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Fintech is making credit cards weirder

175 points by indus 4y ago

gtowey 4y ago
> Who knows if this optimism will prove to be wise. All we can say for sure right now is that the companies in the best position to understand the risks and opportunities of investing in the credit card business are investing heavily. This is kind of a non-statement because every market collapse ever was preceded by "people who appear to understand the market making heavy investments" right up until the crash when it becomes obvious they didn't understand anything. Basically it's saying "following the herd is smart, unless the herd turns out to have been wrong"
- yieldcrv 4y ago
  One thing my publicist used to do was make listicles. It would have some competitors in first or fourth spot, myself in the 2nd or 3rd spot and then some other potential solutions. The purpose wasn’t for engagement, it was just to modify search results and ping a few specific people’s google alerts, specifically the competitor. One benefit is that the competitor would be intruiged that they were noticed at all, and be keen on being invited to an interview or seen on stage in a fireside chat at a conference, and the continued interaction meant more partnership and deals got done. The point of all this being that you can collect more resources together. And it doesnt matter that any of our solutions didnt have product market fit. I periodically quizzed my co-founder “we’re still in the ‘make-money’ game, right” just to make sure.
schroeding 4y ago
> The downside to these cards’ safe design is that the use of these cards doesn’t generate repayment data that is all that useful for lenders Oh no! Anyway[1]... :) But on a serious note, personally I'm glad that those fintech pseudo credit card products exist. I would be happy to be able to just pay with my normal bank / debit card everywhere on the web. I can't, not even with a third-party like PayPal, but I can with a virtual fintech "credit card", without needing a "real" credit card. [1] https://www.youtube.com/watch?v=9S8eNZ4fw5I https://www.youtube.com/watch?v=9S8eNZ4fw5I
- TheLoafOfBread 4y ago
  From my experience PayPal sucks for paying anything as (at least for me) it constantly triggers fraud alerts and then blocks whole account for days. Currently I have virtual Visa card provided by my bank in EU. I can load this card into Google Pay and pay with NFC in phone, use it on Amazon/AliExpress/other eshops etc.
  - em-bee 4y ago
    paypal can be problematic for receiving money, but i have no problem with paypal to pay my hosting and i used it for airbnb from my debit-card/bank account. the only time i had a problem was when i received money, and paypal wanted to see a bank statement to verify my identity i think. where is your money coming from? and where is it going?
    - TheLoafOfBread 4y ago
      Boss in company had setup following chain: company bank account -> PayPal debit card -> Digi Key order. Worked once, payment refused ever since. Randomly locked and needed to call support to unlock it, so it can be locked again after few days. Similar problem with all other eshops for ordering parts/material. After an argument with the boss, I have forced using of virtual debit card directly from a bank account, never had any problem since. From experience which I got, I don't even understand how anybody can take PayPal seriously.
      - em-bee 4y ago
        part of paypals problem is that it seems so inconsistent, and difficult to understand why it works when it does and why it fails. i would not be using paypal if i had another option, so i am glad my usecase works. i am definitely not happy having to use and support a company that treats its customers arbitrarily like that.
- Spivak 4y ago
  Unless this is something different I think most people want to generate that information -- "look I'm a trustworthy borrower, give me good credit score!" Like the credit score system is dumb, sure, but I don't make the rules and playing the game can save me about a hundred thousand bucks off my mortgage.
radpanda 4y ago
The website for X1 advertises "End free trials automatically with auto-expiring virtual cards" [0] - if that takes off, would services just start blocking folks from signing up for free trials with X1 cards? Is that a feasible thing to do, to say "yeah, we accept Visa, but not Visa cards issued by X1"? I feel like I've heard something slightly similar recently about Google Ad services blocking payments from virtual cards or other "weird" cards. 0: https://x1creditcard.com https://x1creditcard.com
- schroeding 4y ago
  Don't you just... commit fraud instead of "ending the trial"? Just because they can't charge your credit card doesn't mean you don't still own the company money, right? Genuine question, I don't know how it works with credit cards. But you can't "cancel a contract" by voiding a direct debit authorization (where you allow a company to charge your bank account directly) and expect everything to be fine, so I would assume that also applies to credit cards?
  - wyldfire 4y ago
    It doesn't sound like fraud if an opt-out service renewal stops being opt-out (or if you effectively opt-out using an agent).
  - Rebelgecko 4y ago
    If the payment doesn't go through, the company should just stop providing the service. eg the gym cancels your membership
    - tcoff91 4y ago
      I've definitely heard of times where gyms continue to attempt to charge you, claim that you owe them that money, and then send you to collections after months of failed payments.
      - ChuckNorris89 4y ago
alexashka 4y ago
Just make it so anyone with an internet connection can transfer any amount anywhere else, online, without any transaction fees, within seconds. There, there's your fucking fintech. I don't know what everyone else is doing.
- vorpalhex 4y ago
  No good. Money doesn't move instantly, and you need someone to handle disputes. Some reading: https://bam.kalzumeus.com/archive/the-alchemy-of-deposits/ https://bam.kalzumeus.com/archive/the-alchemy-of-deposits/ https://bam.kalzumeus.com/archive/no-payments-are-final/ https://bam.kalzumeus.com/archive/no-payments-are-final/
  - falcolas 4y ago
    Not counting the myriad regulations that need to be followed the moment you cross country lines.
  - toomuchtodo 4y ago
    > Money doesn't move instantly It will shortly (testing phase is in progress since 2022Q1). FedNow instant payment rails go live next year and payments are required to settle within ~8 seconds. Transaction cost the Fed charges is 5 cents, up to $500k per transaction ($100k while it shakes out initially). (Tangentially, [Transfer]Wise is very compelling for moving value internationally, and is instant in a lot of cases; they also plug into instant transfer rails in local currencies whenever possible) https://www.federalreserve.gov/paymentsystems/fednow_about.htm https://www.federalreserve.gov/paymentsystems/fednow_about.h... https://news.ycombinator.com/item?id=32098635 https://news.ycombinator.com/item?id=32098635 (see citations at bottom of comment)
    - egypturnash 4y ago
