Debit cards are hidden financial infrastructure

Post by blntechie » Sat, Nov 13, 2021, 9:31 PM UTC

trinovantes wrote: post #218

avianlyric wrote: post #210

Earlier quoted context omitted.

They’re talking about interchange fees you pay on every transaction. Which is where the money to fund rewards comes from. In the US you’ll be paying something like 1% on interchanges fees for every transaction, in the EU it’s something like 0.05%. Orders of magnitude less, thus orders of magnitude less rewards, and also fraud, because banks can’t use the interchange to write off fraud and thus implement proper contro…

Unless the merchant is offering discounts for cash payment, it's the customers who are not using credit cards that are paying/subsidizing the fees. Sadly, not using a credit card is just throwing money away in North America

Post by Spooky23 » Sat, Nov 13, 2021, 9:40 PM UTC

leviathant wrote: post #319

Spooky23 wrote: post #120

Earlier quoted context omitted.

Not really, it’s all about payment history. Use your card for gas, etc is more than enough to demonstrate a pattern of on time payments. People who don’t use credit often get penalized from a scoring perspective because they don’t have a large credit line and have a higher utilization. The bank wants you to make payments, period. More credit lines means you have more resilience.

It's more than payment history. I avoided credit until I bought a car, and I made a point to pay my car loan off early. Seemed like a way to demonstrate that I was responsible with my money. The month I paid off that loan, my credit score dropped precipitously. In 2006, my wife and I bought a home, and had to get two separate loans to make it work, because our credit scores weren't great at age 26, since I generally…

Post by another-dave » Sat, Nov 13, 2021, 10:02 PM UTC

jon-wood wrote: post #222

8ytecoder wrote: post #157

Earlier quoted context omitted.

It a uniquely American stupidity that somehow everyone just lives with. The concept of overdraft doesn’t even exist in normal consumer accounts anywhere else in the world. The first thing I do when I open an account here is to disable overdraft - but then you have to pay return cheque charges by whoever was trying to charge your account.

Overdrafts are very much a thing in the UK, most accounts allow it, but you have to request it in advance. In effect they work like a pre-approved loan, which at least when I was working badly paid jobs and needed food right up before payday was a very welcome feature.

Post by t0mas88 » Sat, Nov 13, 2021, 10:24 PM UTC

namibj wrote: post #308

rjzzleep wrote: post #81

Earlier quoted context omitted.

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) accoun…

My German back account has overdraft, but that only charges via ~12% annual interest (billed at end-of-month, but charges proportionality if you've been in the red for part of the month). Also note that for ATMs (including deposits) and within-bank transfers, we had no more than a couple seconds latency since €, which got expanded for all willing banks to cross-bank push transactions specifically requested to be "SEP…

Post by JoBrad » Sun, Nov 14, 2021, 12:47 AM UTC

pbourke wrote: post #336

Ozzie_osman wrote: post #283

Earlier quoted context omitted.

Yea. For people who aren't familiar with this, the bank will reorder your transactions and batch them to do the biggest one first. Then you get charged an overdraft fee per transaction after that. If they did the small ones first, you may not go into overdraft until the last big one... So you'd pay one fee. Do the largest first, then each small one causes a fee. Highway robbery.

The argument, which I do not buy as sufficient but add here for completeness, is that it’s better for your large purchases (ie rent) to clear before your $10 lunch, etc.