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Credit card reward systems & points are not free. Comes at the cost of higher transaction fees that eventually get passed on to the customer. I’ve found these

Credit card reward systems & points are not free. Comes at the cost of higher transaction fees that eventually get passed on to the customer. I’ve found these schemes much less prevalent in Europe (with the exception of AMEX, but half of the vendors in Europe seems to not accept that anyway). On top of that, in the EU, interchange fees are capped to 0.3% of the transaction for credit cards and to 0.2% for debit cards. This prevents it from becoming the points hell of the US market.

ghaff 4y ago
Although I'm pretty sure most of the rewards go to people willing to pay for premium cards because they make a lot of transactions. Do the people with free credit cards subsidize them? Maybe but it's not obvious. Of course, the people with the biggest reward cards are probably not paying much interest or late fees either.
- NavinF 4y ago
  > Do the people with free credit cards subsidize them? Depends on the card. Interchange fees are much lower for basic cards so if you get at least 2% cashback, that's break-even. Of course cards with annual fees get a lot more rewards in the form of transferable airline points and have much higher interchange fees to cover that.
  - iancarroll 4y ago
    The interchange fee differences between credit card types are not very high, usually around 0.5%. You can see the public Visa interchange rates at https://usa.visa.com/content/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf https://usa.visa.com/content/dam/VCOM/download/merchants/vis.... Credit card companies play a lot of games with this too and will “upgrade” your card type if they think it’s worth it, even if you don’t make any changes. The biggest variances involve non-exempt (Durbin amendment) debit cards.
    - NavinF 4y ago
      Ah I thought the interchange rates would be 1% higher for the best cards, not 0.5% higher I guess the lowest tier cards really do subsidize the rest.
kuschku 4y ago
Girocard was actually still significantly cheaper than the capped credit and debit cards (0.125% end-to-end cost (!)), and yet now we're seeing banks drop it because MasterCard has threatened to stop business with any bank that doesn't drop it. IMO, the EU should either break up MasterCard & VISA, nationalize them, or build their own system (maybe unify Girocard, Dankort, etc?) and make that mandatory. The difference between the MasterCard & VISA fees and e.g. Girocard fees is almost 2%. That's equivalent to paying an additional 2% tax on everything. With that amount of money we could make all transit in the EU entirely free of charge and expand it quite a bit, yet all it's doing right now is make some rich assholes even richer.
- pbreit 4y ago
  Credit cardholders mostly get 1-3% back so it’s a bit of a wash.
- ymolodtsov 4y ago
  Nationalizing a company that isn't really incorporated in your state is funny. EU has already limited the interchange fees on domestic cards. Plus, basically every EU country has some kind of a homegrown system.
  - kuschku 4y ago
    Mastercard has warned banks that it'd stop cooperating with banks that still support the national card systems. It's clear they're trying to kill those off, and it's working. That's why merging the national systems and making that new, merged, EU wide system mandatory is absolutely essential.
chinathrow 4y ago
> Credit card reward systems & points are not free. I always treat them as a system for the corruption of myself. They pay me to use their card (for a payment!!!) and therefore I get corrupted and I become part of the problem.
bel_marinaio 4y ago
Why are so many things better in the EU?
- AnhTho_FR 4y ago
  Haha EU isn't perfect, but from a super high-level and personal point of view (and there are millions of nuances within Europe), but generally there's more emphasis on the common good as a society, than what I've seen in the US (I grew up in France but part of my family lives in the US).
- wpietri 4y ago
  A historian, Walter McDougall, author of the excellent "Let the Sea Make a Noise", was planning to write a history of America around the duality of the word "hustle", which can mean both "energetic, go get 'em attitude" and "scam". In America we are very accepting of anti-social or exploitative behavior as long as somebody's getting rich. I also think a lot about the term "puffery", which in American law is when companies make false claims about a product, but in a fashion where everybody is assumed to know that they're lying, which makes it ok: https://en.wikipedia.org/wiki/Puffery https://en.wikipedia.org/wiki/Puffery It really says something to me that we supposedly have such a deep expectation of commercial lies that it's acceptable. I think in a healthier country someone would say, "Wait, what if they just didn't lie?"
  - jhdhjdkjdhcfnj 4y ago
    it's a way to exhert maximum control with minimal effort (in this case, talking about flow of capital) https://en.m.wikipedia.org/wiki/Normalization_(sociology) https://en.m.wikipedia.org/wiki/Normalization_(sociology)

ghaff 4y ago

Although I'm pretty sure most of the rewards go to people willing to pay for premium cards because they make a lot of transactions. Do the people with free credit cards subsidize them? Maybe but it's not obvious. Of course, the people with the biggest reward cards are probably not paying much interest or late fees either.