      Oh wow, I just wrote a reply to the parent comment opining that the government should be providing electronic transactions instead of letting a handful of private companies skim a few percent off of every transaction in 75% of the economy. I'm looking forwards to this! (https://www.moderntreasury.com/learn/what-is-fednow https://www.moderntreasury.com/learn/what-is-fednow, from your second link, is a description of FedNow that's attempting to explain it with less financial jargon.)
humanistbot 4y ago
Literally every single "weird" or novel feature in this article is also offered by mainstream banks. Those banks are way less likely to collapse and leave their clients out of luck (remember most startups fail). The "weird" features mentioned in the article include: secured credit cards (or charge cards) for those with little to no credit, 'elite' metal cards with bundled subscriptions to Priority Pass and TSA Pre (which you can buy cheaper directly), split repayment, and virtual / one-off account numbers. Yawn.
- onlyrealcuzzo 4y ago
  > and virtual / one-off account numbers Which major card issues offer this? This is a feature I've wanted for a long time - but AFAIK - none of my cards have it.
  - criddell 4y ago
    I think Apple's credit card does something close to this: https://www.idownloadblog.com/2019/04/01/apple-card-virtual-numbers/ https://www.idownloadblog.com/2019/04/01/apple-card-virtual-...
  - toomuchtodo 4y ago
    CapitalOne, it’s specific to certain credit cards they offer. Bank of America used to, unsure if they still do.
    - homero 4y ago
      Capital One makes you download a browser extension for some reason which I refuse to do. There is no other way to use them, not online not in the app. It's the craziest thing I've seen.
  - turkishmonky 4y ago
    Citibank and Capital One offer them on some cards, iirc
  - mrep 4y ago
light_hue_1 4y ago
Wow. The X1 card is a terrible deal in a nice looking package. Compared to the Chase Sapphire Reserve, it's just a step down in every way. You have lower rewards (about half) and fewer perks.
- snazz 4y ago
  You should compare the X1 against other cards with no annual fee, not against the CSR with its $550 annual fee.
  - nilespotter 4y ago
    I've never had a card with an annual fee, honestly never really even considered it. I am FLOORED people are willing to get one that's $550. How does it work, if I go to sleep on 12/31 with a $0 balance, do I wake up on 1/1 owing $550?
    - ac29 4y ago
      Those ultra high annual fee cards tend to have substantially better rewards than cheaper cards. For the sort of person who might spend $50,000 or more on travel in a year for example, it can make sense.
      - snazz 4y ago
        Exactly. In the case of the CSR, there’s a big general travel credit (maybe $200 or $300 off the top of my head), so that makes the net price less ridiculous. The target market with that kind of travel rewards card spends enough on travel for the rewards and statement credits to easily outweigh the annual fee. I don’t spend anywhere near enough for it to make sense for me, but it’s not quite as crazy as the $550 price tag makes it seem.
    - bern4444 4y ago
      You pay annually like any recurring subscription. That chase card and its american express equivalent (the platinum card) give pretty nice rewards for people who travel often. This includes airport lounge access, credits for dining or taking uber/lyft, access to helpful services, status at hotels etc. There are rewards cards across the price spectrum (some are free, some have an annual fee of $100, $250 etc). Often for anything except the higher cost credit cards, making up the fee in rewards is trivial. American express has a CC that gives 6% back on groceries up to $6,000 annually. The annual fee is $100. That's pretty easy to make back and then some as an individual let alone as a couple or even a family.
csomar 4y ago
I was expecting this about disrupting the MasterCard/Visa duopoly and sure was I disappointed. All fintech relies on two things: A bank and a payment network (Mastercard/Visa). This makes fintech an inferior product and most fintech I have tried have an abysmal customer service. Also, because fintech does its verification thing over the Internet, it seems that they rely more on their AI to block/ban people than a phone call. Fintech also seems to be more down to lick regulation, banks and mastercard feet at the expense of their customers. This explosion of credit cards/offers/rewards is hardly innovation. It has already happened with banks (every big store has its own credit card) and it's usually a bad deal for customer as it requires "loyalty" to that brand. That's it folks. The market has been cornered by a couple guys and it seems the regulatory barriers have been lifted high enough that nobody can enter again. Remember when MasterCard/Visa used to send these cards for free without any KYC whatsoever?
- AviationAtom 4y ago
  Congress is poised to force Visa and Mastercard to allow their branded cards to be processed through alternate processing networks. That should be an interesting shakeup, if it pans out.
  - anonporridge 4y ago
    Sounds like Congress is feeling like Visa/Mastercard haven't been spending enough money on lobbying recently.
    - danaris 4y ago
      Does the reason really matter, if what they're doing is a clear positive?
- CharlesW 4y ago
  > All fintech relies on two things: A bank and a payment network (Mastercard/Visa). Fintech is much bigger than credit card networks. Bitcoin may be the most obvious fintech example that requires neither, but there are many others.
cudgy 4y ago
“It’s [a credit card] a way to pay for things that’s a loan, but it doesn’t have to be a loan if you pay it back on time but it can be a loan if you need money in an emergency.” This seems overly pedantic. It’s still a loan regardless of whether one pays it back within the grace period. A better way to describe it is a 0% interest loan that escalates to a usurious rate once the grace period date is reached.
llaolleh 4y ago
None of those are really "innovative".
- datavirtue 4y ago
  Because there is a littany of regulations that narrowly define what is possible...and ALL innovations have to comply. The most innovative solutions require a backing bank that can expand/adapt their underwriting--the only place where there is wiggle room.
balderdash 4y ago
All credit card business models seem to be a variation of: 1) payment for volume (I.e. sharing some of the transaction fees generated with customers in the form of points/miles/etc), and/or 2)credit underwriting (I.e. extending credit to profitably (in-excess of the sun of their default risk and your funding costs))
Nextgrid 4y ago
