4 ms·

On average the credit card company is the one giving you the free loan.

by ubercow13 6y ago

nfriedly 6y ago
I guess you're both giving each other loans, but even if you pay your bill in full each month, yours still isn't free. If you're getting 5% back, then the item was almost certainly marked up more than 5%. So you're still paying something for that loan in the form of higher up-front pricing. And, of course, if you don't pay your bill in full each month, then you're likely looking at 15-20% or more (APR) on whatever balance you left unpaid.
- mehrdadn 6y ago
  > If you're getting 5% back, then the item was almost certainly marked up more than 5%. How though? The 5% back is not a rebate coming from the merchant, it's coming from the card issuer. Don't they (generally -- barring special agreements for specific cards) get the same amount of money regardless of what cards people use?
  - nfriedly 6y ago
    When I ran a business that accepted credit cards, I had to pay different levels of fees depending on the type of card and rewards scheme associated with it. I had to set my prices based on the highest rewards card fees, and if someone paid with a lower fee card, I just kept the difference as extra profit. (My agreement with the CC processor explicitly required me to give everyone the same price regardless of how they paid.) I think 5% is a special case that's limited to specific vendors or products, I'm not aware of any general rebate higher than 2%. I know Stripe and Square and other companies have come along now that charge the same fees regardless of the type of card - but note that they're all above 2%. I think the only difference now is that Stripe/Square/etc. keep the difference as profit when someone pays with a non-rewards card, instead of the vendor. (But, in their defense, they're able to negotiate lower rates than I was ever able to get on my own.)

4 ms·

On average the credit card company is the one giving you the free loan.

by ubercow13 6y ago

On average the credit card company is the one giving you the free loan.

nfriedly 6y ago
I guess you're both giving each other loans, but even if you pay your bill in full each month, yours still isn't free. If you're getting 5% back, then the item was almost certainly marked up more than 5%. So you're still paying something for that loan in the form of higher up-front pricing. And, of course, if you don't pay your bill in full each month, then you're likely looking at 15-20% or more (APR) on whatever balance you left unpaid.
- mehrdadn 6y ago
  > If you're getting 5% back, then the item was almost certainly marked up more than 5%. How though? The 5% back is not a rebate coming from the merchant, it's coming from the card issuer. Don't they (generally -- barring special agreements for specific cards) get the same amount of money regardless of what cards people use?
  - nfriedly 6y ago
    When I ran a business that accepted credit cards, I had to pay different levels of fees depending on the type of card and rewards scheme associated with it. I had to set my prices based on the highest rewards card fees, and if someone paid with a lower fee card, I just kept the difference as extra profit. (My agreement with the CC processor explicitly required me to give everyone the same price regardless of how they paid.) I think 5% is a special case that's limited to specific vendors or products, I'm not aware of any general rebate higher than 2%. I know Stripe and Square and other companies have come along now that charge the same fees regardless of the type of card - but note that they're all above 2%. I think the only difference now is that Stripe/Square/etc. keep the difference as profit when someone pays with a non-rewards card, instead of the vendor. (But, in their defense, they're able to negotiate lower rates than I was ever able to get on my own.)