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How credit cards make money

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Re: How credit cards make money

#181

Post by mywittyname »

TheDong wrote: post #163
lotsofpulp wrote: post #83

Earlier quoted context omitted.

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…

Retailers do track spend based on payment type. It was the case several years ago that people who paid with credit cards tended to spend more and buy higher margin items than other payment types.

I'm not sure if this is still the case, but if it is, then that is one situations where accepting credit cards pays for itself.

It is helpful to keep in mind that different businesses can pay wildly different fees for CC transactions. Walmart can sell you a $0.50 item for basically nothing, while a corner market might be better off if you stole it instead. So Walmart might absolutely want everyone to use credit cards while the corner market would likely prefer nobody did.

Re: How credit cards make money

#182

Post by downut »

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.

We're not rich, but we are maximally financially solid and stable. I mean, I drive a 2001 truck I bought new, for cash. Better half drives a newish base Prius. House is not fancy.

How on earth can it make sense for us to get issued two $95/year CCs, as happened this year. I can use the 20% AirBnB bonus to cash in $1200, each card, as happened once. We're waiting on passports for the second. Edit: I've also cashed in points for 12 transatlantic flights over the last 15 years, on other CCs.

We haven't missed a CC payment in decades. I can cancel at any time. We don't have that many accounts to switch, might take an hour.

We're puzzled. But ok, we do it.

Edit2: Ok, after reading more comments, the profit from us would seem to come out of spend. Some more details then. We make net slightly less than 6 figures, and save 50% of that for retirement. House payment is $800, and nearly done. Travel is our vice, but we do eg a week in Paris for maybe $1500, and we do everything we want to. A big chunk of that is AirBnB, and... the CC typically pays that.

I'm not denying that the super solid big spenders aren't super profitable for the issuers. I am puzzled why we get issued the cards. I mean, 2 cards from the same vendor just splits the pie between the two accounts, and increases the spend zero.

Re: How credit cards make money

#183

Post by mindslight »

reaperducer wrote: post #180
mindslight wrote: post #141

Earlier quoted context omitted.

Any such policy would need to be specified within the lease to be enforceable. If there is nothing in your lease that mandates a bespoke payment method, call their bluff and just pay by check. There are real issues with incomprehensible leases and terms of adhesion sprung late in the process, but it behooves us to keep focus on the specific contours of the problem so the people who are able to push back on such nonse…

The primary reasons people choose a residence are price and location. Method of payment is probably not even in the top hundred reasons on the list.

I'm not saying that this is the only way to push back against such bullshit, or asserting that those who don't push back deserve what they get. I'm merely pointing out one avenue for fighting it that someone may want to explore.

It might be important enough for you, next rental. It might be important for someone with similar preferences [0] that has read your comment and will be on the lookout. I've rejected unconscionable leases wholesale and gotten simple boilerplate ones in their place. It can be done.

The more we openly discuss such bullshit, the fewer surprises can be sprung on renters late in the process. And sharing the wisdom of experience, for instance that it's totally acceptable to sit there and slowly read complex legal documents when the counterparty wants you to quickly sign (or even saying you have to take it home to review!) means more negotiating power for those still learning.

[0] Really, having a single day window to pay should be a concern to anybody. It sounds like an utterly shameless way of creating late fees.

Re: How credit cards make money

#184

Post by aspenmayer »

ricardobayes wrote: post #162
zucked wrote: post #113

Earlier quoted context omitted.

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.

Revolut is available in US for a year or more now, but I’m not sure about the feature you mentioned.

Re: How credit cards make money

#185

Post by GordonS »

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 got burned by Ryanair at the start of the pandemic. I'd paid something like £2,000 for flights, and for months those scumbags refused to refund me.

I'd paid with a credit card, so I asked my card provider to do either a chargeback or section 75 (I forget which) to force a refund, and the money was back in my account within a couple of weeks.

Re: How credit cards make money

#186

Post by passerby1 »

Fnoord wrote: post #155
nostromo wrote: post #91

Earlier quoted context omitted.

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…

You can save your debit/credit card, just don't save the CVV (if it is static). My debit card provider also has a feature to randomizes CVV every 5 minutes ie. for every purchase (I can enable or disable the feature). CVV is mandatory for online usage of debit/credit card. The same provider also give 25 IBANs per account. I could, for free, put 25 virtual debit cards on them, and have the IBANs empty unless I put mon…

> My debit card provider also has a feature to randomizes CVV every 5 minutes

What's name of your debit card provider?

Re: How credit cards make money

#187

Post by rconti »

amichal wrote: post #134
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.

I went with a girlfriend to her small-town-CA home, about 15 years ago. Went to get groceries and she just gave their name and a 3-digit number and the groceries went on the family account. I'm 40, but I had never before seen that in my life.

Re: How credit cards make money

#188

Post by hammock »

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…

>It is believed by many that banks make lots of money selling "your data." This is not a significant contributor to the economics of credit cards, for reasons which are slightly too complicated to get into in this piece. The short version: much like Google and Facebook, issuers can demonstrate to the most sophisticated organizations on the planet that they can deterministically influence actual purchasing behavior. That's easier to sell than a CSV file and worth more to more businesses.

What did you mean by this? I get that raw customer transaction data might not be as valuable as one would think, but you seem to suggest that there is another thing they do with the data that DOES make money. Can you elaborate?

Re: How credit cards make money

#189

Post by xtracto »

mattfrommars wrote: post #122

The knowledge which the author has been sharing has been my interest for a long time. I gave up because lack of material on it. Any idea how did OP gain all these knowledge? For example, I want to implement a QR payment application, think like transferring money through Venmo using QR code, now Paypal does it, very popular in China -- basically a payment processing application but my local country - think Mexico or P…

What Plaid (and similar others) are doing to "connect" and interact with a bank was basic bank login flow scraping (maybe not scraping itself, but you can check the HTTPS network traffic). I know Paybook [1] is doing it in Mexico

[1] https://www.paybook.com/w/en/paybook/site/home

Re: How credit cards make money

#190

Post by hammock »

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…

There is usually a fixed cash advance fee to pull money out of a credit card at an ATM. Last i checked it could be $20-30.

There are plenty of debit cards that you can use at foreign atm's with no ATM fee or foreign transaction fee.

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