The concept of a credit card is an anachronism that filled a local maximum and is only kept there because those who have the power to change things benefit from the status-quo. Back in the early days of payment cards, settlement took days or weeks and checking whether the customer had enough balance in real-time wasn't possible. The technology to make a debit card just wasn't there, so it makes sense that payment cards started as being credit. In this day and age, there is no functional difference between a debit or a credit card - both are processed online in the vast majority of cases, and even debit cards will typically allow offline transactions up to a certain amount if the terminal can't check the balance online. Banks now issue both and your current account and credit card account can very well be rows in the same table of the same DB if you obtained both from the same bank. There are regulatory differences (in regards to fraud protection for example) but those are just because the law didn't catch up (or doesn't want to catch up - see last paragraph) rather than a technical difference. Nowadays there is no reason why credit should be tied to a specific card & account with very rigid rules regarding repayment schedules and fees. If you want to lend, just put the money into the customer's current account and let them use that amount with their debit card. Even better, we already have real-world implementations of this - most accounts offer an arranged overdraft which allows the balance to go negative and automatically repays itself as soon as you deposit money in. Some banks will even "helpfully" authorize transactions despite the lack of an arranged overdraft, just to immediately slap you with an unarranged overdraft fee. Clearly the technology is there and has been proven. The reason credit cards persist is because their rigid, often complex, and nonsensical - why should the same bank charge different fees or interest depending on whether it's a CC vs overdraft usage? - rules allow these banks to offer "free" money (in the forms of 0% interest or benefits) to those who know how to play the system to their advantage, subsidized by the poor and less financially-savvy who don't know or can't afford to play the system and end up getting played by said system instead, incurring late payment fees and/or interest.
- jrsj 4y ago
  The entire credit rating system is pretty dependent on credit cards too.
- Mountain_Skies 4y ago
johndhi 4y ago
Thought about this at the gas pump yesterday that told me I'd pay more if I used a 'credit card' versus a 'check card.' I thought: why can't I just have one card that can do both?
- CharlesW 4y ago
  Don't all debit cards support this? Mine always have, and I've always assumed that was a universal capability. https://www.credit.com/blog/what-happens-if-i-swipe-my-debit-card-as-a-credit-106688/ https://www.credit.com/blog/what-happens-if-i-swipe-my-debit...
personjerry 4y ago
Did you know in most parts of the world, credit cards aren't that popular? From what I've seen, in Latin America and much of the EU debit or even cash is the default. Even in the UK, there are no weird, arbitrary reward points programs like in the US - it's standardized. In my experience only the US and Canada have these crazy credit card deals and programs. Which is good for me I guess, I get my points as I can still use my Visa credit card around the world. But man, unless you do the research and understand your card, credit cards can really be shady (especially exploitative for those with low financial understanding) and I do think we should get rid of them.
- nyokodo 4y ago
  > credit cards can really be shady (especially exploitative for those with low financial understanding) and I do think we should get rid of them. Or, promote better financial literacy.
  - nilespotter 4y ago
    I like your optimism. It's not clear to me your average American and his public education are capable of understanding them, regardless of what financial literacy we may or may not be able to inculcate.
    - nyokodo 4y ago
      > It's not clear to me your average American and his public education are capable of understanding them Basic financial literacy sufficient to manage credit is well within the abilities of those with average intelligence. If the Public Schools are unable to teach that then we should reform them. It's not like credit cards are the only financial pitfall that people desperately need help to avoid.
  - Nextgrid 4y ago
    Just because a specific skill can help you avoid the pitfalls doesn't mean those pitfalls should be kept around. Just because OSHA and health & safety rules exist doesn't mean we intentionally make power tools and machines have blunt electrified edges to cut/electrocute anyone who isn't "literate" enough and accidentally touches the thing. I'm personally tired of everything in the world being intentionally hostile.
t_mann 4y ago
> This has been the competitive dynamic within banking, when it comes to product innovation – tiny variations on a theme. > Fintech is painting way outside the lines and consumers are benefiting from the resulting innovations. I am baffled at both assertions - that banks have barely invented any new financial products in the past century, and that Fintechs are creating new financial products. Both statements seem so far out of line that I suspect the author has little to no knowledge of the financial sector and believes the tiny number of products used by most retail consumers represent the full universe of financial products. The reality is that banks have been extremely creative in creating new products in the decades up to the financial crisis (MBSs, CDOs, CDSs,...). And if you look what happened to those products, you'll be thankful that they've mostly been kept away from retail clients. The 1.5 decades since the crisis have seen less innovation from banks because regulators put their foot down. I've yet to see a genuinely new product offered by a Fintech (unless you count crypto/DeFi among Fintech, which is usually considered to be separate).
mise_en_place 4y ago
The article didn’t mention hybrid banks/credit builder for new businesses. Brex used to be in this category and they helped me build my business credit score. Unfortunately they now only support customers with $1 MM+ revenue per year. I am grateful to them though, for helping me build credit for my business and having great customer support
robocat 4y ago
> Americans opened 233 million new credit card accounts during the second quarter The Internet says “US adults age 18 and over, grew to 258.3 million in 2021” (paraphrased). I presume there is some power law where some residents have many cards, but there is presumably a constraint on the most cards (bank credit checks, number of different cards). Aside: i wonder who in the US has the maximum number of credit cards assigned to them in one year, or concurrently?
- NavinF 4y ago
  Personally I have 20 cards, most of which were aquired over a couple of years ~8 years ago. You can apply for 6 cards every 6 months or so (2 per bureau assuming they only do one hard pull) without significantly reducing your credit score for the next year. I'd guess the limit is ~400 right now since you'd have to start collecting decades ago.
  - balderdash 4y ago
    Why? And why not pair some back?
    - NavinF 4y ago
      A much better question is why pare some back? Closing credit cards that don't have an annual fee has zero benefits. That said, I'll answer your question: One component of your credit score is AAoA (average age of accounts) and it takes a hit when you close an account and it gets deleted from your credit history after a couple of years. So if you wanna minmax an 850 and get very favorable terms (well below inflation) on every loan (cards, cars, mortgages, etc), having very old accounts with a small/zero balance is optimal. (For the same reason, closing recently opened accounts can improve your score after they get deleted from the credit report a couple of years after you close them)
