4 ms·

If you're middle class or higher, a credit card is a no-brainer in the US. I pay for 1 international trip a year + a few domestic trips just using my card for e

If you're middle class or higher, a credit card is a no-brainer in the US. I pay for 1 international trip a year + a few domestic trips just using my card for every day purchases. I rack up points, pay everything off, and benefit tremendously.

jjoonathan 6y ago
I know that getting a very visible 2% back from an invisible 4% fee is psychologically fun in a way that a European-style 0.5% fee isn't, but the net effect of the American style is still to transfer more money from you to the credit card company.
- throwawayboise 6y ago
  The fact of the matter is that retail goods and services cost the same whether I pay cash or use a credit card. So might as well take the benefits the card offers. Every great once in a while I will run into a small business that doesn't take credit cards, or offers a discount for cash. But it's quite rare.
  - jjoonathan 6y ago
    Yeah, which the CC oligopoly has conveniently arranged through merchant contracts. The Europeans negotiated around this with legislation and won a better deal. In the US, I'm sure people would scream and cry if the evil government tried to take their 2% rewards, even if it meant 3.5% lower prices. We don't like math very much over here -- as this thread is proving.
    - Tempest1981 6y ago
      Or resigned to the massive power of lobbyists.
    - fredophile 6y ago
      I doubt prices on most common purchases would change at all. That extra money would just go to the retailers instead.
  - xeromal 6y ago
    This was exactly my point. The amount of cash discount places are dwindling so you're actively losing money if you pay cash.
  - bogomipz 6y ago
    >"The fact of the matter is that retail goods and services cost the same whether I pay cash or use a credit card. So might as well take the benefits the card offers" The merchant costs for processing the purchase of those products is baked into price though. The net effect is that the fees the merchant pays push your retail price up. You're not really getting a benefit if you get 2% back and the retail price is 2% higher to account for the merchants processing fees.
- btilly 6y ago
  The invisible fee is paid by the merchant, not the consumer. And fees aren't 4%, they are generally 1.3% to 3.5%. With higher fees for American Express, and merchant types with higher fraud rates. (American Express also offers greater rewards to consumers...) In the end, aside from the complicated consumer reward part, the amount that the credit card companies get isn't that different from the European system.
  - jstanley 6y ago
    > The invisible fee is paid by the merchant, not the consumer. But the customer pays the merchant. It's all paid by the customer.
    - btilly 6y ago
      The customer is paying whether or not they use a credit card. However actual businesses have overhead for dealing with physical cash as well. It is slower at the teller, needs to be manually counted and recounted, transported (sometimes with security) and so on. It is not clear whether real costs of handling money are greater or less than merchant fees.
continuational 6y ago
It's a no-brainer, because whether you have a credit card or not, you're paying for those trips every time you purchase something.
- xeromal 6y ago
  That's true in a macro sense but so is everyone else, even people paying cash sometimes.
watermelon0 6y ago
Doesn't the money have to come from somewhere? I assume merchants need to pay fees to credit card companies, and in turn this results in higher product/service prices?
- xeromal 6y ago
  Indeed that's the truth but they charge that for every customer including cash customers except specific places like arco. So if everyone is getting charged, best get some benefit from it!
  - jjoonathan 6y ago
    ...which is a state of affairs the CC companies have arranged through anticompetitive terms in merchant contracts. Cash never had a chance to compete. The moment people realize they could get effectively twice the rewards points by squeezing out the fat cut taken by the CC companies, they absolutely will. CC companies will fight tooth and nail to make sure the fees stay invisible and unavoidable via cash.
    - ImPostingOnHN 6y ago
      Totally -- if the government passes some law that says, for example, credit card companies can't give out 5% rewards, but only if the prices of goods drops 5%, I would be 100% in support of that. Until that happens, I'll take the 5% cash back, since it is preferable to 0% cash back while paying the same price.
- kj4ips 6y ago
  That's where most of it comes from in the US, interchange rates on credit cards are not regulated, so they're generally somewhere around 2%. Which, coincidentally, is the benchmark for "decent" credit card rewards. Some cards will offer rewards on certain kinds of purchases, often up to 5%, but offering only 1%, or nothing for other purposes. Since the average person only has a single credit card, the majority of cardholders produce more in interchange fees than they collect in rewards. There's also some complicated accounting voodoo that I don't truly understand, that effectively means that banks can treat extended credit as a pseudo asset, plus, whenever alone is outstanding, it's value is added to the virtual money supply. It is possible for an individual customer to get significantly more in rewards than interchange, but as this is a relatively small portion of customers, most issuers do not seem to care.

