An interesting article, but it doesn't sufficiently emphasize the lede: When you use a reward card, the merchant is charged a higher fee than if you used a "normal" card. Simply by putting a different branding on the plastic you pay with, the credit card issuer gets more money from each transaction.
The article goes on to ask the question "Why isn’t every card a rewards card?", meaning why doesn't every card pay cash back, but I think the more interesting question is why every card isn't branded in a way that makes the issuer more money. Why do they bother to issue cards where they get paid less? Why not brand every card as a "Signature Preferred" and then pocket the money instead of giving it to the less discerning customers?
And the most interesting question only gets a handwave: "The basic intuition underlying rewards cards as a product is that highly desirable customers have options in how they spend their money." But how far does this go in explaining why merchants "choose" to participate in this program. The obvious answer would seem to be that they get no benefit from the system as it exists but have no real choice, but maybe there is a better answer?
I liked the topic, but wished the author could have given more insight on what's happening behind the scenes to produce the outcome we see.
>Redditors are frequently sophisticated with their spreadsheets; many of them could clearly earn three orders of magnitude more from the financial industry if they stopped thinking that the right way to monetize spreadsheet skill was in gaming credit card signup bonuses.
It's a pretty decent outlet for having something complicated to work on. Another would be EVE Online with the added bonus that it's also an actual game. My guess is most of those people are just trying to min-max what the companies allow them, rather than trying to find an exploit in the system that prints money per spreadsheet CPU cycle.
I am suspicious that anyone can get a job in finance with only churning (or EVE) spreadsheet skills. I have rarely found "well if you can do that hobbyist but seemingly proximal activity, you can walk into a decent-paying job" to be true in tech and I suspect it's true for finance too.
Maybe the finance bros just need a leetcode-for-spreadsheets website to run their technical interviews to open the floodgates though.
I am pretty deep into the credit card hobby and most of the people in it are high-earning professionals already. The last meetup I went to consisted of half of software engineers.
So we already have jobs that pay well for optimizing things.
At the end of the day, it's mostly a hobby and you either find keeping track of everything and making effective use of rewards worth it or not. Personally, I have a few cards for targeted use but mostly I just take 2% cash back on a free card and figure that's close enough.
I was also intrigued by that quote and find it rather dubious. Coincidentally today, I and 5 other family members are boarding business class international flights worth ~$60k cash, paid for with signup bonus points. This doesn’t even include the other tens of $thousands of redemptions we’re doing on both this trip and the rest of the year. This is also just side hustle/hobby-that-pays-for-itself “money,” in addition to the (not) “three orders of magnitude” faang income.
I think churning is just a hobby for bored divorced guys and used as a proxy for developing any real (non-financialized) interests. Normal cash back for most cards is good enough for most people, and you aren't going to get big point kickbacks unless you already have a lot of money to spend.
The Acquired podcast did an episode on the history of Visa that covers a lot of how the credit card industry works.
As another commenter noted, this article doesn’t pull out clearly how this whole credit card reward scheme actually works. The Acquired episode does, by the end.
It works like this: the ‘luxury’ credit card providers, partnering with Visa, take money away from merchants in order to extract profit for themselves while keeping the credit card consumers happy. The merchants are pissed about this, and regularly make lawsuits to regulate interchange. The money extracted by the credit card companies and Visa causes merchants to raise prices for everyone regardless of whether they have a rewards card or use a credit card at all.
This creates in effect a massive money transfer from the poor, who do not use rewards cards, to the rich consumers who do. The Acquired podcast provides specific numbers on just how much worse off poor consumers are given this system, and how much the richest consumers benefit.
I come from Australia where interchange fee regulation tamps down on the kind of credit card mania and fetishism seen in the USA.
Fun fact: this is why crypto never took off as a replacement for credit cards. Too many entrepreneurs focused on “lower fees” as if it were some technical property. But it was never about the technology.
Interchange fees primarily fund consumer rewards programs and benefits. To become an appealing choice for consumers, any new payment method has to offer competitive benefits. Those benefits are funded by the fees.
Visa/MC/AmEx have essentially created a system whereby higher-spending customers are able to wrench more value from merchants in the form of higher fees. This is reflected in the fee schedules that slice and dice merchants by category and customers by card tier.