- yabones 4y ago
  There exists a very strange group of people who practice "churning", something I don't fully understand. It involves opening as many accounts as possible to get sign-up bonuses, promotions, etc, then transferring balance back and forth between accounts, then closing accounts. https://old.reddit.com/r/churning/ https://old.reddit.com/r/churning/ I would imagine those people are in the 99th % of cards per capita...
mgaunard 4y ago
I always thought that credit cards were for poor people, since why would I ever need a loan with 15-20% interest. Then recently I hired a car and they forced me to take the zero-excess insurance (50% of the cost of a one week hire for a convertible) because I didn't have a credit card. I'm now in the market for a credit card, but I have no interest in any of the credit features, I just need it to be accepted as a credit card worldwide. Unfortunately all comparisons online focus on the interest rate that I couldn't care less about.
- cwkoss 4y ago
  I think nearly every credit card will be able to support "accepted as a credit card worldwide". So, I think you can just pick whatever card doesn't have an annual fee, maybe choose one with rewards you'd use if you care.
- twblalock 4y ago
  Just get a card with wide acceptance and no annual fee: any basic Visa or Mastercard from any bank. Keep it simple and just get one from the bank you already use for checking -- then you will only have one online banking portal to use for both your card and your checking account. Set up autopay for one of your monthly bills to use the card. Set up another autopay from your checking account to pay off the card's balance every month. Do that, and you will have a credit card that is regularly used, with a history of paying the bill on time, without spending any money you would not have spent anyway.
asib 4y ago
> The reality of credit card adoption – and we have decades of data to demonstrate this – is that young consumers don’t like credit cards until, suddenly, they do. Older Gen Z consumers are reaching this point. For me, this is only because I will be locked out of access to certain essential financial products as the result of having no credit history. The advice I hear is to get a credit card and use it like a debit card, always paying off on schedule. Why can't decades of debit card use and living within my means demonstrate the same thing? It seems ridiculous to me. The starter credit cards also offer, in my opinion, rather measly rewards, so there is very little upside. It really feels like I'm just being forced to do a dance for the banks. And can someone explain why credit scores aren't just visible in every bank's (web) app? I acknowledge that it is ultimately possible to obtain your credit score free of charge, but how is it not anti-consumer that doing this requires you to jump through hoops and use a service like ClearScore? I believe there's a strong case for saying that credit scores exist in a similar space to criminal records, in that they're often used to further marginalise those most vulnerable in society. Or at the very least, that is the result of their existence. For the avoidance of doubt, I do not believe myself to be a vulnerable member of society and I do not feel as though credit scores are wielded against me in the way I describe in the paragraph above. I also do not think that the marginalising effect due to credit scores is as great as that of having a criminal record.
- Mandatum 4y ago
  It is insanity that the US still works on a positive credit system. Literally every other developed country in the world has it the other way round, prove you have negative or bad credit with failed payments. The US system is both inequitable and exploitative.
  - lupire 4y ago
    Can I get a 1million Euro loan with no credit history?
    - Mandatum 4y ago
      Sure, if you can prove revenue, income or assets. Same process for someone with good credit in the US - except we don't shut the doors on people who haven't got a fucking credit card like some sort of racket.
rurp 4y ago
> if you ever try to explain how a credit card works to a 14-year-old, you’ll quickly remember just how complicated and strange they are. Are credit cards really as complicated for most people as this article claims? The explanation I got as a teenager was something like, "Instead of paying with cash you can use credit from a card, then at the end of the month you pay off all of those charges to the bank at once. Technicaly you don't have to pay it off immediately, but if you wait you'll also pay a horrible amount of extra fees; which you never want to do". It was pretty easy to grok at the time, and is how people should approach credit cards 99.999% of the time. Once a person gets older and has built up some credit they can look for a card with good rewards, which for most people will just be looking for the highest cash back percent they can get.
- alxhill 4y ago
  I think the complexity arrives when the 14-year-old asks the follow up question "why?"
  - asdff 4y ago
    Because if you get scammed its easier dealing with a credit card company than your bank
    - dotopotoro 4y ago
      Why? (5 “why”s in total)
      - asdff 4y ago
        Because when your credit card is scammed, its the credit card companies money that has been stolen so they are want to get it back. When its your debit card being scammed, its your money being stolen, and any help to get it back is just a cost center for the bank so they don't really invest in this side of their business like credit card companies do.
  - graypegg 4y ago
DubiousPusher 4y ago
> Rewards are great. No they're not.
praveen9920 4y ago
India has done a phenomenal job of getting rid of the mastercard/visa duopoly in India by introducing Rupay. Some people may say it is just another monopoly but being owned by govt has its own perks for both consumers and merchants AND Banks, end of the day everyone wins. They are simplifying and inviting newer technology to spread credit products across India. Just like UPI, Rupay is taking over India like wildfire. US can take a page out of India's technology adoption ( except may be for crypto )
jimt1234 4y ago
The explosion of credit cards over the last 25 years reminds me of an article I once read about the psychology of casinos, in particular the mental detachment of money. Basically, casinos figured out a long time ago that a person will gamble a lot more in chips than actual cash, because cash is emotionally connected to food, rent, clothes, etc., whereas chips are detached from that emotional connection, and thus casino customers are more inclined to gamble more with chips than actual cash. I'm probably being Captain Obvious, but seems to me the credit card industry took this psychology and ran with it, essentially creating the modern consumer experience, which is basically this: https://www.youtube.com/watch?t=64&v=EAyJmIXcyMg https://www.youtube.com/watch?t=64&v=EAyJmIXcyMg
unethical_ban 4y ago
re: Hands on the wheel banking I wish the blog author didn't force me to read a ten minute article as a context clue to a sentence 1/3 of the way through the article I'm reading.
adultSwim 4y ago
As a crazy person, that Always Sunny meme makes me very uncomfortable.

