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Credit cards exist because people need a line of credit and debit cards seem to offer the same benefits as Dwolla, at a lower interchange rate for the merchant.

Credit cards exist because people need a line of credit and debit cards seem to offer the same benefits as Dwolla, at a lower interchange rate for the merchant. The P2P feature is nice, ACH generally isn't used directly by individuals and wire transfers/EFTs can be quite expensive. I wish someone would make a real alternative credit processing network, but there are so may laws and regulations, I wonder if it is even possible to ever have something like a simple 1% transaction charge.

davej 15y ago
Credit cards exist because it used to be very difficult to check the balance of an account in realtime during transactions. This is no longer an issue. It's true that some people need to purchase items on credit but the reason that they're so popular now is less to do with having a line of credit and more to do with the legacy of the technology.
- smiler 15y ago
  The primary reason _is_ for people to spend money they don't have. Secondary reason is that CC offer easier charge back, customer protection etc.
  - davej 15y ago
    That may be true now. I was specifying the reason that they came into existence in the first place (as opposed to debit cards), not why people use them now. My opinion is that the reason credit cards remain so popular now is because of Visa's policy that forbids merchants from charging a different price for credit card transactions. As a consumer, when you pay by cash or debit then you are effectively subsidizing purchases by credit card. Credit cards wouldn't be so popular if the consumer was made to bear the true cost of their chosen transaction method. I think many would prefer to use a debit card and be reimbursed the difference for the transaction fee (vs. credit card) but Visa's policies don't allow this and unfortunately it's not viable for most businesses to simply stop accepting credit cards. Edit: I was wrong, while retailers can't add a surcharge for credit cards, they can offer a discount for cash/debit/cheque transactions: http://usa.visa.com/personal/using_visa/checkout_fees/index.html http://usa.visa.com/personal/using_visa/checkout_fees/index....
    - smiler 15y ago
      I don't know of the laws in various countries, but this already happens on major purchases here in the UK - flights, holidays etc. You will be charged a surcharge for using a credit card, or a fixed fee. Eg £4.50 for a CC, free for a debit card.
    - mhb 15y ago
      Merchants are allowed, by the credit card companies, to offer a discount for cash.
- blahedo 15y ago
  I think that "the reason" will vary from person to person. For me I prefer my credit card to debit because of consumer protections and chargeback ability; but I definitely know a lot of people that use their credit card as an actual line of credit.
- chollida1 15y ago
  > It's true that some people need to purchase items on credit but the reason that they're so popular now is less to do with having a line of credit and more to do with the legacy of the technology. I don't know if that is true. My wife and I make a fari bit of money but we use credit cards so we don't have to worry about cash flow. If I want a new mac I just go out and buy it. I don't have to worry if I have enough money in my account at that exact moment or not because I know that at the end of the month when the credit card bill comes I"ll have enough to cover it. We might be an exception because my wife divides our income into several buckets as it comes in and then pulls from those buckets to pay the credit card bill at the end of the month, so I know very well what my monthly budget is . TL/DR we use credit cards as a line of credit to smooth over cash flow throughout the month as do most afluent people I know.
julian37 15y ago
Also, debit cards pay straight out of your regular bank account. With Dwolla, funds come out of your Dwolla account and it takes 2-4 days or longer to move funds into that account. It's an interesting concept but with delays like that I don't see how it can compete with plastic. Too bad, card processing fees are outrageous! http://help.dwolla.com/customer/portal/articles/225303-why-is-my-deposit-taking-so-long-to-show-up-in-my-dwolla-account- http://help.dwolla.com/customer/portal/articles/225303-why-i...
- JoshTriplett 15y ago
  According to the article, you can use a bank account directly.
  - julian37 15y ago
    But even then, how long will it take for the funds to clear? Credit and debit cards work so well online because clearing happens almost instantaneously.
  - tpowell 15y ago
    You can, I just confirmed by bank account with Dwolla this morning. One of the guys asking Dwolla questions on Twitter was a 4th generation jeweler, who regularly has $10k and up transactions. He was very eager to learn about the merchant APIs. He could probably save $500-$900 on a $30k ring if the transaction was made with their service. There are a million examples like that out there.
    - julian37 15y ago
      Can you pay instantly with it, just like with a card?
    - billybob 15y ago
      Your post made me do two double-takes. 1) People buy $30k rings!? 2) People put $30k on a credit card!?
tdfx 15y ago
If you're doing it right then your credit card account should be earning you the approximate equivalent of 1% cash back via rewards points or another mechanism. For my personal card I use Chase Sapphire (the one without the yearly fee), which gives 2x points for all dining purchases. Always confuses me when I see people using cash or debit cards. At my current rate of spending I could get a free iPad and a few other goodies every year by doing nothing more than not bothering to carry cash. In fact, merchants have to increase their prices slightly to account for the transaction fees, so anyone using cash is actually (in a small way) paying for my rewards.
- UrbanPat 15y ago
  Yes, that's the whole problem. I'm tired of paying for other people's airline miles, cashback, etc. This is an inefficiency built into the payment system, and it harms small businesses and lower-income people the most. I try to avoid using my credit card out of principle, because I don't like charging merchants more. I appreciate that Dwolla is trying to remove this inefficiency from the system. Mass conversion to a more efficient system would, eventually, mean cheaper prices for everyone.
- BrandonM 15y ago
  It always confuses me when I don't see people take pennies out of the change tray at gas stations; it's free money, just sitting there. It confuses me when people pay to ride the bus when they're so unlikely to get caught not paying. It confuses me that people don't just file for bankruptcy and forget all their credit card debt. If you're still confused, people have their own pride and principles. Something being legal or otherwise doable does not mean that everyone considers it moral. To me, it feels wrong to leverage a slimy Visa policy to bilk airfare from merchants who have to accept credit to compete and from customers who don't opt-in to the game.
  - tdfx 15y ago
    As it turns out, when I'm not stealing pennies from the penny trays at gas stations, I often shop at businesses that only accept cash and have no issue with it. If a business accepts credit cards, however, I'd rather have that small part of the fee come back to me than stay in Visa's pocket.
crikli 15y ago
No, credit cards exist because in 1978 the Supreme Court released an opinion allowing banks to export interest rates from one state to the other. So a bank in a state with a 25% interest rate cap could lend to a family in another state with a 12% interest rate cap. Politicians figured out quickly that if they bumped up the credit rate ceiling in their state that the financial institutions would come running, cash in hand. Thirty(ish) years later we have an insidious industry that has saturated US culture with the poison of unsecured credit. They set up stands at colleges, snaring college freshmen with offers of free tee-shirts. They sponsor educational curriculums in grade schools advocating the use of credit cards. They even kick money to toy makers to include a little "Visa" or "Mastercard" with their products. They lobby Congress to pass laws making it harder for people who've dug themselves into a hole to include credit card debt in bankruptcy. Credit is not necessary for modern living, despite the propaganda that permeates every piece of media to which we have access. I know this because 18 years ago I was that ignorant kid that wanted a free teeshirt. Ten years ago I quit using credit as a means of purchase, and six years ago I made my last monthly payment (with the notable exception of student loans, which is a rant for another day).
- eridius 15y ago
  I'm 26 years old and I have never owned a credit card. Unless you really need to use a credit card as a short-term loan (which has always sounded to me like a really bad idea), they're just not necessary.
  - pdovy 15y ago
    That isn't necessarily true. I have and frequently use a credit card, but I do not actually need the line of credit. I have it to establish a credit history so that someday when I actually do need credit (e.g., for a home loan), I'll be able to get it.
  - ars 15y ago
    So what do you use to buy stuff electronically? Or rent a car? And if you tell me a debit card then you are making a mistake. There is nothing wrong with using a credit card for a short term loan, especially if you actually have enough money to cover that loan.

