I find it pretty damn rational to deliberately remove CONSUME MOAR incentives like points/miles/cash-back rewards from my life.
With a credit card, the money never leaves your account in the first place, at least until the bill is due.
Regardless, I know I'm legally protected with any credit card I use. With a debit card, it depends on the bank's fine print as to how disputes are handled.
I know this wasn't the point of your story, but refusing to refund the transaction takes it firmly from "honest mistake" into "fraud" territory in my book. Oops, I accidentally stole your money, my bad. No, I won't give it back. WTF?
As such, debit cards are still very popular for people who need to control every dollar, which is a lot more people than you think. Often folk would rather a transaction be denied than to go into expensive debt - they've been burned, they've learned the hard way.
I see a lot of people using pre-paid credit cards. You can just roll into Walgreen's, flop cash on the counter, and "charge up" your card.
But you're absolutely correct, people act as if CC's don't have the inherent risk of going into debt, not as bad but similar to a pay-day loan. People throw around the word privilege, but it applies here.
Agreed.
> debit cards are still very popular for people who need to control every dollar,
But that's terrible advice. Debit cards will debit immediately from your account and you may know that banks are very creative in re-ordering transactions to inflict you maximum pain.
You have $1000 balance and on the same day issue payments for $10, $20, $30, $40, $50 and $999. If the bank processes those in the same order you get hit with one overdraft fee when the final $999 payment goes through.
But no, the bank will rearrange that to process $999 first, and hit you with five overdraft fees. So nice of them. I mean nice for them.
With a credit card the payments are buffered away from your balance and you can choose when to pay it.
To be honest Visa type services should be provided via the central bank (again, Visa itself isn’t a credit card issuer) so businesses don’t have to soak the payment percentages
Regulatory capture has made that near impossible now. At least crypto throws another challenger in the ring and can give people and businesses an, albeit inferior, alternative.
The reason we don't have free tax preparation software (or a tax system that doesn't require that) and don't have free health care is because of competence issues. Taxes seems like a different dimension of problem, so let's leave it aside for the moment. Do we really believe that the people that work in the government here (in the US) are actually competent enough to administer a public health care system? I don't. I'd like to be convinced otherwise. Maybe you mean to say that we'd, I don't know, outlay lobbying and redirect that economic activity toward paying market salaries to people who are, in fact, competent enough to administer a public healthcare system.
The service the networks provide is a way for all participants (banks, people, businesses, etc) to trust one another, as well as a healthy rules-based system to address disputes. Getting this working is not trivial.
Banks pay fees today around this to the payment networks. The Fed could simply charge a tiny fee per transaction to the bank to cover this.
It would be much less expensive than Visa and Mastercard, since there is no service fee on top.
To clarify, I never said it be 100% free, but it would dramatically lower and standardize fees.
As far as trust goes, if you can't trust the central bank, we have bigger problems don't we?
Or UPI in India: https://en.wikipedia.org/wiki/Unified_Payments_Interface
So to answer your question: with law on your side. You limit price gouging, and mandate interoperability with a cheaper system.
https://www.federalreserve.gov/paymentsystems/regii-average-...
The middle man doesn't really take all that much - most of interchange goes to the cost of loan origination, insurance and most importantly cash back and rewards programs. There's no annual fee 2% cash back cards. It's a little disingenuous to say the 1.5-3.5% interchange fee "mostly goes to middle men" when most of it goes right back into your pocket in one way or another.
There are two problems with this. The first is that not everybody is eligible for the no annual fee 2% cash back cards, and the people who aren't are the people in financial straits, so this is effectively a tax on the poor.
The second is that it's an anti-competition measure. Sure, maybe you get 2% out of the 3% the merchant is charged, but then you refuse to use a competing payments system because you want your 2%. And then we're stuck with the incumbents forever because anything new and different can't build a network effect when customers would have to pay a de facto 2% tax on everything they buy in order to use it.