175 points by indus 4y ago

> Who knows if this optimism will prove to be wise. All we can say for sure right now is that the companies in the best position to understand the risks and opportunities of investing in the credit card business are investing heavily. This is kind of a non-statement because every market collapse ever was preceded by "people who appear to understand the market making heavy investments" right up until the crash when it becomes obvious they didn't understand anything. Basically it's saying "following the herd is smart, unless the herd turns out to have been wrong"

yieldcrv 4y ago
One thing my publicist used to do was make listicles. It would have some competitors in first or fourth spot, myself in the 2nd or 3rd spot and then some other potential solutions. The purpose wasn’t for engagement, it was just to modify search results and ping a few specific people’s google alerts, specifically the competitor. One benefit is that the competitor would be intruiged that they were noticed at all, and be keen on being invited to an interview or seen on stage in a fireside chat at a conference, and the continued interaction meant more partnership and deals got done. The point of all this being that you can collect more resources together. And it doesnt matter that any of our solutions didnt have product market fit. I periodically quizzed my co-founder “we’re still in the ‘make-money’ game, right” just to make sure.

schroeding 4y ago

> The downside to these cards’ safe design is that the use of these cards doesn’t generate repayment data that is all that useful for lenders Oh no! Anyway[1]... :) But on a serious note, personally I'm glad that those fintech pseudo credit card products exist. I would be happy to be able to just pay with my normal bank / debit card everywhere on the web. I can't, not even with a third-party like PayPal, but I can with a virtual fintech "credit card", without needing a "real" credit card. [1] https://www.youtube.com/watch?v=9S8eNZ4fw5I https://www.youtube.com/watch?v=9S8eNZ4fw5I

TheLoafOfBread 4y ago
From my experience PayPal sucks for paying anything as (at least for me) it constantly triggers fraud alerts and then blocks whole account for days. Currently I have virtual Visa card provided by my bank in EU. I can load this card into Google Pay and pay with NFC in phone, use it on Amazon/AliExpress/other eshops etc.
- em-bee 4y ago
  paypal can be problematic for receiving money, but i have no problem with paypal to pay my hosting and i used it for airbnb from my debit-card/bank account. the only time i had a problem was when i received money, and paypal wanted to see a bank statement to verify my identity i think. where is your money coming from? and where is it going?
  - TheLoafOfBread 4y ago
    Boss in company had setup following chain: company bank account -> PayPal debit card -> Digi Key order. Worked once, payment refused ever since. Randomly locked and needed to call support to unlock it, so it can be locked again after few days. Similar problem with all other eshops for ordering parts/material. After an argument with the boss, I have forced using of virtual debit card directly from a bank account, never had any problem since. From experience which I got, I don't even understand how anybody can take PayPal seriously.
    - em-bee 4y ago
      part of paypals problem is that it seems so inconsistent, and difficult to understand why it works when it does and why it fails. i would not be using paypal if i had another option, so i am glad my usecase works. i am definitely not happy having to use and support a company that treats its customers arbitrarily like that.
Spivak 4y ago
Unless this is something different I think most people want to generate that information -- "look I'm a trustworthy borrower, give me good credit score!" Like the credit score system is dumb, sure, but I don't make the rules and playing the game can save me about a hundred thousand bucks off my mortgage.

radpanda 4y ago

The website for X1 advertises "End free trials automatically with auto-expiring virtual cards" [0] - if that takes off, would services just start blocking folks from signing up for free trials with X1 cards? Is that a feasible thing to do, to say "yeah, we accept Visa, but not Visa cards issued by X1"? I feel like I've heard something slightly similar recently about Google Ad services blocking payments from virtual cards or other "weird" cards. 0: https://x1creditcard.com https://x1creditcard.com

schroeding 4y ago
Don't you just... commit fraud instead of "ending the trial"? Just because they can't charge your credit card doesn't mean you don't still own the company money, right? Genuine question, I don't know how it works with credit cards. But you can't "cancel a contract" by voiding a direct debit authorization (where you allow a company to charge your bank account directly) and expect everything to be fine, so I would assume that also applies to credit cards?
- wyldfire 4y ago
  It doesn't sound like fraud if an opt-out service renewal stops being opt-out (or if you effectively opt-out using an agent).
- Rebelgecko 4y ago
  If the payment doesn't go through, the company should just stop providing the service. eg the gym cancels your membership
  - tcoff91 4y ago
    I've definitely heard of times where gyms continue to attempt to charge you, claim that you owe them that money, and then send you to collections after months of failed payments.
    - ChuckNorris89 4y ago

alexashka 4y ago

Just make it so anyone with an internet connection can transfer any amount anywhere else, online, without any transaction fees, within seconds. There, there's your fucking fintech. I don't know what everyone else is doing.

vorpalhex 4y ago
No good. Money doesn't move instantly, and you need someone to handle disputes. Some reading: https://bam.kalzumeus.com/archive/the-alchemy-of-deposits/ https://bam.kalzumeus.com/archive/the-alchemy-of-deposits/ https://bam.kalzumeus.com/archive/no-payments-are-final/ https://bam.kalzumeus.com/archive/no-payments-are-final/
- falcolas 4y ago
  Not counting the myriad regulations that need to be followed the moment you cross country lines.
- toomuchtodo 4y ago
  > Money doesn't move instantly It will shortly (testing phase is in progress since 2022Q1). FedNow instant payment rails go live next year and payments are required to settle within ~8 seconds. Transaction cost the Fed charges is 5 cents, up to $500k per transaction ($100k while it shakes out initially). (Tangentially, [Transfer]Wise is very compelling for moving value internationally, and is instant in a lot of cases; they also plug into instant transfer rails in local currencies whenever possible) https://www.federalreserve.gov/paymentsystems/fednow_about.htm https://www.federalreserve.gov/paymentsystems/fednow_about.h... https://news.ycombinator.com/item?id=32098635 https://news.ycombinator.com/item?id=32098635 (see citations at bottom of comment)
  - egypturnash 4y ago
    Oh wow, I just wrote a reply to the parent comment opining that the government should be providing electronic transactions instead of letting a handful of private companies skim a few percent off of every transaction in 75% of the economy. I'm looking forwards to this! (https://www.moderntreasury.com/learn/what-is-fednow https://www.moderntreasury.com/learn/what-is-fednow, from your second link, is a description of FedNow that's attempting to explain it with less financial jargon.)

