7 ms·

I have to say the best thing about credit cards in the U.S. is the massive point bonuses you get for signing up for cards. I have gamed the credit card bonus sy

I have to say the best thing about credit cards in the U.S. is the massive point bonuses you get for signing up for cards. I have gamed the credit card bonus system for ~6 years and pay for 90%+ of my personal travel including international business and first class flights and high end hotels with points earned from opening multiple cards each year with almost no impact to my credit score (760+). Combined with the fact that points are not taxable it is probably the single most lucrative “side hustle” I have that requires almost no work.

ceejayoz 8y ago
All those bonuses are coming from somewhere, though. In this case, it mostly comes from higher fees on merchants, which leads to higher prices. You're getting some points, sure, but everything you buy is a percent or two higher to pay for it.
- ams6110 8y ago
  That's all true, but as a consumer I think a percent or two is worth the conveniences that cards offer. I pay for virtually everything with cards. I rarely even carry cash. Cash is bulky, dirty, inconvenient to get, and has absolutely no loss protection. I pay my balance in full every month, so I don't pay finance charges. If you can't do that, then don't use cards. They will eat you alive. Understand that most of the benefits/points that are offered are paid for by people who carry a balance. If you can manage them and keep the balances paid, the points are just icing on the cake. I rarely pay for hotels anymore, for example.
  - AceJohnny2 8y ago
    > If you can't do that, then don't use cards. They will eat you alive. I like to think as credit cards as tax on the poor to feed the rich.
    - AlexTWithBeard 8y ago
      I would call it a tax on those with poor financial planning skills.
      - AceJohnny2 8y ago
        Also, yes. But not only. I recommend this wonderful essay into the trials of being poor, which isn't necessarily because you're bad at financial planning: https://whatever.scalzi.com/2005/09/03/being-poor/ https://whatever.scalzi.com/2005/09/03/being-poor/ Also this recent HN posting and discussion, about the "Vimes [from Discworld] Boot Theory": https://news.ycombinator.com/item?id=18793259 https://news.ycombinator.com/item?id=18793259
        AlexTWithBeard 8y ago
        Read the "being poor" article. Conclusion: I'm poor.
      - moosey 8y ago
        That would be great if it weren't a prisoner's dilemma at that point. There is no getting away from the fees, so I must get a credit card, but that means that all of my purchases are tracked. If you don't think this is important, you haven't been paying much attention.
  - nothrabannosir 8y ago
    > but as a consumer I think a percent or two is worth the conveniences that cards offer Yes, but we're also paying for that guy's international flights. I don't care how little it is: I don't want to pay for that. Buy your own vacation. For the record: good on him for taking the points. 100% his prerogative. My problem is purely with the eventual cost being amortised across other customers, even non-CC customers.
- pitaj 8y ago
  Sure, but very rarely can you pay less by not using credit cards. There are some exemptions like "cash discounts" but in my experience they're rare.
  - coldtea 8y ago
    >Sure, but very rarely can you pay less by not using credit cards Only if you pay the full dose immediately at the end of the billing period. Anytime you've haven't paid your cc bill in time, you're charged way more in interest. People have crushed under cc debt.
    - pitaj 8y ago
      That's tangential at best to a discussion of credit cards as a payment processor.
      - coldtea 8y ago
        The encouragement of the use of credit cards goes hand in hand with "spontaneous purchases" without the money, added interest, and cc debt. So, it's only tangential in the NRA sense of "guns don't kill people, people do". Hooking people to using credit cards for payments plays into this whole system. In Germany and France, for example, the equivalent payment systems are still online, through cards, etc., but they involves debit cards almost exclusively.
    - Nasrudith 8y ago
      I think it is a given that ironically you should never use credt cards for credit but like a debit card. The point about paying less is that the merchants who often complain of the processing fees and delays seldom give a discount for paying in cash to offset the lack of fee surcharges bundled into sale prices.