If you want to build a new payment system it is important to understand that it’s not just a negotiation between merchants and issuers. It’s a two-sided market where customers also leverage their spending power, directly or indirectly.
> this is why crypto never took off as a replacement for credit cards
If this were true you would expect crypto to have taken off in countries with low interchange rates. Europe, for example, has far less of a rewards and points culture for payment, and (compared to the US) much lower interchange.
Crypto never took off as a replacement for credit cards for many reasons - the biggest coins out there are simply too volatile to be usable as a currency, they lack the consumer protections you get paying with a credit card, and they’re simply too complex for an average person to understand.
Funny, because I would pay twice the CC fee for credit card transactions to be as painless as crypto. I'd rather scan a barcode and wait two minutes, compared to typing my address, handing over my phone number, confirming my zip, waiting for my CC's TOTP to arrive. Only for it to still fail 5% of the time for who knows what reason.
It's not just crypto it's any alternative payment system. Multiple payment vendors have tried to up-end the credit card companies by focusing on lower fees for merchants, but customers have no incentive to use that new system if they have a benefit to using their credit card, at least in the US.
It's why, though, there are a bunch of payments companies that have popped up in places throughout Asia that aren't competing with rewards systems off the back of interchange.
> Fun fact: this is why crypto never took off as a replacement for credit cards. Too many entrepreneurs focused on “lower fees” as if it were some technical property.
I always thought the big problem with crypto was that the fees were atrocious for any small transaction.
And the fees only get higher as the network gets busier. You can choose to have a send some money with a small fee, but the miners will never confirm your transaction, as each block is limited.
The only way to cost in cc fees is to always assume the highest tier plus one time fees. This is then built into the retail cost of everything
If you pay with a lower fee card, you subsidize the higher fee customers
If you pay cash, debit, or check and don’t say anything - you subsidize the higher fee credit card payers
If you ask me, I’ll give you 2% discount for cash or check. I’ve built in 3%+
Visa debit is the biggest scam going, they’ve found a way to charge 2.5% to take debit cards. In Canada forever it’s been 0.10 a transaction for debit for higher volume clients
Pretty much - you need to get a high reward cc and use it for all your purchases and pay it off every month. If not, and you don’t ask for a discount, you subsidize the people who do.
Example - last month I was “funded” $130,681.33 this includes debit cards which I pay a low flat rate for (but this is changing)
On $130,681.33 I paid $2,433.51 in service charges or 1.86% . Plus the liability of the possibility of a charge back, also I do not accept Amex.
- In the EU the main reason Rewards cards have declined is that the regulator capped interchange to a very small amount in 2015. The US will follow suit at some point (as noted debit cards have gone that way) but I guess not as low
- I think the simple answer to nkurz's point on why don't all cards charge the maximum in interchange is - it's just market forces. It's not worth enough money to long-term piss off the bigger merchants (i.e. Amazon). When you have a 30% APR card non-rewards card, the 3% interchange is small beans. Also the acquiring bank would probably want a bigger piece of the pie if it were more widespread
- Credit Card economics is radically different across different countries (for all sorts of reasons). So for example, a third of card users in the US explicitly seek the rewards and another third have it for the various protections/security vs. debit cards. In the UK only 12% seek rewards, with the two biggest use cases being to spread costs of big transactions or to improve their credit score. (so for that reason it's sort of hard to have a global view of this problem)
My credit card is a Fidelity 2% cash back Visa. (I think it was originally American Express, but it's Visa now. Presumably that happened sometime after 2016.) I don't travel much, so getting cash deposited into my brokerage is more useful to me, and with a "2% on everything" card, it's not really worth it to me to carry around other cards for specific categories.
After I bought my current home, I put a bunch of expenses on the card. I didn't realize I had gone over the limit until I got a letter in the mail telling me that they automatically increased the limit. They keep increasing it every year or two, so at this point I could put a mid range car on the card.
All that said, I would prefer if rewards cards in general were banned and everything was just 2% cheaper. The whole concept feels a little dirty to me, like I'm taking a bribe to use a specific form of payment. But, at the same time, it doesn't make sense not to in the current market.
