Express. Back in 2016 there wasn't anything
| else really like it other than Amex's high tier cards. It also
| had a really generous sign up bonus when they first released
| it, 100,000 points if you spent a certain amount on the card in
| the first few months. Since then other issuers have been
| playing catch-up so the CSR stands out less.
| cschneid wrote:
| When it came out, its signup bonus was quite generous, and its
| points could be redeemed for a lot of value if you used them
| right (travel). It's less generous now, but still pretty solid.
|
| The big one is that points can be used for 1.5x travel or
| something like that. So 100 points buys $1.50 of travel, which
| can add up pretty quickly. The signup bonus was worth something
| like $1200. And its 'better than normal' categories fit well
| with professionals in cities who eat out a lot, with a high
| point-accumulation from that use.
| modeless wrote:
| The big news in credit card rewards (that I was hoping this
| article would address) is that Robinhood just announced a 3% flat
| cash back card, highest I've ever seen, where the only catch is
| that the money is deposited into your Robinhood account.
|
| At 3% they are clearly losing tons of money on every transaction.
| There is an annual fee but it is only $60. The money can be
| withdrawn from Robinhood as soon as it is deposited. How can they
| possibly afford this? What are people doing with their money in
| Robinhood that they are willing to pay people over 1% (I'm
| assuming) just to deposit money there in a roundabout way?
| Sohcahtoa82 wrote:
| They take a loss from every transaction and make up for it with
| volume. /s
|
| My guess is that since Robinhood Gold gives you a lower margin
| interest rate, enticing people to use more margin, they hope to
| reap all the money back and then some.
|
| Since the rebate money goes directly into your Robinhood
| account, rather than a checking account, they encourage it to
| stay in Robinhood.
| mdaniel wrote:
| > They take a loss from every transaction and make up for it
| with volume. /s
|
| https://youtu.be/KodqIPMbyUg?t=54 _(First CityWide Change
| Bank 2 - Saturday Night Live)_
| mdaniel wrote:
| recently relevant:
| https://news.ycombinator.com/item?id=39909035 _(How can
| Robinhood afford 3% cash back on its new credit card?; Apr
| 2024; 21 comments)_
| modeless wrote:
| Thanks, I missed that one. Seems like the answer is nobody
| really knows and it's all unsatisfying speculation.
| vl wrote:
| Fidelity has flat 2% no fee "deposit to fidelity" card since
| forever. Probably Robinhood is competing in "small customer"
| segment and just passes all rewards to customers since it's
| attractive for their target customer?
| modeless wrote:
| 2% I can understand. 3% is a big loss to take.
| waynesonfire wrote:
| credit card transaction fees should be charged to the customer
| not the merchant.
| dhosek wrote:
| I'm really curious about how the T-Mobile dining program works
| where by registering my credit card (which already gives 3%
| cashback on restaurant purchases), I get another 5% cashback
| through T-mobile.
| cess11 wrote:
| Quite interesting. I've had one encounter with such a credit
| card, which I only used for making a rather large payment over
| the course of four months without having to pay interest. To me,
| that was the attraction, not having to adjust my monthly
| budgeting much and also not having to dip into savings. My bank
| would have said 'yeah, lol, you pay our 8% interest if you want a
| loan you could actually cash out at any time'.
|
| Where I live credit cards are still relatively uncommon, most
| cards in use are debit, and from the article it seems they have a
| simpler scheme behind them. The idea to have a 'book-buyers
| credit card' seems quite foreign, though I think some people have
| gas-station-related cards.
| yruthewaythatur wrote:
| What are these rewards programs? is this a USA specific thing?
| skrbjc wrote:
| Depending on the card, you get around 1 or 2 or even 3% back in
| cash or other types of rewards like airline miles on your
| purchase. Basically the credit card company charges a merchant
| something like 3% on a transaction they accept through a credit
| card, and the credit card company decides to pass on a portion
| of that fee to the credit card user as an incentive to use that
| credit card over another form of payment.
|
| In my case, I pay for as much as I possibly can using a credit
| card and then pay it off at the end of the month so that I can
| get that % reward back and am not charged any fees.
| nfriedly wrote:
| My credit card is a Fidelity 2% cash back Visa. (I think it was
| originally American Express, but it's Visa now. Presumably that
| happened sometime after 2016.) I don't travel much, so getting
| cash deposited into my brokerage is more useful to me, and with a
| "2% on everything" card, it's not really worth it to me to carry
| around other cards for specific categories.
|
| After I bought my current home, I put a bunch of expenses on the
| card. I didn't realize I had gone over the limit until I got a
| letter in the mail telling me that they automatically increased
| the limit. They keep increasing it every year or two, so at this
| point I could put a mid range car on the card.
|
| All that said, I would prefer if rewards cards in general were
| banned and everything was just 2% cheaper. The whole concept
| feels a little dirty to me, like I'm taking a bribe to use a
| specific form of payment. But, at the same time, it doesn't make
| sense not to in the current market.
| xyzelement wrote:
| I likewise have this card and it worked for me in a certain
| point in my life but it depends on what you spend money on. As
| a family of 4 we spend a lot on groceries and eating out so its
| good to use a card for those things that gives us 3%. The sort
| of most obvious one is the amazon visa which you can connect to
| your amazon account and get the 3% off on everything there
| automatically.
|
| It's not a life changing amount but it's free money.