- 0xffff2 8y ago
  Everything everyone buys is a percent or two higher. This behavior should really be considered antisocial. GP is taking advantage of the system for their own personal (moderate) gain to the (very small) detriment of everyone else.
  - ForHackernews 8y ago
    Sadly, that pretty much describes most successful businesses on the internet today.
  - FiveSquared 8y ago
    Then if I walk in front of my neighbor’s driveway, I will take advantage of the system for my own personal gain to the detriment of the neighbors!
  - dguo 8y ago
    Seems like a good example of "concentrated benefits versus diffuse costs." https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action
  - megaman8 8y ago
    The problem isn't the consumer who takes advantage of the system. the problem is the regulations that prevent consumers from choosing whether they want to pay that extra 2-3% that credit card companies charge the merchant. Right now, if i want to pay with cash, I still end up paying that extra 2-3%, even if the merchant wants to give me a 2-3% discount, they're not allowed, due to those regulations.
    - Domenic_S 8y ago
      It's payment network agreements, not regulations in the government sense. E.G. If you accept Visa, you cannot mark up credit transactions & discount for cash per your agreement with them. It's nuanced (gas stations do it compliantly by advertising both prices next to each other). More info: https://www.pymnts.com/visa/2018/non-compliant-cash-discount-card-fees/ https://www.pymnts.com/visa/2018/non-compliant-cash-discount...
- skj 8y ago
  A tax paid by those without the same strategy, presumably. For instance, I hate the idea of CC points and do not participate. I still use my card and pay the same prices.
- mehrdadn 8y ago
  Isn't this only true if you assume profits are constant (hence competition effectively not happening)? They could we be paying for some of it by sacrificing profits, and judging from the fact that some of the best deals get discontinued, I don't assume they all end up making money.
  - zAy0LfpBZLC8mAC 8y ago
    The money still came from somewhere.
    - mehrdadn 8y ago
      Yes, I don't think anyone claimed money comes from nowhere.
      - zAy0LfpBZLC8mAC 8y ago
        Well, you kinda did when you implied that profits aren't paid by the customer. Just because a company "sacrifices profits", doesn't mean those profits would be the same at the same price in a market where there is no credit card quasi-monopoly.
- the_watcher 8y ago
  I think the bonuses are primarily paid for by the interest charged to people who carry a balance, since the entire point of the rewards programs is to create customers who carry a balance.
  - ceejayoz 8y ago
    At least some of the cost is borne by merchants - rewards cards have a higher interchange rate. https://www.nerdwallet.com/blog/credit-cards/money-credit-card-rewards/ https://www.nerdwallet.com/blog/credit-cards/money-credit-ca...
    - cmurf 8y ago
      Yes, if there were a law requiring the consumer pay all fees for their specific card, this form of freeloading wouldn't exist.
  - ticmasta 8y ago
    This is true. The fees pay to run the program including all the front-end companies that sell card products to the market; the banks financing it want those big, juicy 20% APRs
- deleted 8y ago
  [deleted]
- ticmasta 8y ago
  But everyone pays the higher prices while very few hustle CC rewards programs. Just like that superman movie plot or Office Space, the GP is gathering up all those fractional pennies and using them to buy first class air travel.
curiousgal 8y ago
r/churning for those who are interested.
mehrdadn 8y ago
Are you sure you're not spending more than you otherwise would be? That's the real kicker with bonuses.
- randomacct3847 8y ago
  I pay my rent with my credit card when I need to meet a certain level of spend to get a sign up bonus e.g. I’m not actually buying things I otherwise wouldn’t buy just because I opened a new card
  - wil421 8y ago
    Are you using cash advances to pay for rent? How can you use a credit card to pay rent without getting hit hard with fees and special interest.
    - dguo 8y ago
      Some places just accept credit card payments. Even with a ~3% surcharge for paying with a credit card, it can easily be worth it, depending on the particular sign up bonus.
    - randomacct3847 8y ago
