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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

#91

Post by paxys »

slicktux wrote: post #41
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.

Delivery apps don’t mandate that the price on their apps be the same as on the actual menu. If you walk in and order you’ll pretty much always get a lower price.

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

#92

Post by cpburns2009 »

nsedlet wrote: post #31

Credit cards also transfer wealth from people who pay interest to people who don’t. It’s a silly system, where everyone has to invest their time (optimizing for rewards, avoiding interest) in an ultimately negative sum game. I hate it so much.

There is literally no time involved in avoiding interest. You pay your complete balance when it's due. As far as rewards go, I can't be bothered with them so I always just opt for cash back which I do maybe twice a year. Time involved: 5 minutes / 6 mo.

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

#93

Post by api »

59percentmore wrote: post #87
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.

Things that are more expensive in the US for no reason: Healthcare Internet access College sighs and adds "The very act of making a purchase" At least we have cheap gas? farts

Internet access sort of has a reason: the US is geographically huge and more sprawled out. But that's not enough to explain all of the difference.

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

#94

Post by Symbiote »

Torkel wrote: post #49
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?

In Denmark most retailers will pass on the surcharge they get from accepting a foreign (non-EU) card with higher fees.

You see at the bottom of restaurant menus a note stating this.

It also applies to Danish business credit cards, as those aren't covered by the consumer credit card fee limits.

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

#95

Post by tialaramex »

tiffanyh wrote: post #53
Torkel wrote: post #49

Earlier quoted context omitted.

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?

Issuing banks typically add an FX fee to the cardholder for cross border transactions. Not always, but many times they do.

Even if the FX is notionally "free" they pick the rates. So they can set those rates to generate exactly the same profit for them as with fees.

You will probably not see rates that are even competitive with a dodgy FX cash place at an airport, let alone with the numbers you've seen on financial networks for what FX transactions by banks cost, but you feel happy because there was "no fee".

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

#96

Post by janpeuker »

As others have mentioned this is particularly prevalent in the US. I always liked that Australia's vision for a peer-to-peer payment system (note cards are mainly for merchants, hence the rewards) has inclusivity [1] as one of its core tenets "continue to transact ... without disproportionate burden or risk ... those experiencing financial hardship". They also just stopped surcharging [2] and have capped interchange fees since a long time.

1) https://a2apaymentsaustralia.com.au/wp-content/uploads/2026/...

2) https://www.rba.gov.au/payments-and-infrastructure/review-of...

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

#97

Post by snarf21 »

59percentmore wrote: post #75

How hard is it for the wealthy to not smack everyone else around at every possible opportunity? What happened to noblesse oblige? (This is not a rhetorical question, I would love to hear others' take on the psychology and history of the subject. Really, how hard is it?)

It becomes a scorecard. Success in life is strictly about making the number go up. It doesn't matter if they could spend $100K a day for life and never go broke. They must have a bigger number and be higher on the Forbes (e.g.) list. Some people are so obsessed with it they lie and make up things to claim their number is much higher than it actually is.

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

#98

Post by twoodfin »

nsedlet wrote: post #31

Credit cards also transfer wealth from people who pay interest to people who don’t. It’s a silly system, where everyone has to invest their time (optimizing for rewards, avoiding interest) in an ultimately negative sum game. I hate it so much.

Why do you think it’s a negative sum game?

I don’t have any data, but my intuition is that overall high-fee, high-reward cards increase propensity for consumer spending by at least a few % beyond the fees/rewards.

The merchants think so, too, or they wouldn’t accept the processors that let their banks hand out these cards.

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

#99

Post by nutjob2 »

nsedlet wrote: post #31

Credit cards also transfer wealth from people who pay interest to people who don’t. It’s a silly system, where everyone has to invest their time (optimizing for rewards, avoiding interest) in an ultimately negative sum game. I hate it so much.

I don't have to invest any time at all. I just use the (US) card that gives me the greatest benefits, be it cash back or services. Usually I just look at the reward rate, which is a base 2% for me right now going up to 5% for some things.

I love it. As someone who never carries a balance I get paid by banks for doing pretty much nothing at all.

And I don't worry about US retailers, I don't live there.

I should add that rewards are not the best benefits. Sign up bonuses are much more lucrative, running to hundreds of dollars per card, and can often be repeated. Same applies to bank accounts.

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

#100

Post by mc32 »

nsedlet wrote: post #31

Credit cards also transfer wealth from people who pay interest to people who don’t. It’s a silly system, where everyone has to invest their time (optimizing for rewards, avoiding interest) in an ultimately negative sum game. I hate it so much.

Alternatively CC companies could cut off people over certain credit risk and then be able to charge interest in line with the lower overall credit risk…

Borrowers can also keep from overextending their credit and go on debit cards instead…

Obviously these things can have an impact on people but before the 80s credit cards were not widely available to people with high credit risk and the world still functioned.

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