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How credit cards make money

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Re: How credit cards make money

#311

Post by xmprt »

treyfitty wrote: post #234

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 me…

I had to take a few minutes to understand this case. So essentially, merchants who were already accepting Amex cards couldn't tell their customers to use a Visa card instead if they had one. If a merchant didn't want to accept Amex cards then they shouldn't have partnered with Amex.

Re: How credit cards make money

#312

Post by thrdbndndn »

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.

> If you want to support the merchant, spend cash

WTF? Why is this burden on the customer? If you want to support them you buy from them, period.

Re: How credit cards make money

#313

Post by nyokodo »

nikitaga wrote: post #298
apahwa wrote: post #296

Earlier quoted context omitted.

why is electing in quotes?

Because US election system does not reflect the will of the population, or even the voting population. FPTP is a highly deficient system that results in the same two parties staying in power indefinitely, which is only marginally better than a single party state. So, I find it hard to blame the population for the politicians they elect in this case. US elections are a lot more constrained by the ruling class and the…

> FPTP is a highly deficient system that results in the same two parties staying in power indefinitely

New Zealand has used MMP for 25 years and yet it still dithers between two major parties. Minor parties do tend to have to be incorporated into coalitions with one or the other major party, which is something, however, they’re almost always the same minor parties falling along the left right divide. Electoral systems do have an effect and they are setup to make it hard to radically change the system, however, they strengthen they don’t create the two party dynamic. Two major parties aligned with common human biases always seem to spring up when people are free to choose.

Re: How credit cards make money

#314

Post by noduerme »

nikitaga wrote: post #298
apahwa wrote: post #296

Earlier quoted context omitted.

why is electing in quotes?

Because US election system does not reflect the will of the population, or even the voting population. FPTP is a highly deficient system that results in the same two parties staying in power indefinitely, which is only marginally better than a single party state. So, I find it hard to blame the population for the politicians they elect in this case. US elections are a lot more constrained by the ruling class and the…

Just my on-the-ground view as an American, I've seen both major parties in this country change radically in my lifetime to the point of being unrecognizable. In the case of the Republican party this has happened twice.

The USSR had only one Party, but intra-party politics were all the more fierce as a result. I'm not saying that a full or even reasonably varied spectrum of true, non-spectacular or intelligent alternatives are being presented to the American voter. Just that what a 2-party system lacks in superficial variety it may more than make up for in internecine disagreement.

The ideological spread between Joe Manchin and AOC covers most of the ground covered by center and left European parties.

Re: How credit cards make money

#315

Post by causi »

treyfitty wrote: post #234

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 me…

Sounds like a bad thing to me. Why not offer the service to retailers for free and then make your money by charging interest on unpaid customer debt? Making retailers cover the operating costs of your moneylending business just seems like bullying.

Re: How credit cards make money

#316

Post by Dylan16807 »

perl4ever wrote: post #308
Dylan16807 wrote: post #302

Earlier quoted context omitted.

> the credit card companies could instantly raise interest rates and end grace periods to compensate exactly I don't think you can simplify it that much. If you end grace periods, the people that currently don't pay interest will suddenly be charged huge amounts. If you drastically lower the interest rates to make their costs match the old model, then other people that pay the card off slower will suddenly be paying…

> the people that currently don't pay interest will suddenly be charged huge amounts They will be charged the same amount if the interest rates are set accordingly, it will just be explicit. >other people that pay the card off slower will suddenly be paying much less than before You say that as if their rate must remain, if not fixed, in a fixed ratio with others. I don't see why. >trying to replace fees with interes…

Just as a nice round example number, let's say someone is effectively paying a 1% fee at time of purchase.

How do you turn that into an interest rate? Stuff at the start of the month and stuff at the end of the month are going to pay interest for different lengths of time. What if they change the timing of purchases?

Let's say you pick an average you're satisfied with. Okay, now you've calculated a rate you need to charge for the first month to match the old fee. You have to charge this specific percentage for the first month to make the math work out. ...but what if that percentage doesn't match the percentage you used to charge after the grace period?

One way to resolve this is to charge a first-month interest rate and a subsequent-months interest rate. But that's not really an "interest rate" anymore, is it? You're just obfuscating the fee, and the goal of this exercise was to make things more transparent.

