How credit card rewards became a $9.2B wealth transfer • Hacker News Board

Re: How credit card rewards became a $9.2B wealth transfer

#21

Post by svpk » Tue, Aug 25, 2026, 12:10 PM UTC

hvb2 wrote: post #11

aurareturn wrote: post #6

I always wondered why people in America would ever pay by cash or credit card - unless they are laundering that cash. Otherwise, you're giving up 1-3% discount. Set auto-pay on your credit card to pay in full every month. I've never once paid for credit card interest. I think there's a term inside credit card companies for people like me: leeches or something like that.

> Otherwise, you're giving up 1-3% discount. I would be curious what percentage of people actually qualifies for a card with over 2% cashback especially without a monthly fee. My guess is that that percentage is very low. High earner/spender, sure but that's not most people

I know that Discover has a card with a 5% discount category that changes once a quarter. Everything not in the category gets 1%. It's not hard to get the card (or at least wasn't) and was frequently advertised to college students.

If you combine that with a card that gives 2% on everything than it wouldn't be hard to average over 2% cashback as long as you were mindful about using the discover card for qualifying purchases and the 2% card for everything else.

Re: How credit card rewards became a $9.2B wealth transfer

#22

Post by Xirdus » Tue, Aug 25, 2026, 12:10 PM UTC

hvb2 wrote: post #11

aurareturn wrote: post #6

I always wondered why people in America would ever pay by cash or credit card - unless they are laundering that cash. Otherwise, you're giving up 1-3% discount. Set auto-pay on your credit card to pay in full every month. I've never once paid for credit card interest. I think there's a term inside credit card companies for people like me: leeches or something like that.

> Otherwise, you're giving up 1-3% discount. I would be curious what percentage of people actually qualifies for a card with over 2% cashback especially without a monthly fee. My guess is that that percentage is very low. High earner/spender, sure but that's not most people

My first US credit card was a 4-3-2-1% rewards program and I had literally zero income at the time. I was told by the banker, "oh you can't do that right away, you must first get a secured card to build your credit score, after a year you can try applying for real", but I told them I don't care and to send the application anyway, and I've got it.

Ever since then, I wondered how much of the "not qualifying" is due to misinformation like this.

Re: How credit card rewards became a $9.2B wealth transfer

#23

Post by post-it » Tue, Aug 25, 2026, 12:11 PM UTC

tiffanyh wrote: post #19

SXX wrote: post #7

Important context: this is US thing. EU capped interchange fees at 0.2% for debit and 0.3% for credit cards. So in US card processing is x5-x10 more expensive.

To be more specific, this is a US credit card topic. Debit card fees are capped in the US, yet I’ve never received a discount from a merchant for paying with debit instead of credit. As such, I just pay with credit and have never understood this argument.

That's what makes it a wealth transfer, from debit card users to you.

Re: How credit card rewards became a $9.2B wealth transfer

#24

Post by bluebarbet » Tue, Aug 25, 2026, 12:11 PM UTC

criddell wrote: post #14

SXX wrote: post #7

Important context: this is US thing. EU capped interchange fees at 0.2% for debit and 0.3% for credit cards. So in US card processing is x5-x10 more expensive.

How generous are credit card rewards in the EU?

Presumably not very, because the large majority of Europeans do not use credit cards.

Re: How credit card rewards became a $9.2B wealth transfer

#25

Post by KolmogorovComp » Tue, Aug 25, 2026, 12:12 PM UTC

tiffanyh wrote: post #19

SXX wrote: post #7

Important context: this is US thing. EU capped interchange fees at 0.2% for debit and 0.3% for credit cards. So in US card processing is x5-x10 more expensive.

To be more specific, this is a US credit card topic. Debit card fees are capped in the US, yet I’ve never received a discount from a merchant for paying with debit instead of credit. As such, I just pay with credit and have never understood this argument.

> As such, I just pay with credit and have never understood this argument.

Because the merchant pass the higher processing cost to all customers.

Re: How credit card rewards became a $9.2B wealth transfer

#26

Post by SXX » Tue, Aug 25, 2026, 12:12 PM UTC

criddell wrote: post #14

SXX wrote: post #7

Important context: this is US thing. EU capped interchange fees at 0.2% for debit and 0.3% for credit cards. So in US card processing is x5-x10 more expensive.

