I play the credit card "game" because I hate feeling like I'm leaving money on the table, but I really wish I didn't have to. Some degrees of fees make sense, to run the network, and handle fraud, but it's ridiculous that people have this sense that shopping should somehow fund your vacation.
Where I am it's increasingly common to see credit card fees when checking out. I get it, because merchants are being charged 3-5% of their total revenue. I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.
There is, it's called debit cards, but Stripe et al. "simplified" pricing by charging a percentage regardless of card type instead of the traditional interchange-plus pricing. Merchant banks "used to" make money by tacking on fixed fees, i.e. a set-up fee, terminal fee, monthly fee, etc, but then Stripe came along and provided (1) a better dev experience, (2) better onboarding, and (3) simplified pricing.
For US readers - in my country in europe I'd say that 95% of people have only debit card, not credit card. it's very not common to have a credit card here. Card payments are extremely common, but everyone uses debit card.
The EU caps all card interchange fees at 0.3% for credit cards and 0.2% for debit, which is an order of magnitude lower than some of the fees in the US.
That’s why you don’t see the same kinds of credit card deals in the EU compared to the US.
Note that the caps were introduced because the EU already had widespread use of bank cards, but local schemes were being replaced with Mastercard/Visa debit - the caps were brought in to prevent the duopoly from profiteering. (Apple/Google pay also use Mastercard/Visa virtual cards in the EU.) Before the cap, credit cards had way higher fees and there were some reward cards, which led to merchants simply not accepting Mastercard/Visa. Local schemes included Mastercard-owned Maestro (used in Germany, The Netherlands and for some reason Brazil) but also local schemes like Belgium's Bancontact/MrCash. It's unfortunate some of those schemes didn't just merge and started competing in foreign countries as well.
At least in Germany as far as I'm aware all banking cards are in fact "simple" visa cards who uses "V-pay", since 2012/2014?
Personally I "like" or prefer V-pay because it made payment in the EU more easily for me without the need of a credit card even 8 years ago. Since the pandemic, I only pay for a (real) credit card (with daily billing) because some goods or services can only be paid with a "real" card, like more expensive cars at a car renting company or sometimes hotel rooms and the like.
In general I try to pay with cash so nobody needs to pay extra fees. But more and more smaller businesses prefer electronic payments. Then I use the banking card with V-pay and to state it again, the real visa card is only used when no other options are available.
> o nobody needs to pay extra fees
Processing cash is by far >not free<! In fact, it costs a lot of money due to all the things involved (counting/collection/recycling etc). Anf it inwolves additional risks for the handling party.
People often say that but does the cost for handling cash really scale (even approximately) proportionally with the number of transactions or revenue?
Or is it more binary that you have to decide, you either handle any cash and have the cost associated with it, or you refuse to take cash at all? If the latter is the case, then avoiding cash altogether seems somewhat unrealistic where I am from. And if it doesn't scale then it makes a lot of sense cost-wise to try to do as many of your transactions with cash as possible.
Depends on, sure there is some "efficient frontier" where it flips.
Think about all the supermarket chains, handling millions of cash daily; in my region, those are relying heavily on outsourced cash recycling companies - why? Its more effort/cost if they would do this themself.
In the past I handled cash as an employee and as a volunteer. Like even a quiet night at a bar can sum up to a few thousand EUR.
Yes handling cash is not free. But compared to some charges or fees it's often quiet cheap.
Sure you need to think a head like how much small change money you will need or how much cash for change in general. You also need kind of routine and flow for counting and handling but even if I had to count up to 10k EUR in small bills t does not needed more then half an hour incl putting it into the safe or on the way home putting it into the banking machine... At least in Germany it's not that big of a deal breaker.
half an our - every day.
I know of a large restaurant chain with some "bigger" branches: They often have to count two or three times with different people to be sure, that the amount is correct. Every evening.
Then you have transport companies which pick up the cach (or refill ATM) - you pay there for every time they stop, and you pay a tiny fraction per bill processed etc. (though, most restaurants do not use these services)
Then you finally have the very high risk of getting robbed.
I think that there was a recent HN thread that linked to an article which argued that the credit card system of USA has the purpose of taking money from the poor and giving them to the rich, and the estimated amount of the money transferred in this way was huge.
The EU limits for card fees prevent this in Europe, which is very good.
Assuming they pay their credit card bill themselves, it's effectively a volume discount for big spenders (though that "volume" goes to multiple vendors). The argument that the money "comes from" other customers is sort of like claiming that when you "save money" by buying things on sale, the money comes from other customers who paid full price. Actually you aren't "saving money" at all; you're spending money.
Similarly, the "whales" in a casino get lots of "free" benefits, but only because they're losing a lot of money gambling. They paid for them.
