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

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

#421

Post by xyzelement » Wed, Aug 26, 2026, 4:01 PM UTC

GPerson wrote: post #401

xyzelement wrote: post #365

Credit cards and cash have their place but the story being told doesn't track with experience. First, businesses are increasingly differentiating pricing between cash and credit card - this is most obvious in gas stations where the price you see on the big sign is the cash price and not what you practically end up paying. Or the various restaurants and other businesses that offer cash discounts. While this is relativ…

“Most people have had the experience of wanting to buy something unplanned and not having the cash on them, but buying it anyway via credit card.” I believe you, but this experience is totally alien to me and I don’t know of anybody who has done this. I wonder if it’s a generational thing.

Literally between posting the above and now, I went to a rural bike ride with my family. Didn't bother to bring cash. Ended up riding past an antique shop and bought my son an old school tractor toy via Google Wallet.

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

#422

Post by xyzelement » Wed, Aug 26, 2026, 4:04 PM UTC

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.

it is trivial to find a credit card with no fee and 1%-3% percent cash back.

Imagine everything you bought in the past 3 decades from grocery to hotel room and air travel. Now imagine having 2% of it in your pocket.

that's eaey to understand right?

additional benetit like purchase protection, vendor disputes, etc.

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

#423

Post by ngriffiths » Wed, Aug 26, 2026, 4:08 PM UTC

gruez wrote: post #296

ngriffiths wrote: post #239

Earlier quoted context omitted.

To be clear though, the higher FICO scores get hosed the most, see the graph earlier on. Your quotes are conditional on FICO so they don't take that into account. The only way I can put these things together is that at the high FICO end, both wealthier and poorer consumers get hosed a lot but wealthier consumers not quite as much. On the other hand, lower FICO band doesn't get as bad of a deal overall but it is worse…

>To be clear though, the higher FICO scores get hosed the most, see the graph earlier on. Your quotes are conditional on FICO so they don't take that into account. Are you talking about "Consumption by income decile" graph? That doesn't show them being hosed, unless you think everyone should pay a flat rate to access the credit card system.

I'm talking about "Interchange income - rewards expenses," where the difference is 6x higher at the highest FICO scores. And of course interchange income is not the same as cost to the cardholder but they are linked

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

#424

Post by CircuitSeuss » Wed, Aug 26, 2026, 4:41 PM UTC

semiquaver wrote: post #353

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…

Do you have evidence to support your claim of targeted pricing practices? In what areas?

FTC study, Jan 2025 https://www.ftc.gov/system/files/ftc_gov/pdf/p246202_surveil...

Frequently sited investigative video journalism on grocery delivery prices (and more): https://youtu.be/osxr7xSxsGo

Airlines: https://fortune.com/2025/07/16/delta-moves-toward-eliminatin...

Insurance: https://www.insurancebusinessmag.com/us/news/technology/gm-l...

Frankly, it’s everywhere— if a company is large enough, they will leverage consumer data to increase profits as much as the consumer will bear. There are many other examples, but I’ll just link you this as a jumping off point if you want to go further: https://epic.org/krogers-surveillance-pricing-harms-consumer...

Ongoing US house oversight committee investigation http://pallone.house.gov/media/press-releases/pallone-launch... https://oversight.house.gov/wp-content/uploads/2026/03/Lette...

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

#425

Post by tyrabound » Wed, Aug 26, 2026, 4:47 PM UTC

rsynnott wrote: post #207

tyrabound wrote: post #140

Earlier quoted context omitted.

That is a spurious argument. You have a choice in whether you pay interest, you do not have a choice about a purchase including the cost of paying payment processor fees since the price is the same if you use paper money. One of the most corrupting yet hidden forces in America today are the payment networks MC/Visa etc. due to their bribing and corruption of the government in order to prevent things like making payme…

> especially in places like Europe where they’ve foolishly and enthusiastically started forcing everyone into digital payment In Europe (or at least the EEA, but the UK and I think Switzerland have their own capping) card interchange is capped at, generally, 0.3%.

That does not apply universally and it mostly for various domestic payment processors of the very kind that should have also been implemented in the USA a long time ago, if the US government weren't so dark rotten and corrupt and had actually been responsive or even just representative of the people for the last 150 or so years.