      I pay a 2.5% fee but it’s not considered a cash advance just a regular purchase. The math works for me since it’s the fastest and most convenient way to meet spend (usually around $3k) For a $3k rent payment (mine is less than this but as ex to meet spend), you’d pay a $75 fee, but earn the signup bonus + 3075 points. Depending on the credit card, 3075 points is likely at least worth $30.75 if not more, so your net fee is $44.25 or 1.475%, which is not bad IMO.
      - wil421 8y ago
        Gotcha it was to meet the sign on bonus. I was thinking you were getting a net benefit for just the points alone not to meet the sign on bonus.
ZeljkoS 8y ago
Money doesn't grow on trees. The "bonus" you get is actually paid by higher prices on the stuff people buy. Card fees are transferred to merchants, and merchants transfer it to customers via higher prices. I wrote about it some time ago: https://svedic.org/economy/indirect-razors-and-blades-business-model https://svedic.org/economy/indirect-razors-and-blades-busine... But, you are right, if you careful you can game the model. In your case, if you are paying 90% of your travel expenses with bonuses you are probably getting back more than $400 a year, which is an average credit card cost per US household.
- randomacct3847 8y ago
  It’s much more than $400. If you optimize redemptions it is more like $25k+ back a year e.g. a single first class redemption (took Japan Airlines first class last month to Tokyo) was ~$12k one way.
  - ac29 8y ago
    Keep in mind the profit margin on first class seats is insane - their cost to provide a "$12k" trip was probably more like $1-2k. There's a reason you can get crazy amounts of miles via sign up bonuses, but you never see a cash back award much above $500 (and those are usually for business cards with high minimum spends).
    - deleted 8y ago
      [deleted]
    - randomacct3847 8y ago
      Yes, I mean I don't personally value a first class trip at $12k (e.g. would never pay for it out of pocket), but it's fun to be able to experience the very best in air travel at almost no cost every one in awhile. I do value business class, though, and happy that I can redeem points over paying for it out of pocket. There is a joy in actually being able to lie flat and sleep on a 11-14 hour flight to Asia or Europe and feel rested when you arrive vs feeling sore/cramped/and jet lagged for the first 2 days of your trip!
kakarot 8y ago
The best thing about credit cards in the U.S. is the amount of transactional data credit card companies are able to sell to anyone with a dollar. Your credit reward system comes at the cost of half of the world's businesses and the government knowing every single thing on your shopping list last week.
- paulie_a 8y ago
  That is not how credit card processing works. Some companies store additional data on a store by store basis, but visa/MasterCard does not transmit that info. They deal with a lot of data, but it's transactional. To make the transaction happen. So no they can't sell your shopping list, the system simply doesn't work that way. Terminals don't send that info.
  - kakarot 8y ago
    In-store reward systems aggregate purchases under a common identifier, and chain stores will also attempt to cross-reference purchases and create identifiers for non-members through credit and debit cards. Even when individual items cannot be attained, these systems still can reveal a lot just through the purchase summaries. Store location, type of purchase, etc. All of this data ends up in the hands of tons of financial companies. Stores don't have to directly give up this data to competitors. The information market is simply too big and unregulated. Cash is the only way to circumvent this process until we have anonymous credit systems.
    - paulie_a 8y ago
      Yes in store reward systems are completely different than credit card and debit card companies. I work in that industry and look at the raw data. You are definitely incorrect about how the various levels of a transaction works and how the various companies collect pieces of relevant information. Information is definitely collected but please don't spread misinformation. Your above sumnary is completely misguided to how it actually works.
      - 8y ago
mrfusion 8y ago
That’s amazing. Do you have any tips? I was trying to do this and got completely overwhelmed with all the numbers. Plus for the life of me I can figure out if a travel card is better than cash back.
alkonaut 8y ago
I wonder why this isn’t the case in Europe? Some cards offer small bonuses but peanuts compared to US ones.

