5 ms·

I use a credit card that I pay off in full every month and I get 2% cash back paid for by interest other users pay.

by UltraSane 5mo ago

akomtu 5mo ago
Don't you pay 3% of every purchase to your credit card?
- IncreasePosts 5mo ago
  No? There's zero % interest for every purchase if you pay for it fully the next billing cycle
  - lxgr 5mo ago
    Yes, but consider who pays the merchant fee in the end. Sure, you might be getting a kickback of that in rewards, but usually less than you pay yourself in fees indirectly.
    - IncreasePosts 5mo ago
      Very few places offer discounts for cash, so ultimately everyone pays it, but only those with good credit card rewards get some of it back.
      - lxgr 5mo ago
        Yes, that's the problem: Part of people are getting part of the pot of extra money back, through a highly complex coupon collector's version of a Rube Goldberg machine that skews win rates towards those with better credit. It's really the perfect scheme, as the system creates its own never ending supply of advocates.
- tunesmith 5mo ago
  as opposed to what, though? You don't get a 3% discount for using cash.
  - AnthonyMouse 5mo ago
    In many cases they do actually offer the discount (or tack on the "hidden" fee for using a credit card). In some markets there are also sellers who only accept cash (often discount stores etc.) and correspondingly have lower prices, which is a slightly more inconvenient version of the same thing if you patronize them. Moreover, we should encourage every retailer to offer this, because getting 2% back (or less) while paying 3% more is not just a net loss, it's also worse for privacy.
    - satvikpendem 5mo ago
      Depends on your points usage, airline points can be much more valuable than the 3% fee.
      - AnthonyMouse 5mo ago
        Airlines also sell "points" for cash and you can get them for essentially the same cost as the credit card companies do. They're just using the 2% cash back to buy them for you, so even if you want flights, getting a 3%+ discount and using the money to buy points puts you ahead. It also lets you time your purchase (there are sometimes temporary "deals" on points), collect interest on the cash until you exchange it for something, and not lock yourself in to getting only airline miles instead of any of the other things you can buy with money until you decide that instead of having it imposed you at the point you use that card.
        CPLX 5mo ago
        That's not really true on a practical level. For the most part, you can't just buy airline points at the one to two cent price that you effectively get them for in credit card transactions or the even lower price that the credit card companies themselves are likely paying.
- elteto 5mo ago
  Most of the time it’s the other way around, at least in the US: because cash and credit card prices are almost always the same it is the cash users who are overpaying, to the tune of 2-3% of the purchase price. It makes no sense to use cash.
  - lxgr 5mo ago
    Sure, but somebody is still paying more in aggregate than what you get out as rewards, or this industry would not exist.
    - UltraSane 5mo ago
      Yes, the 12 to 30 percent interest the credit card companies charge.
- satvikpendem 5mo ago
  No, the merchant pays, although recently more and more have been handing off the 3% to the consumer by giving a lower cash price. But well, most people don't have cash so that's essentially a convenience fee.
  - AnthonyMouse 5mo ago
    The credit card companies tell you that the merchant pays. Cost incidence doesn't work like that. If every seller in a fungible commodity market has the same additional cost, the price is going up by that amount.
    - deleted 5mo ago
      [deleted]
    - mercutio2 5mo ago
      Yes, but you’re perhaps missing OP’s point? Incidence is very much on customers, but (high interchange fee) credit card users are getting a rebate of most, if not all, of that. It’s the cash users who AREN’T getting a rebate, and thus the incidence is on them (and people using other low-or-zero cashback payment methods).
      - AnthonyMouse 5mo ago
        The incidence is on everyone. Paying 3% more or, for small purchases, >10% more is a net loss even if you get 2% back. Meanwhile merchants are increasingly offering a lower price for paying cash, and the ones offering that will generally have the same credit prices as the ones who don't, so paying with a card is paying 3%+ more to get 2% back -- and not everyone even gets 2% back. People with poor credit typically aren't offered those cards.
SkiFire13 5mo ago
Most of your cash back money actually comes from fees that merchants pay. In the US and especially for credit cards with cash back those fees can be quite high, and unfortunately it's illegal for merchants to discriminate against credit cards with high fees.
- bhelkey 5mo ago
  > it's illegal for merchants to discriminate against credit cards with high fees Do you have a source for this? Often times merchants don't accept American Express because it charges higher fees [1]. [1] https://www.bankrate.com/credit-cards/business/why-american-express-isnt-universally-accepted/#why https://www.bankrate.com/credit-cards/business/why-american-...
  - lxgr 5mo ago
    Those rules are about discriminating against various cards from the same brand. They have also been significantly limited in many jurisdictions by now.
  - UltraSane 5mo ago
    It isn't illegal but it is against most credit card companies merchant agreements. But I do rarely see it like in some vending machines.
- mercutio2 5mo ago
  This used to be true. But the 2025 Interchange Fee Settlement abolished the “Honor All Cards” regime. Perhaps, I know it’s crazy, but… perhaps segmenting the market into extremely high-spending customers, normal pay-every-month-relatively-low-fees, and no-frills, was a smart move by the big issuers? My sense is that alienating big spenders (whose interchange fees tend to be in the 4% range) is just not worth it? All I can say for sure is no store I’ve ever encountered has operationalized the newfound ability to differentially reject some cards yet. I am starting to see grittier establishments offer 5% cash discounts more frequently than they used to, and I’m always happy to pay cash when they do. But when there’s no discount, why would I forgo better accounting and 3-5% back in points?

