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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

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.
    - Kinrany 3y ago
      Other customers bear most of the cost of merchants raising prices because of the 3% fee, not you.
    - willseth 3y ago
      Right, but the interesting part of TFA is about how the rates paid by merchants are higher for the top 10% of cards. Your example assumes the same rate paid by everyone. Because only a small portion of transactions incur the high rate/high reward, it seems far less likely that the split between pass-through vs eat-it still won't benefit high end cardholders.
      - AnthonyMouse 3y ago
        That still depends on what the split is. If the average fee is 3% and the high-end customer is getting 2% back, the merchant could be passing on e.g. 2.1% and causing you to come out behind while still passing on only 70% of the cost. And for anyone getting less cash back the math is even worse, which from the same premise will be the majority of people or else the merchant's costs (and so the amount they pass on) would be even higher.
        willseth 3y ago
        > If the average fee is 3% and the high-end customer is getting 2% back ... You're not picking realistic numbers. The fees range from around 1.5% to ~3%, and the 2.5%-3%+ fees are limited to ~10% of customers. An average fee of 3% doesn't make sense. Very basic napkin math would be 0.9((1.5+2.5)/2)+0.1((2.5+3)/2) = ~2.1% average. So only in the 100% passthrough case does the high end cardholder actually lose. That's not likely. And if you look at the chart, if 740 is 10%, there are probably far fewer than 10% of transactions averaging 2.75%, so this is likely still way overestimating.
        AnthonyMouse 3y ago
        > The fees range from around 1.5% to ~3%, and the 2.5%-3%+ fees are limited to ~10% of customers. An average fee of 3% doesn't make sense. That's just the interchange fee, not what merchants are actually paying. Stripe charges a flat 2.9% + $0.30 and this is considered competitive: https://stripe.com/pricing https://stripe.com/pricing For a $20 transaction, that's 4.4%, and that's for everybody, not just the people with rewards cards.
matheusmoreira 3y ago
> paying the ~€5 a month fee for a bank account That's the problem right there. Bank accounts should be free by force of law. A bank charging depositors for literally anything is just absurd. They should be paying you, not the other way around.
- Ekaros 3y ago
  For many average people I don't see how they could be free. Maybe savings account with limitations should pay something and be free, but with checking account. You get what couple thousand passing through each month? You have all the costs like KYC requirements, actual overhead of tracking and managing the balances and payments. And many of the payments options are free or low cost... If it was such money maker, surely there would be lot of competition offering zero fee bank accounts.
  - andruby 3y ago
    In a lot of EU countries there is plenty of competition and there are multiple options for free bank accounts. The banks make money of the debit & credit card payments, savings accounts, having you as a customer for mortgages and other loans. List of 30 free checking accounts in Belgium: https://www.spaargids.be/sparen/gratis-zichtrekeningen.html https://www.spaargids.be/sparen/gratis-zichtrekeningen.html (NL/FR)
  - matheusmoreira 3y ago
    > For many average people I don't see how they could be free. I do. In fact it is free in my country. Anyone can go to literally any bank and get a free account with support for basic operations, including a checking account. I set up my GitHub Sponsors thing with a free bank account. I'm not paying the bank to get paid by GitHub. Just turn it into a basic human right and don't look back. They should be glad we're depositing our money in there. It's just completely absurd to be charged even a fraction of a cent for the privilege of having some bankers profiting off of your money. It'd make sense to pay them if they were safekeeping it for you in their vaults. They aren't. They're lending it all out to third parties, gambling in stock markets. You name it, they're doing it. These bankers actually crash the economy now and then with their irresponsibility and they face approximately zero consequences for it. So why should anyone pay them a cent for this "privilege"? That's just clown world levels of insane. They should be competing to see who can pay depositors the most, not charging them. Managing balances? It's the computer's job. Overhead? Literally not our problem. Just make them eat all those costs. Maybe that'll even make them start lobbying for less government bureaucracy so as to reduce their "overhead". AML/KYC is just the financial arm of global mass surveillance anyway and should not even be legal to begin with.

