5 ms·

The fees are 3% only in the US and the bulk of that is returned to buyers as cash back or loyalty points, and to offset the cost of loan origination and warrant

The fees are 3% only in the US and the bulk of that is returned to buyers as cash back or loyalty points, and to offset the cost of loan origination and warranties. The EU has capped debit interchange at .2% and credit at .3%, Australia in the low 1s if I recall correctly. They just don’t really have rewards.

jen729w 4y ago
Yeah typically around 1.5% in Australia. Which is often passed on to the consumer at the point of sale. We do have a non-Visa/MC payment system here in 'eftpos', which is ubiquitous. AFAIK this is exclusively debit not credit, but this isn't my area, I'm just a consumer. https://www.eftposaustralia.com.au https://www.eftposaustralia.com.au
- _carbyau_ 4y ago
  EFTPOS got kicked to the curb when paywave-with-no-pin started. And then the pandemic reinforced that idea for a lot of people. I don't know when I last used EFTPOS.
  - jen729w 4y ago
    Aah so am I not actually using it? Like I said, no idea. Most consumers don't. There's a terminal, I wave my [phone|watch|card] at it, it beeps, I walk away. Happy days. In that case if it's a Visa card, is Visa the processing entity?
    - _carbyau_ 4y ago
      I am wishywashy on details too sorry. There is a combination of your card (debit/credit[visa/mastercard]) and the merchants setup. I am not sure who processes the payment on the merchant/supplier side for EFTPOS vs credit. So, if you have a Visa credit card, and the money comes from your credit account, like many, then it is clearly using Visa Paywave. But historically, it was Visa and Mastercard that started it with "no pin required" as an opt-out thing(IE it was enabled for you by default), and their main market is credit. Most people just rolled with it. Using the phone NFC however should give you more control I would think. But I honestly have never set it up.
    - throwaheyy 4y ago
      EFTPOS started in the 1980s as a full-electronic network when Visa/MC transactions still used a manual imprinter and paper slips with carbon copies. Visa/MC have also gone full electronic since then, so EFTPOS has kind of served its purpose.
holistio 4y ago
Nobody really has rewards. We don't have them in Europe, and some people in the USA think they have them. What they have is crazy high credit card fees and the need to juggle a bunch around to get a few things credit card companies decided to buy for you en masse. When I buy a $5 latte, I give Visa $0.01. When you do the same, you pay $0.15. Come the hell on. "REWARDS". Smh.
- lotsofpulp 4y ago
  I get a minimum 2.6% cash back on everything I purchase, but most things I get 3.5% to 5.25% cash back. There are a bunch of free 2% cash back credit cards, so people would at least break even if they wanted to.
  - dcolkitt 4y ago
    Generally those types of deals require either parking six figures out liquid assets at the issuing bank and/or paying high annual fees (which of course favor the biggest spenders who amortize the cost over lots of volume). Either way the current system definitely favors the rich over the middle class.
    - lotsofpulp 4y ago
      In my case, it does not have to be liquid. Any investments count, including IRA/529 and other accounts. The 2% cash back cards generally have no requirements. I am going to have those same investments anyway in VOO at one brokerage or another, so there is no opportunity cost. You are correct that it is sort of a wealth transfer from poorer to richer. But merchants are free to offer discounts for non credit card purchases, and they do many times.
    - JumpCrisscross 4y ago
      > system definitely favors the rich over the middle class This is correct. But it's a far cry from "nobody really has rewards." Framed a bit differently, our credit card system is a regressive tax on consumption.
  - 4y ago
TrueGeek 4y ago
Interesting. How much money is lost by banks giving out cash back rewards to Americans using credit cards in Europe?
- philip1209 4y ago
  I'm not sure, but note that many banks make money on currency conversion, such as by offering non-market conversion rates.
  - jkaplowitz 4y ago
    Some of the best traveler-focused US rewards cards, like the Chase Sapphire Reserve cards, have no foreign transaction fees, even zeroing out what Visa charges them. And these cards are okay not only with frequent travel but even foreign residential addresses (only for customers who relocate - US address required at initial signup). I have one of those, used it while living in Canada, and soon expect to use it while living in Europe. They do of course make money by charging a high annual fee, but another commenter already explained how the rewards offered by this card can still give more in value than the annual fee costs. This is absolutely true in my case.
- supertrope 4y ago
  None. When an American uses a rewards card the merchant pays 3% interchange so the customer can pocket 1%. These are high fees compared with a local using a card with the fee capped at 0.3%.
jasonwatkinspdx 4y ago
It's worth noting there's some real economic disparity in just who can get rewards cards with significant incentives in the US.
- arcticbull 4y ago
  Yep, but also, those vanilla no-rewards Visa cards only have interchange rates as low as like 1.5% whereas those high-end cards like an Amex Platinum can cost as much as 3.5%. [1] [1] https://www.bankrate.com/finance/credit-cards/why-american-express-isnt-universally-accepted/ https://www.bankrate.com/finance/credit-cards/why-american-e...
  - ShroudedNight 4y ago
    Yet the price the purchaser pays doesn't change, so the less fortunate end up subsidizing the rich. Credit card rewards are egregiously regressive.

