Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How credit cards make money

bam.kalzumeus.com

Post reply on HN
Print view View original

271–280 of 445 posts

Re: How credit cards make money

#271

Post by voidfunc »

clairity wrote: post #265
voidfunc wrote: post #254

Earlier quoted context omitted.

Cash is wonderful too for tax evasion. Hence cash only businesses.

yes, but that’s a non sequitur . tax evasion via cash-only businesses is likely a rounding error on national receipts, and most of those businesses are straight up illegal (fencing, drug/weapons/human/sex trade, etc.), so justice is difficult/expensive and can be pursued more aggressively via criminal law anyway. we should worry a teeny-tiny bit about mom-n-pop taxes and service worker tips, and rather a lot about ta…

Where are you living that cash-only businesses are mostly illegal enterprises?

In the northeast there are tons of cash-only bars and restaurants (im sitting in one), food places (especially hot dog stands lol), and housing/plumbing/electrical contractors (friends with a few that offer _steep_ cash-only discounts).

Cash is king if you want to avoid government scrutiny.

Re: How credit cards make money

#272

Post by Jensson »

rsj_hn wrote: post #269
Jensson wrote: post #264

Earlier quoted context omitted.

> The business doesn't lose 3 percent of revenue, because it also saves money not dealing with cash: Debit cards circumvents the need for cash as well and are much cheaper. Everyone uses debit cards where I live, cash is very rare so companies doesn't need to deal with it much. So the difference is really just a straight 3% vs 0.15% with no other consequences.

That's an interesting point. I'm not aware of any POS payment processor used by business that accepts debit cards but not credit cards. Not sure why that is.

I think it is mostly that it confuses buyers and that confusion costs more than credit cards costs. You'd need regulations to get around this.

Re: How credit cards make money

#273

Post by rendaw »

bluedevil2k wrote: post #76
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…

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…

Isn't a lot of the risk of fraudulent charges, etc. due to bad credit card design decisions and outdated technology? Is this something we should be grateful for?

Re: How credit cards make money

#274

Post by ghaff »

reaperducer wrote: post #93
ollien wrote: post #44

Earlier quoted context omitted.

> You are no longer obsessing over "early payday" features or ACH speeds. Timing ACH payments _sucks_. Tangential, but I'm in a renting situation where my landlord demands rent land in their account on the first of the month. Receiving rent on the 26th (i.e. 5 days early, not 26 days late) was deemed "too confusing" for them. I now have to play this awful game of timing ACH transfers to land on their account as close…

I'm in a renting situation where my landlord demands rent land in their account on the first of the month. Receiving rent on the 26th (i.e. 5 days early, not 26 days late) was deemed "too confusing" for them. I ran into this at my last place. I'm the sort of person who likes to pay things ahead so I don't have to think or worry about them. I was used to paying my rent ahead and quarterly. When I moved to the new plac…

If I rented, that would be pretty much impossible for me. I travel a lot, couldn’t drop it off in person or guarantee having access to an online system, or otherwise deterministically get a payment to them on a specific date.

Re: How credit cards make money

#275

Post by alberth »

the_pwner224 wrote: post #30
alberth wrote: post #16

> "A much smaller portion of interchange goes to the credit card processor, to the acquiring bank, and to the credit card network" That's technically not accurate. Credit card networks do not earn money from interchange [1]. [1] "Visa does not make money from individual transactions." https://revenuesandprofits.com/how-visa-makes-money-understa...

> Visa does not make money from individual transactions. Instead, it earns revenues from the issuers and acquirers based upon the overall payment volumes and number of transactions processed. Which is effectively the same thing.

But it’s not.

You’re assuming the card networks are even charging issuers, and issuers are funding these fees from the revenue they collect in interchange. They are not.

It’s not uncommon for the card networks to not even charge issuers at all. The card networks need to win over the issuers to even issue cards for their network. It’s much easier to win an issuers business by not charging them any fees at all.

Re: How credit cards make money

#277

Post by alberth »

patio11 wrote: post #22
alberth wrote: post #16

> "A much smaller portion of interchange goes to the credit card processor, to the acquiring bank, and to the credit card network" That's technically not accurate. Credit card networks do not earn money from interchange [1]. [1] "Visa does not make money from individual transactions." https://revenuesandprofits.com/how-visa-makes-money-understa...

I would like to reiterate my standard disclaimer for this publication but if you want to bet that I don't understand how scheme fees are calculated that is a poor decision.

I’m not suggesting you don’t understand it, but see my sister comment in this thread.

How it’s worded implies issuers are even paying a fee & that fee is derived from interchange. When that’s not always the case.

Re: How credit cards make money

#278

Post by dantheman »

smnrchrds wrote: post #267
throwawaycities wrote: post #256

Earlier quoted context omitted.

What does that even mean? Credit card companies exist (and make money) in both common law and civil law countries. Or you could even look within the US and examine the singular state that is a civil law jurisdiction and there is no real impact vs the other 49 states. In fact I’d wager a guess very few people even know 1 of the states is a civil law jurisdiction because it has very little impact in practice.

Court decisions in common law jurisdictions have important and long-lasting effects, not only on the case at hand, but for decades (or centuries) to come on things you wouldn't think can be remotely related to the case. It's not like that in civil law jurisdictions. Had this case been in France, the decision on credit card would not have created a precedent that Uber and AirBnB and App Store could use to their advant…

If it's a problem then it can be fixed through legislation, no need to change what's been litigated.

Re: How credit cards make money

#279

Post by bitcurious »

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…

So many stories here, I’ll add another. Bought an appliance from a vendor that advertised free installation, but on two occasions the tech refused to do installation because it was coded incorrectly in their system. Hired a contractor, disputed the cost.

Re: How credit cards make money

#280

Post by dantheman »

quantified wrote: post #276

They also drive up prices by a few percent when compared to cash. If you want to support the merchant, spend cash and they don’t lose the 3-5% overhead to the card & network.

There is a cost to dealing with cash, which is why some merchants prefer to be all card/no cash.
Post reply on HN