How credit card rewards became a $9.2B wealth transfer • Hacker News Board

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

#281

Post by phil21 » Tue, Aug 25, 2026, 6:35 PM UTC

rpdillon wrote: post #258

ramijames wrote: post #151

Earlier quoted context omitted.

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.

I completely get where you're coming from, but credit cards are a tool, and you can came out way ahead using them properly. For starters, they are key to having a good credit rating, which opens a lot of doors - maintain 3 open cards, pay off the full balance every month, and keep those accounts open for 10+ years. Big lift. Second, never use a card with an annual fee. Third, which I already said, but bears repeating…

> way ahead

This is overselling it. You can come out 2% ahead or so. 4-5% if you are an extremely high spender who enjoys mentally managing 5 or 6 credit cards to max out category bonuses and other benefits and all that.

You come out marginally ahead at the expense of mental overhead. Good tradeoff for some, not for others.

I use a credit card, I dropped from 3-4 different cards trying to max out those 4-5% spending categories and just have a straight 2% cashback on everything card now. Plus one backup on a different payment network in case one goes down. It got to be exhausting trying to remember to manage so many cards plus remember to use the points, make sure to use the right card for the right thing, and all the other BS.

For some of my friends it's a hobby which is great for you if you enjoy such things! For me, it's just adding another chore to my life. Not worth the 1-2% or so marginal gain against my spending.

The super easy stuff is long gone these days too. You get far larger discounts paying via ACH for utility bills/cell phone bills/etc. vs. what credit card rewards give you so all the "autopilot" stuff is largely gone.

I do remember the days where we paid our Equinix bill via the company Amex. That was pretty fun while the party lasted!

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

#282

Post by recursivecaveat » Tue, Aug 25, 2026, 7:10 PM UTC

ThePowerOfFuet wrote: post #250

freeone3000 wrote: post #223

Earlier quoted context omitted.

Because it gives me 2.5% cash back, which is basically free money.

That comes out of the merchant's pocket, who has priced it into the sale price you are paying. It is not, thus, free money, at all.

On a macro level, that's true. On an individual level, your avacados cost 3% more whether you use credit or debit, it's just your choice to recover 2.5% from that back in rewards or not.

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

#283

Post by stefanfisk » Tue, Aug 25, 2026, 7:35 PM UTC

joenot443 wrote: post #276

stefanfisk wrote: post #241

Earlier quoted context omitted.

I’m in Stockholm, and our condo HOA (BRF) includes 1Gbps per unit in the fee for all units because billing individually would cost more in admin than the service itself. We have FTTP and then cat6 to each unit.

That sounds really convenient! Is it a new building? I know the odd American or Canadian build will have that, but only the newer and more expensive ones.

The building is from the 1940s.

But this is a pretty common setup for condos in Swedish cities. Rentals usually have access to the same infrastructure but at higher prices due to kickbacks demanded by the landlords from the ISPs.

The backbone of it all is a state owned fiber connecting the cities together with municipal fiber.

But even outside of the cities FTTP is quite common. There are companies which specialize in finding rural areas where there’s enough interest to justify the cost of connecting them and then coordinating getting an economic association setup to own and manage the local infrastructure.

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

#284

Post by post-it » Tue, Aug 25, 2026, 8:06 PM UTC

cge wrote: post #148

post-it wrote: post #32

Earlier quoted context omitted.

That is what it says after all, it's pretty explicit.

It's just such a bizarre choice that one might hope there would be another interpretation. Why measure a percentage change on sales tax, which varies heavily from location to location, and is not what the associated fees are based on, rather than simple choice of total cost?

Because sales tax is something you pay that's more than the sticker price, and people tend to have an intuition for sales tax in their area. Personally, I find "a 3% credit card fee is like paying 21% more in sales tax" to be intuitive.