The other way to resolve this is to have the "interest rate" change every single month, based on the timings of when you did all your purchases. This is just taking the old system and hiding it inside a black box, and that black box spits out an "interest rate" each month.

Unless I'm grossly missing something, there's no way to use just an interest rate to emulate a system of upfront fee plus interest rate. Do you have a suggestion of how to make the math work? Tell me what interest rate could replace "2% fee, 1 billing cycle grace period, 16% interest afterwards". Also tell me what interest rate could replace "0.5% fee, 1 billing cycle grace period, 16% interest afterwards".

Re: How credit cards make money

#317

Post by quantified »

makeitdouble wrote: post #293
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.

To add to dantheman’s point, a lot of merchants are more than willing to spend 3~5% in fees if it means making a register line 10~15% faster, or reduces the cash stock they need to keep at hand and manage thorough the day. Privileging cash as a customer isn’t universally better for the merchant.

Then, politeness suggests you ask if you’re thinking about it.

Re: How credit cards make money

#318

Post by Jensson »

nyokodo wrote: post #313
nikitaga wrote: post #298

Earlier quoted context omitted.

Because US election system does not reflect the will of the population, or even the voting population. FPTP is a highly deficient system that results in the same two parties staying in power indefinitely, which is only marginally better than a single party state. So, I find it hard to blame the population for the politicians they elect in this case. US elections are a lot more constrained by the ruling class and the…

> FPTP is a highly deficient system that results in the same two parties staying in power indefinitely New Zealand has used MMP for 25 years and yet it still dithers between two major parties. Minor parties do tend to have to be incorporated into coalitions with one or the other major party, which is something, however, they’re almost always the same minor parties falling along the left right divide. Electoral system…

But MMP means that if people are really unhappy with the current system then a new party will appear. Trump wouldn't have been a republican, instead he would have been the leader of the new right, similar to how many such parties popped up like mushrooms all over Europe. They weren't old parties that got reformed, they were new parties created as a response to people demanding such parties.

You are right that such changes are rare, they certainly don't happen once every 25 years, but the fact that they can happen is really important. Otherwise you are left with situations like current USA where many wants to vote for lower taxes but don't want to support Trumps other political views, in Europe you just vote for another right wing party but what do you do in USA?

Similarly you have many people who wants to vote for higher taxes and more government programs, but don't want to vote for all the identity politics. What should they vote for? Now the entire left is associated with identity politics and the entire right is associated with opposition to identity politics, making it hard to distinguish between different views and probably making the whole political conversation way more toxic than it needs to be. It has gotten to the point that people often assume you are racist if you argue for lower taxes etc.

Re: How credit cards make money

#319

Post by Jensson »

perl4ever wrote: post #301
ilammy wrote: post #292

Earlier quoted context omitted.

> But when people has to pay the real costs of credit cards then basically nobody wants one. I believe there is an opportunity cost for not using a credit card in US: you don't build your credit history. This might leave you disadvantaged in the future because... the finance industry (as an extension, the society) is structured in a way that you must have a good credit history.

I interpret your tone as suggesting the justification is circular and arbitrary, that finance doesn't serve a human need.

People can take loans all over the world, USA is the only country I'm aware of where you need to do stuff like use a credit card to take a loan. Don't you think it is suspicious that the finance market decided that the only way to get a loan is to first buy a lot of expensive finance products? It is kind of like how politicians are mostly lawyers, and they decided that the only way to ensure your rights is to pay a ton of money to a lawyer, is that just a coincidence? I don't think so, to me both of those seems very corrupt.

Re: How credit cards make money

#320

Post by divbzero »

toast0 wrote: post #136
computator wrote: post #97

Earlier quoted context omitted.

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…

> Failing that idea, do you have any tips for frequent American travellers on how to get foreign cash without paying excessive conversion fees? Many credit union deposit accounts with ATM access can use some foreign ATMs with no fees and reasonable forex rates. Some online deposit accounts with ATM fee reimbursements will also reimburse foreign ATM fees and have reasonable forex rates. Things like Schwab and Fidelity…

I second the parent’s suggestion of using a checking account that supports low-fee foreign withdrawals. Charles Schwab has worked for me at many international ATMs.

Some people advise sticking with four-digit PINs for compatibility with older ATMs [1] but I don’t know if that’s a practical limitation at this point.

[1]: https://www.latimes.com/travel/deals/la-tr-spot-20140713-sto...

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