humanistbot 4y ago

Literally every single "weird" or novel feature in this article is also offered by mainstream banks. Those banks are way less likely to collapse and leave their clients out of luck (remember most startups fail). The "weird" features mentioned in the article include: secured credit cards (or charge cards) for those with little to no credit, 'elite' metal cards with bundled subscriptions to Priority Pass and TSA Pre (which you can buy cheaper directly), split repayment, and virtual / one-off account numbers. Yawn.

onlyrealcuzzo 4y ago
> and virtual / one-off account numbers Which major card issues offer this? This is a feature I've wanted for a long time - but AFAIK - none of my cards have it.
- criddell 4y ago
  I think Apple's credit card does something close to this: https://www.idownloadblog.com/2019/04/01/apple-card-virtual-numbers/ https://www.idownloadblog.com/2019/04/01/apple-card-virtual-...
- toomuchtodo 4y ago
  CapitalOne, it’s specific to certain credit cards they offer. Bank of America used to, unsure if they still do.
  - homero 4y ago
    Capital One makes you download a browser extension for some reason which I refuse to do. There is no other way to use them, not online not in the app. It's the craziest thing I've seen.
- turkishmonky 4y ago
  Citibank and Capital One offer them on some cards, iirc
- mrep 4y ago

light_hue_1 4y ago

Wow. The X1 card is a terrible deal in a nice looking package. Compared to the Chase Sapphire Reserve, it's just a step down in every way. You have lower rewards (about half) and fewer perks.

snazz 4y ago
You should compare the X1 against other cards with no annual fee, not against the CSR with its $550 annual fee.
- nilespotter 4y ago
  I've never had a card with an annual fee, honestly never really even considered it. I am FLOORED people are willing to get one that's $550. How does it work, if I go to sleep on 12/31 with a $0 balance, do I wake up on 1/1 owing $550?
  - ac29 4y ago
    Those ultra high annual fee cards tend to have substantially better rewards than cheaper cards. For the sort of person who might spend $50,000 or more on travel in a year for example, it can make sense.
    - snazz 4y ago
      Exactly. In the case of the CSR, there’s a big general travel credit (maybe $200 or $300 off the top of my head), so that makes the net price less ridiculous. The target market with that kind of travel rewards card spends enough on travel for the rewards and statement credits to easily outweigh the annual fee. I don’t spend anywhere near enough for it to make sense for me, but it’s not quite as crazy as the $550 price tag makes it seem.
  - bern4444 4y ago
    You pay annually like any recurring subscription. That chase card and its american express equivalent (the platinum card) give pretty nice rewards for people who travel often. This includes airport lounge access, credits for dining or taking uber/lyft, access to helpful services, status at hotels etc. There are rewards cards across the price spectrum (some are free, some have an annual fee of $100, $250 etc). Often for anything except the higher cost credit cards, making up the fee in rewards is trivial. American express has a CC that gives 6% back on groceries up to $6,000 annually. The annual fee is $100. That's pretty easy to make back and then some as an individual let alone as a couple or even a family.

csomar 4y ago

I was expecting this about disrupting the MasterCard/Visa duopoly and sure was I disappointed. All fintech relies on two things: A bank and a payment network (Mastercard/Visa). This makes fintech an inferior product and most fintech I have tried have an abysmal customer service. Also, because fintech does its verification thing over the Internet, it seems that they rely more on their AI to block/ban people than a phone call. Fintech also seems to be more down to lick regulation, banks and mastercard feet at the expense of their customers. This explosion of credit cards/offers/rewards is hardly innovation. It has already happened with banks (every big store has its own credit card) and it's usually a bad deal for customer as it requires "loyalty" to that brand. That's it folks. The market has been cornered by a couple guys and it seems the regulatory barriers have been lifted high enough that nobody can enter again. Remember when MasterCard/Visa used to send these cards for free without any KYC whatsoever?

AviationAtom 4y ago
Congress is poised to force Visa and Mastercard to allow their branded cards to be processed through alternate processing networks. That should be an interesting shakeup, if it pans out.
- anonporridge 4y ago
  Sounds like Congress is feeling like Visa/Mastercard haven't been spending enough money on lobbying recently.
  - danaris 4y ago
    Does the reason really matter, if what they're doing is a clear positive?
CharlesW 4y ago
> All fintech relies on two things: A bank and a payment network (Mastercard/Visa). Fintech is much bigger than credit card networks. Bitcoin may be the most obvious fintech example that requires neither, but there are many others.

cudgy 4y ago

“It’s [a credit card] a way to pay for things that’s a loan, but it doesn’t have to be a loan if you pay it back on time but it can be a loan if you need money in an emergency.” This seems overly pedantic. It’s still a loan regardless of whether one pays it back within the grace period. A better way to describe it is a 0% interest loan that escalates to a usurious rate once the grace period date is reached.

llaolleh 4y ago

None of those are really "innovative".

datavirtue 4y ago
Because there is a littany of regulations that narrowly define what is possible...and ALL innovations have to comply. The most innovative solutions require a backing bank that can expand/adapt their underwriting--the only place where there is wiggle room.

balderdash 4y ago

All credit card business models seem to be a variation of: 1) payment for volume (I.e. sharing some of the transaction fees generated with customers in the form of points/miles/etc), and/or 2)credit underwriting (I.e. extending credit to profitably (in-excess of the sun of their default risk and your funding costs))

