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I don't understand. Isn't there something in the US like `Bancontact' ? In Belgium (and, I believe, Germany, The Netherlands, France, etc.) your bank issues you

I don't understand. Isn't there something in the US like `Bancontact' ? In Belgium (and, I believe, Germany, The Netherlands, France, etc.) your bank issues you a `debit' card that could act as a credit card but it's not its first use or purpose. When you pay with it you slide it into a terminal, enter your pin and validates the transaction. The money is then transferred from your bank account to the merchant's one. There's only one intermediate between banks and it's the service provider (whose name escapes me at the moment) and there are 0 fees applied. It's on the merchant and it's not percentage based but transaction based (much less than 5ç I believe but the merchant has to rent the terminal). There are basic insurance for card stealing that covers `some' things and you can buy larger ones if needed. Why is the credit card the default in the US ?

mschuster91 11y ago
> Why is the credit card the default in the US ? The article states the reason: interests, over-due payback fees. Banks in the US don't have any incentive to provide their customers with debit cards other than to generate a shitty small fee. Banks make real money by borrowing the customer (e.g.) 1000$ and collecting it either in full or in partials, and they hope that the customer pays in partials because they can earn interest for long(er) time. A debit card, on the other side, allows for maximum 3-4 days (due to interbank settlement weirdness) and thus the profit from interest falls away.
- lotsofpulp 11y ago
  Benefits of credit cards : you can get ~2% back on all purchases, you get a free minimum 20 day loan so your cash is not affected immediately, and if there is fraud, you don't lose any cash. Also, has insurance and foreign exchange fee benefits. Debit cards: if it gets compromised, you start losing cash out of your account I don't see why it is in anyone's benefit to use a debit card, unless they lack self control.
  - mschuster91 11y ago
    > you can get ~2% back on all purchases Who pays for these 2% cashback? Most definitely not the card networks, and not the merchants. It's the CONSUMERS who pay for their own cashback. > Also, has insurance and foreign exchange fee benefits That "insurance" stuff is highly questionable imho, and most people don't ever need the forex benefits. > Debit cards: if it gets compromised, you start losing cash out of your account Chip and PIN. It's not hacker proof either, I admit, but way better than CCs.
    - massysett 11y ago
      Yes we pay, but consumers without cards pay the exact same price. Merchants seem loath to charging a credit card fee. I've seen a few gas stations offer a modest cash discount, and a few places like Costco won't take most credit cards. As long as consumers don't see the price directly, they have no cause to care. If merchants charged 5 cents for debit but 2 percent for credit, that would wipe out my benefit for "rewards" and my use of credit would be eliminated immediately.
    - lotsofpulp 11y ago
      Since the prices are the same for mostly everything, then it's even more imperative to make sure you get your 2% back, otherwise you're just subsidizing other people's credit card rewards!
    - tracker1 11y ago
      But the price isn't lower for using cash, or other payment methods... as I mentioned in another post, I'm surprised Walmart and/or Amazon don't have their own charge account system, given their sheer size, they could offer a 2-3% discount for members, and still come out ahead.
      - mrks_ 11y ago
        Amazon has a store card (https://www.amazon.com/iss/credit/storecardmember https://www.amazon.com/iss/credit/storecardmember). Is that what you mean?
deleted 11y ago
[deleted]
MichaelBurge 11y ago
It's been years since I've used any debit card. I'm scared to use my debit card, preferring a credit card in almost every case. The one exception is when I need to get cash from an account(and I tend to just visit the bank in-person for that, rather than risk an ATM or grocery store machine being rigged). I understand that my credit card has very strong protections by law, since the bank has loaned me money and people do not have to pay back debts that are not theirs, the bank is at risk of losing money in the event of fraud. Debit cards claim similar protections, but since my actual money was transferred I am the one at risk of losing money in the event of fraud. The bank isn't as motivated to investigate my case, since they're not at risk as much. For a similar reason, I'm scared of checks. If you write someone a check, that's enough information for them to drain the associated account. It's free to query the bank to see "Does this account have $X?", so a binary search will let you know the balance of any account on a check. Then they can withdraw it at any time. It's especially bad for checks written against business checking accounts, since they're not protected by consumer protection laws that allow for 60 days to find fraud but rather by the Uniform Commercial Code that only allows a single day to catch fraud. Do I really want to check on my bank account every single day? For now, I just live with that terror and only write checks to people big enough to sue. No SaaS app will ever get a check from me without me doing some restructuring on my bank accounts.
- kintamanimatt 11y ago
  Aren't checks an anachronism in the US yet? I'd have thought bank transfers would have been more widely adopted in the US by now. I tend to use my debit cards more than credit cards. I've occasionally had to make chargebacks for fraudulent use and there's been no perceptible difference between a credit card chargeback and a debit card chargeback. The bank does the job equally well no matter the type of account. It's all fairly seamless and has always been done quickly by phone. The biggest risk I foresee is losing my wallet, not a fraudulent transaction. That's why I have two wallets with two set of cards, so I can easily failover to that wallet while replacement cards are being generated. The only interesting event that the bank couldn't/wouldn't fix was the time when Best Buy somehow auth'd my card dozens of times in a row for a reasonably expensive laptop. They managed to reduce my available balance far, far into the negative. Obviously they were just authorizations, not final sales, so the money never actually came out of my account, but it was interesting how my bank was happy to let me go many thousands overdrawn and their fraud systems didn't kick in at all. That card was useless until the authorizations dropped off the account.
danmaz74 11y ago
Debit cards are prevalent in Italy too, where they're called "PagoBancomat". But AFAIK the cost is commission based (now limited by European law to 0.2%, as opposed to 0.3% for credit card transactions).
mseebach 11y ago
Pretty much every European country has their own incompatible, cheap debit card system. The problem is that they are incompatible, and often difficult to access for outsiders (non-permanent residents). As a contractor, I've be in large company cafeterias where the only payment option was such a card (getting by by handing cash to one of the employees I'm working with, high friction and not very professional). In the US, when I was an exchange student in the late 90s, I could pay with my local banks ATM card (so, a debit card) in the local supermarket. I can't remember how far that network extended, but it certainly existed. The reason credit cards are a thing is because processing payments between a global set of debitors and a global set of creditors, instantly and securely (and yes, despite various problems and shortcomings, on the margin, it's very safe), is a pretty hard problem, much more so 20-30 years ago when the current systems came of age. The credit part is necessary because until recently, the technology simply didn't allow for online processing of payments, all the way from the debitors bank account. The payment would clear against your credit, the expectation that you're good for it, not actual cash in your account. Running such a network is complicated, thus the fees. In the past 5 or so years, both Visa and MasterCard have introduced proper debit cards, that is, card where payments are instantly processed against your bank account balance. This is still complicated, but essentially a new, much simpler and more modern network, and thus fees are much lower. Despite the security of the legacy network, this is safer yet, which is good for both merchants and bank (and, indirectly, consumers, though arguments can be made over whether the lower fees outweigh the cost of taking on a higher liability). I expect expensive credit cards to largely go away, if not by regulation, then competition, and be replaced by debit cards and decoupled credit products and travel-benefits/insurance products. On the margin, the vast majority of users will (and economically should) prefer to save ~2% on their spending to earning airline miles.
- jacquesm 11y ago
  The situation has dramatically improved in the last couple of years. I've been on a fairly extensive trip of Europe recently and I had to use my credit card only on the French toll routes, everywhere else my regular debit card worked. As opposed to previous trips where far more than half the expenses ended up on the CC.
- 11y ago

