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Carolina Cloud pays SOFR on unused prepaid credits

docs.carolinacloud.io

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Re: Carolina Cloud pays SOFR on unused prepaid credits

#31

Post by dcchuck »

stego-tech wrote: post #6

I think this is pretty great, though I’m sure hyperscalers will find a way to make sure such a scheme becomes as shitty for customers as frequent flier programs are today. Think of it from a small hobbyist perspective: I want to host a few small workloads, but I don’t want to deal with reoccurring billing. Maybe I have money now, but can’t guarantee it later. With this scheme, I frontload with a substantial amount of…

Yes - presuming the funds can’t earn SOFR+. The opportunity cost is the interest being earned elsewhere (minus interest earned taxes)

Re: Carolina Cloud pays SOFR on unused prepaid credits

#32

Post by teiferer »

Mentioning what SOFR is would be incredibly useful.

Gemini: The Secured Overnight Financing Rate (SOFR) is a broad measure and benchmark interest rate for U.S. dollar-denominated loans and derivatives, reflecting the cost of borrowing cash overnight backed by Treasury securities.

Re: Carolina Cloud pays SOFR on unused prepaid credits

#33

Post by ihumanable »

teiferer wrote: post #32

Mentioning what SOFR is would be incredibly useful. Gemini: The Secured Overnight Financing Rate (SOFR) is a broad measure and benchmark interest rate for U.S. dollar-denominated loans and derivatives, reflecting the cost of borrowing cash overnight backed by Treasury securities.

The first sentence of the first section entitled "The Rate" reads as follows

> The rate tracks SOFR (the Secured Overnight Financing Rate), the benchmark overnight interest rate published every business day by the Federal Reserve Bank of New York.

See https://docs.carolinacloud.io/organizations/prepaid-interest...

Re: Carolina Cloud pays SOFR on unused prepaid credits

#34

Post by alias_neo »

infecto wrote: post #29
kachnuv_ocasek wrote: post #28

Earlier quoted context omitted.

I'd guess that's a part of the TOS.

TOS is not the point. The root of this thread was surprise over rules around interest. I am saying it’s not surprising because companies could then easily create weird schemes.

I think you're overcomplicating it.

It's "ok" _because_ the credits can't be turned back into cash (thanks to their TOS).

If some business tried some clever scheme where they offer this "interest" on credits that _can_ be turned back into cash, they'd be breaking the law and would need a banking license, it's already covered.

Re: Carolina Cloud pays SOFR on unused prepaid credits

#35

Post by infecto »

alias_neo wrote: post #34
infecto wrote: post #29

Earlier quoted context omitted.

TOS is not the point. The root of this thread was surprise over rules around interest. I am saying it’s not surprising because companies could then easily create weird schemes.

I think you're overcomplicating it. It's "ok" _because_ the credits can't be turned back into cash (thanks to their TOS). If some business tried some clever scheme where they offer this "interest" on credits that _can_ be turned back into cash, they'd be breaking the law and would need a banking license, it's already covered.

I think you’re oversimplifying it. “They can’t be redeemed for cash” isn’t a universal legal test. Financial regulation generally looks at the substance of the product. Otherwise every company could sidestep banking and payments rules by calling customer balances “credits.”

Now let’s go full circle back to the original point. I don’t think it’s surprising that a company paying interest on credits may face more paperwork and rules for what is truly a gimmick that most large customers will never even care about. Which was my only point and I think the plot has gotten lost as this keeps going deeper.

Re: Carolina Cloud pays SOFR on unused prepaid credits

#37

Post by bux93 »

bojangleslover wrote: post #10
badatnames wrote: post #2

I've looked at doing this in Europe before, interest-bearing completely changes the classification of the prepayment. I didn't dig too deeply, but the general gist was that regulation-wise it really wasn't worth doing for a relatively gimmick-level feature

This is interest on credits, not on cash. Once you start paying interest on cash you need a banking license. I think you'd be fine even in Europe paying interest on credits.