ceejayoz 8y ago

All those bonuses are coming from somewhere, though. In this case, it mostly comes from higher fees on merchants, which leads to higher prices. You're getting some points, sure, but everything you buy is a percent or two higher to pay for it.

ams6110 8y ago
That's all true, but as a consumer I think a percent or two is worth the conveniences that cards offer. I pay for virtually everything with cards. I rarely even carry cash. Cash is bulky, dirty, inconvenient to get, and has absolutely no loss protection. I pay my balance in full every month, so I don't pay finance charges. If you can't do that, then don't use cards. They will eat you alive. Understand that most of the benefits/points that are offered are paid for by people who carry a balance. If you can manage them and keep the balances paid, the points are just icing on the cake. I rarely pay for hotels anymore, for example.
- AceJohnny2 8y ago
  > If you can't do that, then don't use cards. They will eat you alive. I like to think as credit cards as tax on the poor to feed the rich.
  - AlexTWithBeard 8y ago
    I would call it a tax on those with poor financial planning skills.
    - AceJohnny2 8y ago
      Also, yes. But not only. I recommend this wonderful essay into the trials of being poor, which isn't necessarily because you're bad at financial planning: https://whatever.scalzi.com/2005/09/03/being-poor/ https://whatever.scalzi.com/2005/09/03/being-poor/ Also this recent HN posting and discussion, about the "Vimes [from Discworld] Boot Theory": https://news.ycombinator.com/item?id=18793259 https://news.ycombinator.com/item?id=18793259
      - AlexTWithBeard 8y ago
        Read the "being poor" article. Conclusion: I'm poor.
    - moosey 8y ago
      That would be great if it weren't a prisoner's dilemma at that point. There is no getting away from the fees, so I must get a credit card, but that means that all of my purchases are tracked. If you don't think this is important, you haven't been paying much attention.
- nothrabannosir 8y ago
  > but as a consumer I think a percent or two is worth the conveniences that cards offer Yes, but we're also paying for that guy's international flights. I don't care how little it is: I don't want to pay for that. Buy your own vacation. For the record: good on him for taking the points. 100% his prerogative. My problem is purely with the eventual cost being amortised across other customers, even non-CC customers.
pitaj 8y ago
Sure, but very rarely can you pay less by not using credit cards. There are some exemptions like "cash discounts" but in my experience they're rare.
- coldtea 8y ago
  >Sure, but very rarely can you pay less by not using credit cards Only if you pay the full dose immediately at the end of the billing period. Anytime you've haven't paid your cc bill in time, you're charged way more in interest. People have crushed under cc debt.
  - pitaj 8y ago
    That's tangential at best to a discussion of credit cards as a payment processor.
    - coldtea 8y ago
      The encouragement of the use of credit cards goes hand in hand with "spontaneous purchases" without the money, added interest, and cc debt. So, it's only tangential in the NRA sense of "guns don't kill people, people do". Hooking people to using credit cards for payments plays into this whole system. In Germany and France, for example, the equivalent payment systems are still online, through cards, etc., but they involves debit cards almost exclusively.
  - Nasrudith 8y ago
    I think it is a given that ironically you should never use credt cards for credit but like a debit card. The point about paying less is that the merchants who often complain of the processing fees and delays seldom give a discount for paying in cash to offset the lack of fee surcharges bundled into sale prices.
0xffff2 8y ago
Everything everyone buys is a percent or two higher. This behavior should really be considered antisocial. GP is taking advantage of the system for their own personal (moderate) gain to the (very small) detriment of everyone else.
- ForHackernews 8y ago
  Sadly, that pretty much describes most successful businesses on the internet today.
- FiveSquared 8y ago
  Then if I walk in front of my neighbor’s driveway, I will take advantage of the system for my own personal gain to the detriment of the neighbors!
- dguo 8y ago
  Seems like a good example of "concentrated benefits versus diffuse costs." https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action
- megaman8 8y ago
  The problem isn't the consumer who takes advantage of the system. the problem is the regulations that prevent consumers from choosing whether they want to pay that extra 2-3% that credit card companies charge the merchant. Right now, if i want to pay with cash, I still end up paying that extra 2-3%, even if the merchant wants to give me a 2-3% discount, they're not allowed, due to those regulations.
  - Domenic_S 8y ago
    It's payment network agreements, not regulations in the government sense. E.G. If you accept Visa, you cannot mark up credit transactions & discount for cash per your agreement with them. It's nuanced (gas stations do it compliantly by advertising both prices next to each other). More info: https://www.pymnts.com/visa/2018/non-compliant-cash-discount-card-fees/ https://www.pymnts.com/visa/2018/non-compliant-cash-discount...
skj 8y ago
A tax paid by those without the same strategy, presumably. For instance, I hate the idea of CC points and do not participate. I still use my card and pay the same prices.
mehrdadn 8y ago
Isn't this only true if you assume profits are constant (hence competition effectively not happening)? They could we be paying for some of it by sacrificing profits, and judging from the fact that some of the best deals get discontinued, I don't assume they all end up making money.
- zAy0LfpBZLC8mAC 8y ago
  The money still came from somewhere.
  - mehrdadn 8y ago
    Yes, I don't think anyone claimed money comes from nowhere.
    - zAy0LfpBZLC8mAC 8y ago
      Well, you kinda did when you implied that profits aren't paid by the customer. Just because a company "sacrifices profits", doesn't mean those profits would be the same at the same price in a market where there is no credit card quasi-monopoly.
the_watcher 8y ago
I think the bonuses are primarily paid for by the interest charged to people who carry a balance, since the entire point of the rewards programs is to create customers who carry a balance.
- ceejayoz 8y ago
  At least some of the cost is borne by merchants - rewards cards have a higher interchange rate. https://www.nerdwallet.com/blog/credit-cards/money-credit-card-rewards/ https://www.nerdwallet.com/blog/credit-cards/money-credit-ca...
  - cmurf 8y ago
    Yes, if there were a law requiring the consumer pay all fees for their specific card, this form of freeloading wouldn't exist.
- ticmasta 8y ago
  This is true. The fees pay to run the program including all the front-end companies that sell card products to the market; the banks financing it want those big, juicy 20% APRs
deleted 8y ago
[deleted]
ticmasta 8y ago
But everyone pays the higher prices while very few hustle CC rewards programs. Just like that superman movie plot or Office Space, the GP is gathering up all those fractional pennies and using them to buy first class air travel.

curiousgal 8y ago

r/churning for those who are interested.