I likewise have this card and it worked for me in a certain point in my life but it depends on what you spend money on. As a family of 4 we spend a lot on groceries and eating out so its good to use a card for those things that gives us 3%. The sort of most obvious one is the amazon visa which you can connect to your amazon account and get the 3% off on everything there automatically.
It's not a life changing amount but it's free money.
> All that said, I would prefer if rewards cards in general were banned and everything was just 2% cheaper.
Would you prefer that reality literally, or just if it was effectively like that? Literally doing that seems way worse than payment methods competing for your business with rewards.
I've had the Fidelity 2% card for a long time. It's simple, and mostly no-nonsense. It's one of my two "everyday carry" cards, and what I use for everything except Amazon and Whole Foods Market (WFM).
For Amazon and WFM, I use the Amazon (Chase) card. Since WFM has replaced or outlived most of the grocery stores near me, this is my other carry card, and it doubles as a backup card if the Fidelity 2% has a problem.
I almost added a Target 5% store card recently, because being a cheap bastid overrides being a minimalist bastid. But I abandoned the card application form, when something about it seemed a little too invasive. So I'll keep doing the Fidelity 2% card when I shop at Target, and that makes Target prices a little less competitive.
I am really interested in the content of this post, and I assume other posts from the author. But his writing style is extremely long winded.
For instance, this is somehow only two sentences.
It is a fee, ultimately paid by the card-accepting business, which gets sliced up between various parties in the credit card ecosystem to incentivize them to put their logos in the wallets and on the phones of well-heeled customers and increase the amount they spend and the frequency with which they spend it. (In industry, we sometimes distinguish interchange—which mostly goes to the issuing bank—and scheme fees—which mostly go to the credit card brand itself—but as interchange is much larger, let’s just call them both interchange for simplicity.)
Not to go too off topic but I'm extremely interested in the throwaway comment about holding enough equity in your service provider of choice to justify calling investor relations when you have an issue. Is this a real thing that people do? If it works it sounds like an amazing life hack but I have my doubts how much influence they would have over the "real" support.
Probably going against the grain here, but I think it’s great that at least a modest fraction of the benefits of highly risk-optimized revolving credit and low-friction electronic payments are feeding back to the consumer, vs. having all the value derived from that technology captured by the banks and merchants.
In a world where these high-exchange-fee / high-reward cards were outlawed, merchants would pay less in aggregate in fees. But almost surely they’d lose out net from a drop in overall consumer spending.
That affiliate programs inspire gamification for consumers to optimize their spending patterns to “win prizes” seems like a neat bit of competitive market pressure: It’s obviously a win for all involved or they wouldn’t be so popular.
I wish stripe or some company would create a zero fee credit card that is truly equivalent to using cash. The wealth transfer from cash payers, merchants, and some card users to other card users and the cc companies is one of those gross injustices, a small and persistent leech on society. Surely there’s a way to do cc transactions for near zero? What is the point of all this tech otherwise?
There's still fraud detection / prevention, card terminals, and other various infrastructure to pay for. Someone's going to pay for it, somehow.
Also, suppose Stripe did offer a low / zero transaction cost card. What's the incentive for me (a customer) to get it? It isn't any better than the other no-monthly-fee CCs, and is strictly inferior to a rewards card.
For merchants, yes, they are incentivized to accept Stripe's new card. But they can't stop accepting the other ones until Stripe has a significant share of the transactions. And may not be able to do so even then.
And meanwhile Stripe is eating the cost of running this new zero fee card system, which effectively takes away money that they could invest in their own business.
Sounds like a lose, lose, lose all around.
The real solution is to have a law that caps the CC transaction fee. Or allow merchants to add a surcharge for rewards CCs.
It has to be minted and circulated, we see it as "free" but in practice the gov foots the bill. And, for cards it would be issuers footing the bill.
Then moving cash isn't free either. Merchants handling a lot of cash also pay to get their cash moved, processed, exchanged etc. It's an aspect where card could be lower, but zero is also an impossoble goal.
Agree but maintaining the infrastructure has a cost someone has to pay and I as a customer won’t see any benefit.