Contrast with frequent-flier miles where businesses pay for plane tickets but the points go to individuals. That's pretty clearly siphoning off business expenses.
> Actually you aren't "saving money" at all; you're spending money.
You are spending money, but you are spending far less money than the poor spend when paying for exactly the same products or services.
If I want to buy a few server CPUs or a few server computers or a few "datacenter" GPUs, I have to pay at least 2 or 3 times more than billionaires pay for them.
The same if I want to buy any other kinds of components that can be used to build things, e.g. power MOSFET transistors.
There is no "economy of scale" here, because those products are already fabricated in the high volumes that reduce their production costs.
For shipping, the costs are typically the same, regardless if the recipient is a big company or a small company or an individual, so they do not justify the price differences.
Even when the handling and shipping costs were bigger for small quantities, a small business or an individual could just pay the difference in handling and shipping prices, but that does not happen in reality, when the discounts given to the rich are many times higher than the shipping costs.
This policy of huge discounts is one of the main causes why all the markets end up in being dominated by monopolies or quasi-monopolies, because it is impossible for new entrants to compete with the incumbents, who pay much less than them for everything. Thus the biggest companies end up selling mostly between themselves, excluding any others.
ok, but what about for equivalent spenders?
one cash, one credit?
the credit payer is clearly paying less, with the difference paid by increased prices overall. That is the cash purchaser paying the credit one
That is the cash purchaser paying the retailer more than they need to. There's no conservation law stating that store revenue is a constant and missed revenue from one customer must be made up for by another, nor that every additional operating cost must be directly pushed onto customers.
Similarly, we do not say that October shoppers transfer wealth to Black Friday shoppers, even though the only tangible difference from your scenario is an irrelevant temporal one.
The model is inverted here, though. The whales essentially get the big discounts at the expense of those who go into debt for one reason or another. That's why there's an argument of wealth transfer up. The "biggest spenders" will end up paying little or no interest
A refutation of that view: https://www.complexsystemspodcast.com/episodes/credit-card-r...
I reached the midpoint of the podcast without seeing a proper argument against this then I gave up.
It tries to argue that higher reward rates are necessary to attrach customers that pay a lot (for credit card companies) and that lower income people are generally subsidized by taxes (obvious but unrelated), but at no point (until where I read) it seems to address the issue of merchants having to generally increase prices due to these cards.
> lower income people are generally subsidized by taxes
Pretty flimsy argument to begin with. Because the rich then argue to lower their taxes and/or simply not pay them and the whole system falls apart. Not to mention that lower income people paying more to keep afloat debt than taxes (which at worst is a much better interest deal for an installment plan) is a much worse model for society.
Looking now at that, it does a poor job of making a true refutation.
What that article explains, is that the system of credit card fees and rewards that is used in USA is extraordinarily complicated, variable and obfuscated in comparison with other countries, so it is extremely difficult to discover who gains most and who loses most.
So the conclusion is more like "there is insufficient evidence because we cannot access all the required financial information" for the claims of the other article and the refutation itself presents no evidence that the claims of wealth redistribution are incorrect.
> has the purpose of taking money from the poor and giving them to the rich
Are you saying it is intentional? Is it not more simply explained as simple greed by two companies colluding to keep competitors out of their market?
But simple corporate greed is the same thing as taking money fro the poor and giving it to the rich?
It may be a partial factor. Similar to how CC companies have a logical reason to reject high charge chargeback items , but may also be ideologically driven to push certain agendas as well.
Yep, pretty much the credit card tax. One of the most ugly things.
Do you have a link? Highly interested in that thread. Do you know if people discussed how state solutions faired? I'm assuming something like Pix from the Brazilian Central Bank does an even better job at prevention while providing a public service.
https://www.library.hbs.edu/working-knowledge/how-credit-car... probably this
Pix, UPI, and a few more
That would be this post of 16 days ago, 453 comments: https://news.ycombinator.com/item?id=49432201
Wouldn’t it be simpler for European countries to simply raise the VAT and redistribute the proceeds to poor people, rather than regulate the interchange fees if the concern is inequality
VAT is a regressive consumption tax. Raising VAT, hurting poor people the most, skimming a bit off the top and then "redistributing" it back to them would make no sense.
Do you mean a higher corporate tax paid by companies like VISA and Mastercard?
Either way, the solution is already on the horizon: Digital Euro.
So.. you’d have both higher taxes and higher interchange fees? What’s the appeal of that?
Your solution sounds significantly more complicated actually.
In what way? There are many sources of inequality. Trying to play whack a mole with each one seems much more laborious than simply deciding how much inequality you want in society, and then setting it with the tax code
Inequality isn’t as simple as pulling one tax lever, and not all levers are equally effective at all points of the pull. Dead-weight loss is an important concept when designing tax policies, otherwise why not simply eliminate ALL taxes in place of an expanded VAT or income tax or corporate tax or whatever.
