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How credit cards make money

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Re: How credit cards make money

#161

Post by jacquesm »

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…

Funny how the banks are able to roll back at will when they are defrauded but when it is their customers they pretend that they can't do anything. I've seen transactions six months old rolled back because it benefited the bank.

Re: How credit cards make money

#162

Post by ricardobayes »

zucked wrote: post #113
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've taken this one step further and I now use a full-on burner credit card. It has no autopay or reoccurring payments associated with it so I could light it on fire and not be too upset about it. I' have all my autopayments set up on a specific card that never leaves a drawer in my house. End result is that when the burner card gets compromised, as it does several times a year at gas pumps and such, I toss it out, g…

You guys would love revolut we have in Europe. It has capability to generate virtual card numbers that automatically get disabled after a single use.

Re: How credit cards make money

#163

Post by TheDong »

lotsofpulp wrote: post #83
stefan_ wrote: post #53

Earlier quoted context omitted.

The intersection between the people that have random overdrafts and those that just pay off their credit card debt in full every time is the empty set. Why make up excuses for a few rent seekers that tax the entire economy?

Merchants WANT people to use credit cards. There is nothing stopping merchants from offering a cash/debit price and a credit price since 10 years ago. The frank dodd legislation made illegal for card networks to ban offering discounts for debit card payments, and in Mar 2017, the Supreme Court said merchants cannot be barred from advertising higher prices for credit cards. https://www.ftc.gov/tips-advice/business-cen…

I don't think "WANT" is the right word there. "WANT" is active, and I would posit that merchants "reluctantly accept reality" when it comes to credit cards.

The obviously silly analogue would be that a merchant who dislikes guns could choose to hang a sign in their texas cafe with "no guns allowed", but they probably won't. That doesn't mean they WANT people to bring in guns, but that they think it would do too much harm within the market they're in to reject them. It would be a case of "reluctant acceptance of reality".

I think credit cards are the same. It should be self-evident that a merchant would want customers to pay with debit cards since the lack of interchange fees means the merchant makes strictly more money. Of course they want to make more money. But they also must accept that charging more fees for credit card users or rejecting them entirely would reduce overall customer base and profit, and so they accept that people can use credit cards. They want customers, not credit card usage.

Re: How credit cards make money

#164

Post by WalterBright »

lotsofpulp wrote: post #96
WalterBright wrote: post #42

Earlier quoted context omitted.

I take advantage of that by using the card to pay bills (that don't charge a "convenience fee" to use a CC) and try to time things to get as close to the 60 days as I can. It's just a long standing habit of mine.

That seems like a lot of trouble compared to setting up auto pay for everything to save a few bucks.

Well, I did try to get my credit limit raised temporarily once so I could buy a car with the card, and get the cash back. The CC company refused. I pointed out how they'd still be making 2% net on the transaction, which would be well worth their while. This kind of pitch was above the pay grade of the phone people, and I got the "there's nothing I can do" garbage.

Re: How credit cards make money

#165

Post by chemmail »

prepend wrote: post #159
figassis wrote: post #140

Earlier quoted context omitted.

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 s…

How is this better than using a credit card?

Some people can't control themselves.

Re: How credit cards make money

#166

Post by kipchak »

patio11 wrote: post #14
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.

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 "folks like us" archetype is one which is definitely tracked and goes by different names at different places.

Out of curiosity, what names does that archetype go by?

Re: How credit cards make money

#167

Post by [deleted] »

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…

[deleted]

Re: How credit cards make money

#168

Post by adrr »

drfuchs wrote: post #99
adrr wrote: post #39

Earlier quoted context omitted.

But the card issuer is issuing debt for 0% to these users. Upwards of 60 days. That cost money to the card issuer.

The card issuer doesn’t pay the merchant for a while, so it’s the merchant who is essentially paying the actual debt interest for a few months. Ask the owner of any small business where you use your card how long it takes for them to actually see the money.

Settlement is a couple of days. If merchant is getting their money later, the processor is holding the cash. I’d guess to manage risk from chargebacks.

Merchants pay interest with the increased interchange. This is why debit cards have reduced interchange. ~2% vs 0.05%

Re: How credit cards make money

#169

Post by mst »

criddell wrote: post #139
kelnos wrote: post #115

Earlier quoted context omitted.

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.

The article disagrees with data sales being a relevant factor.

Re: How credit cards make money

#170

Post by loeg »

bradj wrote: post #117
lotsofpulp wrote: post #94

Earlier quoted context omitted.

Even they have their limit. I remember banks going crazy with cash back for opening credit cards, and then 6 years ago, Chase released Sapphire Reserve which basically gave people $1,500 to $2,000 upfront, and then after that I feel the churning scene significantly died down since Chase ended up taking huge losses for that. My wife and I basically got $3k or $4k I think for taking a few minutes to fill out a credit c…

That is definitely still a thing. I get AMEX offers regularly equivalent to $1200 in rewards.

Amex explicitly no longer offers me sign-up bonuses because I'm not a profitable customer for them.
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