Debit cards are hidden financial infrastructure • Hacker News Board

Re: Debit cards are hidden financial infrastructure

#81

Post by rjzzleep » Sat, Nov 13, 2021, 3:13 AM UTC

mherdeg wrote: post #56

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…

It's not just overdraft fees right? It's overdraft fees plus transaction reordering which makes the magic happen. I'm still kind of mesmerized on this one, it felt like regulatory action almost happened, the most lucrative of the overdraft practices got limited circa 2009/2010, and then banks voluntarily toned it down and the regulators mostly looked the other way on things like reordering?

What's transaction reordering?

1. have $10 in your checking

2. pay $9 for steak

3. fill account with $500

4. buy sausage for $2

bank reorders it as

1. have $10 in your checking

2. pay $9 for steak

3. buy sausage for $2

4. charge overdraft

5. count $500 deposit

Is that what banks would do? I faintly remember that really old accounts I had in Germany had overdraft capability, but for all newer(last decade or so) accounts, I had to explicitly request overdraft. I guess it was inherently more user hostile in the US. Although in German its not because of good service, but rather because banks don't trust the consumer.

Re: Debit cards are hidden financial infrastructure

#82

Post by nverno » Sat, Nov 13, 2021, 3:14 AM UTC

numair wrote: post #68

saxonww wrote: post #61

Earlier quoted context omitted.

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 interest…

at least they got rid of those $35 overdraft fees on a 50 cent negative balance, that was BS. So, maybe there is a brighter financial future

Re: Debit cards are hidden financial infrastructure

#83

Post by f3d46600-b66e » Sat, Nov 13, 2021, 3:14 AM UTC

latchkey wrote: post #77

In Vietnam, even the 'credit cards' are 'debt cards'. There is no concept of a credit score there (or a legal way to really make people pay up a debt), so they came up with this work around. To get a credit card, you have to carry the total amount of 'credit' as a time deposit in your account that you can't touch.

Secured credit cards also exist in America :-)

Re: Debit cards are hidden financial infrastructure

#84

Post by smabie » Sat, Nov 13, 2021, 3:14 AM UTC

wetpaws wrote: post #22

greenyoda wrote: post #8

Earlier quoted context omitted.

Good advice, but only if you pay off your balance in full every month to avoid the huge interest charges.

Why in the world wouldn't you want to do it.

You can earn higher interest than the APR on your cc by yield farming stablecoin pools

Re: Debit cards are hidden financial infrastructure

#85

Post by ffggvv » Sat, Nov 13, 2021, 3:15 AM UTC

numair wrote: post #68

saxonww wrote: post #61

Earlier quoted context omitted.

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 interest…

j.p. morgan existed before regulatory bodies did

Re: Debit cards are hidden financial infrastructure

#86

Post by lotsofpulp » Sat, Nov 13, 2021, 3:15 AM UTC

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…

> This is just another way the financial system (including fintech startups) prey on the poor.

This is the way a government preys on the poor by not making electronic transfer of money a utility.

The businesses are just doing business, no one sets out and says I want to screw the poor. The prices simply reflect the risks to the business. If society wants to subsidize those risks for the poor, then it should by creating a utility that allows quick and free transfers of money, and for all people to have free accounts.

Re: Debit cards are hidden financial infrastructure

#87

Post by smabie » Sat, Nov 13, 2021, 3:15 AM UTC

tasogare wrote: post #23

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.

What? That seems totally backwards. Don't spend money you don't have, which mean using debit. Credit is useful for the single use case of buying a house.

I have money and I will take as much debt as I possibly can get.

Re: Debit cards are hidden financial infrastructure

#88

Post by rjzzleep » Sat, Nov 13, 2021, 3:15 AM UTC

rp1 wrote: post #78

eyelidlessness wrote: post #76

Earlier quoted context omitted.

Overdrafts were the second thing that came to mind, a decade into clawing my way out of poverty and just plain being broke. The first was the scam of debit cards and secured credit cards being treated fundamentally differently. They both operate basically the same way for customers (you’re only spending your own money, it’s not credit in the lending sense), but debit cards are a profit center with no credit reporting…

What do you mean by secured credit cards can be recommended is any discriminatory way? I definitely think the nation should prioritize financial literacy in the education system, but I'm not sure you should be trusting any information you get from a bank regarding what to do with your money.

Well they work like debit cards in a way, you can't overdraft and you build credit with it. It's what's recommended for newcomers to the US. But I'm not sure they're really the same given that your credit limit will be as high as the spare amount of money you can keep as security in your bank.

Re: Debit cards are hidden financial infrastructure

#89

Post by chrisseaton » Sat, Nov 13, 2021, 3:18 AM UTC

numair wrote: post #72

DaiPlusPlus wrote: post #65

Earlier quoted context omitted.

> “doing a service for the community” Go on then... what was their argument?

There is Congressional testimony somewhere on this topic that provides their talking points. They were scolded without being actually punished, if I remember correctly.

I guess stopping you defaulting on loans so losing your car and things.

Re: Debit cards are hidden financial infrastructure

#90

Post by dec0dedab0de » Sat, Nov 13, 2021, 3:18 AM UTC

DaiPlusPlus wrote: post #65

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?

I believe the argument in favor of overdraft fees is that they are essentially extending a line of credit at the moment the customer needs it. As opposed to just denying the transaction outright. I had this happen to me once well over a decade ago, and I argued with my bank to make it so I would just be denied if it ever happened again. They acted shocked as if most people would rather go into debt than be denied.