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How credit cards make money

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Re: How credit cards make money

#231

Post by perl4ever »

blacksmith_tb wrote: post #89
vel0city wrote: post #85

Earlier quoted context omitted.

Can you further explain that cash deposit to credit card payment process through an ATM? I've only ever used ATMs to withdraw funds, never to make deposits, so I don't know what that process would look like or which banks would let me do that.

I had no idea that was an option, but I see BofA[1] supports it. Seems broadly less convenient than online, but I suppose better than needing to wait in line for a human teller. 1: https://www.bankofamerica.com/banking-information/assistance...

My credit union's app was very frustrating for depositing checks. Many reviews online said so, but apparently were ignored. So for a while I would go to an indoor ATM when I got a paper check which is not that often.

Then I had an idea - I got a piece of black construction paper for a background and it was much happier taking pictures of checks on that.

Re: How credit cards make money

#232

Post by AviationAtom »

patio11 wrote: post #50
lnwlebjel wrote: post #47

Patrick, how much do you read in a given day (eg. hours?) All those words (and the deep knowledge they reveal) must come from somewhere. And what do you read? Not just twitter I suspect. This article of yours is fascinating: https://bam.kalzumeus.com/archive/financial-innovation-is-ha... Thanks

Varies wildly by the day (and year); probably two hours at the median. I have an advantage in that this sort of thing was a hobby for me for 20 years and then it became very work-relevant the last 5. Someday I'll try to curate a reading list but in the meanwhile the sort of things I read are generally the sort of things I link to in essays/on Twitter/etc. Everything from WSJ to Byrne Hobart's newsletter to Fed resear…

*Lying For Money

Re: How credit cards make money

#233

Post by magicalhippo »

djbusby wrote: post #230
magicalhippo wrote: post #219

Earlier quoted context omitted.

> Moral of the story: don't use debit cards I use a debit card for groceries and such. However, just to be sure, my paycheck goes to an account with no cards attached. I then transfer small amounts ($100 or so) every now and then to the debit card account. This limits my exposure to card fraud, and also has the nice side benefit of giving me back some of that "spending feeling" that cash has. If I have to transfer sa…

What if you overdraft and then get hit with fees? Or even NSF fees?

My bank doesn't allow overdrafts beyond $10 or so, no fees except a few percent in penalty rate if I keep it negative for a while.

There are some edge cases where one might overdraft more (delayed transactions IIRC), but again no fees.

Re: How credit cards make money

#234

Post by treyfitty »

One of the under appreciated legal precedents set a couple years ago was the Ohio V AmEx anti trust case. The case predicated against AmEx’s merchant contract forbidding merchants to steer customers away from using their Amex card. This was a common practice for many years, especially at restaurants since AmEx charged restaurants 6%.

The Supreme Court ruled that amex was able to keep the anti-steering provision in merchant contracts because they defined credit cards as a two sided market, and the harm to customers couldn’t be proven. In essence, the Supreme Court set a precedent that in any 2 sided market, in order for something to be considered anti competitive, a high bar needed to be met: the government must show that both sides of a 2 sided market be harmed in order for something to be anti competitive.

Had the ruling been the other way, almost every industry would have been impacted- Uber, App Stores, Advertising…etc are all 2 sided markets.

In essence, Credit cards have had a huge impact to our lives this century for reasons that are not appreciated enough.

Re: How credit cards make money

#235

Post by jjav »

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…

> > At the end of the day, credit cards are still significant better for customers.

> Yeah, I don't know.

Credit cards are safer for the consumer, by regulation. So that much is just factual.

You can set up automatic payment for your credit cards if you like, no involvement. I don't because I like to review each line item and control when I post the payment, but it's possible.

A debit card is basically an open port into your bank account. A credit card is a firewall which buffers all withdrawal requests for a month (or so) until you approve them (or reject any fraudulent ones).

Re: How credit cards make money

#236

Post by Gargyle »

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…

I am used to US credit cards and moved to Germany a few years ago.

In Germany credit card chargebacks are very cumbersome. I had 3 banks' customer service tell me at first that it isn't possible (like they had no process for it or the agent never did that or is too lazy) and then the next agent said it works but has huge-list-of-drawbacks-fill-9001-forms-and-waste-days effort.

Re: How credit cards make money

#237

Post by perl4ever »

adev_ wrote: post #223
emodendroket wrote: post #216

Earlier quoted context omitted.

Right, it's hard to see what the advantage of debit would ever be. The guy at the bank always looks at me like I'm crazy for wanting just an ATM card and not a debit card, but between credit, cash, and checks, I cannot think of any situation at all where I'd want to use debit instead.

> Right, it's hard to see what the advantage of debit would ever be. Not being able to indebt yourself is THE major advantage of debit card. Not everybody in this world is reasonable when it is about spending and finance management. In some European countries with a more conservative mindset related to debts (Germany, France, ...), people will tend to have the exact opposite stance : "Why would I ever need a credit c…

There are a number of credit card issuers in the US offering 1.5% cash back.

Suppose you charge $1000 each month at the rate of about $33 per day, and also pay it off when the bill is due.

In a year, you've gotten 1.5% of $12,000 back which is $180, but you could also look at it as though they are paying you 36% per year to use (on average) $500 of their money.

The latter interpretation makes it seem irresistible to me.

Re: How credit cards make money

#239

Post by contingencies »

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…

1. History and death of attempts at carrier-proxied mobile payments, including SMS and so forth.

2. Parallel graph of dominant internet access points and type thereof (fixed/mobile) per market vs. dominant payment systems and payment characteristics such as payment size, card not present, etc.

3. True history of SWIFT.

4. Parallel graph of Chinese mobile payment growth vs. historical credit card payment growth.

5. Overarching trend in bank points of presence including ATMs and branches across multiple developed markets vs. mobile.

6. Trends in subscription payments as a percentage of overall credit card spend + subscription support in alternate settlement systems.

Re: How credit cards make money

#240

Post by idoh »

rconti wrote: post #187
amichal wrote: post #134

Earlier quoted context omitted.

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.

I saw this happening in Woodside CA (very much in the SF Bay Area) less than a year ago.
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