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

#426

Post by bigjimmyk3 » Wed, Aug 26, 2026, 4:49 PM UTC

alex43578 wrote: post #288

gruez wrote: post #172

Earlier quoted context omitted.

>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 t…

Walmart has already done the thing that you are describing; they have had Walmart Pay for some time (https://www.walmart.com/cp/walmart-pay/3205993).

Starbucks also pushes their app and paying via app, which has the side-effect of bundling 5 $5 transactions into one $25 transaction (a "card reload"), thus reducing their fee overhead.

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

#427

Post by tyrabound » Wed, Aug 26, 2026, 4:52 PM UTC

_aavaa_ wrote: post #156

tyrabound wrote: post #140

Earlier quoted context omitted.

That is a spurious argument. You have a choice in whether you pay interest, you do not have a choice about a purchase including the cost of paying payment processor fees since the price is the same if you use paper money. One of the most corrupting yet hidden forces in America today are the payment networks MC/Visa etc. due to their bribing and corruption of the government in order to prevent things like making payme…

> similar to how taxes are added after the fact That is not a positive. I'm fine with splitting up a price if you want to show how much tax gets added, but having to continuously do the mental math of "no this item is 10.99 it's 10.99 + tax" is very frustrating. When I pick up a $11 item, I want to spend $11.

I get your point, it's the argument of the disengaged pseudo-citizen that just doesn't want their convenience bothered. We have those here too even though it's a bit different here. A good case could be made for cash payments receiving a discount, i.e., less the payment processor fee. You may not pay $11 when you pick up a $11 item that way either, but it might place you to never know by how much it will be that way, i.e., maybe $10.75 instead.

I would even advocate that in the US we require taxation to be handled that way too because you are right, most of our citizens can't do basic math, let alone in their heads, or even really care; but if the price tag had to be the taxed price and you then get a discount if you pay cash, it would be a far better situation. There has never been a better time to do this with digital price tags.

The inherent problem is that the likes of the masses are hard to organize, let alone corral and focus on a single thing and everyone thinks they are smarter than the average.

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

#428

Post by structural » Wed, Aug 26, 2026, 5:27 PM UTC

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…

Imagine you walk up to a shelf and all the prices reconfigure based on a model of the most you would be willing to spend for each item, including putting fake "normal" prices so that the "sale" price you are shown is whatever percentage markdown makes you likely enough to buy.

There's no advertising here, there's just aggressively trying to drain each person's wallet as much as possible and seeing how far you can get before they change behaviour.

One example: my friend and I both requested rides using the same app, standing next to each other to the same street in the same neighborhood 3-4 miles away. He owns a car and rarely uses car services, I do not and it's my primary transportation. The quoted cost of his ride was half mine. It was shocking.

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

#429

Post by mrguyorama » Wed, Aug 26, 2026, 5:39 PM UTC

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.

Why was that not a problem in the mid 1800s when we crisscrossed the entire country with railroads and telegraph cables?

Sure is funny how FDR had us spend a little cash 100 years ago to ensure even the remotest farm gets electricity, and we already gave ISPs a shitload of cash to do the same, but now "We can't" build telephone poles to rural places. Even though those same places already have telephone poles for power and telephone.

AT&T was able to leverage it's monopoly position and defense industry relationship to basically invent everything that runs the modern world (and were compelled to license those advancements out) while modern monopolies can't even dig some holes.

Sounds like we need some more "Consent Decrees" and a DoJ that makes large companies scared.

We damned every single river in the nation. We built so much railroad that it crashed the industry. We built those railroads purposely in places where nobody lived and then willed towns into existence around them. We built the interstate highway system.

Why can we suddenly not build anything? Maybe it's because people keep insisting, against all historical evidence, that we can't, and they don't even try.

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

#430

Post by GPerson » Wed, Aug 26, 2026, 5:52 PM UTC

liveoneggs wrote: post #420

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.

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 curre…

I honestly don’t know what you’re talking about. I’m juggling a few hundred dollars in my checking account all the time. Is that well off? I don’t think so.