How credit cards make money • Hacker News Board

Re: How credit cards make money

#201

Post by dangrossman » Fri, Nov 05, 2021, 11:45 PM UTC

TorKlingberg wrote: post #26

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…

I take it interchange fees is the reason some small stores will not take credit cards for small purchases, and low-margin stores will often not take Amex. Separately, is the "credit score" system a particularly American concept? In the UK the credit report companies will give you a number, but it seems to be something they make up to fill a consumer demand rather than something card issuers actually use. Do you know…

I feel bad about the stores that don't take Amex. Either their owner is relying on knowledge that's decades out of date, or they have a very bad merchant account provider. Amex cards cost no more to charge than Visa/MC cards these days. There are even Visa/MC cards with higher interchange fees than any Amex card.

Re: How credit cards make money

#202

Post by secabeen » Fri, Nov 05, 2021, 11:50 PM UTC

mindslight wrote: post #147

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?

Everybody finds different local maximums. I autopay credit cards in full every statement, while most charges that hit my checking account are overdrafts - it autopulls from the companion savings account with a better rate. Credit cards coalescing many small charges into one allows me to easily stay within 6 transactions per month (Reg D). Although I look forward to returning to using cash wherever possible after the…

Yep. I'm the same way. The only thing to be careful about (in the US) is that banks can force convert a savings account to a checking account if you make more than 6 withdrawals a month. It hasn't ever happened to me, but they warn me regularly about it.

Re: How credit cards make money

#203

Post by sokoloff » Fri, Nov 05, 2021, 11:50 PM UTC

GordonS wrote: post #185

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…

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.

I had a hotel double charge me a number of years back. I called the hotel to straighten it out and got some run around. So, I called my bank (USAA) to ask what I should do. They said “do a chargeback and that’ll force them to show documentation”. “Okay, I’d like to chargeback one of the transactions.” “We’ll just do it for both and let them sort it out.” Hotel never responded at all, so the entire stay was free instead of just being the correct amount.

Re: How credit cards make money

#204

Post by leetcrew » Fri, Nov 05, 2021, 11:50 PM UTC

TeMPOraL wrote: post #195

morpheuskafka wrote: post #37

> Debit cards are a very similar product with enough under-the-hood differences that they deserve their own moment in the sun. In particular, due to a quirk of U.S. interchange regulation, they basically fund most of the fintech industry Basically, the Durbin Amendment caps interchange on debit cards at a far, far lower rate than credit cards; they also have different networks (not MC or Visa) that can be run at leas…

> At the end of the day, credit cards are still significant better for customers. (...) Yeah, I don't know. Thing is, I don't like the stress involved. I prefer to deal with the money I have, not with the money I hope I'll have in one month's time. Not to mention, the cognitive burden of constantly keeping in mind the various balances and expected money flows, and having to manually push money around. It all feels li…

it's not like debit cards are extremely safe to begin with. banks (in the US, at least) will happily let you withdraw $XXX more than you actually have and charge you a fee on top of it.

do you routinely overdraw your bank account? if not, you probably a) keep more than enough in checking to cover a typical month's expenses, or b) carefully track your balance to ensure each purchase won't take you past zero. unless having a credit card in your hand gives you an uncontrollable urge to spend more money than you have, I don't really see how this is any less trouble than a debit card. if you're not living paycheck to paycheck, just put the card on autopay and keep 2X your monthly expenses in checking. if you don't have a lot of surplus income, you need to be careful, but it's no different with debit.

Re: How credit cards make money

#205

Post by dangrossman » Fri, Nov 05, 2021, 11:52 PM UTC

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.

2-3 business days between charging someone's card, and the settlement including that charge hitting my business checking account. Not months.

Re: How credit cards make money

#206

Post by hocuspocus » Fri, Nov 05, 2021, 11:53 PM UTC

sofixa wrote: post #151

Generally good article, but this part bothers me: > For another, this ended up being an almost peculiarly American experience. In Europe, regulators were worried about the cost of interchange to businesses (rather than consumers) and capped it. Since issuers didn’t have the margin to compete on rewards paid for by interchange, they instead leaned into branding and convenience, and credit cards became a smaller portio…

Also card usage varies a lot between countries, mostly for cultural reasons.

Moreover I'm fairly certain that before the mandatory cap on interchange, countries with relatively high card payments were also the ones with the cheapest PSP fees.

Re: How credit cards make money

#207

Post by astura » Fri, Nov 05, 2021, 11:56 PM UTC

revolvingocelot wrote: post #98

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…

>It is very clear that most merchants earn more from people using credit cards more often, otherwise there is no reason they would try to dissuade or offset it by adding a premium for using credit cards. Can you elaborate? IME merchants do NOT want people to use credit cards; transaction fees eat into the sale price. I remember a time when some electronics stores would explicitly advertise a cash discount, so as to a…

Research suggests people simply tend to spend more when paying with plastic. Sometimes up to 100% more.

https://www.nerdwallet.com/article/credit-cards/credit-cards...

Re: How credit cards make money

#208

Post by area51org » Fri, Nov 05, 2021, 11:56 PM UTC

blyvocalfrylish wrote: post #4

otterley wrote: post #2

Flagging to remove unnecessary author name in title.

but... i like this author? when i see patio11 or Patrick McKenzie's name in a submission title or submitter field, i know that i am going to be reading some good writing today.

Really? I find him self-important and full of dubious ideas. I know that's not the conventional wisdom about him here, but take a long look at what he actually says about things. He's often wrong, and is rarely open to the possibility that this is the case.

Re: How credit cards make money

#209

Post by highpost » Fri, Nov 05, 2021, 11:57 PM UTC

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…

I use this approach and it has reduced my stress immensely. Before when my regular credit card was compromised I would need to cancel it and reprogram all my auto-billing accounts. With about 20 of these there was always a painful hiccup. It’s been several years now of smooth sailing.

Re: How credit cards make money

#210

Post by dangrossman » Fri, Nov 05, 2021, 11:58 PM UTC

_trampeltier wrote: post #49

Does anybody know excactly what data a store get about me, if I buy it with a Credit or Debit card. Does someone has some example data or so?

If you're using an EMV chip card, they don't get any personal information about you from the card at all. The card is used to authenticate a transaction, nothing more. The store's payment gateway knows what brand of card it charged, how much money was captured and when, none of which is personal information.