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Debit cards are hidden financial infrastructure

bam.kalzumeus.com

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Re: Debit cards are hidden financial infrastructure

#61

Post by saxonww »

numair wrote: post #43

The beginning of this article is a fairy tale that ignores what used to be one of the biggest drivers of revenue for banks: overdraft fees. Maybe the HN crowd has never been in a situation where they were auto-billed into a negative balance, which then caused an overdraft fee that then further drove their balance into negative territory, but this was a weekly/monthly fiasco for millions of Americans. I was once in a…

I don't know if it addresses your point at all, but two posts back he talked about overdraft fees: https://bam.kalzumeus.com/archive/financial-innovation-is-ha.... There was an HN thread for this one too; patio11 is HN-famous.

Re: Debit cards are hidden financial infrastructure

#62

Post by toomuchtodo »

kcb wrote: post #44
toomuchtodo wrote: post #33

Earlier quoted context omitted.

It really depends where on the income and wealth ladder you are. Lower and middle income, cash is king. Upper income, you’re as invested as possible and you’re able to pay for expenses with a combination of credit/margin, investment income, and comp (salary and equity liquidation). You’re keeping as little cash on hand as possible because “cash is trash” and doesn’t keep up with inflation such that assets do.

You still need a buffer to pay for expenses...$3000 to someone with Upper Income is not a lot. I don't think anyone is liquidating assets to pay for their electric bill.

Expenses can be paid from margin and credit, and that paid back when the income lands in the brokerage or cash management account. Credit cards are usually ~20 days float, margin is 1-2% for as long as you’re extended with it (ignore margin rack rate on brokerage sites, high net worth folks aren’t paying that).

Higher level, being poor is expensive and it gets cheaper and easier to get ahead as you get ahead.

Re: Debit cards are hidden financial infrastructure

#63

Post by tata71 »

Spooky23 wrote: post #57
Lammy wrote: post #46

Earlier quoted context omitted.

My credit score goes down unless I carry some revolving balance.

No, that’s not how it works.

Using a very, very low, or no percentage of your available credit for ages makes you just as bad of an investment for these companies as customers who run off on the bill.

In both cases, higher risk of default, less chance of profiting from interest, lower creditworthiness score!

Re: Debit cards are hidden financial infrastructure

#64

Post by dustintrex »

kccqzy wrote: post #59

> Typically, the apps offer their users a choice: payouts at the speed of banking, for free, or payouts at the speed of the Internet, for a small convenience fee. Cash App charges 1.5% with a minimum of a quarter. This is just another way the financial system (including fintech startups) preys on the poor. If you are well off, you wouldn't want to pay any convenience fee for the privilege of receiving money from a bu…

It's also another illustration of how backwards US payments infra is. In the EU, SEPA instant payments are just that: by law it can take a maximum of 10 seconds for the recipient to get paid, including across countries. And, of course, they're free.

https://en.wikipedia.org/wiki/Single_Euro_Payments_Area

Re: Debit cards are hidden financial infrastructure

#65

Post by DaiPlusPlus »

numair wrote: post #43

The beginning of this article is a fairy tale that ignores what used to be one of the biggest drivers of revenue for banks: overdraft fees. Maybe the HN crowd has never been in a situation where they were auto-billed into a negative balance, which then caused an overdraft fee that then further drove their balance into negative territory, but this was a weekly/monthly fiasco for millions of Americans. I was once in a…

> “doing a service for the community”

Go on then... what was their argument?

Re: Debit cards are hidden financial infrastructure

#66

Post by nightski »

just-ok wrote: post #52
aynyc wrote: post #4

Use credit card, it’s the card issuers that are on the hook for fraud. It’ll help you build credit. Use debit when you don’t have the means or credit history.

One of the biggest wins from credit cards (imo, of course) is reward programs. Getting a 1-3% discount on purchases is pretty nice (plus, obviously, fraud protection, etc.). However, some issuers are using crypto to claw back at this perk; for example, the Coinbase debit card can give you 4% back.

The Coinbase card ties up your assets (you have to hold USD or crypto on their platform). Whereas the credit card is an interest free loan for the statement period. I'd take the latter any day of the week.

Re: Debit cards are hidden financial infrastructure

#68

Post by numair »

saxonww wrote: post #61
numair wrote: post #43

The beginning of this article is a fairy tale that ignores what used to be one of the biggest drivers of revenue for banks: overdraft fees. Maybe the HN crowd has never been in a situation where they were auto-billed into a negative balance, which then caused an overdraft fee that then further drove their balance into negative territory, but this was a weekly/monthly fiasco for millions of Americans. I was once in a…

I don't know if it addresses your point at all, but two posts back he talked about overdraft fees: https://bam.kalzumeus.com/archive/financial-innovation-is-ha... . There was an HN thread for this one too; patio11 is HN-famous.

That seems like yet another PR piece that revolves around a, “look, finance didn’t need regulatory action to fix itself, it just needed ‘innovation!’” narrative. No, sorry, these markets were created by regulatory action, and they still need regulatory action to fix the flaws in their design.

I found patio11 to be more informative before all of his writing suffered from a Stripe bias. And I found Stripe more interesting when it wasn’t trying to be the Microsoft of finance.

Edit: And so people understand how these two things — abusive banks and Stripe — are connected: revenue-envy among large corporations trying to move up the ranks and attract bigger valuations almost inevitably leads to “innovations” that are bad for the customer / community / whatever. All roads lead to Rome.

Re: Debit cards are hidden financial infrastructure

#69

Post by salawat »

numair wrote: post #43

The beginning of this article is a fairy tale that ignores what used to be one of the biggest drivers of revenue for banks: overdraft fees. Maybe the HN crowd has never been in a situation where they were auto-billed into a negative balance, which then caused an overdraft fee that then further drove their balance into negative territory, but this was a weekly/monthly fiasco for millions of Americans. I was once in a…

When I realized this is when I swore off of Fintech. Permanently.
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