I think it would be healthy to be able to have options with near zero cost but I guess this would only happen with strong regulations, which seems almost impossible in this space (in the US)
To facilitate the penetration and usage of RuPay Credit Cards on UPI, there will be no charge for transactions up to ₹2,000, an NPCI circular said. For transactions upwards of ₹2000, the applicable MDR amount will be borne by merchants and no additional charges will be levied upon the customers.
Disadvantages of Rupay Cards
Limited International Acceptance: One of the main disadvantages of RuPay cards is their limited acceptance outside of India. ...
Restricted Usage: RuPay cards are primarily designed for domestic use within India.
The AI generated cover image was kind of distracting to be honest. If having a full-screen image to go with the post was so important, one would have contracted a designer or just purchased something cool.
Often times you will find cash only businesses, especially in Chinatown and restaurants that will give you a discount on the final bill if you pay in cash. I have been to some mid-range restaurants that will knock 10% off my bill if I pay in cash instead of credit. This is the merchant fighting back using their own stratagems.
In many cases in my experience the vendors who can successfully pull off this strategy have a high quality, high value product and operate in a no-frills store front and are often family owned, maybe a generation or two already. There is a Vietnamese banh mi sandwich vendor where I live who has been around for 30 years only accepts cash - they have the history and patronage to pull this off.
And then there are plenty of other merchants that are 100% cashless, presumably because they don’t want the hassle (and perhaps cost) of handing, exchanging, storing, and transporting paper cash and coins to and from a bank.
> I have been to some mid-range restaurants that will knock 10% off my bill if I pay in cash instead of credit. This is the merchant fighting back using their own stratagems.
Not sure how things are in the USA, but in Germany, that has nothing to do with "fighting back" and everything with dodging VAT.
The sort of obvious thing is that taking cash doesn't just save the merchant credit card fees but enables them to play games with the income they report for tax. Same with like repairmen that will give you a much better deal if you pay cash - it's not just CC fees they are avoiding.
Fun fact, this is actually illegal here in Sweden! That is, merchants aren't allowed to adjust prices based on payment method. Not sure what the reasoning is.
My local restaurant instituted a surcharge for card users. Kind of irritating but I understand why, considering the margins in the restaurant industry.
Pretty verbose article that can be summarized as “Credit cards charge merchants a fee, sometimes more when co-branded, to entice customers to use their credit card in favor over others.”
While this focuses mainly on the consumer-credit card company relationship, I wanted to add this interesting study on the relationship between consumers across socioeconomic strata:
```
Since retailers usually charge the same price regardless of payment method, payment card
rewards programs with different levels of rewards effectively cause some customers to subsidize
the consumption of others. The research presented confirms that households with income
less than $75,000 per year collectively transfer over $3.5 billion to those making more than
$75,000 per year.
Furthermore, the cost of interchange fees to retailers can be significant, especially in competitive
sectors such as gasoline and groceries. This study demonstrates that interchange costs are
typically about 17 to 19 percent of retailer profit. Variance in these costs may induce risk-averse
retailers to set higher prices, thus generating additional economic inefficiencies and hurting retail
consumers.
Negative impacts on low income and minority households and small businesses have become
“entrenched” and are likely to get worse as interchange fees continue to increase. This economic
inefficiency will not change unless there is a “sufficiently large shock” in the form of policy or
technology to change the dynamics of the monopolies holding sway over the credit card system.
```
A valid interpretation but not the only way to describe it. If a merchant offers a 10% discount for spending $1000 or more, are they making lower-spending customers subsidize the purchases of higher-spending ones? Are they transferring wealth from poor to rich?
Technically yes. But what would the impact be of outlawing the practice of volume discounts through a “policy change”?
> In industry, we sometimes distinguish interchange—which mostly goes to the issuing bank—and scheme fees—which mostly go to the credit card brand itself—but as interchange is much larger, let’s just call them both interchange for simplicity.
It’s frustrating to read an article that acknowledges (indirectly) that payment networks don’t earn revenue from interchange nor have anything to do with reward programs, but then goes on to say that for simplicity they will refer to it as if it did.
If there is a better name for the table of rates (or the list of rates on a monthly CC transaction table for your business) I don’t know it. It’s absolute madness and near impossible to make sense of.
