How credit cards make money • Hacker News Board

Re: How credit cards make money

#131

Post by ed_elliott_asc » Fri, Nov 05, 2021, 8:57 PM UTC

nostromo wrote: post #91

bluedevil2k wrote: post #76

Earlier quoted context omitted.

You missed the biggest advantage of credit cards - the limited liability of the card holder to fraudulent charges! From a financial website… “ CREDIT CARDS Credit cards offer consumers the widest fraud protection. By Federal law, a cardholder is only liable for the first $50 of an unauthorized transaction at most, with many issuers offering cards with zero liability. DEBIT CARDS Debit card holders are protected under…

I got burned by Aliexpress and now I highly recommend people use credit cards for all purchases. I had a debit card saved on Aliexpress. The account was compromised by unknown means (maybe public wifi). Someone bought several $1,000+ phones from China that shipped to me in the US. I presume the sellers were in on it and were selling me unwanted inventory at inflated prices. Because they had tracking information, my b…

I haven’t had anything this bad but always use credit cards online and maybe even in real life and pay off the balance as the protections are so much better - it is stupid really.

Re: How credit cards make money

#132

Post by toast0 » Fri, Nov 05, 2021, 8:59 PM UTC

lotsofpulp wrote: post #125

fragmede wrote: post #66

Earlier quoted context omitted.

Ooh that's a good one. It includes a detour into some really weird forex stuff. If you're used to it it's not that weird but as a American, with US credit card, and a US bank account who then banks exclusively in USD, I found it complicated and fascinating. Basically, other countries can bank in USD sometimes , so there's a weird corner case that you can send USD to a merchant but can land in their account as $conver…

As an aside, if you are using no forex fee US credit card, and a foreign merchant asks if you want to pay with USD or the local currency, always choose local currency. If you choose USD, then the merchant gets to choose whatever exchange rate they want to convert at, and will be far from the spot price (hence some merchants go out of their way to ask you if you want to pay with USD). If you choose the local currency,…

Even if you have a card that charges an exchange fee, they likely charge a fee for USD denominated foreign transactions too, although it may be slightly less, and the more favorable exchange rate from your bank may cover the fee.

Re: How credit cards make money

#133

Post by jedberg » Fri, Nov 05, 2021, 8:59 PM UTC

lotsofpulp wrote: post #116

jedberg wrote: post #92

Earlier quoted context omitted.

Given that you are sending pounds instead of dollars, I'm guessing you live in a civilized place with modern banking and not a backwoods like the USA. The problem is not technology, it's the USA banking system. We have no way to instantly send money to someone over a few thousand dollars without huge fees. Oftentimes rent exceeds that limit in urban areas.

You can send money via Zelle instantly, but I would stick to check or ACH purposes for legal dispute reasons in the case of conducting business, especially paying rent.

Zelle has a few thousand dollar per day/week/month limit, which, at least in the Bay Area, is too low for rent.

Re: How credit cards make money

#134

Post by amichal » Fri, Nov 05, 2021, 9:03 PM UTC

teej wrote: post #3

> It’s often forgotten, but prior to credit cards, many Main Street retailers like e.g. pharmacies maintained hundreds or thousands of credit accounts for customers individually, necessitating their own back offices, accounting, and collections headache. This article is a great history of how the modern credit card came into being https://www.washingtonpost.com/archive/lifestyle/magazine/19...

Our local small town cafe did this up until COVID... via a big three ring binder. You could run either a credit or debt as long as it was close and a couple of families i know would do this so their kids could stop and get snacks without cash.

Re: How credit cards make money

#135

Post by judge2020 » Fri, Nov 05, 2021, 9:04 PM UTC

kayodelycaon wrote: post #119

lotsofpulp wrote: post #90

Earlier quoted context omitted.

Another popular one people do not expect is Apple credit card’s bank is Goldman Sachs.

Apple doesn’t hide they partnered with Goldman Sachs. https://www.apple.com/newsroom/2021/08/apple-card-and-goldma...

It also explicitly shows up in credit reports as "GS BANK". Had to explain that to a few friends that didn't look too closely into how Apple Card worked or the fine print of their credit line.

Re: How credit cards make money

#136

Post by toast0 » Fri, Nov 05, 2021, 9:07 PM UTC

computator wrote: post #97

patio11 wrote: post #9

I'm happy to answer any questions or take suggestions for future issues if you have them, HN. Repeating something I've said before: this is the 3rd issue of a weekly newsletter, and its going to come out on every Friday for the foreseeable future. As someone who has spent more than 10 years here, I'm keenly sensitive to HN's desire to not have the front page be as predictable as my new shipping cadence. I'd appreciat…

If you have a credit card that charges no foreign exchange fee, could you overpay your credit card (i.e., leave a balance in your favor on the card), then withdraw cash at foreign ATM machines, thereby avoiding both forex fees and credit card interest? The terms & conditions on my credit card sound like it should work (I shouldn’t be charged interest if I have a credit balance), but I’ve never tried it. Failing that…

> Failing that idea, do you have any tips for frequent American travellers on how to get foreign cash without paying excessive conversion fees?

