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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

#191

Post by swed420 »

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.

Discussion of Patrick's article:

https://news.ycombinator.com/item?id=39928604

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

#192

Post by oefrha »

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.

Try to pay for SaaS online. Tons of them accept nothing but credit cards; and then some of them accept direct withdrawals from bank account but it takes days to verify. Services using Stripe seems to be the worst at this. (I’ve never carried a credit card balance my whole life.)

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

#193

Post by toomuchtodo »

zf00002 wrote: post #50
toomuchtodo wrote: post #3

Earlier quoted context omitted.

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.

Always ask if they’ll give you the discount paying with Zelle if they won’t for debit. Almost every major bank supports Zelle currently in your native banking app.

https://www.zelle.com/get-started

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

#194

Post by nickjj »

tialaramex wrote: post #175
Lucasoato wrote: post #137

Earlier quoted context omitted.

I’ll never understand this credit card debt thing... and why should businesses eat the credit card commission cost? Is it 5%? You pay for it, why should I?

The reason for a business to want to accept cards is that some fraction of your customers would choose not to buy whatever it is you sell if not for the convenience. Whether that's a guy who decides not to buy donuts because then he won't have even to buy more scratch-offs or the woman who doesn't get those bald tires replaced because if she did the family will be leaving on cheese sandwiches until payday. For the co…

> If you pay next month you can have stuff today.

There is value in this even if you always pay your full statement balance every month.

If you have a stable source of income knowing your credit card payment is due on the 7th of every month means you don't have to monitor your checking account's balance for every purchase. You only have to think "make sure you can cover $X by the 7th".

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

#195

Post by paxys »

skinfaxi wrote: post #173
paxys wrote: post #78

Earlier quoted context omitted.

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.

It's a world of difference if one of them gets stolen vs the other.

In that case a credit card is actually significantly better than debit

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

#196

Post by djoldman »

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.

Credit card companies make 3/4 of their revenue from interest. From Capital One's 10k, Net Interest Income vs. Total Net Revenue:

  2023: 79.5%
  2024: 79.8%
  2025: 80.2%
https://www.sec.gov/ix?doc=/Archives/edgar/data/0000927628/0...

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

#197

Post by losvedir »

nerdjon wrote: post #155
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 si…

The rewards differences can be significant. Eg 4% vs 1% cash back is $3k difference on an annual spend of $100k.

On the one hand, relative to our income it's not so important, but on the other it feels bad leaving $3k on the table.

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

#198

Post by rcxdude »

hunter-gatherer wrote: post #122
rcxdude wrote: post #59

Earlier quoted context omitted.

And often the credit card companies try to enforce this by writing wording into their contracts that try to stop merchants offering different prices for different payment methods.

This is true. In fact, if you come across a merchant that accepts credit with a minimum purchase amount or tacks an extra fee, you can take the receipt and call the terminal owner (visa/MasterCard) and report it. The receipt has a terminal ID, and it turns out the likes of Visa get really pissed if merchants do that. I know this because I used to work on a US military base. There was a sole merchant on a particular i…

Yeah, it propagates the problem because the price signal never makes it to the consumer.

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

#199

Post by Aefiam »

croon wrote: post #144
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).

While I hate that it's like this, you're leaving money on the table. Currently you're keeping money in the bank accruing the bank interest to occasionally pay for stuff. With a credit card you would get various bonuses/cashback/gameified returns by owing them money, and it costs you nothing as long as you pay them back once a month interest free. If you however slip up/miss a payment it will cost you a lot. Both case…

as far as I understand it, the creditcard rewards are from the creditcard fee, which is capped in the eu, so you are not missing out much.

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

#200

Post by caminante »

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.

The parent isn't explaining it well, largely because it's not rational.

I think of it like alcoholics who can't be near alcohol. It's some deep seated degeneracy or fear.

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