Often I feel like they exist only to confuse the merchant into just throwing up their hands and saying “I mean, I guess it’s right”. It also means that almost none of them can tell you how much they’re paying for credit card transactions. All they know is the sales person said “I can get you the best rates” which may or may not be true, those people will lie to you and tell you anything that you want to hear, I know this from personal experience. These people are snakes and dealing with them makes my skin crawl.
I’m aware that there’s a chance that I’m leaving money on the table, but this is one of the main reasons I use Stripe. I prefer predictability an inscrutable of data that may or may not show that I’m saving a little bit more. It’s also why I normally avoid credit cards that have rotating categories or this or like. I prefer a flat, easy to understand rate that I can compare to other cards instead of having to keep track of which card I’m using which month. Again, this means I’m leaving money on the table, but I do it for my own sanity.
The big news in credit card rewards (that I was hoping this article would address) is that Robinhood just announced a 3% flat cash back card, highest I've ever seen, where the only catch is that the money is deposited into your Robinhood account.
At 3% they are clearly losing tons of money on every transaction. There is an annual fee but it is only $60. The money can be withdrawn from Robinhood as soon as it is deposited. How can they possibly afford this? What are people doing with their money in Robinhood that they are willing to pay people over 1% (I'm assuming) just to deposit money there in a roundabout way?
Well written and pretty interesting. Somewhat obvious I suppose.
I was hoping he would go into detail on how programs like Citi double cash work. In that program you get the normal 1% back at purchase and then 1% at payment. I assume the latter is subsidized from interest payments, but what about card holders that never pay interest? Are they subsidized by those that do?
Quite interesting. I've had one encounter with such a credit card, which I only used for making a rather large payment over the course of four months without having to pay interest. To me, that was the attraction, not having to adjust my monthly budgeting much and also not having to dip into savings. My bank would have said 'yeah, lol, you pay our 8% interest if you want a loan you could actually cash out at any time'.
Where I live credit cards are still relatively uncommon, most cards in use are debit, and from the article it seems they have a simpler scheme behind them. The idea to have a 'book-buyers credit card' seems quite foreign, though I think some people have gas-station-related cards.
[+] [-] nkurz|1 year ago|reply
The article goes on to ask the question "Why isn’t every card a rewards card?", meaning why doesn't every card pay cash back, but I think the more interesting question is why every card isn't branded in a way that makes the issuer more money. Why do they bother to issue cards where they get paid less? Why not brand every card as a "Signature Preferred" and then pocket the money instead of giving it to the less discerning customers?
And the most interesting question only gets a handwave: "The basic intuition underlying rewards cards as a product is that highly desirable customers have options in how they spend their money." But how far does this go in explaining why merchants "choose" to participate in this program. The obvious answer would seem to be that they get no benefit from the system as it exists but have no real choice, but maybe there is a better answer?
I liked the topic, but wished the author could have given more insight on what's happening behind the scenes to produce the outcome we see.
[+] [-] hnthrow289570|1 year ago|reply
It's a pretty decent outlet for having something complicated to work on. Another would be EVE Online with the added bonus that it's also an actual game. My guess is most of those people are just trying to min-max what the companies allow them, rather than trying to find an exploit in the system that prints money per spreadsheet CPU cycle.
I am suspicious that anyone can get a job in finance with only churning (or EVE) spreadsheet skills. I have rarely found "well if you can do that hobbyist but seemingly proximal activity, you can walk into a decent-paying job" to be true in tech and I suspect it's true for finance too.
Maybe the finance bros just need a leetcode-for-spreadsheets website to run their technical interviews to open the floodgates though.
[+] [-] MattGaiser|1 year ago|reply
So we already have jobs that pay well for optimizing things.
[+] [-] ghaff|1 year ago|reply
[+] [-] sam2426679|1 year ago|reply
This was otherwise an interesting article.
[+] [-] hnuser123456|1 year ago|reply
[+] [-] kkukshtel|1 year ago|reply
[+] [-] thundergolfer|1 year ago|reply
As another commenter noted, this article doesn’t pull out clearly how this whole credit card reward scheme actually works. The Acquired episode does, by the end.
