The nice thing about Stripe is that they have really shaken up the online payments here in Australia. They are 1.75%+30c per transaction here, and that caused the others to drop down to that as well (even Braintree which was one the last IIRC).
In the US Stripe charges 2.9%. That's 66% more than in Australia. Do you think it costs Visa that much extra to process a payment in the US? No, it clearly does not.
Whilst I'll happily congratulate Stripe for the investment, I don't myself see it as a good thing. With Stripe having investments from both Visa and AmEx they have little incentive to challenge the current fee structure. Stripe processes its payments in the US through a strategic deal with Wells Fargo, who have a substantial (> $1 billion) investment in Visa, who in turn have an investment in Stripe. Do any large retailers or merchants have similar investments in Stripe? I don't believe they do.
If you're a merchant I wouldn't see Visa and American Express investing and taking equity in Stripe as a good thing. These are companies that have every possible reason to keep credit card fees as high as possible and prevent regulation from reducing them (which is exactly why Australia's fees are much lower - they're regulated).
I like Stripe as a company. I think they do great stuff. But a Stripe that's received investment from the card networks is a Stripe less likely to make disruptive moves to break the monopoly card networks have today.
Meanwhile I pay ~6.5% for every transaction using PayPal because of their clever combination of first charging for cc (3.5%-3.9% for international transactions) and then another 3% mandatory currency conversion fee because they don't allow withdrawing USD to USD accounts not in US (so living in Europe I don't have any options other than to convert USD to my currency on their terms).
Can't wait for some competition to come to Poland.
(for the record market price for currency conversion is way below 0.5%).
Surpassingly low for Stripe. Here in Norway it is cheaper than in the US but still quite more expensive than other options (no set up costs though). 2.4% for local cards and 2.9% for international cards. And to charge in USD you need a US bank account otherwise you are hit with a 2% conversion fee (ridiculously high).
can somebody explain why we have credit cards to me? Where I live it's kinda uncommon and I can't even get one as a student. And I never saw the need for one either as we can just pay everything with direct bank transfers. And yes you can undo bank transfers.
I just don't get the obsession? Why would anyone ever want debt? We have money to pay for stuff, why not use your money instead?
They're far and away the most convenient payment method in the US, both for customers and merchants.
They work globally, for values of "globally" which include "most parts of the first world which you, as someone in the middle or upper middle class, are likely to find yourself in." You can take a wee little bit of plastic issued by a small bank in central Japan and buy dinner in Prague or take a cab in Portland.
They are the cheapest way to access short-term credit, which is an astoundingly useful thing to have available. Poor folks in the US pay through the nose for it; middle class folks pay an amount between "It's literally a we-pay-you-to-access-it situation" and "A relatively modest APR in the teens, which -- in real terms -- means you can borrow $2k for an unanticipated expense without anyone judging you and it will cost you ~$25 a month." (Examples of unanticipated expenses can include medical expenses, car repairs which are necessary to continue one's employment, responding to sudden family emergencies like e.g. a parent's stroke while you're a student living in another state, etc.)
A credit card amounts to a no-haggling 1% discount on all your spending.
They create an instant, durable record of all spending, which is very useful for e.g. businesses or individuals who are attempting to budget better.
Why would anyone ever want debt?
I get the mindset behind this; I was terrified of debt growing up, for family/cultural reasons. I've matured a bit in my relationship with debt as a businessman. $100 in interest is not morally different than $100 in SaaS expenses. If it allows you to grow the business faster than you would be able to from your cash flow, than it's not a particularly difficult decision to borrow.
Credit and debit cards are the easiest way to pay in America, since bank transfers are not really an option for merchants. It's really uncommon to pay by check at the point of sale (to the extent where people might respond negatively), and cash is actually pretty inconvenient in the US due to odd-even pricing tactics giving everyone pockets full of small coins.
Most people would agree that the most intelligent way to use a credit card is to treat it as a debit card and never incur a balance. Instead, you'd pay each month's bill in full. This way, you pay no interest on your debt; in fact, you are effectively incurring zero debt. Moreover, a lot of credit cards offer rewards programs in terms of cash back or "points" as a percentage of your expenditures. With some mixing and matching of cards, you can easily get 2-3% cash back on your aggregate purchases, or rack up some free airline flights.
I actually find this to be a huge moral gray area; the reason that Visa, Discover, and MasterCard can afford to pay out handsome rewards is partly because of the financially illiterate charging more to their credit cards than they can afford to pay off. [1] I don't have the exact numbers on me, but I think interest versus merchant fees was about a 67%-33% split in terms of credit card company revenue. (American Express is an exception because they do not allow you to carry a balance on a lot of their cards; they will report your account as delinquent and terminate service.)
