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How credit card rewards became a $9.2B wealth transfer

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

#41

Post by slicktux »

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 believe a similar thing happened with fast food and food delivery fees. It costs money to be listed on the food delivery app so fast food chains started charging everyone the same price to offset the cost of being listed on the apps.

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

#42

Post by greenavocado »

svpk wrote: post #21
hvb2 wrote: post #11

Earlier quoted context omitted.

> 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 pur…

> as long as you were mindful about using the discover card for qualifying purchases and the 2% card for everything else.

And that's the rub. Credit card companies know most people won't be too mindful most of the time about their spending habits.

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

#44

Post by cfiggers »

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.

When I and my (still fairly young) family needed to move cross-country, my wife and I accepted a credit card offer with 0% APR for the first year and put all our moving expenses on it. Then once we settled, we paid it down a bit at a time each month, and then right before it would have started charging interest we paid the rest as a lump sum.

Really helped us float the moving company and also some DIY renovations on our house that we didn't have all the cash on hand to pay for outright. And we didn't pay a thin dime for the privilege.

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

#45

Post by throw0101a »

internet2000 wrote: post #30
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.

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

Well, there was that time in the 1930s.

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

#46

Post by dukeofdoom »

So if anyone is trying to picture what 9.2 would buy. The new bridge between US and Canada (Gordie Howe) was 4.6 billion. So that is 2 giant bridges + related infrastructure ... worth of wealth transfer. That bridge had some corruption / payoffs, so we should discount that by 10% wealth transfer as well.

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

#47

Post by AnssiH »

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?

My understanding is that they are much less generous on average compared to U.S.

E.g. for now I have the most premium card offered by my bank (50€/mo), and it gets me extra product insurance, rental car insurance, travel insurance, free lounge access, and some other things like that, but no cashback or similar.

I think some premium cards do offer cashback nowadays, but they are in the minority. Some cards also offer airline reward points. My experience is limited to Finland, though.

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

#48

Post by throwaway_20357 »

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?

Usually ~1%. Some direct cashback, some via rewards points (e.g. 1.5 AMEX MRP earned per EUR are roughly worth 1ct).

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

#49

Post by Torkel »

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 does it work if I have a US credit card and use it abroad? Do I still get the kickback even though the merchant fee is capped?

This feels like a potential arbitrage opportunity... I live in Sweden, but if I can use a US credit card I can get high rewards?

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

#50

Post by zf00002 »

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…

Car mechanics, dealerships, house fixing contractors, city (property taxes), these are the ones that I can think of in the past year I've come across charging a fee for credit card payments. What's most irritating is that most of them do not setup for and drop the fee if you pay by debit card.
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