| gen220 wrote:
| Just an unsolicited pointer, but if you're US-based you might
| consider computing the cost/benefit of an Amex blue cash
| preferred.
|
| It carries an annual fee of $95, but the 6% back on groceries
| (on your first $6000/yr) and 3% on gas add up pretty quickly.
| neilv wrote:
| I've had the Fidelity 2% card for a long time. It's simple, and
| mostly no-nonsense. It's one of my two "everyday carry" cards,
| and what I use for everything except Amazon and Whole Foods
| Market (WFM).
|
| For Amazon and WFM, I use the Amazon (Chase) card. Since WFM
| has replaced or outlived most of the grocery stores near me,
| this is my other carry card, and it doubles as a backup card if
| the Fidelity 2% has a problem.
|
| I almost added a Target 5% store card recently, because being a
| cheap bastid overrides being a minimalist bastid. But I
| abandoned the card application form, when something about it
| seemed a little too invasive. So I'll keep doing the Fidelity
| 2% card when I shop at Target, and that makes Target prices a
| little less competitive.
| nfriedly wrote:
| > It's simple, and mostly no-nonsense.
|
| Yeah, that's the other reason I like it: I rarely have to
| think about it. Both paying off the monthly balance and
| cashing out the rewards are fully automated.
|
| All I have to remember to do is save a copy of the annual
| summaries at least once every 3 years, because they don't let
| you go back farther than that.
|
| I try to keep most of my finances "on rails" like that where
| bills, savings, etc. just happen automatically.
| gist wrote:
| > There are many, many other sucker buttons.
|
| Sucker buttons? How about (this is addressed to a certain group
| of people not everyone) spend your time trying to make money in
| some way rather than trying to max small amounts that you get
| from credit cards, reward programs what not. As if everyone is
| just some kind of retired person with time on their hands to
| think about miles, rewards etc as a way to keep busy.
| lenerdenator wrote:
| Remember: there is no such thing as a free lunch.
|
| If they're rewarding you with something, either you or someone
| else is paying for it. Someone else, in this case, means another
| cardholder. Maybe the merchant the rewards program is through is
| counting on you to spend on something you otherwise wouldn't.
| Sure as hell isn't the bank offering the card.
|
| The credit-ification of everyday purchases in the United States
| since the 1980s has been a disaster for the average American's
| financial health.
| spywaregorilla wrote:
| What do you mean another cardholder? It's the vendors paying
| the credit card tax.
| lenerdenator wrote:
| And where does the vendor get their money?
| neilv wrote:
| > _Due to long-standing practice, I am (homeopathically) exposed
| to the common equity of financial services companies that my
| family uses, so that I can call up Investor Relations if I ever
| need to escalate a routine banking issue._
|
| For this to be effective, what parts-per-billion concentration do
| I need?
| wtatum wrote:
| Not to go too off topic but I'm extremely interested in the
| throwaway comment about holding enough equity in your service
| provider of choice to justify calling investor relations when you
| have an issue. Is this a real thing that people do? If it works
| it sounds like an amazing life hack but I have my doubts how much
| influence they would have over the "real" support.
| renhanxue wrote:
| It's a thing the author of that article does, at least. He's
| got an article mostly about how to escalate identity theft
| complaints here that touches on it:
| https://www.kalzumeus.com/2017/09/09/identity-theft-credit-r...
|
| It's very long so I'll just quote a small bit specifically
| about the Investor Relations:
|
| > _If you cannot route letters to the legal department, go as
| high up as required. Pro-tip: virtually every major US company
| has a department called Investor Relations which is trivially
| discoverable, very well-funded, publicly routable, and very
| bored during 80% of the year. You can excuse any letter to
| Investor Relations with: "I am a shareholder in BigBank. I was
| therefore profoundly displeased when I learned..."_
|
| > _What's a well-paid bored professional in Investor Relations
| going to do with your account information? Nothing? Nothing is
| a great way to get fired. No, they're going to open up their
| internal phone tree or ticketing system and say "I have a
| letter from an investor which alleges an identity theft issue.
| Which group handles that? Your department? Great; handle it and
| call me when you're done. Do you want it by fax, email, or
| FedEx?"_
|
| For this to work though you've got to _present_ like your
| position in the stock is in the millions of dollars, even if it
| 's actually like $100. The author of the article has been in
| the financial industry for a very long time, and has also spent
| a long time as a Japanese salaryman, so he can definitely pull
| that off.
| dexwiz wrote:
| There are a ton of free services only accessible to those
| with money. For example, if you buy jewelry from any luxury
| store you can often also bring it in for free cleaning. But
| they will honor this for any piece you bought from them. And
| if you bring in a mix of pieces they will often clean them
| all.
|
| Luxury retail isn't often worth it, but when it is it comes
| with lifetime services.
| steelframe wrote:
| It's fascinating to me how much people discount their privacy.
| acyou wrote:
| Before, the American economy has been built on excess
| consumption. Assuming that the rising tide lifts all boats,
| rewarding and encouraging excess consumption helped everyone, not
| just the wealthy. That's almost the opposite case when most goods
| purchased are now overseas imports. If the model doesn't make
| sense anymore, it should be replaced. Remove the ban on charging
| based on payment method.
|
| Stripe is relevant. If customer and merchant incentives are
| aligned, I would say Stripe probably just wants to have low or
| minimum interchange? Have I misunderstood?
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