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Let’s just say you’re a wealthy consumer with a million dollars in the bank. You’d still buy things with a credit card, why? 1. Purchase protection (insurance)

Let’s just say you’re a wealthy consumer with a million dollars in the bank. You’d still buy things with a credit card, why? 1. Purchase protection (insurance) 2. Chargeback protection 3. Rewards either points or “cash back” 4. Merchants hardly ever give cash discounts anymore, credit card fees are baked into the price of everything so you’re going to pay for the advantages above and receive nothing in return, plus have the burden and liability of carrying cash. Merchant side. 1. CC fees are high so we add 3.5% to the retail price of everything. Someone pays cash? Good, a small bonus. 2. Merchants are being charged the same for “debit” cards which allow electronic payments from bank accounts, coming with the same chargeback risks and fees as a CC. So what the heck assume the worst for every transaction. How to fix this. Does it need fixing? If the gov is going to push everything to electronic payments, you might as well get the rewards. The trap, if you’re not paying off your balance every month, the rewards are nothing and the interest rate is crippling.

lxgr 2y ago
> 1. Purchase protection (insurance) 2. Chargeback protection These are available on debit cards as well. (Both by law, i.e. Regulation E, and both Visa and Mastercard requiring issuers to provide zero liability policies to consumers.) > 3. Rewards either points or “cash back” Which consumers more than pay for themselves – all consumers, including those paying cash.
- ryandrake 2y ago
  > These are available on debit cards as well. The UX for chargeback protection is not quite the same, though. Say someone commits fraud and charges $1000 to my credit card. All that happens is 1. Some time later, I see the charge on my list of other charges, and 2. My bill is $1000 higher this month, which I dispute. Some time later, the CC company confirms it's fraud and the $1000 (and the interest) disappears from my bill. Say someone commits fraud and charges $1000 to my debit card attached to my checking account. Between the time the fraud happens and the time the bank confirms its fraud (or otherwise restores the funds per their fraud-reporting policy), my bank account balance is now $1000 lower. Maybe some checks start bouncing. Maybe I needed that $1000 for an upcoming purchase, and it's not available for a short period of time. Yes, the numbers will all eventually be correct, but it's mayhem in the mean time.
mey 2y ago
Related to charge backs, it's a security wall between theft and your actual cash. FCBA covers credit cards but not debit cards. While many banks will work to resolve fraud, your cash will still be locked up during that time.
imroot 2y ago
Debit card interchange fees are limited to 21 cents per swipe and 0.05% of the transaction. https://www.federalreserve.gov/paymentsystems/regii-about.htm https://www.federalreserve.gov/paymentsystems/regii-about.ht...
bluGill 2y ago
Cash is not the bonus you think it is. Few have calculated the risk of robbery, (both employee and otherwise) counterfeit money, miscounting, and all the time spent counting and recounting cash. Having been mananger of a fast food in a previous life just my time to count cash was 1% of gross income and the other clerks similar - divided over each customer.
dehrmann 2y ago
Cash isn't necessarily cheaper for merchants. They have to deal with depositing it, there's a risk of theft during transport, employees are more likely to steal it, there are losses from counterfeit money, and it might take longer to process the transaction.
WalterBright 2y ago
1. For the consumer, paying off the balance due at the last minute gives you an interest-free loan on your spending for an average of 6 weeks. Let's say you spend $1000 per month. At 5% interest, that saves you about $30 a month. 2. It gives you an itemized list of what you spent. It reminds me of an article long ago that explained how Amazon could make money selling items at cost. a) they get paid by the customer right away b) they don't pay the vendors for 90 days. Thus, Amazon gets paid interest for 90 days on the volume of business they do, which is very large. Not many people seem to understand the time value of money, certainly it isn't taught in school. It's not just about mortgage interest rates. It's everything that involves money.
- nejkbnek 2y ago
  > 1. For the consumer, paying off the balance due at the last minute gives you an interest-free loan on your spending for an average of 6 weeks. Let's say you spend $1000 per month. At 5% interest, that saves you about $30 a month. Saves you versus... taking a 5% loan for the 6 weeks? You need to actually invest the money versus paying the credit card to earn interest. The average consumer is not walking around picking up pennies in front of a steamroller trying to get $30/month with clever interest rate arbitrage. > Not many people seem to understand the time value of money, certainly it isn't taught in school Realistically a person will take out loans for like 4-5 transactions in their life where this actually matters. House, car, student loans, maybe a small business. If you look at personal finance advice they usually use the "snowball method" of simply paying down the highest-interest debt first and reducing expenses.
  - WalterBright 2y ago
    > taking a 5% loan for the 6 weeks? You need to actually invest the money versus paying the credit card to earn interest. And I do. I don't have any actual money. It's all invested. I look for ways to borrow money at a lower rate and invest it at a higher rate. > Realistically a person will take out loans for like 4-5 transactions in their life where this actually matters. Every time you buy something with a credit card, you take out a 0% loan for 6 weeks. If you pay attention to what a bank does, if the bank hands you a check for borrowed money, they start charging you interest immediately. If you pay off the loan by handing them a check, they charge you interest until the check clears. I.e. the bank works the float both ways. The pennies add up. If you're not aware of this for a large transaction, the other party surely is and is taking advantage of you. A few years ago, it was commonplace for late night TV to run seminars that I call "Make Money By Real Estate Scamming". I decided to watch one and see how it went. The presenter presented a series of transactions that ended up netting the buyer $15,000. It was complicated, so I set about figuring just how the $15,000 from nothing came about. It turns out it hinged on giving the sucker a bond that paid $X upon maturity in lieu of paying $X today. The $15,000 was the interest on the time to maturity. The complications were all about hiding this.
chrismcb 2y ago
I also hate having to carry a brief case of money around. Seriously though while the purchase protection is nice, so is the ability to cancel a lost or stolen card. And if course the cats is slightly smaller than one million dollar bills
- eesmith 2y ago
  But of course we didn't. We used checks.

