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What do Visa and Mastercard do? An intro to card networks

tautology.town

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Re: What do Visa and Mastercard do? An intro to card networks

#321

Post by adrian_b »

skybrian wrote: post #234
adrian_b wrote: post #199

Earlier quoted context omitted.

I think that there was a recent HN thread that linked to an article which argued that the credit card system of USA has the purpose of taking money from the poor and giving them to the rich, and the estimated amount of the money transferred in this way was huge. The EU limits for card fees prevent this in Europe, which is very good.

Assuming they pay their credit card bill themselves, it's effectively a volume discount for big spenders (though that "volume" goes to multiple vendors). The argument that the money "comes from" other customers is sort of like claiming that when you "save money" by buying things on sale, the money comes from other customers who paid full price. Actually you aren't "saving money" at all; you're spending money. Similar…

> Actually you aren't "saving money" at all; you're spending money.

You are spending money, but you are spending far less money than the poor spend when paying for exactly the same products or services.

If I want to buy a few server CPUs or a few server computers or a few "datacenter" GPUs, I have to pay at least 2 or 3 times more than billionaires pay for them.

The same if I want to buy any other kinds of components that can be used to build things, e.g. power MOSFET transistors.

There is no "economy of scale" here, because those products are already fabricated in the high volumes that reduce their production costs.

For shipping, the costs are typically the same, regardless if the recipient is a big company or a small company or an individual, so they do not justify the price differences.

Even when the handling and shipping costs were bigger for small quantities, a small business or an individual could just pay the difference in handling and shipping prices, but that does not happen in reality, when the discounts given to the rich are many times higher than the shipping costs.

This policy of huge discounts is one of the main causes why all the markets end up in being dominated by monopolies or quasi-monopolies, because it is impossible for new entrants to compete with the incumbents, who pay much less than them for everything. Thus the biggest companies end up selling mostly between themselves, excluding any others.

Re: What do Visa and Mastercard do? An intro to card networks

#322

Post by ThunderSizzle »

JamesSwift wrote: post #236
quickthrowman wrote: post #147

Earlier quoted context omitted.

> but it's ridiculous that people have this sense that shopping should somehow fund your vacation. Some people are dumb and think tax refunds are free money when in reality they’re an interest-free loan to the IRS. Money is fungible and instantly redeeming rewards for a statement credit is almost always the optimal way to use credit card rewards. A person who wants to fund a vacation with rewards can simply redeem th…

> Money is fungible and instantly redeeming rewards for a statement credit is almost always the optimal way to use credit card rewards. Uhh I have no credit cards where redeeming for credit is the optimal play. Every single one has 'offers' that give a further multiplier on the dollar amount of the points. Eg redeem $80 of points for a $100 home depot gift card.

If you use it, that's great. If you don't use the gift card, then cash is obviously better

Re: What do Visa and Mastercard do? An intro to card networks

#323

Post by _bernd »

KellyCriterion wrote: post #310
_bernd wrote: post #306

Earlier quoted context omitted.

At least in Germany as far as I'm aware all banking cards are in fact "simple" visa cards who uses "V-pay", since 2012/2014? Personally I "like" or prefer V-pay because it made payment in the EU more easily for me without the need of a credit card even 8 years ago. Since the pandemic, I only pay for a (real) credit card (with daily billing) because some goods or services can only be paid with a "real" card, like more…

> o nobody needs to pay extra fees Processing cash is by far >not free<! In fact, it costs a lot of money due to all the things involved (counting/collection/recycling etc). Anf it inwolves additional risks for the handling party.

In the past I handled cash as an employee and as a volunteer. Like even a quiet night at a bar can sum up to a few thousand EUR.

Yes handling cash is not free. But compared to some charges or fees it's often quiet cheap.

Sure you need to think a head like how much small change money you will need or how much cash for change in general. You also need kind of routine and flow for counting and handling but even if I had to count up to 10k EUR in small bills t does not needed more then half an hour incl putting it into the safe or on the way home putting it into the banking machine... At least in Germany it's not that big of a deal breaker.

Re: What do Visa and Mastercard do? An intro to card networks

#324

Post by the_af »

LeBit wrote: post #151
losvedir wrote: post #139

Earlier quoted context omitted.

Debit cards aren't that, in practice, because as you say they typically get the same 3% fee whenever I've asked. Toast and other point of sale networks just charge it based on the network and not the card type. But even so, I still prefer the credit card instrument, used as a "charge card". For those that don't know, a "charge card" is common with businesses and is expected to be paid off every month. But it helps wi…

As a Canadian , I thought that was the expected de facto way of using credit cards: you pay everything with it so you get rewards (ie money) at the end of the year as a function of how much you used the card during the year. At the end of the month, you pay whatever the outstanding balance is, otherwise you pay high interests.

I thought this was how credit cards were used the world over. It's certainly how I use them. How do Americans use them that differs from this? Color me confused.

(Also: installments. They are often the norm in my country, but I understand they are less common for Americans).

Re: What do Visa and Mastercard do? An intro to card networks

#325

Post by _zoltan_ »

1970-01-01 wrote: post #20

>The merchant pays 2.5% The best way to pay for poor services already rendered and move on with life is to simply pay via card. Didn't like that haircut? Terrible food at the restaurant? Hold onto your cash and slip them the card.

I almost never pay cash.

Re: What do Visa and Mastercard do? An intro to card networks

#326

Post by TacticalCoder »

karlosvomacka wrote: post #133
ianhawes wrote: post #58

Earlier quoted context omitted.

