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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

#331

Post by thaumasiotes »

tialaramex wrote: post #95
tiffanyh wrote: post #53

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".

> You will probably not see rates that are even competitive with a dodgy FX cash place at an airport

You're crazy.

I have a Capital One account because they advertised "no foreign transaction fees". I checked on my foreign-currency payments and was always charged an amount that looked eerily similar to "1% more than you would have paid at the published exchange rate", so it's not clear to me why they say "no fee" and not "1% fee".

But the 1% fee that they actually have is very reasonable. An airport stall is in an entirely different league.

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

#332

Post by Steve44 »

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.

I only get cashback on my Amex, nothing with Visa or Mastercard; perhaps I could shop around but over 90% goes on my Amex so haven't bothered to.

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

#333

Post by thaumasiotes »

gruez wrote: post #107
tialaramex wrote: post #95

Earlier quoted context omitted.

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".

>they pick the rates. So they can set those rates to generate exactly the same profit for them as with fees. No, the rate is set by the card network, eg https://usa.visa.com/support/consumer/travel-support/exchang...

That link doesn't support your claim:

>> Your bank may or may not use the rate indicated by this calculator to bill you

---

(As a side note: the fine print follows up with this:

>> If your transaction is converted by the merchant or ATM operator, the exchange rate indicated by this calculator will not apply.

Don't ever let a merchant or ATM do foreign currency conversion for you. They charge astronomically high fees without exception. Pay in the foreign currency and let your card do the conversion.)

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

#334

Post by brainwad »

tialaramex wrote: post #237
gruez wrote: post #107

Earlier quoted context omitted.

>they pick the rates. So they can set those rates to generate exactly the same profit for them as with fees. No, the rate is set by the card network, eg https://usa.visa.com/support/consumer/travel-support/exchang...

Huh. I wonder how long that's been true. I guess I haven't been to America since last century, but I could have sworn I had zero fee but unreasonable FX rates when I was in Poland which can't have been more than 25 years ago.

The issuer can opt out of the card network Forex and do it themselves. That's how Revolut and Wise work.

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

#335

Post by [deleted] »

CircuitSeuss wrote: post #324
phyzix5761 wrote: post #323

Earlier quoted context omitted.

Debit card usage is also used for data brokering.

Yes, but typically only on the retailer/ Point of Sales side. Your bank is not selling that information. Of course, things get weird when you have additional intermediaries like Apple or Google pay. In principle at least, there should be some measurable difference vs credit. Would be very curious to see studies on this if anyone finds one!

[deleted]

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

#336

Post by code-blooded »

m101 wrote: post #329

The only way to solve this is to have the user of the credit/debit card pay the fee. Sure, you can do an EU thing of 0.2-0.3% or whatever it is, but this might still be 0.2-0.3% more than it could be in a competitive market.

Handling cash is expensive too, so what EU does is probably beneficial (as in cheaper) to the society as a whole.

I wonder if true transaction cost even reaches the 0.2-0.3% or could be further lowered.

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

#337

Post by brainwad »

m101 wrote: post #329

The only way to solve this is to have the user of the credit/debit card pay the fee. Sure, you can do an EU thing of 0.2-0.3% or whatever it is, but this might still be 0.2-0.3% more than it could be in a competitive market.

Australia tried this, but it led to a different problem of payment processors being able to gouge card payers because merchants were allowed to pass on whatever their costs were, and consumers didn't really have a real choice of paying the fee or not. Also since the fee had to be stated before the card was presented for tap and go payments, it didn't solve the OP problem: debit cards and premium cards all got hit with the same surcharge.

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

#338

Post by InsideOutSanta »

joenot443 wrote: post #188
59percentmore wrote: post #87

Earlier quoted context omitted.

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.

> Canadians like myself have ~40% of our provincial taxes spent on healthcare

Worth noting that taxes in the US are a lot lower than they should be because a large portion of government expenses are financed with debt. Canada owns over 400B in US debt, so that's Canada "subsidizing" US taxes.

Also, yes, that's how healthcare works: when you're young and less sick, you tend to pay more than you get out of it, and then it reverses as you get older.

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

#340

Post by brainwad »

strix_varius wrote: post #302
aurareturn wrote: post #300

Earlier quoted context omitted.

confidence of sufficient funds when that auto payment hits How is this different than paying with cash or debit?

Because cash and debit allow you to pick the time in the month when you happen to have the ability to pay for something. Frankly these questions astound me, do y'all really know no low income folks?

You can always use a credit card as a debit card. Pay it off to zero every day. Indeed with the very low limit cards people with bad credit can get, you kind of have to pay it down faster than the bill comes if you want to keep using it.
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