A "banking license" is typically for "taking deposits or other repayable funds". (There's other kinds of banking licenses, too.) That can be for 0% interest too, or even negative interest (e.g. taking fees into account).

Re: Carolina Cloud pays SOFR on unused prepaid credits

#38

Post by alias_neo »

infecto wrote: post #35
alias_neo wrote: post #34

Earlier quoted context omitted.

I think you're overcomplicating it. It's "ok" _because_ the credits can't be turned back into cash (thanks to their TOS). If some business tried some clever scheme where they offer this "interest" on credits that _can_ be turned back into cash, they'd be breaking the law and would need a banking license, it's already covered.

I think you’re oversimplifying it. “They can’t be redeemed for cash” isn’t a universal legal test. Financial regulation generally looks at the substance of the product. Otherwise every company could sidestep banking and payments rules by calling customer balances “credits.” Now let’s go full circle back to the original point. I don’t think it’s surprising that a company paying interest on credits may face more paperw…

I think there was an original "given" which was that in the US, (where I assume this is), these "credits" don't complicate anything nor create any regulatory burden.

That's not to say in the EU, or the UK (where I am) the case isn't different; but if it _were_ the same as the US, I can totally see why that's fine.

We have loyalty programs, a coffee shop gives you "credit" when you get stamps for your 6th coffee free etc, none of that seems to complicate matters... all because of the key point "it can't be turned back into cash".

EDIT: I would add, in the hope of further supporting my argument, that many places that offer loyalty and discount schemes, their ToS explicitly states that it's "not exchangeable" and "has no cash value", which would support my point (at least in the UK).

Re: Carolina Cloud pays SOFR on unused prepaid credits

#39

Post by teiferer »

ihumanable wrote: post #33
teiferer wrote: post #32

Mentioning what SOFR is would be incredibly useful. Gemini: The Secured Overnight Financing Rate (SOFR) is a broad measure and benchmark interest rate for U.S. dollar-denominated loans and derivatives, reflecting the cost of borrowing cash overnight backed by Treasury securities.

The first sentence of the first section entitled "The Rate" reads as follows > The rate tracks SOFR (the Secured Overnight Financing Rate), the benchmark overnight interest rate published every business day by the Federal Reserve Bank of New York. See https://docs.carolinacloud.io/organizations/prepaid-interest...

> The first sentence of the first section entitled "The Rate" reads as follows

That's nice. Though I won't read that far if I have no idea what this is going to be about. 1 paragraph is how much you get my attention for and if that's not enough then my attention goes elsewhere.

Re: Carolina Cloud pays SOFR on unused prepaid credits

#40

Post by infecto »

alias_neo wrote: post #38
infecto wrote: post #35

Earlier quoted context omitted.

I think you’re oversimplifying it. “They can’t be redeemed for cash” isn’t a universal legal test. Financial regulation generally looks at the substance of the product. Otherwise every company could sidestep banking and payments rules by calling customer balances “credits.” Now let’s go full circle back to the original point. I don’t think it’s surprising that a company paying interest on credits may face more paperw…

I think there was an original "given" which was that in the US, (where I assume this is), these "credits" don't complicate anything nor create any regulatory burden. That's not to say in the EU, or the UK (where I am) the case isn't different; but if it _were_ the same as the US, I can totally see why that's fine. We have loyalty programs, a coffee shop gives you "credit" when you get stamps for your 6th coffee free…

You started by telling me I was overcomplicating it, but I think you also missed the context of the thread. The original post was specifically about why they decided not to do this in the EU because it created additional regulatory overhead.

My only point from the beginning has been that this isn’t surprising. If paying interest on prepaid customer balances were legally trivial just because they’re called “credits” or have “no cash value,” companies could structure around those rules very easily. That’s why I questioned whether “can’t be redeemed for cash” was actually the legal test.

The loyalty points example is a different product entirely. Even for the linked company I imagine the only reason they do this is a fun marketing angle for winning a finance customer.

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