davej 15y ago

Credit cards exist because it used to be very difficult to check the balance of an account in realtime during transactions. This is no longer an issue. It's true that some people need to purchase items on credit but the reason that they're so popular now is less to do with having a line of credit and more to do with the legacy of the technology.

smiler 15y ago
The primary reason _is_ for people to spend money they don't have. Secondary reason is that CC offer easier charge back, customer protection etc.
- davej 15y ago
  That may be true now. I was specifying the reason that they came into existence in the first place (as opposed to debit cards), not why people use them now. My opinion is that the reason credit cards remain so popular now is because of Visa's policy that forbids merchants from charging a different price for credit card transactions. As a consumer, when you pay by cash or debit then you are effectively subsidizing purchases by credit card. Credit cards wouldn't be so popular if the consumer was made to bear the true cost of their chosen transaction method. I think many would prefer to use a debit card and be reimbursed the difference for the transaction fee (vs. credit card) but Visa's policies don't allow this and unfortunately it's not viable for most businesses to simply stop accepting credit cards. Edit: I was wrong, while retailers can't add a surcharge for credit cards, they can offer a discount for cash/debit/cheque transactions: http://usa.visa.com/personal/using_visa/checkout_fees/index.html http://usa.visa.com/personal/using_visa/checkout_fees/index....
  - smiler 15y ago
    I don't know of the laws in various countries, but this already happens on major purchases here in the UK - flights, holidays etc. You will be charged a surcharge for using a credit card, or a fixed fee. Eg £4.50 for a CC, free for a debit card.
  - mhb 15y ago
    Merchants are allowed, by the credit card companies, to offer a discount for cash.
blahedo 15y ago
I think that "the reason" will vary from person to person. For me I prefer my credit card to debit because of consumer protections and chargeback ability; but I definitely know a lot of people that use their credit card as an actual line of credit.
chollida1 15y ago
> It's true that some people need to purchase items on credit but the reason that they're so popular now is less to do with having a line of credit and more to do with the legacy of the technology. I don't know if that is true. My wife and I make a fari bit of money but we use credit cards so we don't have to worry about cash flow. If I want a new mac I just go out and buy it. I don't have to worry if I have enough money in my account at that exact moment or not because I know that at the end of the month when the credit card bill comes I"ll have enough to cover it. We might be an exception because my wife divides our income into several buckets as it comes in and then pulls from those buckets to pay the credit card bill at the end of the month, so I know very well what my monthly budget is . TL/DR we use credit cards as a line of credit to smooth over cash flow throughout the month as do most afluent people I know.

