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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

#411

Post by bvanheu »

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.

there is a big chunk of people who wouldn't afford healthcare in the USA but still have access to in Canada. I don't mind paying more taxes if this means everyone has healthcare access.

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

#412

Post by maerF0x0 »

roland35 wrote: post #15

Patrick McKenzie (patio11 fame) had a great blog post in credit card rewards There is a lot that goes into it, and it is interesting how customers like me who literally never have carried interest and have to made thousands of $ in rewards over the years still make the banks money.... https://www.bitsaboutmoney.com/archive/anatomy-of-credit-car...

It's a mess, much like tip culture[1], because it just real equalized like this:

1. Merchant sells for price X

2. Credit card is invented

3. Merchant has to sell for price > X (say, 1.02 X) to cover some buyers using CC

4. Credit card offers 2-3% rewards on some goods

5. Merchant has to sell for prices even > X (say 1.04 X) to cover nearly all customers using cards. Customers who do not use the cards pay 1.04X and do not get rewards to compensate.

6. Merchant loses because they're beholden to processors, Customers lose because they're getting 2-3% of semi-currency for the cost of ~4% cash currency.

7. Processors get their profit

[1] - Employees deserve good wages for good work, tipping is just a bad algorithm to accomplish that

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

#413

Post by toast0 »

JKCalhoun wrote: post #268
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.

In Germany I saw they charged extra for using my credit card. A U.S. retailer told me the credit card companies won't allow that in the U.S.?

> A U.S. retailer told me the credit card companies won't allow that in the U.S.?

That used to be the case, but it's not current. Merchants can charge a credit card fee, and many do. Many merchants near me (washington state) don't, but those that do add a fixed fee of 1-3% for credit.

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

#414

Post by dramm »

I was working with a team pitching a new marketing database system to Discover Card decades ago. When we were first shown around their HQ which was a kind of hybrid open floor plan with lots of cubicles there was a large office with fancy Queen Anne? style furniture in it, IIRC an EA or two sitting outside. it looked nice but kinda out of place in a sea of cubicles and standard office furniture. I asked who's office that was and was told it's Nancy Donovan's (we were meeting with her team). But they did not describe Nancy as the head of Marketing and Sales etc., they described her as "the person who developed the cashback program". I liked their clarity about recognizing what worked.

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

#415

Post by toast0 »

wookmaster wrote: post #274

Im really surprised the number of comments here who think the rewards are free money they're getting. The stores are paying 3-5% transaction fees for you to use credit cards then they give you 2-3% back and force you to spend it on things they deem can be redeemed. You're paying for that 2-3% back in higher prices for everything. The whole thing is a giant scam and should be shut down.

> force you to spend it on things they deem can be redeemed.

Cards that redeem to cash or payment credit are readily available. You only get miles or flooz if that's what you want.

The system is bad, but if I'm buying stuff within the system, a rewards card is usually the least cost out of pocket.

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

#416

Post by cjenkins »

maerF0x0 wrote: post #409
GPerson wrote: post #408

Earlier quoted context omitted.

I just use debit cards and Venmo for everything. I’ve never understood why I’d use a credit card when I can just use the debit card and pay no fee. I’ll never afford a house anyways so the credit score argument is meaningless to me.

fwiw there is still a fee involved, usually just much lower so the merchant eats it

In the US debit card fees are capped (https://www.federalreserve.gov/paymentsystems/regii-average-...). The cap is low enough that there isn't enough to fund rewards like we see on credit cards. IIRC there were debit card rewards when they first came out but those went away with the fee caps.

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

#417

Post by quickthrowman »

ChrisMarshallNY wrote: post #266
bluGill wrote: post #125

Earlier quoted context omitted.

Credit cards are cheaper than cash for most merchants. Most people forget about all the costs of cash because they are hidden, but they add up to more than the couple % credit cards cost.

> Credit cards are cheaper than cash for most merchants. Huh. I always thought it was the opposite. I know several restaurants that refuse to accept credit cards. They are great places to eat, but I won't go there. I don't think they miss my custom, though. Refusing to accept credit seems to be a signal of excellence, around here.

If you only accept cash, you can report whatever you feel like as income* and avoid paying taxes on the rest.

* As long as you don’t raise any red flags in your accounting, which can be difficult.

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

#418

Post by CircuitSeuss »

sfn42 wrote: post #397
kevin_thibedeau wrote: post #377

Earlier quoted context omitted.

That data is used in some alarmingly manipulative ways that directly affect your life.

I personally don't really see the problem. I'm not going to buy something I don't want/need. If they use the data to show me ads for something I want that then leads me to making a purchase, to me that seems like a win/win. I'm generally a pretty frugal person, I have a good handle on my personal finances and I don't really buy much stuff at all. Maybe for someone else, shopping can be similar to an addiction where t…

If you have time and are interested I highly recommend reading Privacy Is Power by Carissa Véliz https://www.penguin.co.uk/books/442343/privacy-is-power-by-c... https://annas-archive.gd/md5/11585979e43939b8175e1cba336bc9f...

If you don't have time, you can find brief but less compelling argument here: https://www.privacyguides.org/en/basics/why-privacy-matters/

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

#419

Post by rkuodys »

Brian_K_White wrote: post #361
rkuodys wrote: post #355

Earlier quoted context omitted.

Is't the fact that data is valuable for somebody, does not mean that it has a cost (price) for me? Spending data is definitely valuable for seller / corporation to know what to produce. I, on the other hand, cannot get money by saving information. It's not zero sum game, that either I have it or seller have value out of it. Just like with garbage - for me old broken furniture might be a garbage, while for other it's…

The only reason it's valuable is because of it's utility to extract value from you. Not just money either but for instance the power to manipulate. It's not a scientific discovery.

But something can be valuable to somebody without hurting you. For example if you participate in study as a member of control group. There is no impact to your life and huge benefit to whoever is producing the research. Similarly waste collection businesses take something that has no value to you and generate profit by modifying your waste into something valuable. That is to say - the fact that somebody gains value does not equate that you are loosing the same value.

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

#420

Post by liveoneggs »

GPerson wrote: post #408
liveoneggs wrote: post #407

Earlier quoted context omitted.

how much cash do you walk around with?

I just use debit cards and Venmo for everything. I’ve never understood why I’d use a credit card when I can just use the debit card and pay no fee. I’ll never afford a house anyways so the credit score argument is meaningless to me.

So we're on topic: as the article points out - I use cash back cards so other people (like you) subsidize my spending. There are other major benefits to using a CC but anyway..

You are, apparently, well-off enough to have enough money in your venmo/checking where you don't think about it too much but I think the OP was referring to the less well-off but common situation where you are spending a little over your current ability - be it physical cash on hand (not your situation) or the amount available in your account.

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