How credit cards make money • Hacker News Board

Re: How credit cards make money

#321

Post by nobody9999 » Sat, Nov 06, 2021, 6:16 AM UTC

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…

>You missed the biggest advantage of credit cards - the limited liability of the card holder to fraudulent charges!

An excellent point. Although my bank (Chase) caps my debit card liability at $50 despite the difference in the law.

But that has its own disadvantages. Whenever I travel, if I use the debit card, I invariably get declined the first time I use it and my phone and email blow up with "Fraud Alert!" notifications.

Which is annoying as hell, especially since if I use a credit card for the same transaction, Chase doesn't flag that as fraud.

Which, of course, is related to how they indemnify my debit card above and beyond the law.

Re: How credit cards make money

#322

Post by nobody9999 » Sat, Nov 06, 2021, 6:21 AM UTC

clairity wrote: post #245

ClumsyPilot wrote: post #222

Earlier quoted context omitted.

"non-major in-person purchases as it's inherently private and anonymous" Most of the time that's an anti-feature - there is no point of hiding transactions of you buying bread, it could provide you an alibi in case you are accused of a crime, but there is no conceivable way it could be used against you.. (people don't stop to buy bread on the way to the crime scene)

how many common crimes are you committing for that to be your primary concern? sometimes you just don't want to share every single bit of purchase data with hoarders like visa, chase, kroger, and google.

> how many common crimes are you committing for that to be your primary concern? sometimes you just don't want to share every single bit of purchase data with hoarders like visa, chase, kroger, and google.

I think that GP is concerned with being able to show that they didn't commit a crime, rather than that they frequently commit them.

That said, I generally prefer cash for in-person transactions, not just for the anonymity, but because most smaller retailers pay much higher fees to the credit card processors than big ones.

An excellent example is NYC taxis. The CC processing goes through a couple different levels of "service" providers and the drivers get dinged for 5% on every transaction. Whereas a large retailer is likely only charged 0.5-0.75%.

Which can make a big difference for people like cab drivers. As such, I always pay cash for taxi fares.

Re: How credit cards make money

#323

Post by crooked-v » Sat, Nov 06, 2021, 6:28 AM UTC

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…

Also, the basic structure of the Senate means that a clear majority of the country is represented by a clear minority of Senators.

Re: How credit cards make money

#324

Post by emodendroket » Sat, Nov 06, 2021, 6:28 AM UTC

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…

I am more comfortable with exercising self control than with the idea that if my card is somehow misused I don't have access to my funds until it's straightened out. In fact, if you don't trust yourself, I'd say cash is even better, because the physical act of taking out the money makes you less likely to spend it frivolously.

Re: How credit cards make money

#325

Post by emodendroket » Sat, Nov 06, 2021, 6:29 AM UTC

Jensson wrote: post #258

perl4ever wrote: post #237

Earlier quoted context omitted.

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…

And you pay 3% on every transaction to get 1.5% back. Seems like a pretty bad deal. Or do you really think businesses just gives you 3% for free on every purchase rather than raising prices on everything to make up for that 3% loss? A raw 3% of revenue is huge, there is no way businesses can take that without raising prices as consumer sales is pretty efficient and has small margins already. So they raise prices for…

Except for a handful of businesses like cash stations, almost nobody raises prices for credit card users in the US (in fact I think their merchant agreements forbid this). So if I use cash I'm the sucker subsidizing everyone else's rewards points.

Re: How credit cards make money

#326

Post by rsj_hn » Sat, Nov 06, 2021, 6:30 AM UTC

crooked-v wrote: post #323

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…

Also, the basic structure of the Senate means that a clear majority of the country is represented by a clear minority of Senators.

That's the purpose of the Senate. The Senate is there to represent states, not people.

The House is there to represent people.

Both need to agree in order to get something done. This ensures that something that is passed is approved by a majority of people and a majority of states.

Otherwise, without this proposition, the states might not have ratified the constitution - the states predate the nation, and the nation is a union of states. This method of government is called "Federalism".

Re: How credit cards make money

#327

Post by emodendroket » Sat, Nov 06, 2021, 6:32 AM UTC

Jensson wrote: post #285

perl4ever wrote: post #283

Earlier quoted context omitted.

You're looking at it the wrong way. It's just a shell game to get around truth-in-lending laws. Using a credit card is borrowing money. Interest rates have to be disclosed. So the fees plus the grace period are a way of making it look like typical card users are not paying a lot of interest. People getting cash back are actually paying low interest rates, because the market dictates it. If the fees were prohibited, t…

Well, I live in Europe, use debit and the transaction costs are 0.15% with no hidden fees anywhere in the system. And that is the norm, I don't know of anyone who uses credit cards here. (Although we call debit cards issued by Visa or Mastercard credit cards since Americans call those brands of cards credit cards, but people who use them don't have any credit, your account gets deducted instantly and you can't buy if…

People will go toward the option the system points them to, and in the US you don't pay extra fees for credit cards and have the best fraud protection with them. So why wouldn't you use it? Sure, I guess I might think twice if I had to pay a surcharge with every card purchase. But I don't, so why should I behave as though I did?

Re: How credit cards make money

#328

Post by tehwebguy » Sat, Nov 06, 2021, 6:35 AM UTC

rootsudo wrote: post #291

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…

A waste, get cash back on credit cards for grocery, 3%. Not shocking or great, but 3% on an annual bill of $10,000 is a nice $300, maybe a week of free groceries? Paycheck to cards not attached does not matter, ACH transfers can still be done much easier vs a EMV/Stripe read of a debit card. So all you are doing is amplifying your risk without any reward.

Wife picked up the Amex Plat right before the signup offer & annual fee changed drastically this year, offer was 10X on the first $15k spent on gas & groceries and 100,000 points after spending I think $6k within 6 months.

Only using it on gas & groceries, will average 16 points per dollar (approx 12-16%) when we reach $15,000 spent total.

The new deal is similarly structured but horrible in comparison, “shop small” is the category so it’s not realistic to max out the bonus spend without overspending.

Re: How credit cards make money

#329

Post by nobody9999 » Sat, Nov 06, 2021, 6:35 AM UTC

lotsofpulp wrote: post #83

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?

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…

> 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.

Many small retail stores in my area (delis, bodegas, restaurants) incentivize cash/debit. Not by charging less for them, but by charging extra for using a credit card.

Small retailers pay significantly more for CC processing than large retailers. 5-10x more, in some cases.

Re: How credit cards make money

#330

Post by nobody9999 » Sat, Nov 06, 2021, 6:37 AM UTC

lotsofpulp wrote: post #101

revolvingocelot wrote: post #98

Earlier quoted context omitted.

>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…

> How is it very clear that most merchants earn more? Because they do not offer discounts for cash/debit, and they also do not charge a fee for using credit card. As I showed in my post, legally, merchants are clear to advertise higher prices for credit card users. The fact that they do not means they do not want to dissuade credit card use. From there, it follows that since businesses are interested in earning more…

>Because they do not offer discounts for cash/debit, and they also do not charge a fee for using credit card.

Except they do. Especially smaller, mom & pop stores, as I mentioned here[0].

[0] https://news.ycombinator.com/item?id=29128007