How generous are credit card rewards in the EU?

Normal cards not very generous. Fintech can sometimes give 1% cashback capped at 30-50-100 EUR.

Some weird crypto stuff can give more cashback, but it mostly for scheming nerds.

Re: How credit card rewards became a $9.2B wealth transfer

#27

Post by r3trohack3r » Tue, Aug 25, 2026, 12:12 PM UTC

Forgeties79 wrote: post #2

> Because merchants charge everyone the same price regardless of how they pay, those fee costs are factored into prices for all shoppers. However, credit card users get that money back and then some through rewards, while cash and debit users get little or nothing. >The result: People paying cash face the equivalent of a 26% higher sales tax than premium credit card users shopping at the same store. I am surprised th…

I was surprised by this number too - and I’m pretty sure it’s a clever wording trick to inflate the percentage:

> equivalent of a 26% higher sales tax than premium credit card users shopping at the same store.

I do not think the sale price is increased by 26% - which doesn’t square with a 1% to 3% fee - I think they pay approximately 26% more in “sales tax” so you’re paying 26% more than the 7% tax.

Re: How credit card rewards became a $9.2B wealth transfer

#28

Post by steveBK123 » Tue, Aug 25, 2026, 12:12 PM UTC

toomuchtodo wrote: post #3

Forgeties79 wrote: post #2

> Because merchants charge everyone the same price regardless of how they pay, those fee costs are factored into prices for all shoppers. However, credit card users get that money back and then some through rewards, while cash and debit users get little or nothing. >The result: People paying cash face the equivalent of a 26% higher sales tax than premium credit card users shopping at the same store. I am surprised th…

Many restaurants I’ve eaten at lately surcharge credit cards with a 3% fee, offering a discount if you pay cash. This is the way to nullify this regressive policy until the US commercial banking system offers instant payments for merchants, internalizing the externality of the interchange fee. If you pay with card, you US FedNow instant payments went live three years ago, and can move $10M per transaction for a few p…

The problem is the way the US credit/debit card systems are setup, there's not much of a discount/surcharge that would make me switch usage to debit.

If my credit card number gets stolen, zero money ever leaves my account. It simply gets contested before the monthly bill is even due, and cancelled. I have probably had number stolen 5 times in 20 years, and its never cost me a cent. Zero dollars every left my accounts even temporarily.

If my debit card number gets stolen, the money is out of my checking account immediately. Mortgage payments and other bill payments might fail, and the onus is on my to chase up the bank to get charges reversed and money returned to my account.

Re: How credit card rewards became a $9.2B wealth transfer

#29

Post by ixwt » Tue, Aug 25, 2026, 12:12 PM UTC

hvb2 wrote: post #11

aurareturn wrote: post #6

I always wondered why people in America would ever pay by cash or credit card - unless they are laundering that cash. Otherwise, you're giving up 1-3% discount. Set auto-pay on your credit card to pay in full every month. I've never once paid for credit card interest. I think there's a term inside credit card companies for people like me: leeches or something like that.

> Otherwise, you're giving up 1-3% discount. I would be curious what percentage of people actually qualifies for a card with over 2% cashback especially without a monthly fee. My guess is that that percentage is very low. High earner/spender, sure but that's not most people

I have a 2% cash back credit card from my bank, with no monthly fee. It started as a 1% cash back card around a decade ago, and slowly crept up to 2%. It's a nation wide credit union that has certain requirements to join though.

Re: How credit card rewards became a $9.2B wealth transfer

#30

Post by internet2000 » Tue, Aug 25, 2026, 12:12 PM UTC

aurareturn wrote: post #6

I always wondered why people in America would ever pay by cash or credit card - unless they are laundering that cash. Otherwise, you're giving up 1-3% discount. Set auto-pay on your credit card to pay in full every month. I've never once paid for credit card interest. I think there's a term inside credit card companies for people like me: leeches or something like that.

Prices don't go down, they only ever go up.

There is no situation in which interchange fees get slashed and prices go down across the board by 3% to make it worth it for card users.