It works like this: the ‘luxury’ credit card providers, partnering with Visa, take money away from merchants in order to extract profit for themselves while keeping the credit card consumers happy. The merchants are pissed about this, and regularly make lawsuits to regulate interchange. The money extracted by the credit card companies and Visa causes merchants to raise prices for everyone regardless of whether they have a rewards card or use a credit card at all.
This creates in effect a massive money transfer from the poor, who do not use rewards cards, to the rich consumers who do. The Acquired podcast provides specific numbers on just how much worse off poor consumers are given this system, and how much the richest consumers benefit.
I come from Australia where interchange fee regulation tamps down on the kind of credit card mania and fetishism seen in the USA.
[+] [-] abalone|1 year ago|reply
Interchange fees primarily fund consumer rewards programs and benefits. To become an appealing choice for consumers, any new payment method has to offer competitive benefits. Those benefits are funded by the fees.
Visa/MC/AmEx have essentially created a system whereby higher-spending customers are able to wrench more value from merchants in the form of higher fees. This is reflected in the fee schedules that slice and dice merchants by category and customers by card tier.
If you want to build a new payment system it is important to understand that it’s not just a negotiation between merchants and issuers. It’s a two-sided market where customers also leverage their spending power, directly or indirectly.
[+] [-] objclxt|1 year ago|reply
If this were true you would expect crypto to have taken off in countries with low interchange rates. Europe, for example, has far less of a rewards and points culture for payment, and (compared to the US) much lower interchange.
Crypto never took off as a replacement for credit cards for many reasons - the biggest coins out there are simply too volatile to be usable as a currency, they lack the consumer protections you get paying with a credit card, and they’re simply too complex for an average person to understand.
[+] [-] ninepoints|1 year ago|reply
[+] [-] ThrowawayTestr|1 year ago|reply
I thought it was because transactions take minutes instead of seconds.
[+] [-] k8svet|1 year ago|reply
[+] [-] throwaway918274|1 year ago|reply
[+] [-] skrbjc|1 year ago|reply
It's why, though, there are a bunch of payments companies that have popped up in places throughout Asia that aren't competing with rewards systems off the back of interchange.
[+] [-] mdaniel|1 year ago|reply
While looking up a representative link for that, I also saw that it appears Venmo is in that game, too: https://www.cryptovantage.com/best-crypto-credit-cards/venmo...
[+] [-] Sohcahtoa82|1 year ago|reply
I always thought the big problem with crypto was that the fees were atrocious for any small transaction.
And the fees only get higher as the network gets busier. You can choose to have a send some money with a small fee, but the miners will never confirm your transaction, as each block is limited.
[+] [-] 486sx33|1 year ago|reply
The only way to cost in cc fees is to always assume the highest tier plus one time fees. This is then built into the retail cost of everything
If you pay with a lower fee card, you subsidize the higher fee customers
If you pay cash, debit, or check and don’t say anything - you subsidize the higher fee credit card payers
If you ask me, I’ll give you 2% discount for cash or check. I’ve built in 3%+
Visa debit is the biggest scam going, they’ve found a way to charge 2.5% to take debit cards. In Canada forever it’s been 0.10 a transaction for debit for higher volume clients
Pretty much - you need to get a high reward cc and use it for all your purchases and pay it off every month. If not, and you don’t ask for a discount, you subsidize the people who do.
Example - last month I was “funded” $130,681.33 this includes debit cards which I pay a low flat rate for (but this is changing)
On $130,681.33 I paid $2,433.51 in service charges or 1.86% . Plus the liability of the possibility of a charge back, also I do not accept Amex.
[+] [-] ErrantX|1 year ago|reply
- I think the simple answer to nkurz's point on why don't all cards charge the maximum in interchange is - it's just market forces. It's not worth enough money to long-term piss off the bigger merchants (i.e. Amazon). When you have a 30% APR card non-rewards card, the 3% interchange is small beans. Also the acquiring bank would probably want a bigger piece of the pie if it were more widespread
- Credit Card economics is radically different across different countries (for all sorts of reasons). So for example, a third of card users in the US explicitly seek the rewards and another third have it for the various protections/security vs. debit cards. In the UK only 12% seek rewards, with the two biggest use cases being to spread costs of big transactions or to improve their credit score. (so for that reason it's sort of hard to have a global view of this problem)
[+] [-] nfriedly|1 year ago|reply
After I bought my current home, I put a bunch of expenses on the card. I didn't realize I had gone over the limit until I got a letter in the mail telling me that they automatically increased the limit. They keep increasing it every year or two, so at this point I could put a mid range car on the card.