mschuster91 11y ago

> Why is the credit card the default in the US ? The article states the reason: interests, over-due payback fees. Banks in the US don't have any incentive to provide their customers with debit cards other than to generate a shitty small fee. Banks make real money by borrowing the customer (e.g.) 1000$ and collecting it either in full or in partials, and they hope that the customer pays in partials because they can earn interest for long(er) time. A debit card, on the other side, allows for maximum 3-4 days (due to interbank settlement weirdness) and thus the profit from interest falls away.

lotsofpulp 11y ago
Benefits of credit cards : you can get ~2% back on all purchases, you get a free minimum 20 day loan so your cash is not affected immediately, and if there is fraud, you don't lose any cash. Also, has insurance and foreign exchange fee benefits. Debit cards: if it gets compromised, you start losing cash out of your account I don't see why it is in anyone's benefit to use a debit card, unless they lack self control.
- mschuster91 11y ago
  > you can get ~2% back on all purchases Who pays for these 2% cashback? Most definitely not the card networks, and not the merchants. It's the CONSUMERS who pay for their own cashback. > Also, has insurance and foreign exchange fee benefits That "insurance" stuff is highly questionable imho, and most people don't ever need the forex benefits. > Debit cards: if it gets compromised, you start losing cash out of your account Chip and PIN. It's not hacker proof either, I admit, but way better than CCs.
  - massysett 11y ago
    Yes we pay, but consumers without cards pay the exact same price. Merchants seem loath to charging a credit card fee. I've seen a few gas stations offer a modest cash discount, and a few places like Costco won't take most credit cards. As long as consumers don't see the price directly, they have no cause to care. If merchants charged 5 cents for debit but 2 percent for credit, that would wipe out my benefit for "rewards" and my use of credit would be eliminated immediately.
  - lotsofpulp 11y ago
    Since the prices are the same for mostly everything, then it's even more imperative to make sure you get your 2% back, otherwise you're just subsidizing other people's credit card rewards!
  - tracker1 11y ago
    But the price isn't lower for using cash, or other payment methods... as I mentioned in another post, I'm surprised Walmart and/or Amazon don't have their own charge account system, given their sheer size, they could offer a 2-3% discount for members, and still come out ahead.
    - mrks_ 11y ago
      Amazon has a store card (https://www.amazon.com/iss/credit/storecardmember https://www.amazon.com/iss/credit/storecardmember). Is that what you mean?

