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I love traveling cheap on card points and have held V & MA stock long enough to double my cost basis, so I probably stand to lose if this passes, but I think it
by paulgb 3y ago
I love traveling cheap on card points and have held V & MA stock long enough to double my cost basis, so I probably stand to lose if this passes, but I think it’s a good idea. Since most merchants charge the same rate regardless of means of payment, cash and debit customers essentially subsidize free perks for people who use reward cards. Because reward cards scale roughly with your credit score and ability to pay an annual fee, it’s pretty much a regressive tax on low-income people with middle/upper income people seeing the benefit.
There’s essentially no price pressure for interchange fees to go down, as long as they are absorbed by the merchant.
- zeroCalories 3y agoI think the perks are one aspect, but even if you got rid of them there would still be benefits such as convince and security. I think outlawing credit cards should only be on the table once good infrastructure for payments are in place.
- toomuchtodo 3y agohttps://news.ycombinator.com/item?id=36801491 https://news.ycombinator.com/item?id=36801491
- zeroCalories 3y agoYes, I was thinking of that. Zell is also great. But it's still not a drop in replacement for cards, we're still aways from that.
- toomuchtodo 3y agoMore on the topic: https://www.axios.com/2023/07/22/fednow-instant-payments-credit-cards https://www.axios.com/2023/07/22/fednow-instant-payments-cre...
- AnthonyMouse 3y agoIt has always been obvious that points systems are an arbitrage scam. The payment network pays the customer 1% to use their card for which they charge the merchant 2% or more when there are alternatives with low or no fees. The customer chooses the payment method but doesn't directly pay the processing fee, so they choose the payment method with the rewards and then indirectly pay the processing fee which is twice as much or more. Merchants have trouble resisting this because the same system is the one that allows their customers to buy on credit, which is worth more than 2% to them even though that is more than it costs to provide that service in a competitive market. And then the customers who don't need to buy on credit still choose the payment method with high fees for the rewards.
- BenjiWiebe 3y agoI keep seeing this repeated as if a person with low income can't have a good credit score. That isn't true. It's possible to curb one's spending of money they don't have, regardless of your income. And then you get an excellent credit score. Source: my own experiences with credit
- paulgb 3y agoI don't mean to say that a low income person absolutely can't have good credit, but that it's likely to be correlated due to how the system works. For example, a creditor will ask your income before extending credit to you. The more unused credit you have available to you, all else being equal, the better your credit score. So that's at least one reason to expect that they are correlated.
- donmcronald 3y ago> It's possible to curb one's spending of money they don't have, regardless of your income. It would cost me +$100 to get a rewards card. At 1% back I'd need to spend $10k per year on a rewards card to break even. So, if you curb your spending, you're subsidizing those wealthier than you that are spending $10k+ per year on their credit card. Source: I subsidize rich people's rewards cards and don't like it.
- bombcar 3y agoSome rewards cards are free, but maybe you need to spend the $100 on something else? If you have good/decent credit some offer signup bonuses.
- brewdad 3y agoI have 3 different rewards cards that pay me cash and are all free.I do pay a fee for one additional card but it provides perks that are worth that fee to me.
- refurb 3y agoThere are a ton of rewards cards with no annual fee at all.