All that said, I would prefer if rewards cards in general were banned and everything was just 2% cheaper. The whole concept feels a little dirty to me, like I'm taking a bribe to use a specific form of payment. But, at the same time, it doesn't make sense not to in the current market.
[+] [-] xyzelement|1 year ago|reply
It's not a life changing amount but it's free money.
[+] [-] nonethewiser|1 year ago|reply
Would you prefer that reality literally, or just if it was effectively like that? Literally doing that seems way worse than payment methods competing for your business with rewards.
[+] [-] neilv|1 year ago|reply
For Amazon and WFM, I use the Amazon (Chase) card. Since WFM has replaced or outlived most of the grocery stores near me, this is my other carry card, and it doubles as a backup card if the Fidelity 2% has a problem.
I almost added a Target 5% store card recently, because being a cheap bastid overrides being a minimalist bastid. But I abandoned the card application form, when something about it seemed a little too invasive. So I'll keep doing the Fidelity 2% card when I shop at Target, and that makes Target prices a little less competitive.
[+] [-] unknown|1 year ago|reply
[deleted]
[+] [-] jmuguy|1 year ago|reply
For instance, this is somehow only two sentences.
[+] [-] wtatum|1 year ago|reply
[+] [-] twoodfin|1 year ago|reply
In a world where these high-exchange-fee / high-reward cards were outlawed, merchants would pay less in aggregate in fees. But almost surely they’d lose out net from a drop in overall consumer spending.
That affiliate programs inspire gamification for consumers to optimize their spending patterns to “win prizes” seems like a neat bit of competitive market pressure: It’s obviously a win for all involved or they wouldn’t be so popular.
[+] [-] yeknoda|1 year ago|reply
[+] [-] ansible|1 year ago|reply
Also, suppose Stripe did offer a low / zero transaction cost card. What's the incentive for me (a customer) to get it? It isn't any better than the other no-monthly-fee CCs, and is strictly inferior to a rewards card.
For merchants, yes, they are incentivized to accept Stripe's new card. But they can't stop accepting the other ones until Stripe has a significant share of the transactions. And may not be able to do so even then.
And meanwhile Stripe is eating the cost of running this new zero fee card system, which effectively takes away money that they could invest in their own business.
Sounds like a lose, lose, lose all around.
The real solution is to have a law that caps the CC transaction fee. Or allow merchants to add a surcharge for rewards CCs.
[+] [-] knallfrosch|1 year ago|reply
https://www.consilium.europa.eu/en/press/press-releases/2015...
[+] [-] makeitdouble|1 year ago|reply
It has to be minted and circulated, we see it as "free" but in practice the gov foots the bill. And, for cards it would be issuers footing the bill.
Then moving cash isn't free either. Merchants handling a lot of cash also pay to get their cash moved, processed, exchanged etc. It's an aspect where card could be lower, but zero is also an impossoble goal.
[+] [-] melenaboija|1 year ago|reply
I think it would be healthy to be able to have options with near zero cost but I guess this would only happen with strong regulations, which seems almost impossible in this space (in the US)
[+] [-] smallmancontrov|1 year ago|reply
[+] [-] phyphy|1 year ago|reply
[below text is from google search results]
To facilitate the penetration and usage of RuPay Credit Cards on UPI, there will be no charge for transactions up to ₹2,000, an NPCI circular said. For transactions upwards of ₹2000, the applicable MDR amount will be borne by merchants and no additional charges will be levied upon the customers.
Disadvantages of Rupay Cards Limited International Acceptance: One of the main disadvantages of RuPay cards is their limited acceptance outside of India. ... Restricted Usage: RuPay cards are primarily designed for domestic use within India.