Otherwise, as other posters have mentioned, credit cards offer fraud protection. Cards aimed at people with good credit scores often come with other nice benefits, such as additional reimbursement if an airline loses your bag.
[1] There are valid reasons to place a huge charge that you can't afford to pay off immediately. Emergencies do happen, for instance, and it's really great to have a line of credit for that situation. But then your credit card serves the same purpose as a traditional loan.
If you do business travel, and rack up $20k+/month expenses (raises hand), credit cards are invaluable. I certainly don't want to be extending my company $20K. It was impossible for me to have that much money just sitting around when I was in my 20s, particularly if it took a bit of time for the company to pay me back.
From the perspective of a company with hundreds of employees each spending $20k/month - this is effectively a $2mm+ interest free 30 day loan from the credit card company.
Credit Cards take all the fraud risk. If someone fraudulently uses my credit card number, I am not on the hook for any charges. In Canada, at least, the consumer takes the fraud risk for a debit card. (Actually, for Chip+Pin Credit cards, last time I checked, they were trying to get consumers to take the fraud risk as well - not sure if that went through).
Lots of hotels want a credit card, not cash, when you are checking in. Some of then require a credit card, both for reservation, and your stay. I believe that the vast majority of car-rentals require credit cards.
Credit cards in the United States are an effective mechanism for young people to jump start their FICO score, which is important if they ever want to get a loan to purchase a home, (I'm presuming you see the advantage of buying a home with Debt).
Credit Cards, between points and various plans, provide 1-2% cash back on your purchases.
I can load my Credit Card onto my iPhone. I don't know if it's possible to do that with a Debit Card.
Here in Singapore, OCBC will give me an extra 1% on my savings account with their bank (up to $60K - so, $600/year) if I spend $1000/month on my credit card. (And 1% cash back on said card for all expenses.)
With that said - different places have different culture. Here in Singapore, Lots of Taxi's (all of them?) won't take Visa Credit cards, and around half of them won't take any credit cards. Lots of places (all the hawkers that I've run into) are cash only. In West-Coast Canada, Debit-Cards seem to be pretty popular.
But, Net-Net, outside of some of those use cases - I totally agree with you. I don't really see the fascination with credit cards either, particularly now that Visa+Debit cards+Chip+Pin+Smart Phones seem to offer a lot of the advantages of Credit Cards.
Credit cards are used because they allow for global money transactions in much the same way debit cards do locally in your home country. For example, it's practically impossible to fly into USA, rent a car, and book a hotel for a week unless you have a credit card that has several thousand dollars of credit. Even if you have the very same money on your bank account. The system just works that way.
But credit card debt is way overrated. You basically have to have that money anyway (roughly in a month) so that you can pay off the credit card bill. In the average, you can use a credit card to spend your next salary beforehand but that leaves you with nothing to live on the following month. So what you can do with a credit card is rather limited, as if you do not pay off the debt in one month, you're in for some serious interest rates until the balance comes back close to zero again.
Debt is useful when you invest in something that will produce better yield than the interest on the debt. For example, buying an apartment generally will immediately lower your cost of living (in comparison to rent) and subsequently frees more money to pay back the debt and interest. Thus, taking a mortgage makes sense if you can pay it back in a reasonable time so that the proportion of interest won't accumulate into too high in the grand totals.
Then again, buying a new car with a loan makes no sense whatsoever. The value of the car will only degrade and it might actually degrade faster than the rate you're paying off the debt.
> Why would anyone ever want debt? We have money to pay for stuff, why not use your money instead?
I don't carry a balance on my credit card, but I still absolutely love it.
Three main reasons:
1. I don't have to "balance" my checkbook and constantly keep track of how much money is liquid. Instead of tracking my checking account's value before making any purchase, I just do a single monthly payment.
2. Security/protection: A merchant screws with me? I'm covered. Something breaks? I'm covered. I don't like something? I'm covered. Credit cards make purchasing totally risk-free.
3. Rewards. Credit cards have provided me with thousands of dollars worth of free rewards.
The rhetoric around debt is a total red herring and totally orthogonal to the use of credit cards. Many premium credit cards are actually charge cards and don't allow carrying a balance at all.
I have a credit card, but not the american kind of credit card. I have the European kind that gets locked and blocked if it isn't paid off by the end of the billing period (1 month).
