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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

#181

Post by jen20 »

alex43578 wrote: post #158

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 c…

I don’t really care what businesses want at this point: my default position is that they are trying to scam me in some way and must be handled appropriately. Credit cards are a must-have in this situation, since they provide a mechanism other than hope to deal with recalcitrant merchants without wasting my time.

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

#182

Post by caminante »

delish wrote: post #115
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.

Patrick McKenzie rebuts this here: (podcast) https://open.spotify.com/episode/2E2KRPcDvh1LcRw5bIsBms or here (article): https://www.bitsaboutmoney.com/archive/anatomy-of-credit-car... The intuition being: people who carry balances and pay interest don't actually spend very much; they are not wealthy.

That "intuition" is agreeing with the parent.

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

#183

Post by wildrhythms »

ramijames wrote: post #151
amazingamazing wrote: post #138

Earlier quoted context omitted.

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.

For people who only spend what they have, what is the risk? I don't accrue credit card debt, never have, so I've enjoyed a 2-3% discount on my entire spending history. Over lifetime that will probably amount to a couple of vacations.

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

#184

Post by SXX »

edent wrote: post #67
criddell wrote: post #14

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.

At least in the UK Amex interchange fees are not capped like Visa and Mastercard.

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

#185

Post by kotaKat »

ramijames wrote: post #121
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'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.

I assume you've somehow gotten access to stable housing though via that bank account (possibly a home loan, or something else), or accessed a large line of credit before 'modern' credit scoring came into play (FICO scores and the Big Three).

I see many commercials for local banking up here that pulls out 30-40+ year members of the banks boasting about the prosperity the bank provided them, but at the same time, when they'd walked into the bank back in the day A Guy just said "yeah he's good for it" and wrote out the loans they needed.

You can't opt out of the modern credit scoring system and if you fuck it up even once with a bad line item you're out of the running for quite a few things and become virtually poor.

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

#186

Post by gruez »

The most defensible framing that I came across (maybe from patio11?) in favor of credit card rewards is that they're a "bulk discount" on interchange fees. People who spend more on their cards also pay more fees (passed through the stuff they buy), so it kinda makes sense to give them a discount[1]. That's what credit cards do. Cards with the highest rewards are geared towards high spenders, with corresponding credit score and/or minimum income requirements. It's not unlike how the 2 quart (1.89L) bottle of mayo at costco is cheaper than the 8oz (0.24L) bottle from dollar general, but nobody would frame that as a "wealth transfer".

[1] of course, this doesn't need to rely on some principle that people are entitled to discounts if they buy more, because in reality discounts arise from complex market dynamics such as competition and price discrimination.

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

#187

Post by twoodfin »

vitus wrote: post #159
twoodfin wrote: post #98

Earlier quoted context omitted.

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).

So why don’t the Visa and Mastercard banks up fees across their entire card lineup?

If they’re truly too big to give up no matter the fees they charge, they’re leaving money on the table.

Of course, they can’t. If Chase started handing college students a 3% card, the merchants would riot.

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

#188

Post by joenot443 »

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

Bit for bit, internet access is cheaper in America than it is in Canada or Australia.

Canadians like myself have ~40% of our provincial taxes spent on healthcare, so in my case about ~8% of my gross income. Somewhere in the tune of $20k/yr. While I was living in Seattle and filing American, quite a bit less of my gross income went to healthcare. Just food for thought.

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

#189

Post by joenot443 »

alistairSH wrote: post #169
api wrote: post #93

Earlier quoted context omitted.

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.

That might explain internet pricing in North Dakota, but it doesn't explain it in NYC or DC or LA.

I pay $40/mo for 500mbps in my Bushwick apartment - is that considered expensive?

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

#190

Post by Loggias »

ramijames wrote: post #151
amazingamazing wrote: post #138

Earlier quoted context omitted.

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.

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