lxgr 2y ago

> 1. Purchase protection (insurance) 2. Chargeback protection These are available on debit cards as well. (Both by law, i.e. Regulation E, and both Visa and Mastercard requiring issuers to provide zero liability policies to consumers.) > 3. Rewards either points or “cash back” Which consumers more than pay for themselves – all consumers, including those paying cash.

ryandrake 2y ago
> These are available on debit cards as well. The UX for chargeback protection is not quite the same, though. Say someone commits fraud and charges $1000 to my credit card. All that happens is 1. Some time later, I see the charge on my list of other charges, and 2. My bill is $1000 higher this month, which I dispute. Some time later, the CC company confirms it's fraud and the $1000 (and the interest) disappears from my bill. Say someone commits fraud and charges $1000 to my debit card attached to my checking account. Between the time the fraud happens and the time the bank confirms its fraud (or otherwise restores the funds per their fraud-reporting policy), my bank account balance is now $1000 lower. Maybe some checks start bouncing. Maybe I needed that $1000 for an upcoming purchase, and it's not available for a short period of time. Yes, the numbers will all eventually be correct, but it's mayhem in the mean time.

mey 2y ago

Related to charge backs, it's a security wall between theft and your actual cash. FCBA covers credit cards but not debit cards. While many banks will work to resolve fraud, your cash will still be locked up during that time.

imroot 2y ago

Debit card interchange fees are limited to 21 cents per swipe and 0.05% of the transaction. https://www.federalreserve.gov/paymentsystems/regii-about.htm https://www.federalreserve.gov/paymentsystems/regii-about.ht...

bluGill 2y ago

Cash is not the bonus you think it is. Few have calculated the risk of robbery, (both employee and otherwise) counterfeit money, miscounting, and all the time spent counting and recounting cash. Having been mananger of a fast food in a previous life just my time to count cash was 1% of gross income and the other clerks similar - divided over each customer.

dehrmann 2y ago

Cash isn't necessarily cheaper for merchants. They have to deal with depositing it, there's a risk of theft during transport, employees are more likely to steal it, there are losses from counterfeit money, and it might take longer to process the transaction.

WalterBright 2y ago

1. For the consumer, paying off the balance due at the last minute gives you an interest-free loan on your spending for an average of 6 weeks. Let's say you spend $1000 per month. At 5% interest, that saves you about $30 a month. 2. It gives you an itemized list of what you spent. It reminds me of an article long ago that explained how Amazon could make money selling items at cost. a) they get paid by the customer right away b) they don't pay the vendors for 90 days. Thus, Amazon gets paid interest for 90 days on the volume of business they do, which is very large. Not many people seem to understand the time value of money, certainly it isn't taught in school. It's not just about mortgage interest rates. It's everything that involves money.

nejkbnek 2y ago
> 1. For the consumer, paying off the balance due at the last minute gives you an interest-free loan on your spending for an average of 6 weeks. Let's say you spend $1000 per month. At 5% interest, that saves you about $30 a month. Saves you versus... taking a 5% loan for the 6 weeks? You need to actually invest the money versus paying the credit card to earn interest. The average consumer is not walking around picking up pennies in front of a steamroller trying to get $30/month with clever interest rate arbitrage. > Not many people seem to understand the time value of money, certainly it isn't taught in school Realistically a person will take out loans for like 4-5 transactions in their life where this actually matters. House, car, student loans, maybe a small business. If you look at personal finance advice they usually use the "snowball method" of simply paying down the highest-interest debt first and reducing expenses.
- WalterBright 2y ago
  > taking a 5% loan for the 6 weeks? You need to actually invest the money versus paying the credit card to earn interest. And I do. I don't have any actual money. It's all invested. I look for ways to borrow money at a lower rate and invest it at a higher rate. > Realistically a person will take out loans for like 4-5 transactions in their life where this actually matters. Every time you buy something with a credit card, you take out a 0% loan for 6 weeks. If you pay attention to what a bank does, if the bank hands you a check for borrowed money, they start charging you interest immediately. If you pay off the loan by handing them a check, they charge you interest until the check clears. I.e. the bank works the float both ways. The pennies add up. If you're not aware of this for a large transaction, the other party surely is and is taking advantage of you. A few years ago, it was commonplace for late night TV to run seminars that I call "Make Money By Real Estate Scamming". I decided to watch one and see how it went. The presenter presented a series of transactions that ended up netting the buyer $15,000. It was complicated, so I set about figuring just how the $15,000 from nothing came about. It turns out it hinged on giving the sucker a bond that paid $X upon maturity in lieu of paying $X today. The $15,000 was the interest on the time to maturity. The complications were all about hiding this.

chrismcb 2y ago

I also hate having to carry a brief case of money around. Seriously though while the purchase protection is nice, so is the ability to cancel a lost or stolen card. And if course the cats is slightly smaller than one million dollar bills

eesmith 2y ago
But of course we didn't. We used checks.