10 ms·

https://www.bostonfed.org/publications/public-policy-discussion-paper/2010/who-gains-and-who-loses-from-credit-card-payments-theory-and-calibrations.aspx https:

• jamie_ca 8y ago
  I believe it. My MasterCard is 2% cashback (through points, but that just means I batch it), but has an annual fee of $150 for two cards, and a minimum household income. I need to spend $7500 on the card just to break even, but if I funnel nearly all my expenses through the card I can net $1000 or more a year. These "rewards" come from the merchant, in the form of higher fees, and because the merchant can't discriminate prices between credit/cash (probably in the CC t&c somewhere) then if the merchant wants x% profit from me, they're earning >x% from someone paying cash.
  • Nursie 8y ago
    This sounds very weird to this european.... but that's probably because fees here are capped at 0.3% and AFAICT there's not really such thing as a cashback card. (I think they used to exist, just not any more)
    • gst 8y ago
      Are the fees also capped for foreign cards? I spend significant amounts of time in Europe each year (multiple months) and some of my US credit cards don't charge foreign transaction fees and also earn cashback on transactions done in Europe. I'm wondering who is losing money here - the merchant or the card issuer?
      • realityking 8y ago
        The cap only applies to European debit and credit cards used at an European merchant. It also doesn‘t apply to business cards or three-party schemes like AmEx or Diners (unless they‘re co-branded, due to a recent court ruling). Based on this, I believe it‘she merchant who‘s picking up the tab here.
    • Symbiote 8y ago
      Careful generalising the whole EU on stuff like this. These cards were very common in the UK until the new rules limiting fees were introduced. It looks like there are still a few: https://www.moneysavingexpert.com/credit-cards/cashback-credit-cards/ https://www.moneysavingexpert.com/credit-cards/cashback-cred...
      • Nursie 8y ago
        I live in the UK, and that's kinda what I mean - since that rule was brought in, such things are basically unheard of. The most you can get these days seems to be Avios or Amex rewards points.
        • thisone 8y ago
          If you're looking for cashback cards, you may want to look around again on Money Saving Expert. They are definitely available and without a fee. They aren't huge percentages, but if you're only other choice is an airline card and you don't travel enough to make use of the miles, may as well get the cash. Heck, when MBNA recently lost all it's airline business, the card they switched you to is actually quite decent. A bit of cashback and free Mastercard rate foreign transactions.
          • Nursie 8y ago
            > If you're looking for cashback cards, you may want to look around again on Money Saving Expert. I'm not really, but I did do this earlier. Looks like there are about half a dozen available in the UK, only two appeared to be fee-less, the best one being the ASDA Visa which gave 1%. They seem to be a rarity these days.
        • Symbiote 8y ago
          Then it shouldn't "sound really weird", since you know the regulation is fairly recent, that cashback cards existed in the UK, and that America doesn't necessarily have the same regulation.
          • 8y ago
    • cm2187 8y ago
      Most credit cards in the UK offer cashback cards, at least amex does. I am not aware that fees are caped. In fact last time I checked the fees from payment processors (like barclaycard) for a transaction online was in the region of 5%.
      • vertex-four 8y ago
        Interchange fees are capped, but the fees your payment processor charge you are not - it’s just that the payment processor makes more money now. (If you’re not a risky customer, you should be able to get that way down now.) However, Amex until recently qualified for an exemption from those caps, hence being able to provide a useful cashback scheme.
      • Nursie 8y ago
        > Most credit cards in the UK offer cashback cards Not many AFAICT, and of those that do it's not a lot (Amex platinum have a 5% intro offer, but it falls back to 1% after three months). Plus most of them seem to have annual fees. Weirdly enough the best one appears to be an ASDA credit card which gives 1% and has no fee.
    • radicalbyte 8y ago
      Here in The Netherlands you basically can't use credit cards for offline purchases. Everyone uses the European debit cards with chip/pin. The fees are very low too, it's cheaper to process than cash is.
      • kalleboo 8y ago
        Conversely in Sweden all debit cards are VISA/MasterCard so credit cards work literally everywhere
        • nicoburns 8y ago
          Same in the UK.
        • dantheman0207 8y ago
          Debit cards in The Netherlands are almost exclusively MaestroCard, which is why it's so difficult to find a place that accepts credit card. It's also why The Netherlands developed it's own national online payment system - people didn't have a lot of existing options.
      • Jommi 8y ago
        In Finland there is no real differences between credit or debit
      • Symbiote 8y ago
        > Everyone uses the European debit cards with chip/pin Actually, everyone uses Dutch debit cards with Chip+PIN. Colleagues and I had trouble using debit cards from other EU countries on our last visit.
