Sounds like the law needs to be amended to prevent this. Not just for these "what if" scenarios, but for Capital One who's already in this position.
If anything, interchange fees should be brought down for credit cards to match those for debit cards. Europe has them capped at rates far lower than the US. With so many people paying with credit cards, retailers have adjusted prices to compensate, which is effectively a consumption tax paid to Visa, Mastercard, and AmEx... even if you don't use a credit card those added fees are still baked into the price. It's only on big ticket items where it's possible to ask for a cash discount, which is usually discounted by whatever interchange fee the store is paying for credit purchases.
The whole law and its precursors are poorly written. It's all reactionary and heavily lobbied, with no thought put into likely side effects.
Because of how banking transactions are regulated in the US, our cards have much worse security than any other country and force vendors to directly take the fraud losses, while charging them higher transaction fees. The more we try to fix it, the worse it gets.
Even if you want to use a debit card to get the added security of a PIN, if the card number is exposed in a data breach it can still be run as a credit card.
There is some hope that newer payment processors like PayPal and CashApp can get a foothold, but chances are if Visa and MasterCard start seeing some real competition, we'll get another act ensuring that Visa and MasterCard are the only viable options.
US hotels generally want a real credit card specifically to minimize fraud and damage risk. They usually won't accept random apps like PayPal or Cash app. At least with a physical credit card if the guest trashes the room then the hotel can try to run additional changes beyond the hold amount.
People have happily made their worlds more expensive for "points". In what cases are these points actually more valuable than the 1% more the consumer pays for them? Or is just the case that card users are pitted against cash and cash users are the losers?
No snowflake is responsible for the avalanche, no defector is responsible for the all-defect prisoner's dilemma. All choices made were rational, and here we are.
The stats are fuzzy, but about half the users carry a balance, so while they may think they’re winning with points, they are almost certainly losing. For those on the good side of the balance stat…
Points can also be used as an excuse to spend more. Consumers tend to spend about 15% more on a card than they otherwise would with cash. Considering it takes spending $10k to get $200 in points on a straightforward 2% back card, a year’s worth of points can be wiped out pretty quickly by increased spending.
Points are also often locked to an idealistic dream and aren’t cashed in (ex. travel). Other times they get lost on a technicality. For example, my mom had a GM card and spent on it for years as a way of getting extra money for a future car. She wanted a Saturn, which was a subsidiary of GM. When she went to go get the car, she was told Saturn didn’t count. Maybe she should have read the fine print years earlier, but this kind of things happens a lot, and rules also shift over time.
For travel cards, they are generally locked to a particular airline. Most airlines are basically credit card companies that use the airline to advertise the card. Most of their profit comes from the cards. It’s hard to know what if a person is getting a deal or not with point, since it makes the math so fuzzy. Timing and watching for deals will generally get someone a better flight deal, and it probably won’t be with the airline from their card. I have a travel card that isn’t tied to an airline, but only use it for recurring bills these days to avoid most of these traps. There is a yearly fee on it though, so the rewards from the first $2,500 spent just go to pay the fee, effectively.
These card companies don’t give points as charity. They make people use the card more often (increasing swipe fees), increase spending, and often don’t have to pay it all out at the end of the day. So they win multiple ways while the customer loses.
Even without pitting cash vs card, it seems like card users are losing, many are losing even when they think they’re winning.
I’m sure you can point to someone who is actually winning, those people who make a hobby out of playing credit card games, but they are the exception, not the rule. I might be on the winning side, but I call it a wash. I’m not getting enough in points to really care, and mostly ignore them. Every few years they might offset a few nights in a hotel, but if I use that to justify a more expensive hotel, then I just fell into a trap.
If not due to their articles, then what cause do you attribute that widespread outcome among traded, subsidiary, et al. corporations to? (I’m happy to be wrong but it’ll take some time to research this and I want to be sure to hear your opinion in the meantime.)
Back when I was shopping (2022) for a good secured credit card, I consulted NerdWallet among other sites. I found that Discover Card offered good deals for newbies, as well as some sweet cash-back bonuses.
Then I found out why the deals were so so good: Discover Card has low acceptance, especially internationally, and this is often because Discover charges relatively high transaction fees. I also learned that Discover, despite its reputation and age, had only one physical branch, in Delaware or something, and so my inner masochist immediately recognized my true financial love.
I also picked up a Discover Bank checking account, which has even lower acceptance rates, but also offers 1% cash-back if I feel like an adventure.
Since then, Discover eliminated their sole physical branch location, and their credit card division was also acquired by Capital One, https://m.xkcd.com/2206/
But I feel like the proliferation now of Apple/Google/Samsung Pay, Zelle, PayPal, Venmo, et al., will stave off any large-scale gouging of consumers through transaction fees.
Apple/Google/Samsung Pay are primarily used to link to credit cards, and the transaction still run through the card. Zelle is owned by a group of banks. PayPal and Venmo are the same company and in some areas, like Australia, they directly handle in-person payments, but in the US those payments are run through a debit card network, for regulatory reasons.
Discover is widely accepted in South Korea thanks to a nationwide partnership with BC Card and Woori Card networks. That was kinda nice when I visited.
I liked Discover. They were one of the few issuers that supported seeing transaction history in the Apple Wallet app. Now with the Capital One acquisition they are dropping that.
Sounds like the law needs to be amended to prevent this. Not just for these "what if" scenarios, but for Capital One who's already in this position.