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.
  - Kinrany 3y ago
    Other customers bear most of the cost of merchants raising prices because of the 3% fee, not you.
  - willseth 3y ago
    Right, but the interesting part of TFA is about how the rates paid by merchants are higher for the top 10% of cards. Your example assumes the same rate paid by everyone. Because only a small portion of transactions incur the high rate/high reward, it seems far less likely that the split between pass-through vs eat-it still won't benefit high end cardholders.
    - AnthonyMouse 3y ago
      That still depends on what the split is. If the average fee is 3% and the high-end customer is getting 2% back, the merchant could be passing on e.g. 2.1% and causing you to come out behind while still passing on only 70% of the cost. And for anyone getting less cash back the math is even worse, which from the same premise will be the majority of people or else the merchant's costs (and so the amount they pass on) would be even higher.
      - willseth 3y ago
        > If the average fee is 3% and the high-end customer is getting 2% back ... You're not picking realistic numbers. The fees range from around 1.5% to ~3%, and the 2.5%-3%+ fees are limited to ~10% of customers. An average fee of 3% doesn't make sense. Very basic napkin math would be 0.9((1.5+2.5)/2)+0.1((2.5+3)/2) = ~2.1% average. So only in the 100% passthrough case does the high end cardholder actually lose. That's not likely. And if you look at the chart, if 740 is 10%, there are probably far fewer than 10% of transactions averaging 2.75%, so this is likely still way overestimating.
        AnthonyMouse 3y ago
        > The fees range from around 1.5% to ~3%, and the 2.5%-3%+ fees are limited to ~10% of customers. An average fee of 3% doesn't make sense. That's just the interchange fee, not what merchants are actually paying. Stripe charges a flat 2.9% + $0.30 and this is considered competitive: https://stripe.com/pricing https://stripe.com/pricing For a $20 transaction, that's 4.4%, and that's for everybody, not just the people with rewards cards.

matheusmoreira 3y ago

> paying the ~€5 a month fee for a bank account That's the problem right there. Bank accounts should be free by force of law. A bank charging depositors for literally anything is just absurd. They should be paying you, not the other way around.

Ekaros 3y ago
For many average people I don't see how they could be free. Maybe savings account with limitations should pay something and be free, but with checking account. You get what couple thousand passing through each month? You have all the costs like KYC requirements, actual overhead of tracking and managing the balances and payments. And many of the payments options are free or low cost... If it was such money maker, surely there would be lot of competition offering zero fee bank accounts.
- andruby 3y ago
  In a lot of EU countries there is plenty of competition and there are multiple options for free bank accounts. The banks make money of the debit & credit card payments, savings accounts, having you as a customer for mortgages and other loans. List of 30 free checking accounts in Belgium: https://www.spaargids.be/sparen/gratis-zichtrekeningen.html https://www.spaargids.be/sparen/gratis-zichtrekeningen.html (NL/FR)
- matheusmoreira 3y ago
  > For many average people I don't see how they could be free. I do. In fact it is free in my country. Anyone can go to literally any bank and get a free account with support for basic operations, including a checking account. I set up my GitHub Sponsors thing with a free bank account. I'm not paying the bank to get paid by GitHub. Just turn it into a basic human right and don't look back. They should be glad we're depositing our money in there. It's just completely absurd to be charged even a fraction of a cent for the privilege of having some bankers profiting off of your money. It'd make sense to pay them if they were safekeeping it for you in their vaults. They aren't. They're lending it all out to third parties, gambling in stock markets. You name it, they're doing it. These bankers actually crash the economy now and then with their irresponsibility and they face approximately zero consequences for it. So why should anyone pay them a cent for this "privilege"? That's just clown world levels of insane. They should be competing to see who can pay depositors the most, not charging them. Managing balances? It's the computer's job. Overhead? Literally not our problem. Just make them eat all those costs. Maybe that'll even make them start lobbying for less government bureaucracy so as to reduce their "overhead". AML/KYC is just the financial arm of global mass surveillance anyway and should not even be legal to begin with.