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My uncle is a bit of a Luddite and doesn't like how the world is changing, but he has one very good story I think about often. Imagine you live in a town. In t
by grecy 2y ago
My uncle is a bit of a Luddite and doesn't like how the world is changing, but he has one very good story I think about often.
Imagine you live in a town. In that town, you go to the local butcher, and you buy food with $100 cash. The butcher takes it to the local baker and he buys $100 of bread. The baker goes to the local mechanic and pays $100 to get his car worked on. Around and around, always $100 kept local in the town.
Instead, the reality of our world is we all use a credit card, and 2% gets taken every time. Soon enough no local has any of the original money.
- ninkendo 2y agoI am 100000% in favor of government takeover of the payment card industry. Legal tender is unquestionably in the domain of governments, and with payments moving to 100% digital, the idea of a private company with shareholders and a profit incentive, essentially playing the role of an unelected quasi-government setting quasi-fiscal policy is nauseating to me. Visa and Mastercard don’t deserve to exist.
- lxgr 2y agoYou're mixing several (valid!) concerns here that I think deserve being addressed individually. Visa and Mastercard are card brands/schemes/networks, but definitely not issuers of credit cards, and accordingly also not issuers of credit. No fiscal policy is happening here; if anywhere, you'd have to look at banks for that (and it might be interesting, but in my view this has nothing to do with cards). What they do control to a concerning degree is the ability of merchants to accept payments in the first place, together with acquiring banks. If Visa and Mastercard decide that merchant category x or charity y can't accept payments anymore, that's a big problem. In my view, this is a task best left to democratically elected governments held accountable through checks and balances, not to private corporations. Of course, these will also have to follow regulations – but sometimes, they go above and beyond (e.g. out of brand recognition concerns), and in doing so end up exporting decisions and policies into distant corners of the global economy that have no political, legal, or economic recourse. Finally, you've got the concern of market dominance and whether there is effective competition in all relevant markets (e.g. merchant-side in addition to just issuing-bank-side) between the two, and whether that leads to inefficient prices for merchants. But as I've mentioned elsewhere, the biggest chunk for card processing fees is paid back to the cardholders as points in the US, not to Visa or Mastercard.
- fuzzbazz 2y agoThe butcher, the baker and the mechanic pay 35% income tax each. The original $100 turned into -$5 at the end.
- LadyCailin 2y agoThat income tax then goes to build roads and educate their children, at least to some degree. The profits to visa and Mastercard go to the shareholders.
- lxgr 2y agoVisa and Mastercard certainly don't work for free, but the largest part of the interchange goes right back into the pockets of the customer, in the form of rewards points. At least in the US, credit cards really largely an implicit surcharge on cash payers: Paying by card, you effectively pay 97%-99% in 4-8 weeks; with cash, you pay 100% immediately.
- gnicholas 2y agoAnd a surcharge on cc users who don't get points (largely those with worse credit).
- pixxel 2y agoIt’s a shame you feel the need to disparage your uncle before sharing his wisdom. Totally unnecessary.