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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

#341

Post by lesostep »

bluGill wrote: post #118
matheusmoreira wrote: post #82

Earlier quoted context omitted.

> Otherwise you're giving up 1-3% discount. I always ask for a discount but for some reason I almost never get it. The rational move then is to pay in as many installments as I can get without any additional interest. Then time itself gives me the discount. My actual money stays invested and I only pay later. My credit card gives me 1.1% cashback on all purchases. Inflation too does some of the work.

You shouldn't get a cash discount - cash costs the merchant MORE than credit card fees. You have to count all the costs of cash that credit cards don't have: counting, and recounting the cash and change. Then the manager counts and recounts everything in the back room at the end of the shift. Then the manager counts everything twice again to write up the deposit forms. Plus you need a cash register with the extra cas…

That's like a 4-5 seconds of low paid work for each transaction, though. 10 seconds, if I'm being generous. Counting a lot of cash is a long process, but each separate banknote is counted in a fraction of a second.

So, about 4-8 cents, for 30$/hour if we talk about grocery store.

Restaurant might take more time to process cash, but pays lower salary.

I do not think it's a higher cost than current credit card fees

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

#342

Post by skeletal88 »

criddell wrote: post #14
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.

How generous are credit card rewards in the EU?

There are basically none, because the fees are low and card issuers are not allowed to rob retailers with insane fees. If you have a cafe or restaurant where margins are already low then it would be crazy to pay additional 2-3% tax on every payment.

No one wants to accept amex here.

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

#343

Post by B1FF_PSUVM »

w10-1 wrote: post #242

The study methods are closer to advocacy than science or policy. Sure, take any slice of a vast number, and you get a big number. It's not a "wealth transfer" when everyone gets what they bargained for and can opt in or out. Most importantly, the transaction value of using credit cards or rewards systems - what the user actually gets - is not enumerated. Beyond what others have noted (mainly deferred payment), credit…

It's a bullshit guilt-trip piece, already paraded here last month. Might as well be talking about supermarket coupons.

Just the 150 billion from "interchange" (merchant fees) would be enough reason to fund the 15 billion (estimated) rewards.

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

#344

Post by like_any_other »

> Because merchants charge everyone the same price regardless of how they pay, those fee costs are factored into prices for all shoppers. However, credit card users get that money back and then some through rewards, while cash and debit users get little or nothing.

And they charge everyone the same price because credit cards contractually force them to. Merchants can either accept these terms, or forego credit cards entirely. This way credit cards prevent other payment methods from competing on price. Free markets for thee, contractually forbidding competition for me.

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

#345

Post by topspin »

api wrote: post #93
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

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.

> the US is geographically huge and more sprawled out.

There is ample historical evidence that this is a poor excuse.

Long ago, leaders in the US understood the value of universality. You'll likely recognize this as the Network Effect, Metcalfe's Law, etc. Back in the day, they called this "universal service." That thinking was central to the policies established for both electrification and phone service in the US: it wasn't then, and isn't now, truly universal, but what could be feasibly accommodated was, even when costs were/are quite high.

It wasn't lost on the people of those times that such policies inherently meant the cost of including sparsely populated, distant areas would be subsidized by concentrated areas. Before those systems appeared, the founders welded the same thinking into the US constitution in the form of the US postal service, with exactly the same knowledge and concerns.

We've lost that. The change happened prior to the advent of the internet. You're free to attribute this to whatever you wish; I won't offer my view on that, except to say there are no innocents: every argument that fingers ebil capitalists can be countered by examples of urban leaders damning government policies that subsidize non-urbanites. What I know with certainty is, if packet switched networking was somehow a thing in the 19th century, availability would be a given for almost any structure more significant than a hunting cabin in the US today, complete with common carrier, service baselines and rates established with clarity.

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

#346

Post by arpinum »

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.

EU only capped fees for 4 party systems, and only for consumer credit cards. business credit cards and 3 party systems (American Express for example) are not part of the cap and you can get more rewards with these card types.

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

#347

Post by sjhatfield »

nickjj wrote: post #162
steveBK123 wrote: post #86

Earlier quoted context omitted.

Credit card points/miles are an interesting topic, and I have found them to be kind of useful cyclically myself over last 20 years. They are a way for airlines to create value out of thin air with their own fiat currency. For the average consumer the miles create less of a pure economic efficient benefit and more of a psychic benefit - funny money bucket that accumulates to defray some trip expenses. Economically the…

> It's generally a time-vs-money thing though in that to maximize airline/hotel programs Credit card hotel booking portals are often much worse than what's available too. For example, you might end up paying 30-100% more for a hotel booked through Chase Travel. At the very least you'll have way less selection. Even if price matching exists, you could still end up paying more. I am traveling to Mexico next month and I…

Have the same card solely for the rental car cover. And to be fair it works, had an issue and they refunded the full expense without too many hoops to jump through.

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

#348

Post by gnz11 »

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

You can add Pre-K education to that list. It's on par in terms of costs with sending your kids to college.

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

#349

Post by petesergeant »

CircuitSeuss wrote: post #318

This ignores the aspect of consumer data. Credit issuers generate profit through issuing rewards programs in part due to the sale of their customer’s behavioral spending data. Cash and debit users largely retain their data privacy here. It’s hard to put a real world number on what the cost to the consumer is for losing this data ownership, but it is not zero: these data are increasingly used for targeted pricing prac…

I don’t think the credit/debit privacy split you’re imagining works like you think.

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

#350

Post by db48x »

jimbob45 wrote: post #326
red-iron-pine wrote: post #254

Earlier quoted context omitted.

it is for what you get. the US LEC and CLEC system sucks, and I had wayyyy more options in the EU, and in fairly upfront and straightforward ways. e.g. https://documentscontractuels.orange.fr/les-offres-orange-mo...

The EU doesn’t have the challenging scope and geography of the US, no?

The problem in the US is less of a geography problem and more of a regulatory one. Many towns and cities in the US gave the cable companies local monopolies back in the 50s and 60s. There are technical reasons why this worked ok (not well but perhaps better than the alternatives) for television, but now that the same rules have stretched to apply to delivery of internet access they no longer have any technical basis. So at this point they’re just a barrier to competition and exist only to raise prices.

The good news is that modern fiber systems blow cable internet out of the water. It is far cheaper to supply symmetric gigabit internet to every customer over fiber than over cable. Fiber just has more bandwidth to go around. And because it’s a different technology it is not subject to the same local monopolies that cable is encumbered with. This means that the free market is correcting the problem and has been for a decade. In many parts of the country it is now possible to get internet that is faster and cheaper than what is available in the even the best built parts of Europe. The main obstacle to that build–out is probably local permitting. Many large cities require new permits, with public comment periods for each and every one of them, for every single block that an ISP lays fiber for. Cities like San Francisco have imposed a glacial pace on their ISPs.

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