101–110 of 473 posts
Patrick McKenzie (patio11 fame) had a great blog post in credit card rewards There is a lot that goes into it, and it is interesting how customers like me who literally never have carried interest and have to made thousands of $ in rewards over the years still make the banks money.... https://www.bitsaboutmoney.com/archive/anatomy-of-credit-car...
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.
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.
It has no relation to paying interest, only to making transactions with the credit card.
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?
Earlier quoted context omitted.
How generous are credit card rewards in the EU?
In the UK (which broadly follows the same rules), I get 0.25% with a Visa and 1.25% with Amex. Sometimes there are introductory offers for a few months.
Not at many gas stations. Cash gets a discount usually $.10 per gallon. I’ve also started to see restaurants either give a discount for cash, or charge extra for credit card purchases. Business suppliers from tiny shops to large national companies tack on 3% for people paying with credit cards, or like T-Mobile, a $5/line monthly fee in order to get people to pay by direct debit.
Earlier quoted context omitted.
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".
No, the rate is set by the card network, eg https://usa.visa.com/support/consumer/travel-support/exchang...
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.
It is risky and it is very easy to lose great amounts of money on a bad decision when credit is involved. Arguably that makes it bad. But still not negative sum.
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.
Second thing: interchange fees are not the only fees that your typical store has to pay, the total fees are much higher. I think the EU essentially capped Visa/Mastercard profit in the EU, more than they capped small business fees for card payment.