jen729w 4y ago

Yeah typically around 1.5% in Australia. Which is often passed on to the consumer at the point of sale. We do have a non-Visa/MC payment system here in 'eftpos', which is ubiquitous. AFAIK this is exclusively debit not credit, but this isn't my area, I'm just a consumer. https://www.eftposaustralia.com.au https://www.eftposaustralia.com.au

_carbyau_ 4y ago
EFTPOS got kicked to the curb when paywave-with-no-pin started. And then the pandemic reinforced that idea for a lot of people. I don't know when I last used EFTPOS.
- jen729w 4y ago
  Aah so am I not actually using it? Like I said, no idea. Most consumers don't. There's a terminal, I wave my [phone|watch|card] at it, it beeps, I walk away. Happy days. In that case if it's a Visa card, is Visa the processing entity?
  - _carbyau_ 4y ago
    I am wishywashy on details too sorry. There is a combination of your card (debit/credit[visa/mastercard]) and the merchants setup. I am not sure who processes the payment on the merchant/supplier side for EFTPOS vs credit. So, if you have a Visa credit card, and the money comes from your credit account, like many, then it is clearly using Visa Paywave. But historically, it was Visa and Mastercard that started it with "no pin required" as an opt-out thing(IE it was enabled for you by default), and their main market is credit. Most people just rolled with it. Using the phone NFC however should give you more control I would think. But I honestly have never set it up.
  - throwaheyy 4y ago
    EFTPOS started in the 1980s as a full-electronic network when Visa/MC transactions still used a manual imprinter and paper slips with carbon copies. Visa/MC have also gone full electronic since then, so EFTPOS has kind of served its purpose.

holistio 4y ago

Nobody really has rewards. We don't have them in Europe, and some people in the USA think they have them. What they have is crazy high credit card fees and the need to juggle a bunch around to get a few things credit card companies decided to buy for you en masse. When I buy a $5 latte, I give Visa $0.01. When you do the same, you pay $0.15. Come the hell on. "REWARDS". Smh.

lotsofpulp 4y ago
I get a minimum 2.6% cash back on everything I purchase, but most things I get 3.5% to 5.25% cash back. There are a bunch of free 2% cash back credit cards, so people would at least break even if they wanted to.
- dcolkitt 4y ago
  Generally those types of deals require either parking six figures out liquid assets at the issuing bank and/or paying high annual fees (which of course favor the biggest spenders who amortize the cost over lots of volume). Either way the current system definitely favors the rich over the middle class.
  - lotsofpulp 4y ago
    In my case, it does not have to be liquid. Any investments count, including IRA/529 and other accounts. The 2% cash back cards generally have no requirements. I am going to have those same investments anyway in VOO at one brokerage or another, so there is no opportunity cost. You are correct that it is sort of a wealth transfer from poorer to richer. But merchants are free to offer discounts for non credit card purchases, and they do many times.
  - JumpCrisscross 4y ago
    > system definitely favors the rich over the middle class This is correct. But it's a far cry from "nobody really has rewards." Framed a bit differently, our credit card system is a regressive tax on consumption.
- 4y ago

TrueGeek 4y ago

Interesting. How much money is lost by banks giving out cash back rewards to Americans using credit cards in Europe?

philip1209 4y ago
I'm not sure, but note that many banks make money on currency conversion, such as by offering non-market conversion rates.
- jkaplowitz 4y ago
  Some of the best traveler-focused US rewards cards, like the Chase Sapphire Reserve cards, have no foreign transaction fees, even zeroing out what Visa charges them. And these cards are okay not only with frequent travel but even foreign residential addresses (only for customers who relocate - US address required at initial signup). I have one of those, used it while living in Canada, and soon expect to use it while living in Europe. They do of course make money by charging a high annual fee, but another commenter already explained how the rewards offered by this card can still give more in value than the annual fee costs. This is absolutely true in my case.
supertrope 4y ago
None. When an American uses a rewards card the merchant pays 3% interchange so the customer can pocket 1%. These are high fees compared with a local using a card with the fee capped at 0.3%.

jasonwatkinspdx 4y ago

It's worth noting there's some real economic disparity in just who can get rewards cards with significant incentives in the US.

arcticbull 4y ago
Yep, but also, those vanilla no-rewards Visa cards only have interchange rates as low as like 1.5% whereas those high-end cards like an Amex Platinum can cost as much as 3.5%. [1] [1] https://www.bankrate.com/finance/credit-cards/why-american-express-isnt-universally-accepted/ https://www.bankrate.com/finance/credit-cards/why-american-e...
- ShroudedNight 4y ago
  Yet the price the purchaser pays doesn't change, so the less fortunate end up subsidizing the rich. Credit card rewards are egregiously regressive.