julian37 15y ago

Also, debit cards pay straight out of your regular bank account. With Dwolla, funds come out of your Dwolla account and it takes 2-4 days or longer to move funds into that account. It's an interesting concept but with delays like that I don't see how it can compete with plastic. Too bad, card processing fees are outrageous! http://help.dwolla.com/customer/portal/articles/225303-why-is-my-deposit-taking-so-long-to-show-up-in-my-dwolla-account- http://help.dwolla.com/customer/portal/articles/225303-why-i...

JoshTriplett 15y ago
According to the article, you can use a bank account directly.
- julian37 15y ago
  But even then, how long will it take for the funds to clear? Credit and debit cards work so well online because clearing happens almost instantaneously.
- tpowell 15y ago
  You can, I just confirmed by bank account with Dwolla this morning. One of the guys asking Dwolla questions on Twitter was a 4th generation jeweler, who regularly has $10k and up transactions. He was very eager to learn about the merchant APIs. He could probably save $500-$900 on a $30k ring if the transaction was made with their service. There are a million examples like that out there.
  - julian37 15y ago
    Can you pay instantly with it, just like with a card?
  - billybob 15y ago
    Your post made me do two double-takes. 1) People buy $30k rings!? 2) People put $30k on a credit card!?

tdfx 15y ago

If you're doing it right then your credit card account should be earning you the approximate equivalent of 1% cash back via rewards points or another mechanism. For my personal card I use Chase Sapphire (the one without the yearly fee), which gives 2x points for all dining purchases. Always confuses me when I see people using cash or debit cards. At my current rate of spending I could get a free iPad and a few other goodies every year by doing nothing more than not bothering to carry cash. In fact, merchants have to increase their prices slightly to account for the transaction fees, so anyone using cash is actually (in a small way) paying for my rewards.

UrbanPat 15y ago
Yes, that's the whole problem. I'm tired of paying for other people's airline miles, cashback, etc. This is an inefficiency built into the payment system, and it harms small businesses and lower-income people the most. I try to avoid using my credit card out of principle, because I don't like charging merchants more. I appreciate that Dwolla is trying to remove this inefficiency from the system. Mass conversion to a more efficient system would, eventually, mean cheaper prices for everyone.
BrandonM 15y ago
It always confuses me when I don't see people take pennies out of the change tray at gas stations; it's free money, just sitting there. It confuses me when people pay to ride the bus when they're so unlikely to get caught not paying. It confuses me that people don't just file for bankruptcy and forget all their credit card debt. If you're still confused, people have their own pride and principles. Something being legal or otherwise doable does not mean that everyone considers it moral. To me, it feels wrong to leverage a slimy Visa policy to bilk airfare from merchants who have to accept credit to compete and from customers who don't opt-in to the game.
- tdfx 15y ago
  As it turns out, when I'm not stealing pennies from the penny trays at gas stations, I often shop at businesses that only accept cash and have no issue with it. If a business accepts credit cards, however, I'd rather have that small part of the fee come back to me than stay in Visa's pocket.

crikli 15y ago

No, credit cards exist because in 1978 the Supreme Court released an opinion allowing banks to export interest rates from one state to the other. So a bank in a state with a 25% interest rate cap could lend to a family in another state with a 12% interest rate cap. Politicians figured out quickly that if they bumped up the credit rate ceiling in their state that the financial institutions would come running, cash in hand. Thirty(ish) years later we have an insidious industry that has saturated US culture with the poison of unsecured credit. They set up stands at colleges, snaring college freshmen with offers of free tee-shirts. They sponsor educational curriculums in grade schools advocating the use of credit cards. They even kick money to toy makers to include a little "Visa" or "Mastercard" with their products. They lobby Congress to pass laws making it harder for people who've dug themselves into a hole to include credit card debt in bankruptcy. Credit is not necessary for modern living, despite the propaganda that permeates every piece of media to which we have access. I know this because 18 years ago I was that ignorant kid that wanted a free teeshirt. Ten years ago I quit using credit as a means of purchase, and six years ago I made my last monthly payment (with the notable exception of student loans, which is a rant for another day).

eridius 15y ago
I'm 26 years old and I have never owned a credit card. Unless you really need to use a credit card as a short-term loan (which has always sounded to me like a really bad idea), they're just not necessary.
- pdovy 15y ago
  That isn't necessarily true. I have and frequently use a credit card, but I do not actually need the line of credit. I have it to establish a credit history so that someday when I actually do need credit (e.g., for a home loan), I'll be able to get it.
- ars 15y ago
  So what do you use to buy stuff electronically? Or rent a car? And if you tell me a debit card then you are making a mistake. There is nothing wrong with using a credit card for a short term loan, especially if you actually have enough money to cover that loan.