Why would you not want a 3,000 euro interest-free one-month loan? Sometimes you have to deal with bulk expenses that you have the money for, but not the liquidity[1]. In that case credit cards become really useful.
[1] In a recent example I had just moved into a new apartment and had to cover a move-in cost, $2000 worth of IKEA furniture, and $3000 worth of next month's rent in the span of two weeks. All in all some $6000 worth of expenses. It all worked out, but it wouldn't have had I not had access to the liquidity magic of a credit card.
It's not an obsession. Debt is a financial tool to extend your purchasing power beyond the money you have or are willing to spend, in exchange for a fee. It's very powerful and can greatly change your life.
Credit cards in USA and other regions came first before banking really caught up in convenience so they stuck around as the easiest thing to use. Bank transfers are starting to make progress now too and many debit cards function just like credit with all the protection but still as a direct transfer of funds.
Like most things, you're free to use or not use it. However, it's also easy to get yourself in trouble if you use it wrong.
I have no idea where you live, but in my home country (Italy) you have been able to pay with ATM cards for more decades, which means no debt and "pay with money you own".
Debit cards also work the same way.
I also do not understand the obsession with credit cards, but they have some distinctive advantages:
* are more reliably accepted than other means (i.e. no need to convert when abroad, accepted more often than debit cards or ATM cards)
* allow you to make "variable expenses" (i.e. you rent a car with a credit card where if you crash the car you will have to pay X thousand dollars)
* allow you to make large-ish expenses which are difficult with wire transfers (i.e. by that 4K TV Screen while in the shop)
* some places (e.g. Hungary) don't seem to have cheques at all, so either you go outside with a bunch of cash or some expenses (getting that 27" iMac) are really complicated
* not an advantage but: some places (the US?) seem to have a very ingrained culture of personal debt, while others do not
this doesn't fundamentally answer your question, but as a young person, I've been encouraged to get a credit card to develop good credit, for when I need to utilize it in the future. I would rather use a debit card, but I plan to get a credit card for this reason alone.
> can somebody explain why we have credit cards to me?
You have a VISA/MC card because there is no other way to clear globally. You have a credit card instead of a debit card because the issuer gets higher fees.
Leaving the question of debt alone, at this point, you're kind of an idiot if you don't use a credit card as much as you can. At a minimum you can get cash back on every purchase. If you have the discipline to pay your total balance on time you never pay finance charges.
Please note that the distinction between credit and debit card does not exist everywhere, when I moved to the UK, I spent at least an hour discussing with someone trying to understand the concept. To me, they were just all credit cards.
Congratulations to Patrick, John, & the hardworking team @ Stripe! Looking forward to more stellar growth in the future. An investment by AMEX is acknowledgement of an interesting company in the card space. However, an investment by Visa is essentially an industry nod of approval. Seriously can't wait to see what else they have in store.
I'd be happier if they tried to take out the credit card cartel rather than seeking its approval. They're in as good a position as anyone to make progress in that direction, but I suppose everyone has their price.
If anyone from Stripe is reading this... Please, come to Costa Rica (come to Central America for that matter). We already have Paypal and 2Checkout. Having Stripe will help the local tech community develop even more rapidly.
Really fascinating that Visa is a partnere here when they already own Cybersource, which is a key player in the enterprise e-commerce payment space. The $5b valuation is higher than what Visa paid to acquire Cybersource ($2b) in 2010.
Would be great to see the additional features from Cybersource (tax calculation, address verification, fraud management) available with the ease of integration that Stripe provides.
Stripe must introduce cross-border card 2 card payments asap (available for many countries). It's a killer feature and as far as I know is not available by any major world-wide player yet, just on per-country basis.
[+] [-] thejosh|10 years ago|reply
eWay is still 2.6%, hopefully that changes too.
So thanks Stripe for your awesome API & team.
[+] [-] objclxt|10 years ago|reply
Whilst I'll happily congratulate Stripe for the investment, I don't myself see it as a good thing. With Stripe having investments from both Visa and AmEx they have little incentive to challenge the current fee structure. Stripe processes its payments in the US through a strategic deal with Wells Fargo, who have a substantial (> $1 billion) investment in Visa, who in turn have an investment in Stripe. Do any large retailers or merchants have similar investments in Stripe? I don't believe they do.
If you're a merchant I wouldn't see Visa and American Express investing and taking equity in Stripe as a good thing. These are companies that have every possible reason to keep credit card fees as high as possible and prevent regulation from reducing them (which is exactly why Australia's fees are much lower - they're regulated).
I like Stripe as a company. I think they do great stuff. But a Stripe that's received investment from the card networks is a Stripe less likely to make disruptive moves to break the monopoly card networks have today.
