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I wouldn’t assume everyone is happy with it. Consumers are going to prefer rewards programs over no rewards programs. And before you say it results in higher pr

• ddfs123 3y ago
  >Australia regulated away interchange and it didn’t result in lowering prices. Prices has already been raised, I don't think they'll ever drop back, so that doesn't seems like a reasonable data point to dispute the price raising claim.
  • Ekaros 3y ago
    Better measurement might be did they go up less after this or did they go up later? As there should be more leeway in delaying increasing prices.
• andruby 3y ago
  > I wouldn’t assume everyone is happy with it. Consumers are going to prefer rewards programs over no rewards programs. Personally, I would disagree. I prefer no rewards and a simple landscape where I don't have to compare credit cards. I lived in both EU and US, and didn't like the work needed to compare (and keep comparing) all the credit card offerings. In the EU, you just the credit card from your bank and don't feel like you're missing out.
  • deleted 3y ago
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  • balderdash 3y ago
    Why would you prefer a world where where you can’t get a 1-5% discount on everything you buy vs the alternative (spending on a debit card or using cash)? Obviously some people try to over optimize, but 30min of research every few years is definitely with the thousands of dollars of benefits in my mind
    • deleted 3y ago
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  • alibarber 3y ago
    I my part of the EU I'd certainly feel like I'm missing out if I just kept on paying the ~€5 a month fee for a bank account and didn't look for a card that gave me some kind of return on my spend every month... (It's Finland btw, and you need a Finnish, not "anywhere-in-SEPA", bank account in order to practically function in society here with the strong online authentication service)
    • oezi 3y ago
      The return you get is just taken from you without you knowing it. The rewards programs is taking your money and giving you back a part of it.
      • eleveriven 3y ago
        I thougt that it works like when you make a purchase using a credit card that offers rewards, the issuer earns money from the transaction through interchange fees, which are fees charged to merchants for processing credit card payments.
      • willseth 3y ago
        No, it's taking the merchants' money and giving you back part of it. How much do merchants eat it vs passing on the cost? I don't think that's an easy question to answer and probably varies a lot by merchant type and product, but I think we can assume the answer is not always passes on 100% of the cost, so owners of the high end rewards cards are winning to some degree. You could argue that non-rewards cards are absorbing costs of rewards cards in the case where merchants do pass through costs, though.
        • AnthonyMouse 3y ago
          Except that 100% of the cost isn't being transferred to the cardholder, either. You might have a 1% cash back card while the merchant is paying 3%. If only half of the cost is being passed on, you're still losing money. And price isn't the only variable. Even if the merchant ate the entire 3%, that might require them to cut costs in some way so you receive a lower quality product, or drive some competitors out of business and thereby allow the remaining companies to reduce quality without lowering prices because the company providing a better product for the same price was eliminated by the fees.
• mumblemumble 3y ago
  "Lower prices" doesn't necessarily mean they just suddenly and immediately drop. That's no surprise; dropping prices purely out of the goodness of your heart isn't terribly good business practice. Also, for a lot of retail, MSRP is MSRP, and that's a pretty big anchor point. What I'd expect instead, based on my having taken exactly one class in economics as an undergraduate, is subtler effects that play out over time. Maybe the general growth in prices over time slows down a titch until a new equilibrium point is met. Maybe wages rise a little bit because retailers can afford to pay their employees more. Maybe life gets easier for smaller businesses that have less negotiation power than the multinational behemoths. Maybe some bank executive somewhere decides not to buy that third luxury car at the same time as ten thousand restaurant owners decide that, just today, they will treat themselves to an espresso drink from the coffee shop instead of making drip coffee at home. That kind of thing. I think maybe that last example is most interesting to me, because it calls attention to how merchant/consumer is a false dichotomy and things are always a bit more subtle than how the news likes to make us think they are.
  • quartesixte 3y ago
    >because it calls attention to how merchant/consumer is a false dichotomy Yes! People forget that the many merchants in this country are also participants in this consumer economy as well. I think one's exposure to mom&pops/small businesses informs this view greatly. One can be forgiven of seeing merchants as faceless corporations if the entire shopping experience has happened at faceless multinationals (...of whom's profits contribute to many consumer's 401ks!) And also Merchants are in many ways the "edge compute" of the long, very complex tangle of suppliers, wholesalers, service providers, and (of course) the bank. All which entail transactions that, in isolation, looks very similar to merchant-consumer.