mehrdadn 8y ago

Are you sure you're not spending more than you otherwise would be? That's the real kicker with bonuses.

randomacct3847 8y ago
I pay my rent with my credit card when I need to meet a certain level of spend to get a sign up bonus e.g. I’m not actually buying things I otherwise wouldn’t buy just because I opened a new card
- wil421 8y ago
  Are you using cash advances to pay for rent? How can you use a credit card to pay rent without getting hit hard with fees and special interest.
  - dguo 8y ago
    Some places just accept credit card payments. Even with a ~3% surcharge for paying with a credit card, it can easily be worth it, depending on the particular sign up bonus.
  - randomacct3847 8y ago
    I pay a 2.5% fee but it’s not considered a cash advance just a regular purchase. The math works for me since it’s the fastest and most convenient way to meet spend (usually around $3k) For a $3k rent payment (mine is less than this but as ex to meet spend), you’d pay a $75 fee, but earn the signup bonus + 3075 points. Depending on the credit card, 3075 points is likely at least worth $30.75 if not more, so your net fee is $44.25 or 1.475%, which is not bad IMO.
    - wil421 8y ago
      Gotcha it was to meet the sign on bonus. I was thinking you were getting a net benefit for just the points alone not to meet the sign on bonus.

ZeljkoS 8y ago

Money doesn't grow on trees. The "bonus" you get is actually paid by higher prices on the stuff people buy. Card fees are transferred to merchants, and merchants transfer it to customers via higher prices. I wrote about it some time ago: https://svedic.org/economy/indirect-razors-and-blades-business-model https://svedic.org/economy/indirect-razors-and-blades-busine... But, you are right, if you careful you can game the model. In your case, if you are paying 90% of your travel expenses with bonuses you are probably getting back more than $400 a year, which is an average credit card cost per US household.

randomacct3847 8y ago
It’s much more than $400. If you optimize redemptions it is more like $25k+ back a year e.g. a single first class redemption (took Japan Airlines first class last month to Tokyo) was ~$12k one way.
- ac29 8y ago
  Keep in mind the profit margin on first class seats is insane - their cost to provide a "$12k" trip was probably more like $1-2k. There's a reason you can get crazy amounts of miles via sign up bonuses, but you never see a cash back award much above $500 (and those are usually for business cards with high minimum spends).
  - deleted 8y ago
    [deleted]
  - randomacct3847 8y ago
    Yes, I mean I don't personally value a first class trip at $12k (e.g. would never pay for it out of pocket), but it's fun to be able to experience the very best in air travel at almost no cost every one in awhile. I do value business class, though, and happy that I can redeem points over paying for it out of pocket. There is a joy in actually being able to lie flat and sleep on a 11-14 hour flight to Asia or Europe and feel rested when you arrive vs feeling sore/cramped/and jet lagged for the first 2 days of your trip!

kakarot 8y ago

The best thing about credit cards in the U.S. is the amount of transactional data credit card companies are able to sell to anyone with a dollar. Your credit reward system comes at the cost of half of the world's businesses and the government knowing every single thing on your shopping list last week.

paulie_a 8y ago
That is not how credit card processing works. Some companies store additional data on a store by store basis, but visa/MasterCard does not transmit that info. They deal with a lot of data, but it's transactional. To make the transaction happen. So no they can't sell your shopping list, the system simply doesn't work that way. Terminals don't send that info.
- kakarot 8y ago
  In-store reward systems aggregate purchases under a common identifier, and chain stores will also attempt to cross-reference purchases and create identifiers for non-members through credit and debit cards. Even when individual items cannot be attained, these systems still can reveal a lot just through the purchase summaries. Store location, type of purchase, etc. All of this data ends up in the hands of tons of financial companies. Stores don't have to directly give up this data to competitors. The information market is simply too big and unregulated. Cash is the only way to circumvent this process until we have anonymous credit systems.
  - paulie_a 8y ago
    Yes in store reward systems are completely different than credit card and debit card companies. I work in that industry and look at the raw data. You are definitely incorrect about how the various levels of a transaction works and how the various companies collect pieces of relevant information. Information is definitely collected but please don't spread misinformation. Your above sumnary is completely misguided to how it actually works.
    - 8y ago

mrfusion 8y ago

That’s amazing. Do you have any tips? I was trying to do this and got completely overwhelmed with all the numbers. Plus for the life of me I can figure out if a travel card is better than cash back.

alkonaut 8y ago

I wonder why this isn’t the case in Europe? Some cards offer small bonuses but peanuts compared to US ones.