[+] [-] bluecalm|10 years ago|reply
Can't wait for some competition to come to Poland. (for the record market price for currency conversion is way below 0.5%).
[+] [-] sleepyhead|10 years ago|reply
[+] [-] arianvanp|10 years ago|reply
I just don't get the obsession? Why would anyone ever want debt? We have money to pay for stuff, why not use your money instead?
[+] [-] patio11|10 years ago|reply
They work globally, for values of "globally" which include "most parts of the first world which you, as someone in the middle or upper middle class, are likely to find yourself in." You can take a wee little bit of plastic issued by a small bank in central Japan and buy dinner in Prague or take a cab in Portland.
They are the cheapest way to access short-term credit, which is an astoundingly useful thing to have available. Poor folks in the US pay through the nose for it; middle class folks pay an amount between "It's literally a we-pay-you-to-access-it situation" and "A relatively modest APR in the teens, which -- in real terms -- means you can borrow $2k for an unanticipated expense without anyone judging you and it will cost you ~$25 a month." (Examples of unanticipated expenses can include medical expenses, car repairs which are necessary to continue one's employment, responding to sudden family emergencies like e.g. a parent's stroke while you're a student living in another state, etc.)
A credit card amounts to a no-haggling 1% discount on all your spending.
They create an instant, durable record of all spending, which is very useful for e.g. businesses or individuals who are attempting to budget better.
Why would anyone ever want debt?
I get the mindset behind this; I was terrified of debt growing up, for family/cultural reasons. I've matured a bit in my relationship with debt as a businessman. $100 in interest is not morally different than $100 in SaaS expenses. If it allows you to grow the business faster than you would be able to from your cash flow, than it's not a particularly difficult decision to borrow.
[+] [-] MaxScheiber|10 years ago|reply
Most people would agree that the most intelligent way to use a credit card is to treat it as a debit card and never incur a balance. Instead, you'd pay each month's bill in full. This way, you pay no interest on your debt; in fact, you are effectively incurring zero debt. Moreover, a lot of credit cards offer rewards programs in terms of cash back or "points" as a percentage of your expenditures. With some mixing and matching of cards, you can easily get 2-3% cash back on your aggregate purchases, or rack up some free airline flights.
I actually find this to be a huge moral gray area; the reason that Visa, Discover, and MasterCard can afford to pay out handsome rewards is partly because of the financially illiterate charging more to their credit cards than they can afford to pay off. [1] I don't have the exact numbers on me, but I think interest versus merchant fees was about a 67%-33% split in terms of credit card company revenue. (American Express is an exception because they do not allow you to carry a balance on a lot of their cards; they will report your account as delinquent and terminate service.)
Otherwise, as other posters have mentioned, credit cards offer fraud protection. Cards aimed at people with good credit scores often come with other nice benefits, such as additional reimbursement if an airline loses your bag.
[1] There are valid reasons to place a huge charge that you can't afford to pay off immediately. Emergencies do happen, for instance, and it's really great to have a line of credit for that situation. But then your credit card serves the same purpose as a traditional loan.
[+] [-] ghshephard|10 years ago|reply
From the perspective of a company with hundreds of employees each spending $20k/month - this is effectively a $2mm+ interest free 30 day loan from the credit card company.
Credit Cards take all the fraud risk. If someone fraudulently uses my credit card number, I am not on the hook for any charges. In Canada, at least, the consumer takes the fraud risk for a debit card. (Actually, for Chip+Pin Credit cards, last time I checked, they were trying to get consumers to take the fraud risk as well - not sure if that went through).
Lots of hotels want a credit card, not cash, when you are checking in. Some of then require a credit card, both for reservation, and your stay. I believe that the vast majority of car-rentals require credit cards.
Credit cards in the United States are an effective mechanism for young people to jump start their FICO score, which is important if they ever want to get a loan to purchase a home, (I'm presuming you see the advantage of buying a home with Debt).
Credit Cards, between points and various plans, provide 1-2% cash back on your purchases.
I can load my Credit Card onto my iPhone. I don't know if it's possible to do that with a Debit Card.
Here in Singapore, OCBC will give me an extra 1% on my savings account with their bank (up to $60K - so, $600/year) if I spend $1000/month on my credit card. (And 1% cash back on said card for all expenses.)
With that said - different places have different culture. Here in Singapore, Lots of Taxi's (all of them?) won't take Visa Credit cards, and around half of them won't take any credit cards. Lots of places (all the hawkers that I've run into) are cash only. In West-Coast Canada, Debit-Cards seem to be pretty popular.