Nextgrid 4y ago

The concept of a credit card is an anachronism that filled a local maximum and is only kept there because those who have the power to change things benefit from the status-quo. Back in the early days of payment cards, settlement took days or weeks and checking whether the customer had enough balance in real-time wasn't possible. The technology to make a debit card just wasn't there, so it makes sense that payment cards started as being credit. In this day and age, there is no functional difference between a debit or a credit card - both are processed online in the vast majority of cases, and even debit cards will typically allow offline transactions up to a certain amount if the terminal can't check the balance online. Banks now issue both and your current account and credit card account can very well be rows in the same table of the same DB if you obtained both from the same bank. There are regulatory differences (in regards to fraud protection for example) but those are just because the law didn't catch up (or doesn't want to catch up - see last paragraph) rather than a technical difference. Nowadays there is no reason why credit should be tied to a specific card & account with very rigid rules regarding repayment schedules and fees. If you want to lend, just put the money into the customer's current account and let them use that amount with their debit card. Even better, we already have real-world implementations of this - most accounts offer an arranged overdraft which allows the balance to go negative and automatically repays itself as soon as you deposit money in. Some banks will even "helpfully" authorize transactions despite the lack of an arranged overdraft, just to immediately slap you with an unarranged overdraft fee. Clearly the technology is there and has been proven. The reason credit cards persist is because their rigid, often complex, and nonsensical - why should the same bank charge different fees or interest depending on whether it's a CC vs overdraft usage? - rules allow these banks to offer "free" money (in the forms of 0% interest or benefits) to those who know how to play the system to their advantage, subsidized by the poor and less financially-savvy who don't know or can't afford to play the system and end up getting played by said system instead, incurring late payment fees and/or interest.

jrsj 4y ago
The entire credit rating system is pretty dependent on credit cards too.
Mountain_Skies 4y ago

johndhi 4y ago

Thought about this at the gas pump yesterday that told me I'd pay more if I used a 'credit card' versus a 'check card.' I thought: why can't I just have one card that can do both?

CharlesW 4y ago
Don't all debit cards support this? Mine always have, and I've always assumed that was a universal capability. https://www.credit.com/blog/what-happens-if-i-swipe-my-debit-card-as-a-credit-106688/ https://www.credit.com/blog/what-happens-if-i-swipe-my-debit...

personjerry 4y ago

Did you know in most parts of the world, credit cards aren't that popular? From what I've seen, in Latin America and much of the EU debit or even cash is the default. Even in the UK, there are no weird, arbitrary reward points programs like in the US - it's standardized. In my experience only the US and Canada have these crazy credit card deals and programs. Which is good for me I guess, I get my points as I can still use my Visa credit card around the world. But man, unless you do the research and understand your card, credit cards can really be shady (especially exploitative for those with low financial understanding) and I do think we should get rid of them.

nyokodo 4y ago
> credit cards can really be shady (especially exploitative for those with low financial understanding) and I do think we should get rid of them. Or, promote better financial literacy.
- nilespotter 4y ago
  I like your optimism. It's not clear to me your average American and his public education are capable of understanding them, regardless of what financial literacy we may or may not be able to inculcate.
  - nyokodo 4y ago
    > It's not clear to me your average American and his public education are capable of understanding them Basic financial literacy sufficient to manage credit is well within the abilities of those with average intelligence. If the Public Schools are unable to teach that then we should reform them. It's not like credit cards are the only financial pitfall that people desperately need help to avoid.
- Nextgrid 4y ago
  Just because a specific skill can help you avoid the pitfalls doesn't mean those pitfalls should be kept around. Just because OSHA and health & safety rules exist doesn't mean we intentionally make power tools and machines have blunt electrified edges to cut/electrocute anyone who isn't "literate" enough and accidentally touches the thing. I'm personally tired of everything in the world being intentionally hostile.

t_mann 4y ago

> This has been the competitive dynamic within banking, when it comes to product innovation – tiny variations on a theme. > Fintech is painting way outside the lines and consumers are benefiting from the resulting innovations. I am baffled at both assertions - that banks have barely invented any new financial products in the past century, and that Fintechs are creating new financial products. Both statements seem so far out of line that I suspect the author has little to no knowledge of the financial sector and believes the tiny number of products used by most retail consumers represent the full universe of financial products. The reality is that banks have been extremely creative in creating new products in the decades up to the financial crisis (MBSs, CDOs, CDSs,...). And if you look what happened to those products, you'll be thankful that they've mostly been kept away from retail clients. The 1.5 decades since the crisis have seen less innovation from banks because regulators put their foot down. I've yet to see a genuinely new product offered by a Fintech (unless you count crypto/DeFi among Fintech, which is usually considered to be separate).

mise_en_place 4y ago

The article didn’t mention hybrid banks/credit builder for new businesses. Brex used to be in this category and they helped me build my business credit score. Unfortunately they now only support customers with $1 MM+ revenue per year. I am grateful to them though, for helping me build credit for my business and having great customer support

robocat 4y ago

> Americans opened 233 million new credit card accounts during the second quarter The Internet says “US adults age 18 and over, grew to 258.3 million in 2021” (paraphrased). I presume there is some power law where some residents have many cards, but there is presumably a constraint on the most cards (bank credit checks, number of different cards). Aside: i wonder who in the US has the maximum number of credit cards assigned to them in one year, or concurrently?

