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Tech companies are clamoring to give you credit cards

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Re: Tech companies are clamoring to give you credit cards

#51

Post by tomnipotent »

est31 wrote: post #14
dylan604 wrote: post #11

Earlier quoted context omitted.

And here I thought the entire idea behind credit cards was to make up to 22% interest from the user. The 3.5% per transaction from the retailers just seems like bonus. If not even considered a double dipping since most retailers will take the 3.5% into consideration of their pricing.

There is a difference between "credit credit cards" and "debit credit cards". Debit credit cards are a bad idea for consumers because of those 22% as well as liabilities when being victim of a crime. But yes, many people treat the limit of those debit credit cards as a way of having money. It isn't though.

At least in the U.S., there is no such thing as a "debit credit card", and debit cards do not have interest rates as they're (usually) coming straight out of a checking/savings account.

Re: Tech companies are clamoring to give you credit cards

#52

Post by fredophile »

conjecTech wrote: post #18
deegles wrote: post #12

Earlier quoted context omitted.

You have to sort cash, count it, deal with counterfeit bills, run it to the bank, etc. There must be a break-even point if a business values its time.

It's nowhere near 3.5%. It's probably an order of magnitude less. My mother spent a decade as the controller of a luggage store chain. She told me the amount they spent on credit card fees was at times in excess of their stores' payroll. It is rent seeking at nearly unfathomable levels. Even the shady check cashing operations for the unbanked are able to operate profitably on a 1% cut.

I'm not convinced the margins are as big as you might think. My understanding is that the margins are thin but they make it up in massive volume.

Stripe charges 2.9% plus $0.30 per transaction. If you have an average transaction size of $100 you're paying $3.20 in fees (3.2%). There are several no annual fee credit cards that give the consumer 2% cash back. That leaves 1.2%. This 1.2% isn't pure profit. Things like fraud protection will cut into this. There are also several groups that need to split whatever is left of that 1.2%. Stripe needs to make money, Visa/MC need to make money, the bank offering the card needs to make money.

Re: Tech companies are clamoring to give you credit cards

#53

Post by oh_sigh »

throwaheyy wrote: post #31
est31 wrote: post #7

The entire idea behind credit cards is to force processing fees upon store owners. As a store owner you are required to pay up to 3.5% of your revenue to the processing company (the percentage can be even higher than that if you sell stuff for small amounts, like just a dollar). With cash you can choose your bank and there is more of a free market, while with credit cards you can't get around not accepting certain br…

No. The entire idea behind credit cards is to reduce friction in commerce resulting from handling cash. This attracts more customers to businesses through increased convenience. Taking cards is voluntary, there's no "forcing processing fees" involved. Plenty of businesses opt not to take credit cards. In fact, interchange fees (which in the US now top out around 2.7%, not 3.5%) are at an all-time low because of techn…

If it was about reducing friction, why would credit card companies make it mostly against the terms of their contracts to charge different rates for credit card using customers?

Re: Tech companies are clamoring to give you credit cards

#54

Post by conjecTech »

fredophile wrote: post #52
conjecTech wrote: post #18

Earlier quoted context omitted.

It's nowhere near 3.5%. It's probably an order of magnitude less. My mother spent a decade as the controller of a luggage store chain. She told me the amount they spent on credit card fees was at times in excess of their stores' payroll. It is rent seeking at nearly unfathomable levels. Even the shady check cashing operations for the unbanked are able to operate profitably on a 1% cut.

I'm not convinced the margins are as big as you might think. My understanding is that the margins are thin but they make it up in massive volume. Stripe charges 2.9% plus $0.30 per transaction. If you have an average transaction size of $100 you're paying $3.20 in fees (3.2%). There are several no annual fee credit cards that give the consumer 2% cash back. That leaves 1.2%. This 1.2% isn't pure profit. Things like f…

Visa and Mastercard are both publicly traded. You can go look at their financials. I believe Visa still holds the crown for the highest gross margin and price-to-sales ratio of any stock in the S&P 500. Mastercard isn't far behind. These are not marginally profitable businesses. They are money printers that rely on tightfisted control over merchants and the payment clearing infrastructure.

Re: Tech companies are clamoring to give you credit cards

#55

Post by fredophile »

conjecTech wrote: post #54
fredophile wrote: post #52

Earlier quoted context omitted.