  • eek2121 3y ago
    Except prices in Australia, especially in Tech, are among the highest in developed countries. Like I get what you are saying, but reality, in this case, trumps theory.
    • tialaramex 3y ago
• fallingknife 3y ago
  Yeah that's kind of how the system operates in the US. The CC duopoly fleeces merchants and gives out a share of the monopoly profits as rewards to consumers to make any antitrust action against them politically unpopular. It's a shakedown, and yes, getting rid of it would be bad for consumers, at least in the beginning. But it should be done anyway.
  • abalone 3y ago
    I agree except for the part about monopoly. There are in fact competing card networks. The bitter pill to swallow is that consumer preferences played a role in evolving this system. Card networks are managing a two sided market, and that means offering value to both the merchant and the consumer. Reward programs are examples of consumer value. If Visa decided to kill its “signature” interchange tier, those customers would move to MasterCard.
• oezi 3y ago
  Rewards programs are stupid for consumers. They cause higher prices for everyone (even for the rewards recipients). I am fine with merchants keeping the profit, because for most categories of products that I buy there are working markets and every % of profit is turned to lower prices in the end.
  • refurb 3y ago
    Rewards programs cause higher prices just like “free delivery” or “no questions asked returns for 6 months” does. It’s just another cost of business. Sometimes you bump up the price to account for it, sometimes you take the hit in profit in exchange for more volume hand more profit). Very rarely do businesses do “cost plus” pricing. They usually charge what they can. Which is why prices are sticky. For the businesses that price based on cost alone they usually reject credit cards all together. Long ago I shopped at a computer parts store that had the best prices and they were all focused on volume - no further discounts, no credit cards, no free delivery.
    • ddfs123 3y ago
      But if that's true then why Debit cards are not qualified for reward programs ?
      • twoodfin 3y ago
        Because a few years ago, Congress gave into merchants’ demands and capped debit card interchange fees.
  • jacurtis 3y ago
    > They cause higher prices for everyone (even for the rewards recipients). Honestly no. Price is relative. The sticker price might change, but the effective price depends on the customer. Largely generalized: Low-credit customers essentially subsidize the cost for high-credit customers. Let me explain: So let's call the current price: p. - The cash customer pays: p - The rewards card user pays p - 1% (because they get cashback) - The mid-level rewards customer pays p - 2% - The premium reward users pay p - 5% Now let's say that reward cards are banned. No more rewards cards. Let's call the new price (after rewards cards and their associated fees are removed) as 'n'. What would happen? Scenario A: No Change Now I believe if you got rid of rewards cards, then n = p. Merchants wouldn't lower prices, they would just keep them the same and pocket the difference. So now everyone loses, except for cash customers who are unchanged. But everyone pays p, which is at best the same as before, and at worse 5%+ more expensive by getting rid of rewards cards. Scenario B: Utopia, the Merchants Care Let's make the argument you are making, which is that maybe the merchants would be nice and give us a cut of the rewards card savings. This would save them maybe 1%. I suspect slightly less on average, but let's call it 1% to be generous. So in scenario B: n = p - 1% Yes cash customers win! They pay 1% less than before. But the majority of customers still lose. Cash customers are the only winners. Normal rewards card users are paying the same amount they were before. The bell curve of card users are probably paying 1% more, while the high-end premium card users are paying 4%+ more than before. The majority of consumer still lose, only cash customers come out ahead. This scenario of course assumes that merchants are generous and pass on the savings. If this did happen, you would likely notice savings for a year or two at most, due to economics and market forces. Eventually, like I said above. The price just becomes normalized and the price is the price once again. House or car prices go up slightly at first because of more money in customer pockets, employers are less pressured to give out high raises, so maybe income raises are 0.5% on average lower that year, and 0.3% lower the next year and 0.2% lower the year following (which actually makes it look like raises are increasing YoY other than the first year). This continues and 3 years later that 1% gain is normalized into the economy and becomes the new baseline and we are back where we started. So no, everyone does not lose with rewards cards. There are winners and losers. You could argue that lower income customers (the ones most likely to pay with cash or low-end credit cards) pay the price for the higher-income customers (the ones most likely to have 800+ credit scores with premium cards). So, largely generalized you could argue that low-credit customers subsidize the price of goods for high-credit customers. I think that's a more accurate argument. And to be clear, I'm not stating that it's fair, just that it's accurate.
