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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

#151

Post by ramijames »

amazingamazing wrote: post #138
ramijames wrote: post #121

Earlier quoted context omitted.

I'm 46. I've never had a credit card. I have a bank account and a debit card. If I can't afford something, I don't buy it. You can just opt out of using credit cards.

Honorable but foolish. You could effectively get a discount and still use it the same way as your debit card.

Sorry, but I don't care what other people think. It's my money and I'm careful with it.

The entire credit card industry is set up to squeeze out as much profit from people as possible. They offer discounts as an incentive, but it is a huge trap that many, many people fall into. I'm not interested in risk. I'm interested in simplicity.

It's participating in the credit card industry that is foolish.

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

#152

Post by rdschouw »

tomaskafka wrote: post #129
ramijames wrote: post #121

Earlier quoted context omitted.

I'm 46. I've never had a credit card. I have a bank account and a debit card. If I can't afford something, I don't buy it. You can just opt out of using credit cards.

Whole Europe does this. I never understood why whole nation wants to live in debt just to have one extra month of cash flow (which they’ll probably squander soon).

Ex-European here. It is very common to overdraft your bank account in Europe. The overdraft interest fees are very similar to the credit cards here in the US. It is basically the same service but with a different execution.

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

#153

Post by vasco »

kybernetikos wrote: post #128
vasco wrote: post #58

Earlier quoted context omitted.

It has no relation to paying interest, only to making transactions with the credit card.

The relationship is that the service and rewards you get are subsidised by generally poorer people who mess up their financial planning.

Rewards are paid out for transactions, not interest paid, that's all. Otherwise poor people failing payments would get more rewards than the rich which don't. The dynamics would be completely different.

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

#154

Post by ramijames »

nemomarx wrote: post #141
tomaskafka wrote: post #129

Earlier quoted context omitted.

Whole Europe does this. I never understood why whole nation wants to live in debt just to have one extra month of cash flow (which they’ll probably squander soon).

Pay your credit card balance off every week, and it's an overly complicated debit card but you technically build up a score for future loans. Also maybe you get cash back on that? Rational if you want a mortgage in the US at least.

I'm in Boston. I'll never earn enough to buy property here. I'll never have a mortgage.

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

#155

Post by nerdjon »

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 gave up long ago trying to optimize any rewards, it just ended up being stressful and not really worth it ultimately.

Now I just use my apple card everywhere, pay it off every month and get whatever rewards I get.

It feels like a weird situation, those that stand to gain the most from credit cards are also the ones that should feel a difference of under $100 in rewards the least.

The one exception I see is bonus sign up rewards since those can be fairly significant, or making sure you use an airline card at the airline since those bonuses can be fairly significant (with sometimes other benefits). But outside of those exceptions, just choose a card with good rewards and stick with that and pay it off every month.

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

#156

Post by _aavaa_ »

tyrabound wrote: post #140
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.

That is a spurious argument. You have a choice in whether you pay interest, you do not have a choice about a purchase including the cost of paying payment processor fees since the price is the same if you use paper money. One of the most corrupting yet hidden forces in America today are the payment networks MC/Visa etc. due to their bribing and corruption of the government in order to prevent things like making payme…

> similar to how taxes are added after the fact

That is not a positive. I'm fine with splitting up a price if you want to show how much tax gets added, but having to continuously do the mental math of "no this item is 10.99 it's 10.99 + tax" is very frustrating. When I pick up a $11 item, I want to spend $11.

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

#157

Post by bluGill »

EliRivers wrote: post #37
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.

I've heard such people referred to as deadbeats.

Once in a while. However the truth is the large people who collect the 1% and pay off their card every month are the people who don't. These people are customers year after year, and often spend more on their cards (they tend to be higher income), and the bank gets their 2-3% from them (2-3% after rewards)

People who don't pay their card off also are on the look out for lower interest rate cards and switch all the time. they in reality are not paying the very high rates on cards, they are paying the lower introductory rates (which is still a lot of money). These people are also more likely to default and stop paying leaving the bank to write everything off. Combine that with the fact that they typically don't spend as much over several years (they hit their credit limit and their income won't allow an increase so they have to stop spending), and they are not as profitable as it seems.

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

#158

Post by alex43578 »

One factor that never seems to come up in these discussions is that while businesses might not like credit card fees, they also don’t like all the issues with cash: managing it, transporting it, losing it to employee theft, etc. The cost of cash transactions isn’t 0.

Same argument for people: managing cash is a pain, swiping a card is easy. Contesting a transaction or fraud is way easier (infinitely easier?) with a card than cash. Having day to day liquidity even without ever carrying a balance is nice.

Is all this worth $9.2B across the economy? Maybe not, but again, certainly worth more than 0.

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

#159

Post by vitus »

twoodfin wrote: post #98
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.

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

Visa / Mastercard / American Express all have lines of premium credit cards (Visa Infinite, World Elite Mastercard, Amex Platinum), and they're very much too big to ban. You'd just be left with one processor in the US (Discover, now owned by Capital One).

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

#160

Post by cpburns2009 »

paxys wrote: post #78
dougdude3339 wrote: post #54

Earlier quoted context omitted.

I prefer my debit card because I'm more aware of how much I'm spending. Money taken out of my account is immediate and feels real. Ultimately, I spend less.

One isn’t more real than the other. They are both numbers in an online database. In one case your assets are going down, in the other your liabilities are going up. The net result is the same.

I agree with dougdude. I like debit cards better because you see the balance change immediately. The thing I dislike about credit cards is payment is deferred by a month.
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