jjoonathan 6y ago

I know that getting a very visible 2% back from an invisible 4% fee is psychologically fun in a way that a European-style 0.5% fee isn't, but the net effect of the American style is still to transfer more money from you to the credit card company.

throwawayboise 6y ago
The fact of the matter is that retail goods and services cost the same whether I pay cash or use a credit card. So might as well take the benefits the card offers. Every great once in a while I will run into a small business that doesn't take credit cards, or offers a discount for cash. But it's quite rare.
- jjoonathan 6y ago
  Yeah, which the CC oligopoly has conveniently arranged through merchant contracts. The Europeans negotiated around this with legislation and won a better deal. In the US, I'm sure people would scream and cry if the evil government tried to take their 2% rewards, even if it meant 3.5% lower prices. We don't like math very much over here -- as this thread is proving.
  - Tempest1981 6y ago
    Or resigned to the massive power of lobbyists.
  - fredophile 6y ago
    I doubt prices on most common purchases would change at all. That extra money would just go to the retailers instead.
- xeromal 6y ago
  This was exactly my point. The amount of cash discount places are dwindling so you're actively losing money if you pay cash.
- bogomipz 6y ago
  >"The fact of the matter is that retail goods and services cost the same whether I pay cash or use a credit card. So might as well take the benefits the card offers" The merchant costs for processing the purchase of those products is baked into price though. The net effect is that the fees the merchant pays push your retail price up. You're not really getting a benefit if you get 2% back and the retail price is 2% higher to account for the merchants processing fees.
btilly 6y ago
The invisible fee is paid by the merchant, not the consumer. And fees aren't 4%, they are generally 1.3% to 3.5%. With higher fees for American Express, and merchant types with higher fraud rates. (American Express also offers greater rewards to consumers...) In the end, aside from the complicated consumer reward part, the amount that the credit card companies get isn't that different from the European system.
- jstanley 6y ago
  > The invisible fee is paid by the merchant, not the consumer. But the customer pays the merchant. It's all paid by the customer.
  - btilly 6y ago
    The customer is paying whether or not they use a credit card. However actual businesses have overhead for dealing with physical cash as well. It is slower at the teller, needs to be manually counted and recounted, transported (sometimes with security) and so on. It is not clear whether real costs of handling money are greater or less than merchant fees.

continuational 6y ago

It's a no-brainer, because whether you have a credit card or not, you're paying for those trips every time you purchase something.

xeromal 6y ago
That's true in a macro sense but so is everyone else, even people paying cash sometimes.

watermelon0 6y ago

Doesn't the money have to come from somewhere? I assume merchants need to pay fees to credit card companies, and in turn this results in higher product/service prices?

xeromal 6y ago
Indeed that's the truth but they charge that for every customer including cash customers except specific places like arco. So if everyone is getting charged, best get some benefit from it!
- jjoonathan 6y ago
  ...which is a state of affairs the CC companies have arranged through anticompetitive terms in merchant contracts. Cash never had a chance to compete. The moment people realize they could get effectively twice the rewards points by squeezing out the fat cut taken by the CC companies, they absolutely will. CC companies will fight tooth and nail to make sure the fees stay invisible and unavoidable via cash.
  - ImPostingOnHN 6y ago
    Totally -- if the government passes some law that says, for example, credit card companies can't give out 5% rewards, but only if the prices of goods drops 5%, I would be 100% in support of that. Until that happens, I'll take the 5% cash back, since it is preferable to 0% cash back while paying the same price.
kj4ips 6y ago
That's where most of it comes from in the US, interchange rates on credit cards are not regulated, so they're generally somewhere around 2%. Which, coincidentally, is the benchmark for "decent" credit card rewards. Some cards will offer rewards on certain kinds of purchases, often up to 5%, but offering only 1%, or nothing for other purposes. Since the average person only has a single credit card, the majority of cardholders produce more in interchange fees than they collect in rewards. There's also some complicated accounting voodoo that I don't truly understand, that effectively means that banks can treat extended credit as a pseudo asset, plus, whenever alone is outstanding, it's value is added to the virtual money supply. It is possible for an individual customer to get significantly more in rewards than interchange, but as this is a relatively small portion of customers, most issuers do not seem to care.