deleted 11y ago

[deleted]

MichaelBurge 11y ago

It's been years since I've used any debit card. I'm scared to use my debit card, preferring a credit card in almost every case. The one exception is when I need to get cash from an account(and I tend to just visit the bank in-person for that, rather than risk an ATM or grocery store machine being rigged). I understand that my credit card has very strong protections by law, since the bank has loaned me money and people do not have to pay back debts that are not theirs, the bank is at risk of losing money in the event of fraud. Debit cards claim similar protections, but since my actual money was transferred I am the one at risk of losing money in the event of fraud. The bank isn't as motivated to investigate my case, since they're not at risk as much. For a similar reason, I'm scared of checks. If you write someone a check, that's enough information for them to drain the associated account. It's free to query the bank to see "Does this account have $X?", so a binary search will let you know the balance of any account on a check. Then they can withdraw it at any time. It's especially bad for checks written against business checking accounts, since they're not protected by consumer protection laws that allow for 60 days to find fraud but rather by the Uniform Commercial Code that only allows a single day to catch fraud. Do I really want to check on my bank account every single day? For now, I just live with that terror and only write checks to people big enough to sue. No SaaS app will ever get a check from me without me doing some restructuring on my bank accounts.

kintamanimatt 11y ago
Aren't checks an anachronism in the US yet? I'd have thought bank transfers would have been more widely adopted in the US by now. I tend to use my debit cards more than credit cards. I've occasionally had to make chargebacks for fraudulent use and there's been no perceptible difference between a credit card chargeback and a debit card chargeback. The bank does the job equally well no matter the type of account. It's all fairly seamless and has always been done quickly by phone. The biggest risk I foresee is losing my wallet, not a fraudulent transaction. That's why I have two wallets with two set of cards, so I can easily failover to that wallet while replacement cards are being generated. The only interesting event that the bank couldn't/wouldn't fix was the time when Best Buy somehow auth'd my card dozens of times in a row for a reasonably expensive laptop. They managed to reduce my available balance far, far into the negative. Obviously they were just authorizations, not final sales, so the money never actually came out of my account, but it was interesting how my bank was happy to let me go many thousands overdrawn and their fraud systems didn't kick in at all. That card was useless until the authorizations dropped off the account.

danmaz74 11y ago

Debit cards are prevalent in Italy too, where they're called "PagoBancomat". But AFAIK the cost is commission based (now limited by European law to 0.2%, as opposed to 0.3% for credit card transactions).

mseebach 11y ago

Pretty much every European country has their own incompatible, cheap debit card system. The problem is that they are incompatible, and often difficult to access for outsiders (non-permanent residents). As a contractor, I've be in large company cafeterias where the only payment option was such a card (getting by by handing cash to one of the employees I'm working with, high friction and not very professional). In the US, when I was an exchange student in the late 90s, I could pay with my local banks ATM card (so, a debit card) in the local supermarket. I can't remember how far that network extended, but it certainly existed. The reason credit cards are a thing is because processing payments between a global set of debitors and a global set of creditors, instantly and securely (and yes, despite various problems and shortcomings, on the margin, it's very safe), is a pretty hard problem, much more so 20-30 years ago when the current systems came of age. The credit part is necessary because until recently, the technology simply didn't allow for online processing of payments, all the way from the debitors bank account. The payment would clear against your credit, the expectation that you're good for it, not actual cash in your account. Running such a network is complicated, thus the fees. In the past 5 or so years, both Visa and MasterCard have introduced proper debit cards, that is, card where payments are instantly processed against your bank account balance. This is still complicated, but essentially a new, much simpler and more modern network, and thus fees are much lower. Despite the security of the legacy network, this is safer yet, which is good for both merchants and bank (and, indirectly, consumers, though arguments can be made over whether the lower fees outweigh the cost of taking on a higher liability). I expect expensive credit cards to largely go away, if not by regulation, then competition, and be replaced by debit cards and decoupled credit products and travel-benefits/insurance products. On the margin, the vast majority of users will (and economically should) prefer to save ~2% on their spending to earning airline miles.

jacquesm 11y ago
The situation has dramatically improved in the last couple of years. I've been on a fairly extensive trip of Europe recently and I had to use my credit card only on the French toll routes, everywhere else my regular debit card worked. As opposed to previous trips where far more than half the expenses ended up on the CC.
11y ago