I use a credit card that I pay off in full every month and I get 2% cash back paid for by interest other users pay.

akomtu 5mo ago

Don't you pay 3% of every purchase to your credit card?

IncreasePosts 5mo ago
No? There's zero % interest for every purchase if you pay for it fully the next billing cycle
- lxgr 5mo ago
  Yes, but consider who pays the merchant fee in the end. Sure, you might be getting a kickback of that in rewards, but usually less than you pay yourself in fees indirectly.
  - IncreasePosts 5mo ago
    Very few places offer discounts for cash, so ultimately everyone pays it, but only those with good credit card rewards get some of it back.
    - lxgr 5mo ago
      Yes, that's the problem: Part of people are getting part of the pot of extra money back, through a highly complex coupon collector's version of a Rube Goldberg machine that skews win rates towards those with better credit. It's really the perfect scheme, as the system creates its own never ending supply of advocates.
tunesmith 5mo ago
as opposed to what, though? You don't get a 3% discount for using cash.
- AnthonyMouse 5mo ago
  In many cases they do actually offer the discount (or tack on the "hidden" fee for using a credit card). In some markets there are also sellers who only accept cash (often discount stores etc.) and correspondingly have lower prices, which is a slightly more inconvenient version of the same thing if you patronize them. Moreover, we should encourage every retailer to offer this, because getting 2% back (or less) while paying 3% more is not just a net loss, it's also worse for privacy.
  - satvikpendem 5mo ago
    Depends on your points usage, airline points can be much more valuable than the 3% fee.
    - AnthonyMouse 5mo ago
      Airlines also sell "points" for cash and you can get them for essentially the same cost as the credit card companies do. They're just using the 2% cash back to buy them for you, so even if you want flights, getting a 3%+ discount and using the money to buy points puts you ahead. It also lets you time your purchase (there are sometimes temporary "deals" on points), collect interest on the cash until you exchange it for something, and not lock yourself in to getting only airline miles instead of any of the other things you can buy with money until you decide that instead of having it imposed you at the point you use that card.
      - CPLX 5mo ago
        That's not really true on a practical level. For the most part, you can't just buy airline points at the one to two cent price that you effectively get them for in credit card transactions or the even lower price that the credit card companies themselves are likely paying.
elteto 5mo ago
Most of the time it’s the other way around, at least in the US: because cash and credit card prices are almost always the same it is the cash users who are overpaying, to the tune of 2-3% of the purchase price. It makes no sense to use cash.
- lxgr 5mo ago
  Sure, but somebody is still paying more in aggregate than what you get out as rewards, or this industry would not exist.
  - UltraSane 5mo ago
    Yes, the 12 to 30 percent interest the credit card companies charge.
satvikpendem 5mo ago
No, the merchant pays, although recently more and more have been handing off the 3% to the consumer by giving a lower cash price. But well, most people don't have cash so that's essentially a convenience fee.
- AnthonyMouse 5mo ago
  The credit card companies tell you that the merchant pays. Cost incidence doesn't work like that. If every seller in a fungible commodity market has the same additional cost, the price is going up by that amount.
  - deleted 5mo ago
    [deleted]
  - mercutio2 5mo ago
    Yes, but you’re perhaps missing OP’s point? Incidence is very much on customers, but (high interchange fee) credit card users are getting a rebate of most, if not all, of that. It’s the cash users who AREN’T getting a rebate, and thus the incidence is on them (and people using other low-or-zero cashback payment methods).
    - AnthonyMouse 5mo ago
      The incidence is on everyone. Paying 3% more or, for small purchases, >10% more is a net loss even if you get 2% back. Meanwhile merchants are increasingly offering a lower price for paying cash, and the ones offering that will generally have the same credit prices as the ones who don't, so paying with a card is paying 3%+ more to get 2% back -- and not everyone even gets 2% back. People with poor credit typically aren't offered those cards.

SkiFire13 5mo ago

Most of your cash back money actually comes from fees that merchants pay. In the US and especially for credit cards with cash back those fees can be quite high, and unfortunately it's illegal for merchants to discriminate against credit cards with high fees.

bhelkey 5mo ago
> it's illegal for merchants to discriminate against credit cards with high fees Do you have a source for this? Often times merchants don't accept American Express because it charges higher fees [1]. [1] https://www.bankrate.com/credit-cards/business/why-american-express-isnt-universally-accepted/#why https://www.bankrate.com/credit-cards/business/why-american-...
- lxgr 5mo ago
  Those rules are about discriminating against various cards from the same brand. They have also been significantly limited in many jurisdictions by now.
- UltraSane 5mo ago
  It isn't illegal but it is against most credit card companies merchant agreements. But I do rarely see it like in some vending machines.
mercutio2 5mo ago
This used to be true. But the 2025 Interchange Fee Settlement abolished the “Honor All Cards” regime. Perhaps, I know it’s crazy, but… perhaps segmenting the market into extremely high-spending customers, normal pay-every-month-relatively-low-fees, and no-frills, was a smart move by the big issuers? My sense is that alienating big spenders (whose interchange fees tend to be in the 4% range) is just not worth it? All I can say for sure is no store I’ve ever encountered has operationalized the newfound ability to differentially reject some cards yet. I am starting to see grittier establishments offer 5% cash discounts more frequently than they used to, and I’m always happy to pay cash when they do. But when there’s no discount, why would I forgo better accounting and 3-5% back in points?