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

#285

Post by [deleted] » Tue, Aug 25, 2026, 8:07 PM UTC

iso1631 wrote: post #79

post-it wrote: post #23

Earlier quoted context omitted.

That's what makes it a wealth transfer, from debit card users to you.

In my country card fees are less than cash fees, so I guess that's a wealth transfer from card payers to cash payers?

[deleted]

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

#286

Post by pants2 » Tue, Aug 25, 2026, 8:10 PM UTC

jazdw wrote: post #179

pathikrit wrote: post #145

Earlier quoted context omitted.

Why is it so hard lol? I have the Bank of America Rewards card for 25+ years. 2.62% cashback on everything, 3.5% on dining/travel. Maybe there are better ones out there but this is good. I have auto-pay setup so I don't have to worry. I have not spent a second of my time optimizing anything in last 15 years

Lol because in order to get 2.625% cashback at BoA you need to have $1,000,000 in your BoA accounts, maybe that's why it's hard?

Just be rich. What's so hard about that?

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

#287

Post by [deleted] » Tue, Aug 25, 2026, 8:54 PM UTC

oefrha wrote: post #215

timcobb wrote: post #203

Earlier quoted context omitted.

Debit cards charge as credit cards no problem. That said not having a credit card is tough on your credit history. You could just have one and pay the balance but then they still have all your data, it sucks

I’ve specifically had debit card with Visa mark declined online where credit card was expected. Don’t know how common that is because one stops doing that once it happens a couple times.

[deleted]

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

#288

Post by alex43578 » Tue, Aug 25, 2026, 8:59 PM UTC

gruez wrote: post #172

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…

>Is all this worth $9.2B across the economy? Maybe not, but again, certainly worth more than 0. Nobody's arguing that credit card companies are proving zero value, only that they're charging more than what can be "justified" (whatever that means). That's why in europe the interchange rates are capped at some amount to reflect that.

Europe is artificially capping the interchange rates - that doesn’t mean that’s the market price for that service.

As for America, there’s 4 card networks, and no explicit regulation preventing you from starting another (just the huge regulatory burdens involved with any money-processing business, PCI, etc).

If they were charging so much more than is “justified”, couldn’t one of the dozens of well-funded players in the fintech space swoop in? Couldn’t Walmart fall back to cash and a “Walmart card”?

Instead, we see even goliaths like Walmart spending money and time to support newer features like tap to pay because it reduces fraud losses and customers just prefer it.

The “justified” thing is silly - is Apple charging more than is justified because they make a profit?

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

#289

Post by esseph » Tue, Aug 25, 2026, 9:15 PM UTC

Xirdus wrote: post #236

esseph wrote: post #71

Earlier quoted context omitted.

Huh?

Based on the downvote and your reaction, I assume I misread something. We're talking about why Americans sometimes prefer paying with cash over credit card, no?

I just don't understand the statement.

Can you explain the process or idea?

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

#290

Post by quickthrowman » Tue, Aug 25, 2026, 9:35 PM UTC

buran77 wrote: post #245

tylerhou wrote: post #229

Earlier quoted context omitted.

Businesses raise prices to account for interchange fees. So they are essentially is paid by the consumer. If we outlawed rewards credit cards (by capping interchange fees), everything would likely be slightly cheaper.

> Businesses raise prices to account for interchange fees Agreed, which makes the picture even worse for those low income people. Even poor people are guaranteed to occasionally pay the "rich person tax" included in the prices of some of the products and services. At least until some AI pricing starts changing the price real-time based on the buyer's estimated wealth (sort of already real). > So they are essentially…

> Agreed, which makes the picture even worse for those low income people. Even poor people are guaranteed to occasionally pay the "rich person tax" included in the prices of some of the products and services.

Credit card fees are baked into the price of everything that can be purchased with credit card, excluding merchants that offer a cash price and a credit price.

Any time someone pays the (credit card) price with cash or a debit card is paying more than someone that earns CC rewards, it’s virtually every transaction.