Which is exactly what happens to your debit cards -- and then people are subject to the whims of Visa and their opaque capricious KYC implementation.
At least, in Japan, there is JCB, and in China there is UnionPay / Alipay?
There were a bunch of national networks but they're slowly dying I think. The UK's Switch debit card network got rebranded as Maestro and then killed, for example. The UK still has something called Link however (used for ATM withdrawals and I think nothing else).
True. It's CB in France https://en.wikipedia.org/wiki/Groupement_des_Cartes_Bancaire...
Fewer and fewer banks supports it. It's obvious when looking at the neobanks' offers: https://www.zupimages.net/up/24/07/zbua.png ("Réseau CB: Oui [yes] / Non [no]"). A shame as the whole French payment network now relies almost solely on Visa, a $500T US giant.
Most plastic you get these days supports both that and visa/maestro.
[0] an extension of https://en.wikipedia.org/wiki/Bancomat_(interbank_network)
This jumps out because it is such a wide margin. In reality the average interchange fee is 1.8%. Amex at their _highest_ rate, which is the highest of all the networks is 3.5.
So “roughly” is doing a lot of heavy lifting in that sentence which gets further amplified later in the article when they use it to multiply by the total credit volume.
I don’t know that it fully discredits the argument but it is certainly a weak rhetorical tactic.
In the payments space margins are measured in basis points, 2% seems small to laymen. 200 bips seems crazy big to anyone in the industry.
Is this really so? (I don't know, asking.)
Many credit cards give 2% cash back, so they'd be operating at a loss. I'm quite sure credit card companies will never operate at a loss, so that can't be.
> The Regulation on Interchange Fees for Card-based payment transactions entered into force in June 2015.
> Therefore, the Regulation caps interchange fees for consumer debit cards to 0.2 % and consumer credit cards to 0.3 % of the value of the transaction.
For open-loop networks (Visa/Mastercard), this statement is not accurate.
Is there a reason surcharges aren't sufficient to drive down interchange and take fees? Do customers just not care about paying a 2% fee? Do merchants judge that it's not worth pissing off a subset of their customer base if they use a high-fee card and just eat the expense?
It seems clear to me that the problem comes down to customers not actually paying the cost of using a particular card or network.
That's mostly gone now (although I think there are still a couple states that forbid them, Visa and MC at least allow a credit card surcharge or cash discount in their merchant agreements), but it's so normalized at this point that customers are unlikely to care that CC and cash transactions are the same price. So, if you're a merchant, you set your pricing to include your merchant fees and just take the extra profit on cash transactions.
You absolutely pay it; you just don't see it. Go to small town America and deal with a small business and you'll frequently find businesses that will tell you that you can get a 3% discount paying cash. Go to Walmart or Target or Costco or insert national retailer and the discount or "cash back" will be via their branded card.
This isn’t a “loophole”.
It’s the difference between open-loop payment networks and closed-loop.
Visa/Mastercard are open-loop.
Whereas Amex & Discover are closed loop.
On closed-loop, both the issuer and acquirer is the same bank (Discover).
It’s way easier for a merchant to not accept closed-loop than it is open-loop, because they can just elect to not get an acquiring account at that bank (Discover).
This is why Amex and Discover have always been more expensive for a merchant to accept than Visa/Mastercard.
This article is way longer that it should be and it sensationalizes a fairly well known and simple difference.
It was mostly rules from Visa and Mastercard that prevented American Express from being offered by more banks.
They haven't had any other offerings at all which I've found compelling. And their banking services are too sparse to switch to as a main provider. Hard to say it will be missed.
Capital One to buy Discover Financial in $35B stock deal - https://news.ycombinator.com/item?id=39437387 - Feb 2024 (122 comments)
Capital One Is Buying Discover Financial - https://news.ycombinator.com/item?id=39433109 - Feb 2024 (35 comments)
I'm pretty sure ScotiaBank does as well. They even offer their points programme (Scene) with it.
https://www.scotiabank.com/ca/en/personal/credit-cards/ameri...