There is, it's called debit cards, but Stripe et al. "simplified" pricing by charging a percentage regardless of card type instead of the traditional interchange-plus pricing. Merchant banks "used to" make money by tacking on fixed fees, i.e. a set-up fee, terminal fee, monthly fee, etc, but then Stripe came along and provided (1) a better dev experience, (2) better onboarding, and (3) simplified pricing.

For US readers - in my country in europe I'd say that 95% of people have only debit card, not credit card. it's very not common to have a credit card here. Card payments are extremely common, but everyone uses debit card.

> For US readers - in my country in Europe I'd say that 95% of people have only debit card, not credit card. it's very not common to have a credit card here.

In the countries I've been to in the EU (Belgium, France, Spain, Luxembourg), when they give you cards they give you typically both a debit and a credit card. It's extremely common to have both. I've got debit cards, a pre-paid debit card (which I top up when I plan to spend) and credit cards.

And getting up to 2% cashback in the EU (even if the fees vendors can add in the EU are maximum 0.3) is not that hard.

It's very common to pay for mostly everything with a debit card and then use a credit card to, say, book a plane or vacations or to open a tab when you check-in at some hotel.

Heck, I don't even know if you can book a plane with a debit card!? (and anyway then you probably don't get the cancellation insurance etc. that you typically automatically get with a credit card).

Re: What do Visa and Mastercard do? An intro to card networks

#327

Post by dqv »

lxgr wrote: post #201
seabre wrote: post #106

Earlier quoted context omitted.

As someone who has been hit with fraud on a debit card and a credit card, the process to recover money from fraud on a credit card is so much easier and more hassle-free than a debit card. The big difference is that with a debit card, it's your money that is hit by fraud. The debit card is basically just a proxy. You have to go file a police report. You have to hope the bank will give you the money back. When the cre…

I don’t thing Regulation E allows banks to require a police report before processing an unauthorized payment, nor can they outright refuse to do so. Practically, Reg E is essentially as strong as Reg Z.

> Practically, Reg E is essentially as strong as Reg Z.

Not even practically, but that's beside the point. The point is that with regulation E, I am potentially put in a position where I have to work to get my money back; I have to file a lawsuit against the bank if I think their determination is wrong (and that's assuming there isn't an arbitration provision, but many people don't realize they agreed to binding arbitration).

With regulation Z, the bank has to work to get their money back. They have to file the lawsuit against me if they really want the money. And it's $0 liability under many circumstances mandated through the regulation, not just a revocable promise from the bank.

Re: What do Visa and Mastercard do? An intro to card networks

#328

Post by KellyCriterion »

_bernd wrote: post #323
KellyCriterion wrote: post #310

Earlier quoted context omitted.

> o nobody needs to pay extra fees Processing cash is by far >not free<! In fact, it costs a lot of money due to all the things involved (counting/collection/recycling etc). Anf it inwolves additional risks for the handling party.

In the past I handled cash as an employee and as a volunteer. Like even a quiet night at a bar can sum up to a few thousand EUR. Yes handling cash is not free. But compared to some charges or fees it's often quiet cheap. Sure you need to think a head like how much small change money you will need or how much cash for change in general. You also need kind of routine and flow for counting and handling but even if I had…

half an our - every day.

I know of a large restaurant chain with some "bigger" branches: They often have to count two or three times with different people to be sure, that the amount is correct. Every evening.

Then you have transport companies which pick up the cach (or refill ATM) - you pay there for every time they stop, and you pay a tiny fraction per bill processed etc. (though, most restaurants do not use these services)

Then you finally have the very high risk of getting robbed.

Re: What do Visa and Mastercard do? An intro to card networks

#329

Post by KellyCriterion »

yayachiken wrote: post #315
KellyCriterion wrote: post #310

Earlier quoted context omitted.

> o nobody needs to pay extra fees Processing cash is by far >not free<! In fact, it costs a lot of money due to all the things involved (counting/collection/recycling etc). Anf it inwolves additional risks for the handling party.

People often say that but does the cost for handling cash really scale (even approximately) proportionally with the number of transactions or revenue? Or is it more binary that you have to decide, you either handle any cash and have the cost associated with it, or you refuse to take cash at all? If the latter is the case, then avoiding cash altogether seems somewhat unrealistic where I am from. And if it doesn't scal…

Depends on, sure there is some "efficient frontier" where it flips.

Think about all the supermarket chains, handling millions of cash daily; in my region, those are relying heavily on outsourced cash recycling companies - why? Its more effort/cost if they would do this themself.

Re: What do Visa and Mastercard do? An intro to card networks

#330

Post by dqv »

abdullahkhalids wrote: post #166
jimbob45 wrote: post #84

Earlier quoted context omitted.

You have to wait for the investigation to complete to receive compensation if you’re hit by fraud on a debit card. Credit cards don’t share that issue. If you’re poor or living paycheck-to-paycheck, debit cards are potentially a risk to your livelihood.

The underlying problem is that the whole concept of cards is insane. Basically, you go around telling every shopkeeper the code for your safe, and ask them to take however much cash you owe them out of the safe. Sane ways to organize payments: - Merchant gives you a bill-id. You input it into your bank website - where you see the bill amount being charged. You accept, and bank pays merchant. - You give merchant your…

This would also solve a major annoyance I have with card payments, which is no way to link a particular purchase back to a transaction.

With checks, you write a check and can write down the check number with a note about what the payment was for. When the payment posts, the check number is part of the transaction. With a card payment, they charge your card and, sometimes days later, there's a pre-authorization with some obscure transaction description. So many scary transaction descriptions that make me think "wait is this fraud".

With this method, the approval flow would also allow people to add a blurb for what the transaction is for.

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