If anything, interchange fees should be brought down for credit cards to match those for debit cards. Europe has them capped at rates far lower than the US. With so many people paying with credit cards, retailers have adjusted prices to compensate, which is effectively a consumption tax paid to Visa, Mastercard, and AmEx... even if you don't use a credit card those added fees are still baked into the price. It's only on big ticket items where it's possible to ask for a cash discount, which is usually discounted by whatever interchange fee the store is paying for credit purchases.
The whole law and its precursors are poorly written. It's all reactionary and heavily lobbied, with no thought put into likely side effects.
Because of how banking transactions are regulated in the US, our cards have much worse security than any other country and force vendors to directly take the fraud losses, while charging them higher transaction fees. The more we try to fix it, the worse it gets.
Even if you want to use a debit card to get the added security of a PIN, if the card number is exposed in a data breach it can still be run as a credit card.
There is some hope that newer payment processors like PayPal and CashApp can get a foothold, but chances are if Visa and MasterCard start seeing some real competition, we'll get another act ensuring that Visa and MasterCard are the only viable options.
US hotels generally want a real credit card specifically to minimize fraud and damage risk. They usually won't accept random apps like PayPal or Cash app. At least with a physical credit card if the guest trashes the room then the hotel can try to run additional changes beyond the hold amount.
People have happily made their worlds more expensive for "points". In what cases are these points actually more valuable than the 1% more the consumer pays for them? Or is just the case that card users are pitted against cash and cash users are the losers?
No snowflake is responsible for the avalanche, no defector is responsible for the all-defect prisoner's dilemma. All choices made were rational, and here we are.
Thanks moloch¹
1. https://slatestarcodex.com/2014/07/30/meditations-on-moloch/
The stats are fuzzy, but about half the users carry a balance, so while they may think they’re winning with points, they are almost certainly losing. For those on the good side of the balance stat…
Points can also be used as an excuse to spend more. Consumers tend to spend about 15% more on a card than they otherwise would with cash. Considering it takes spending $10k to get $200 in points on a straightforward 2% back card, a year’s worth of points can be wiped out pretty quickly by increased spending.
Points are also often locked to an idealistic dream and aren’t cashed in (ex. travel). Other times they get lost on a technicality. For example, my mom had a GM card and spent on it for years as a way of getting extra money for a future car. She wanted a Saturn, which was a subsidiary of GM. When she went to go get the car, she was told Saturn didn’t count. Maybe she should have read the fine print years earlier, but this kind of things happens a lot, and rules also shift over time.
For travel cards, they are generally locked to a particular airline. Most airlines are basically credit card companies that use the airline to advertise the card. Most of their profit comes from the cards. It’s hard to know what if a person is getting a deal or not with point, since it makes the math so fuzzy. Timing and watching for deals will generally get someone a better flight deal, and it probably won’t be with the airline from their card. I have a travel card that isn’t tied to an airline, but only use it for recurring bills these days to avoid most of these traps. There is a yearly fee on it though, so the rewards from the first $2,500 spent just go to pay the fee, effectively.
These card companies don’t give points as charity. They make people use the card more often (increasing swipe fees), increase spending, and often don’t have to pay it all out at the end of the day. So they win multiple ways while the customer loses.
Even without pitting cash vs card, it seems like card users are losing, many are losing even when they think they’re winning.
I’m sure you can point to someone who is actually winning, those people who make a hobby out of playing credit card games, but they are the exception, not the rule. I might be on the winning side, but I call it a wash. I’m not getting enough in points to really care, and mostly ignore them. Every few years they might offset a few nights in a hotel, but if I use that to justify a more expensive hotel, then I just fell into a trap.
Imagine being so greedy you might upset your cash cow and market dominance for a 20% gain. Unreal levels of hubris here.
If they don’t grow their growth in profits, their stocks will crater. What else could they do? Their articles of incorporation demand maximization.
I'm not aware of any articles of incorporation that demand maximization.
If not due to their articles, then what cause do you attribute that widespread outcome among traded, subsidiary, et al. corporations to? (I’m happy to be wrong but it’ll take some time to research this and I want to be sure to hear your opinion in the meantime.)
[dead]
Anything but offering pay by bank on cheap FedNow instant payment rails.
Maybe in US, there are countries where these fees are regulated.
Nonetheless late stage capitalism is nothing but awful.
Back when I was shopping (2022) for a good secured credit card, I consulted NerdWallet among other sites. I found that Discover Card offered good deals for newbies, as well as some sweet cash-back bonuses.
Then I found out why the deals were so so good: Discover Card has low acceptance, especially internationally, and this is often because Discover charges relatively high transaction fees. I also learned that Discover, despite its reputation and age, had only one physical branch, in Delaware or something, and so my inner masochist immediately recognized my true financial love.
I also picked up a Discover Bank checking account, which has even lower acceptance rates, but also offers 1% cash-back if I feel like an adventure.
Since then, Discover eliminated their sole physical branch location, and their credit card division was also acquired by Capital One, https://m.xkcd.com/2206/
But I feel like the proliferation now of Apple/Google/Samsung Pay, Zelle, PayPal, Venmo, et al., will stave off any large-scale gouging of consumers through transaction fees.
Apple/Google/Samsung Pay are primarily used to link to credit cards, and the transaction still run through the card. Zelle is owned by a group of banks. PayPal and Venmo are the same company and in some areas, like Australia, they directly handle in-person payments, but in the US those payments are run through a debit card network, for regulatory reasons.
Discover is widely accepted in South Korea thanks to a nationwide partnership with BC Card and Woori Card networks. That was kinda nice when I visited.
I liked Discover. They were one of the few issuers that supported seeing transaction history in the Apple Wallet app. Now with the Capital One acquisition they are dropping that.
[flagged]
cancer gonna cancer, amiright