NavinF 4y ago
> Do the people with free credit cards subsidize them? Depends on the card. Interchange fees are much lower for basic cards so if you get at least 2% cashback, that's break-even. Of course cards with annual fees get a lot more rewards in the form of transferable airline points and have much higher interchange fees to cover that.
- iancarroll 4y ago
  The interchange fee differences between credit card types are not very high, usually around 0.5%. You can see the public Visa interchange rates at https://usa.visa.com/content/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf https://usa.visa.com/content/dam/VCOM/download/merchants/vis.... Credit card companies play a lot of games with this too and will “upgrade” your card type if they think it’s worth it, even if you don’t make any changes. The biggest variances involve non-exempt (Durbin amendment) debit cards.
  - NavinF 4y ago
    Ah I thought the interchange rates would be 1% higher for the best cards, not 0.5% higher I guess the lowest tier cards really do subsidize the rest.

kuschku 4y ago

Girocard was actually still significantly cheaper than the capped credit and debit cards (0.125% end-to-end cost (!)), and yet now we're seeing banks drop it because MasterCard has threatened to stop business with any bank that doesn't drop it. IMO, the EU should either break up MasterCard & VISA, nationalize them, or build their own system (maybe unify Girocard, Dankort, etc?) and make that mandatory. The difference between the MasterCard & VISA fees and e.g. Girocard fees is almost 2%. That's equivalent to paying an additional 2% tax on everything. With that amount of money we could make all transit in the EU entirely free of charge and expand it quite a bit, yet all it's doing right now is make some rich assholes even richer.

pbreit 4y ago
Credit cardholders mostly get 1-3% back so it’s a bit of a wash.
ymolodtsov 4y ago
Nationalizing a company that isn't really incorporated in your state is funny. EU has already limited the interchange fees on domestic cards. Plus, basically every EU country has some kind of a homegrown system.
- kuschku 4y ago
  Mastercard has warned banks that it'd stop cooperating with banks that still support the national card systems. It's clear they're trying to kill those off, and it's working. That's why merging the national systems and making that new, merged, EU wide system mandatory is absolutely essential.

chinathrow 4y ago

> Credit card reward systems & points are not free. I always treat them as a system for the corruption of myself. They pay me to use their card (for a payment!!!) and therefore I get corrupted and I become part of the problem.

bel_marinaio 4y ago

Why are so many things better in the EU?

AnhTho_FR 4y ago
Haha EU isn't perfect, but from a super high-level and personal point of view (and there are millions of nuances within Europe), but generally there's more emphasis on the common good as a society, than what I've seen in the US (I grew up in France but part of my family lives in the US).
wpietri 4y ago
A historian, Walter McDougall, author of the excellent "Let the Sea Make a Noise", was planning to write a history of America around the duality of the word "hustle", which can mean both "energetic, go get 'em attitude" and "scam". In America we are very accepting of anti-social or exploitative behavior as long as somebody's getting rich. I also think a lot about the term "puffery", which in American law is when companies make false claims about a product, but in a fashion where everybody is assumed to know that they're lying, which makes it ok: https://en.wikipedia.org/wiki/Puffery https://en.wikipedia.org/wiki/Puffery It really says something to me that we supposedly have such a deep expectation of commercial lies that it's acceptable. I think in a healthier country someone would say, "Wait, what if they just didn't lie?"
- jhdhjdkjdhcfnj 4y ago
  it's a way to exhert maximum control with minimal effort (in this case, talking about flow of capital) https://en.m.wikipedia.org/wiki/Normalization_(sociology) https://en.m.wikipedia.org/wiki/Normalization_(sociology)