But, Net-Net, outside of some of those use cases - I totally agree with you. I don't really see the fascination with credit cards either, particularly now that Visa+Debit cards+Chip+Pin+Smart Phones seem to offer a lot of the advantages of Credit Cards.
[+] [-] yason|10 years ago|reply
But credit card debt is way overrated. You basically have to have that money anyway (roughly in a month) so that you can pay off the credit card bill. In the average, you can use a credit card to spend your next salary beforehand but that leaves you with nothing to live on the following month. So what you can do with a credit card is rather limited, as if you do not pay off the debt in one month, you're in for some serious interest rates until the balance comes back close to zero again.
Debt is useful when you invest in something that will produce better yield than the interest on the debt. For example, buying an apartment generally will immediately lower your cost of living (in comparison to rent) and subsequently frees more money to pay back the debt and interest. Thus, taking a mortgage makes sense if you can pay it back in a reasonable time so that the proportion of interest won't accumulate into too high in the grand totals.
Then again, buying a new car with a loan makes no sense whatsoever. The value of the car will only degrade and it might actually degrade faster than the rate you're paying off the debt.
[+] [-] morgante|10 years ago|reply
I don't carry a balance on my credit card, but I still absolutely love it.
Three main reasons:
1. I don't have to "balance" my checkbook and constantly keep track of how much money is liquid. Instead of tracking my checking account's value before making any purchase, I just do a single monthly payment.
2. Security/protection: A merchant screws with me? I'm covered. Something breaks? I'm covered. I don't like something? I'm covered. Credit cards make purchasing totally risk-free.
3. Rewards. Credit cards have provided me with thousands of dollars worth of free rewards.
The rhetoric around debt is a total red herring and totally orthogonal to the use of credit cards. Many premium credit cards are actually charge cards and don't allow carrying a balance at all.
[+] [-] Swizec|10 years ago|reply
Why would you not want a 3,000 euro interest-free one-month loan? Sometimes you have to deal with bulk expenses that you have the money for, but not the liquidity[1]. In that case credit cards become really useful.
[1] In a recent example I had just moved into a new apartment and had to cover a move-in cost, $2000 worth of IKEA furniture, and $3000 worth of next month's rent in the span of two weeks. All in all some $6000 worth of expenses. It all worked out, but it wouldn't have had I not had access to the liquidity magic of a credit card.
[+] [-] manigandham|10 years ago|reply
Credit cards in USA and other regions came first before banking really caught up in convenience so they stuck around as the easiest thing to use. Bank transfers are starting to make progress now too and many debit cards function just like credit with all the protection but still as a direct transfer of funds.
Like most things, you're free to use or not use it. However, it's also easy to get yourself in trouble if you use it wrong.
[+] [-] riffraff|10 years ago|reply
I also do not understand the obsession with credit cards, but they have some distinctive advantages:
* are more reliably accepted than other means (i.e. no need to convert when abroad, accepted more often than debit cards or ATM cards)
* allow you to make "variable expenses" (i.e. you rent a car with a credit card where if you crash the car you will have to pay X thousand dollars)
* allow you to make large-ish expenses which are difficult with wire transfers (i.e. by that 4K TV Screen while in the shop)
* some places (e.g. Hungary) don't seem to have cheques at all, so either you go outside with a bunch of cash or some expenses (getting that 27" iMac) are really complicated
* not an advantage but: some places (the US?) seem to have a very ingrained culture of personal debt, while others do not
[+] [-] djf1|10 years ago|reply
[+] [-] needusername|10 years ago|reply
You have a VISA/MC card because there is no other way to clear globally. You have a credit card instead of a debit card because the issuer gets higher fees.
[+] [-] pbreit|10 years ago|reply
[+] [-] realusername|10 years ago|reply
[+] [-] rmc|10 years ago|reply
[+] [-] mahmoudimus|10 years ago|reply
[+] [-] danenania|10 years ago|reply
[+] [-] plumeria|10 years ago|reply
[+] [-] msellout|10 years ago|reply
[+] [-] nailer|10 years ago|reply
[+] [-] pbreit|10 years ago|reply
[+] [-] tommccabe|10 years ago|reply
Would be great to see the additional features from Cybersource (tax calculation, address verification, fraud management) available with the ease of integration that Stripe provides.
[+] [-] jusben1369|10 years ago|reply
[+] [-] vizzah|10 years ago|reply
[+] [-] lucaspottersky|10 years ago|reply
[+] [-] WormyMcSquirmy|10 years ago|reply