I'm not convinced the margins are as big as you might think. My understanding is that the margins are thin but they make it up in massive volume. Stripe charges 2.9% plus $0.30 per transaction. If you have an average transaction size of $100 you're paying $3.20 in fees (3.2%). There are several no annual fee credit cards that give the consumer 2% cash back. That leaves 1.2%. This 1.2% isn't pure profit. Things like f…

Visa and Mastercard are both publicly traded. You can go look at their financials. I believe Visa still holds the crown for the highest gross margin and price-to-sales ratio of any stock in the S&P 500. Mastercard isn't far behind. These are not marginally profitable businesses. They are money printers that rely on tightfisted control over merchants and the payment clearing infrastructure.

I took your advice and looked at some financials. The total revenue/cost of revenue for Visa in their most recent info was 5.5. That does seem like a more than healthy profit margin.

For context, here is the same ratio for the FAANG companies and a few telecoms. I would've included some banks as well but they report their income differently so I didn't see an easy way to calculate the same ratio. Facebook 5.5 Amazon 1.3 Apple 1.6 Netflix 1.6 Google 2.2 AT&T 2.2 Verizon 2.4 Comcast 3.2

Out of all these companies the only one with a better ratio was Facebook. However, if you look at total revenue Visa was by far the smallest of the companies I've listed. Based on this info I can agree that Visa could reduce their fees and still have healthy profit margins. If you want to use this as evidence they charge too much and need some form of government intervention you might want to look at Facebook first and keep an eye on the cable companies.

Re: Tech companies are clamoring to give you credit cards

#56

Post by renewiltord »

throwaway_pdp09 wrote: post #48
the_jeremy wrote: post #36

Earlier quoted context omitted.

less hassle, enhanced security. I can spend hundreds of dollars without having to carry that much cash on me, or having to go to an ATM ever. It's more convenient and more secure, which is almost never true today.

Is cash that hard?

Yeah, I carry around a grand on me usually (for drugs and stuff) and it's really bulky. Then you've got the denomination issues.

Re: Tech companies are clamoring to give you credit cards

#57

Post by graham_paul »

asutekku wrote: post #39
graham_paul wrote: post #33

Earlier quoted context omitted.

You are paying a price for that. The second someone steals your phone, you lose it, drop in into water or your battery runs off, you are temporarily poor and if you might find yourself in trouble if you can't get somewhere where you can charge your phone

The second someone steals my cash i don’t have it anymore. If someone steals my phone, it is locked and the money attributed to it are safe. Sure, i may have lost my phone but my money is safe.

If someone steals your cash (as much cash as you can carry): you don't have it anymore.

If someone steals your phone (you will lose at least the value you paid for the phone) and once they force you to unlock the phone and to hand over the passwords, you will lose:

- as much cash as they can take out before you can access a device that will allow you to freeze the card

you will also be a more attractive target for hacking (especially if you are using Android and your phone is like the vast majority of targets that receives security updates very late or it simply does not receive them)

Seen it happen more than once. Yes, you are smart but so are thiefs

Re: Tech companies are clamoring to give you credit cards

#58

Post by graham_paul »

detaro wrote: post #50
throwaway_pdp09 wrote: post #47

Earlier quoted context omitted.

Of interest, and I really don't know as I've never had a smartphone, if your phone is stolen, what stops it being used to pay for something? The point of the convenience was - I thought - that you just swipe. Couldn't a thief? Also how do you do anything if your phone is gone - travel, call, let the bank know, buy a new phone, let your partner know you're in trouble, anything? Also how much is you phone worth? A quic…

You need to unlock the phone to pay with it.

You will just unlock it at the thief's request

Re: Tech companies are clamoring to give you credit cards

#59

Post by throwaway_pdp09 »

renewiltord wrote: post #56
throwaway_pdp09 wrote: post #48

Earlier quoted context omitted.

Is cash that hard?

Yeah, I carry around a grand on me usually (for drugs and stuff) and it's really bulky. Then you've got the denomination issues.

If you take the speed you've just bought everything will be less tiring.

Re: Tech companies are clamoring to give you credit cards

#60

Post by graham_paul »

the_jeremy wrote: post #36
throwaway_pdp09 wrote: post #25

Earlier quoted context omitted.

What is this 'immense value'?

less hassle, enhanced security. I can spend hundreds of dollars without having to carry that much cash on me, or having to go to an ATM ever. It's more convenient and more secure, which is almost never true today.

I would not necessarily call it enhanced security if you are using Android and your phone is not one of the latest models. Plus of course someone can just steal your phone, force you unlock it and steal more than they could ever steal from you if you only had cash.

Your enhanced security is a box containing more money than you can carry. This box can (most of the times) only be opened with a key but this key is always with you. So whoever steals your force will just force you to open the box

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