Many credit union deposit accounts with ATM access can use some foreign ATMs with no fees and reasonable forex rates. Some online deposit accounts with ATM fee reimbursements will also reimburse foreign ATM fees and have reasonable forex rates. Things like Schwab and Fidelity, IIRC. My personal experience is a bit dated, but I'd try to have two separate cards on different networks if possible, because my ATM card only worked in half of the UK ATMs I tried, and that wasn't very convenient, as the ATMs I couldn't used were at the chunnel station and I needed cash for an unlicensed taxi.

Re: How credit cards make money

#137

Post by kgermino » Fri, Nov 05, 2021, 9:09 PM UTC

WalterBright wrote: post #40

patio11 wrote: post #14

Earlier quoted context omitted.

So credit card issuers are pretty sophisticated with regards to this, and many of them track different user personas and use them to dice up their portfolio by archetypes. The "folks like us" archetype is one which is definitely tracked and goes by different names at different places. I express no strong opinion on whether you personally are contribution margin negative for your issuer. On a portfolio level though, t…

The term for us, who pay off their entire balance every month, is "deadbeats".

That’s an interesting term for “profitable customer who pays their debts”

Re: How credit cards make money

#138

Post by 101keyboard » Fri, Nov 05, 2021, 9:10 PM UTC

nostromo wrote: post #91

bluedevil2k wrote: post #76

Earlier quoted context omitted.

You missed the biggest advantage of credit cards - the limited liability of the card holder to fraudulent charges! From a financial website… “ CREDIT CARDS Credit cards offer consumers the widest fraud protection. By Federal law, a cardholder is only liable for the first $50 of an unauthorized transaction at most, with many issuers offering cards with zero liability. DEBIT CARDS Debit card holders are protected under…

I got burned by Aliexpress and now I highly recommend people use credit cards for all purchases. I had a debit card saved on Aliexpress. The account was compromised by unknown means (maybe public wifi). Someone bought several $1,000+ phones from China that shipped to me in the US. I presume the sellers were in on it and were selling me unwanted inventory at inflated prices. Because they had tracking information, my b…

My Citi Dividend 1% Cash Back card allows me to create Virtual Cards for such things.

Any other cards anybody can recommend?

Re: How credit cards make money

#139

Post by criddell » Fri, Nov 05, 2021, 9:15 PM UTC

kelnos wrote: post #115

flerchin wrote: post #11

I feel like folks like us, that never miss a payment, and max out our rewards, are net-losses for most credit card issuers. It's not clear why they don't just fire us as customers.

I used to think that, but I'm not sure. If we're generating enough interchange/fees (or other forms of revenue that aren't so obvious) for them, it might be worth it. I pay $550 annually for one card, but I easily pay for that (and then some) through statement credit and redeeming points. The net value I get out of the card is well over $1k per year. But it's not clear to me whether or not the issuer makes that back…

I'm guessing your data is pretty valuable to them.

Re: How credit cards make money

#140

Post by figassis » Fri, Nov 05, 2021, 9:15 PM UTC

nostromo wrote: post #91

bluedevil2k wrote: post #76

Earlier quoted context omitted.

You missed the biggest advantage of credit cards - the limited liability of the card holder to fraudulent charges! From a financial website… “ CREDIT CARDS Credit cards offer consumers the widest fraud protection. By Federal law, a cardholder is only liable for the first $50 of an unauthorized transaction at most, with many issuers offering cards with zero liability. DEBIT CARDS Debit card holders are protected under…

I got burned by Aliexpress and now I highly recommend people use credit cards for all purchases. I had a debit card saved on Aliexpress. The account was compromised by unknown means (maybe public wifi). Someone bought several $1,000+ phones from China that shipped to me in the US. I presume the sellers were in on it and were selling me unwanted inventory at inflated prices. Because they had tracking information, my b…

My solution to this is having a debit card connected to an account that has no funds and allows no overdrafts. And I only load the account when I specifically want to pay for something. I do this for everything, incl. Spotify, Netflix, etc. I pay a subscription when I want to pay for it, so usually at the end of the month I load the total of my subscriptions and they all go away. This also helps me keep track of my spending and is a good way to see how little things add up, like apple in app subscriptions. I do this religiously because once I was traveling in the winter and suddenly I had $200 disappear from my card and I was unable to get a cab/uber and almost froze to death. Had to get help from police officers. I swore to never again let anyone just take money from me without my approval, whether I owed them or not.

So you find my card in the wild, good luck.