• LastTrain 3y ago
  > Consumers are going to prefer rewards programs over no rewards programs. I believe that you believe. Rewards programs are ultimately bad for consumers and merchants, but great for rent-seeking banks. As a consumer I'd prefer an EU style cap and not have to spend my time working to scrape back some of that money.
  • abalone 3y ago
    What do you mean by “spending time working to scrape back money”? Cashback rewards are fairly automatic. Maybe some have a simple redemption step. Apple Card’s is 100% automatic.
    • Slartie 3y ago
      Did you read the originally linked article? It literally talked about ways in which rewards programs are often designed to only hand out top rewards for a very limited part of all transactions, like only for books at certain bookstores. And that these obscure rules in the extreme case can also change over time, so in one month you need to go to store A, in the next month you better visit store B. So yes, the rewards are "automatic". But what's not "automatic" is you getting the maximum possible reward percentage on your spending. For that, you often need to optimize your spending along the guardrails put up by some random card issuer. Which takes effort and time. I don't know about you, but I've got better uses for my time, so I'd prefer just not having 2-3% of the price of all products I buy to go towards obscure rewards through which I need to claw back some of those 2-3% by gaming the system. If I want to play games, I buy a computer game and play that.
    • madeofpalk 3y ago
      Apple Card doesn't seem like a particularly good business, so much so that the issuer is trying to ditch it https://www.wsj.com/articles/goldman-is-looking-for-a-way-out-of-its-partnership-with-apple-79849a91 https://www.wsj.com/articles/goldman-is-looking-for-a-way-ou... https://archive.is/bkoBG https://archive.is/bkoBG
      • abalone 3y ago
• astura 3y ago
  As much as I like taking advantage of rewards programs as a consumer (and boy I do), if given the choice I would actually prefer merchants paid very low fees and I got no rewards. That's just my personal preference. It seems like a much fairer system. I just don't like that middlemen take an unfair share, even if that middleman is me.
• brazzy 3y ago
  >I wouldn’t assume everyone is happy with it. Consumers are going to prefer rewards programs over no rewards programs> Absolutely not. Fuck rewards programs. I don't want to waste a single second thinking about how to optimize my card usage and spending habits to get "rewards".
  • abalone 3y ago
    I respect that. FWIW I just use three cards: 1. Apple Card which is 2% back on all Apple Pay 2. Costco Visa that does 3% on restaurants and travel 3. Amazon prime visa, 5% back on Amazon and Whole Foods. (This is just saved to my Amazon account so I don’t have to think about it.) It’s pretty easy to remember to use the Costco card at restaurants.
    • matwood 3y ago
      Yeah, I have a similar 'never think about it' plan. The Amazon one alone is huge if you buy a lot of stuff on Amazon and it ends up being completely transparent in usage.
  • refurb 3y ago
    Cool. Do what works for you. For me I just sign up for a new credit card twice a year and then shift my normal spending to the new card, canceling the old one. I usually get a week’s hotel stay for free or $1000 cash back for nothing more than taking 30 minutes twice a year to find the best card.
    • chrisfinazzo 3y ago
      I'd be wary of this approach - either from issuers suspecting you are gaming the system, or the effect on your FICO score as the average age of your accounts decreases. I might be totally off base, but this seems like it can't end well.
      • refurb 3y ago
        Two cards a year isn't even a blimp on most card issuers radar. If you go to r/churning back a few years, people were getting 24 new cards a year. Open the card, buy $4,000 worth of gift certificates, claim the reward, close the card, repeat. It was insane the amount of effort people put into it. Banks creates these rewards to incentivize people to open the cards. Chase did eventually put a limit of 5 cards in 24 months (a limit I have hit), but they just reject you for the card off the bat. In terms of the credit score hit, it's minor. I've never had my score change by more than 5-10 points. I wouldn't do it if I was applying for a mortgage in the near term, but otherwise, it doesn't really change my score as 5-10 points doesn't change the band you're in.