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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

#431

Post by GPerson »

xyzelement wrote: post #422
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.

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.

Okay I can understand that. I thought credit cards had fees. What’s the point of the free money credit card?

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

#432

Post by sfn42 »

structural wrote: post #428
sfn42 wrote: post #397

Earlier quoted context omitted.

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…

That's pretty unrealistic, but I'd visit occasionally just to browse and not buy anything, making the algorithm lower the prices for me. Could build an app where people could register their prices for stuff so everyone could see what the price floor is for a given product. Good luck making a system people won't abuse the shit out of.

And I'm sure there would be competitors simply not doing this where I could shop instead.

If Uber does this and you don't like it then don't use Uber. Regular taxis still exist and I'm sure they'd love to have your business back. Or you could get a car, low-end used EVs are quite affordable and fuel is almost literally free. They seem to hold good resale value too.

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

#433

Post by HeyLaughingBoy »

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.

I was confused by this (because I rarely carry cash) until I saw your response below. I think OP might be using credit/debit card interchangeably? I don't use my credit cards unless I have to, but my debit card is used daily.

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

#434

Post by mrguyorama »

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…

>When Epic game store lowered its fee not a single game got cheaper for the buyers.

At least one reason for this is that Valve has language in their agreements to prevent you from selling your game cheaper on other storefronts. Unambiguously anti-competitive.

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

#435

Post by brainwad »

gblargg wrote: post #371
strix_varius wrote: post #302

Earlier quoted context omitted.

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?

With cash: you must have the money when you make the purchase. With card: you can set the cash aside at the time of purchase to pay when the card bill is due. How does the card give you less flexibility or make it harder to pay for?

With cash you can't overcommit - you can only spend what you have - with card you can. If you are poor, overcommitting is very tempting as otherwise you will be going without things you need/want. But that temptation leads to debt.

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

#436

Post by mrguyorama »

cmurf wrote: post #262
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.

Outlaw rewards credit cards? Or make it compulsory that the true cost of a specific credit card is revealed to the merchant who has the right to absorb or pass on, in a line item, that cost to that specific consumer? If I know I'm paying for my own rewards, I'd choose a card that keeps more money in my pocket. I'd go as low as the PITA factor of cash. It's not clear to me what the net benefit is of a credit card over…

The simple solution is the one Europe adopted: Just cap fees. We do this for Debit cards and it's fine.

>It's not clear to me what the net benefit is of a credit card over a debit card.

In a fair scheme, the net benefit to the purchaser is having a rolling line of credit for whatever they want to use that for, like managing cashflow. It's also a benefit in that it puts a behemoth with immense contractual power between you and the merchant. It doesn't matter how a merchant fucks you over, the credit card company WILL give you your money back and punish the merchant.

To the merchant, the benefits are that credit cards unlock significant consumption that humans normally would not do. It literally causes induced demand. As a consumer, you will spend more money using a credit card, and you will purchase things you otherwise wouldn't. The disconnect in your brain is known. It can also, in very specific contexts, reduce the cost of managing payments and cash. It can reduce employee theft. But this improvement is overstated.

The reason merchants put up with giving away 3% of all revenue and eating $20 per fraudulent transaction plus whatever the cost of the transaction was is entirely about the fact that a consumer using a credit card buys more than one not using a credit card. It's a big boost to your revenue.

But there is absolutely nothing about a payment network that requires such transaction fees. Certainly not "Risk", as the credit card payment network itself carries zero risk on each transaction. Every dollar fraudulently spent comes out of the pocket of merchants, not the payment network. Their only risk is consumer default, but the entire "Credit Score" system exists to nearly eliminate that risk.

The structure of the system is built to get consumers to spend more money than they normally would, and incentivize everyone to play along to get a kickback. Everything in payment infrastructure in America is designed around this. Even gift card companies are built around getting you to spend money you were not intending to and kicking a portion of that back to the brand name on the card.

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

#437

Post by sandmn »

GPerson wrote: post #431
xyzelement wrote: post #422

Earlier quoted context omitted.

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.

Okay I can understand that. I thought credit cards had fees. What’s the point of the free money credit card?

There are plenty of credit cards in US with 2% cashback on any transaction and no fees if you pay bills on time (usually 20-30 days after statement closes). Some of them even throw in small sign in bonus.

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

#438

Post by plant-ian »

GPerson wrote: post #431
xyzelement wrote: post #422

Earlier quoted context omitted.

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.

Okay I can understand that. I thought credit cards had fees. What’s the point of the free money credit card?

As I understand it the cc company takes the fee money from the buyer and it's usually more than the cash back and gambles with it until they give some cash back to the buyer and then pockets the rest. If you have millions of those transactions taking place then you have a huge pool of gambling money available. They also hold the sellers money for a while usually longer than necessary to also boost that pool. Edit: a less cynical view is that you are essentially loaning that money to the credit card company and then it pays you back but it keeps the interest

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

#439

Post by sandmn »

ghaff wrote: post #352
tiffanyh wrote: post #19

Earlier quoted context omitted.

To be more specific, this is a US credit card topic. Debit card fees are capped in the US, yet I’ve never received a discount from a merchant for paying with debit instead of credit. As such, I just pay with credit and have never understood this argument.

It's not unheard of. Gas sometimes. My car dealer for one. (Whether it's a credit surcharge or a debit discount is semantics.) Though with the cashback on my usual credit card I use for domestic credit card purchases, the difference is pretty much not worth worrying about.

I think it's true for most businesses with single transaction being big enough - car dealerships, child care, rent. On the other hand many of them are not happy with cash either because processing cash also incur fees that are not nesessarily less than credit card fees. Most businesses that prefer to take cash are smaller ones because most likely they won't report it.

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

#440

Post by xyzelement »

plant-ian wrote: post #438
GPerson wrote: post #431

Earlier quoted context omitted.

Okay I can understand that. I thought credit cards had fees. What’s the point of the free money credit card?

As I understand it the cc company takes the fee money from the buyer and it's usually more than the cash back and gambles with it until they give some cash back to the buyer and then pockets the rest. If you have millions of those transactions taking place then you have a huge pool of gambling money available. They also hold the sellers money for a while usually longer than necessary to also boost that pool. Edit: a…

//Edit: a less cynical view is that you are essentially loaning that money to the credit card company and then it pays you back but it keeps the interest

It's literally the opposite. The credit card lends you money for free - if you pay your bill every month.

That's the "credit" in "credit card" - they are extending a line of credit to you, not the other way around.

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