        • thesimon 8y ago
          Maestro/VPay cards should work fine. Debit MasterCard/Visa Debit is the issue.
          • 8y ago
  • mercutio2 8y ago
    There are many zero fee 2% cash back cards available in the USA. Why pay fees?
    • ThrustVectoring 8y ago
      For that matter, there's higher flat cashback percentages available if you are paying an annual fee and funneling the majority of your spend through that card. Specifically, the Alliant Cashback Visa Signature is at 2.5% with a $59 annual fee.
      • gst 8y ago
        The Alliant credit card is a great investment if you need to pay estimated taxes: The cheapest IRS payment processor charges 1.87% to pay taxes via credit card, which is much less than the cashback that you receive from Alliant.
    • zero_intp 8y ago
      amex platinum offers rewards that easily pay back the cost if you travel. 2 cards, $450 ($300 + $150) $15 uber/month/card $200 in airline fees Automatic hotel and car rental upgrades more...
    • empath75 8y ago
      You can get a lot more money back with the cards with fees. The fees just encourage you to use them more often.
    • frockington 8y ago
      By paying $500 for a card last year, I was able to net at least 1.5k in additional savings. As long as you remember your point systems and use appropriately its a great system. To get the benefits most require travel or some other expenditure
      • mercutio2 8y ago
        The point is that if you’re only getting 2%, there’s no need to pay fees. If you’ve got a card that pays more than 2%, sure, it can make sense to pay fees.
  • winter_blue 8y ago
    Not sure what country you live, but I live in the U.S. and I happen to have a MasterCard [1] and Visa [2] card which both offer unlimited 2% cashback with no annual fee. [1] Citi Double Cash [2] Fidelity Rewards Visa
  • cynwoody 8y ago
    I have an American Express Blue Cash Preferred, with a $95 fee, and a Fidelity Rewards Visa, with no fee. The AX card rebates 6% on groceries, 3% on gas, and 1% on everything else. The Visa pays 2% on everything else. No silly quarterly schedules on changing categories of spending. Therefore, groceries and gas go on the AX Blue, and everything else goes on the Visa (which used to be an AX card, oops, AXP!). And, of course, both cards get paid off in full every month. If you travel for business a lot, there are a dizzying assortment of deals. But I no longer do, so the above seems optimal for me.
    • empath75 8y ago
      As someone who declared bankruptcy from credit card debt in my 20s and now makes a comfortable six figure income with no debt and who heavily uses rewards cards, the fact that this scheme is just a massive transfer of wealth from the poor to the wealthy disgusts me and I wish they’d do away with it. There are so many ways the wealthy get rewarded with more wealth and the poor get charged for being poor. It’s an absurd system.
• smileysteve 8y ago
  I don't buy this because it discounts the high costs of cash controls. Cash has high costs that likely make electronic forms of payment competitive. You have - Employees skimming the till; - Theft insurance for a safe, the nightly amount in the safe - Managers balancing the cash registers with change/safe - Armored trucks picking up the money (2-3 men guarding the transfer) - Banks processing the money - Employee time and frustration ensuring they didn't come up short tldr; It takes one armed robbery or employee malfeasance before ~2% fees seem very much worth it to reduce cash on hand.
  • matthewwiese 8y ago
    > Employee time and frustration they didn't come up short To add to this, back when I was a retail cashier in high school, there was also the threat of having too much money in the register. Either by negligence, due to miscounting a customer's change, or of outright malevolence (by doing the same). Before I even began training at the register, I was told by the store manager that if the cash in my drawer at the end of my shift was over the amount that the transaction history specified I should have (I believe this was > ~$5 lifetime? It's been a few years so I'm foggy as to the exact figure) that I would be let go. Now, I don't mean to bring this up to debate the point one way or the other, just that it is yet another friction to managing cash as opposed to credit cards.
    • Spooky23 8y ago
      It’s an indicator of skimming gone awry. When I worked at a bagel shop, a common transaction was $4.03. Seeing cash coming out, the cashier would subtotal (sending the ticket down to print), and cancel/no sale the transaction. They would do it 10 times and pull $40.
  • IshKebab 8y ago
    Yeah but those costs are more or less fixed. The only way to reduce them is to stop accepting cash entirely. Also just because cash has costs doesn't mean credit card fees aren't insane. They could be close to 0% if they implemented real security to reduce fraud, and there was actual competition (vendors were allowed to pass fees on to customers).