NavinF 4y ago
Personally I have 20 cards, most of which were aquired over a couple of years ~8 years ago. You can apply for 6 cards every 6 months or so (2 per bureau assuming they only do one hard pull) without significantly reducing your credit score for the next year. I'd guess the limit is ~400 right now since you'd have to start collecting decades ago.
- balderdash 4y ago
  Why? And why not pair some back?
  - NavinF 4y ago
    A much better question is why pare some back? Closing credit cards that don't have an annual fee has zero benefits. That said, I'll answer your question: One component of your credit score is AAoA (average age of accounts) and it takes a hit when you close an account and it gets deleted from your credit history after a couple of years. So if you wanna minmax an 850 and get very favorable terms (well below inflation) on every loan (cards, cars, mortgages, etc), having very old accounts with a small/zero balance is optimal. (For the same reason, closing recently opened accounts can improve your score after they get deleted from the credit report a couple of years after you close them)
yabones 4y ago
There exists a very strange group of people who practice "churning", something I don't fully understand. It involves opening as many accounts as possible to get sign-up bonuses, promotions, etc, then transferring balance back and forth between accounts, then closing accounts. https://old.reddit.com/r/churning/ https://old.reddit.com/r/churning/ I would imagine those people are in the 99th % of cards per capita...

mgaunard 4y ago

I always thought that credit cards were for poor people, since why would I ever need a loan with 15-20% interest. Then recently I hired a car and they forced me to take the zero-excess insurance (50% of the cost of a one week hire for a convertible) because I didn't have a credit card. I'm now in the market for a credit card, but I have no interest in any of the credit features, I just need it to be accepted as a credit card worldwide. Unfortunately all comparisons online focus on the interest rate that I couldn't care less about.

cwkoss 4y ago
I think nearly every credit card will be able to support "accepted as a credit card worldwide". So, I think you can just pick whatever card doesn't have an annual fee, maybe choose one with rewards you'd use if you care.
twblalock 4y ago
Just get a card with wide acceptance and no annual fee: any basic Visa or Mastercard from any bank. Keep it simple and just get one from the bank you already use for checking -- then you will only have one online banking portal to use for both your card and your checking account. Set up autopay for one of your monthly bills to use the card. Set up another autopay from your checking account to pay off the card's balance every month. Do that, and you will have a credit card that is regularly used, with a history of paying the bill on time, without spending any money you would not have spent anyway.

asib 4y ago

> The reality of credit card adoption – and we have decades of data to demonstrate this – is that young consumers don’t like credit cards until, suddenly, they do. Older Gen Z consumers are reaching this point. For me, this is only because I will be locked out of access to certain essential financial products as the result of having no credit history. The advice I hear is to get a credit card and use it like a debit card, always paying off on schedule. Why can't decades of debit card use and living within my means demonstrate the same thing? It seems ridiculous to me. The starter credit cards also offer, in my opinion, rather measly rewards, so there is very little upside. It really feels like I'm just being forced to do a dance for the banks. And can someone explain why credit scores aren't just visible in every bank's (web) app? I acknowledge that it is ultimately possible to obtain your credit score free of charge, but how is it not anti-consumer that doing this requires you to jump through hoops and use a service like ClearScore? I believe there's a strong case for saying that credit scores exist in a similar space to criminal records, in that they're often used to further marginalise those most vulnerable in society. Or at the very least, that is the result of their existence. For the avoidance of doubt, I do not believe myself to be a vulnerable member of society and I do not feel as though credit scores are wielded against me in the way I describe in the paragraph above. I also do not think that the marginalising effect due to credit scores is as great as that of having a criminal record.

Mandatum 4y ago
It is insanity that the US still works on a positive credit system. Literally every other developed country in the world has it the other way round, prove you have negative or bad credit with failed payments. The US system is both inequitable and exploitative.
- lupire 4y ago
  Can I get a 1million Euro loan with no credit history?
  - Mandatum 4y ago
    Sure, if you can prove revenue, income or assets. Same process for someone with good credit in the US - except we don't shut the doors on people who haven't got a fucking credit card like some sort of racket.

rurp 4y ago

> if you ever try to explain how a credit card works to a 14-year-old, you’ll quickly remember just how complicated and strange they are. Are credit cards really as complicated for most people as this article claims? The explanation I got as a teenager was something like, "Instead of paying with cash you can use credit from a card, then at the end of the month you pay off all of those charges to the bank at once. Technicaly you don't have to pay it off immediately, but if you wait you'll also pay a horrible amount of extra fees; which you never want to do". It was pretty easy to grok at the time, and is how people should approach credit cards 99.999% of the time. Once a person gets older and has built up some credit they can look for a card with good rewards, which for most people will just be looking for the highest cash back percent they can get.

alxhill 4y ago
I think the complexity arrives when the 14-year-old asks the follow up question "why?"
- asdff 4y ago
  Because if you get scammed its easier dealing with a credit card company than your bank
  - dotopotoro 4y ago
    Why? (5 “why”s in total)
    - asdff 4y ago
      Because when your credit card is scammed, its the credit card companies money that has been stolen so they are want to get it back. When its your debit card being scammed, its your money being stolen, and any help to get it back is just a cost center for the bank so they don't really invest in this side of their business like credit card companies do.
- graypegg 4y ago

DubiousPusher 4y ago

> Rewards are great. No they're not.

praveen9920 4y ago

India has done a phenomenal job of getting rid of the mastercard/visa duopoly in India by introducing Rupay. Some people may say it is just another monopoly but being owned by govt has its own perks for both consumers and merchants AND Banks, end of the day everyone wins. They are simplifying and inviting newer technology to spread credit products across India. Just like UPI, Rupay is taking over India like wildfire. US can take a page out of India's technology adoption ( except may be for crypto )

jimt1234 4y ago

The explosion of credit cards over the last 25 years reminds me of an article I once read about the psychology of casinos, in particular the mental detachment of money. Basically, casinos figured out a long time ago that a person will gamble a lot more in chips than actual cash, because cash is emotionally connected to food, rent, clothes, etc., whereas chips are detached from that emotional connection, and thus casino customers are more inclined to gamble more with chips than actual cash. I'm probably being Captain Obvious, but seems to me the credit card industry took this psychology and ran with it, essentially creating the modern consumer experience, which is basically this: https://www.youtube.com/watch?t=64&v=EAyJmIXcyMg https://www.youtube.com/watch?t=64&v=EAyJmIXcyMg

unethical_ban 4y ago

re: Hands on the wheel banking I wish the blog author didn't force me to read a ten minute article as a context clue to a sentence 1/3 of the way through the article I'm reading.

adultSwim 4y ago

As a crazy person, that Always Sunny meme makes me very uncomfortable.