[+] [-] dboreham|1 year ago|reply
[+] [-] isodev|1 year ago|reply
The post was informative though.
[+] [-] euix|1 year ago|reply
In many cases in my experience the vendors who can successfully pull off this strategy have a high quality, high value product and operate in a no-frills store front and are often family owned, maybe a generation or two already. There is a Vietnamese banh mi sandwich vendor where I live who has been around for 30 years only accepts cash - they have the history and patronage to pull this off.
[+] [-] temporallobe|1 year ago|reply
[+] [-] brazzy|1 year ago|reply
Not sure how things are in the USA, but in Germany, that has nothing to do with "fighting back" and everything with dodging VAT.
[+] [-] xyzelement|1 year ago|reply
[+] [-] coddle-hark|1 year ago|reply
[+] [-] greedo|1 year ago|reply
[+] [-] treyfitty|1 year ago|reply
[+] [-] ismokedoinks|1 year ago|reply
``` Since retailers usually charge the same price regardless of payment method, payment card rewards programs with different levels of rewards effectively cause some customers to subsidize the consumption of others. The research presented confirms that households with income less than $75,000 per year collectively transfer over $3.5 billion to those making more than $75,000 per year. Furthermore, the cost of interchange fees to retailers can be significant, especially in competitive sectors such as gasoline and groceries. This study demonstrates that interchange costs are typically about 17 to 19 percent of retailer profit. Variance in these costs may induce risk-averse retailers to set higher prices, thus generating additional economic inefficiencies and hurting retail consumers. Negative impacts on low income and minority households and small businesses have become “entrenched” and are likely to get worse as interchange fees continue to increase. This economic inefficiency will not change unless there is a “sufficiently large shock” in the form of policy or technology to change the dynamics of the monopolies holding sway over the credit card system. ```
https://hispanicleadershipfund.org/wp-content/uploads/2022/0...
[+] [-] abalone|1 year ago|reply
Technically yes. But what would the impact be of outlawing the practice of volume discounts through a “policy change”?
[+] [-] alberth|1 year ago|reply
It’s frustrating to read an article that acknowledges (indirectly) that payment networks don’t earn revenue from interchange nor have anything to do with reward programs, but then goes on to say that for simplicity they will refer to it as if it did.
[+] [-] joshstrange|1 year ago|reply
If there is a better name for the table of rates (or the list of rates on a monthly CC transaction table for your business) I don’t know it. It’s absolute madness and near impossible to make sense of.
Often I feel like they exist only to confuse the merchant into just throwing up their hands and saying “I mean, I guess it’s right”. It also means that almost none of them can tell you how much they’re paying for credit card transactions. All they know is the sales person said “I can get you the best rates” which may or may not be true, those people will lie to you and tell you anything that you want to hear, I know this from personal experience. These people are snakes and dealing with them makes my skin crawl.
I’m aware that there’s a chance that I’m leaving money on the table, but this is one of the main reasons I use Stripe. I prefer predictability an inscrutable of data that may or may not show that I’m saving a little bit more. It’s also why I normally avoid credit cards that have rotating categories or this or like. I prefer a flat, easy to understand rate that I can compare to other cards instead of having to keep track of which card I’m using which month. Again, this means I’m leaving money on the table, but I do it for my own sanity.
[+] [-] modeless|1 year ago|reply
At 3% they are clearly losing tons of money on every transaction. There is an annual fee but it is only $60. The money can be withdrawn from Robinhood as soon as it is deposited. How can they possibly afford this? What are people doing with their money in Robinhood that they are willing to pay people over 1% (I'm assuming) just to deposit money there in a roundabout way?
[+] [-] time0ut|1 year ago|reply
I was hoping he would go into detail on how programs like Citi double cash work. In that program you get the normal 1% back at purchase and then 1% at payment. I assume the latter is subsidized from interest payments, but what about card holders that never pay interest? Are they subsidized by those that do?
[+] [-] cess11|1 year ago|reply
Where I live credit cards are still relatively uncommon, most cards in use are debit, and from the article it seems they have a simpler scheme behind them. The idea to have a 'book-buyers credit card' seems quite foreign, though I think some people have gas-station-related cards.