Yes, it’s because Americans have to build credit or otherwise optimize their credit score to finance large purchases. In most other countries there either isn’t a credit score concept or your credit score does not have to be built up over a long period to be effective like it does here. It doesn’t help that a third of Americans dont really have savings either; credit helps them to work around this
I use credit for the purchase protection (I believe many debit cards have this as well but it’s easier when you haven’t yet paid the charge, and seems better enshrined in law for credit), for the rewards (which including signup bonuses can be huge), for the float period, and for security — if somebody fraudulently uses a credit card versus a debit card, there’s no actual money missing while the situation gets resolved.
In germany a similar scheme exists (Schufa) but it's less important.
Yeah, it's all a huge con. The best fiscal habits involves not spending money you don't have, so you should never need a CC to begin with. But if you take that route, you end up being unable to finance a car or apartment because companies can't snoop into how you spend money. So you're forced to either play the game or be so rich you can buy everything you need in cash (which, ironically qualifies you for the best kinds of CC's anyway).
Now, if you DO manage to that threshold... you still want to delay finances. Because installments now become ways to give your money more time to make money and offset whatever you are paying for. The models and incentives are completely at odds.
This is not a universal, however. In the UK, two-thirds of adults have a credit card.
I don't know for other European countries, but in France a lot of people call them "Cartes de crédit" AKA Credit cards, even though, like you said, they are actually debit cards for 95% of people, so this adds to the confusion
Yup and even when they are credit cards, "cartes à débit différé", they behave more like automated charge cards. The amount is automatically taken out of your account at the end of the month, you are supposed to pay in full and don't have the option of making minimum payments. So the poor banks cannot make nearly as much money with interest rates and instead are forced to have relatively high account maintenance fees (that are published and much more transparent to the customer).
That said as a French person with a ssn living in Asia, I don't have a french credit card because it's so expensive and foreign conversion fees are very high, whereas I use a us card because the currency conversion rate is very close to the market rate and it costs a lot less to maintain the account.
> For US readers - in my country in Europe I'd say that 95% of people have only debit card, not credit card. it's very not common to have a credit card here.
In the countries I've been to in the EU (Belgium, France, Spain, Luxembourg), when they give you cards they give you typically both a debit and a credit card. It's extremely common to have both. I've got debit cards, a pre-paid debit card (which I top up when I plan to spend) and credit cards.
And getting up to 2% cashback in the EU (even if the fees vendors can add in the EU are maximum 0.3) is not that hard.
It's very common to pay for mostly everything with a debit card and then use a credit card to, say, book a plane or vacations or to open a tab when you check-in at some hotel.
Heck, I don't even know if you can book a plane with a debit card!? (and anyway then you probably don't get the cancellation insurance etc. that you typically automatically get with a credit card).
How do any of they rent cars when they travel? I think that still requires a credit pretty much anywhere in Europe.
I’s bet the proportion is way higher than 5% even if the overwhelming majority use their credit cards the same was as debit.
I've encountered this issue recently for the first time.
Usually, there is a deposit pre-authorized on the card. The additional insurance plans would lower the deposit (to a few hundred for fuel basically). I usually take the insurance plans anyway because I've had bad experiences that made me happy I had it.
Now, I was in a place where rental companies required credit cards except for the lower end models. It took me a few attempts for one to realize that I would take the additional insurance anyway.
The only time I "needed" a credit card is when I tried to sign up for some US company's service. It rejected my debit card because it wanted credit, so I just took my business elsewhere.
Other than that, I've rented cars, rented other things with a "X will be charged to your card if you return it late", unattended gas stations... all the usual places you'd think need a credit card. It's fine.
We do have a "negative limit" that banks often give you, which means you can go into the red and pay it back later, but that has nothing to do with the card, it works even for normal bank transactions.
I had a car rental in Oslo that only allowed debit cards if you took out their full insurance. I was already insured, we rented though some sort of front, but they only allowed that on a credit credit card.
IIRC then normal bank cards and debit cards can be charged with these future payments up to 500 Eur. So for small and normal cars this works.
I too have a real credit card to be able to rent for instance "bigger" cars like even an Audi A6.
Most often hotels also block 500 Eur, or they state upfront that you need a proper/real credit card and not just a debit card.
That's for me the only reason I have VISA and use it like 3 or 4 times a year...
You pay a deposit with your debit card and get it refunded afterwards ?
Debit cards still go through the same credit card infrastructure. The practical difference at this point is whether the card company backend defer payment until collection date for the benefit of customers, or don't wait and just call APIs on the spot. There's a whole "internet" of credit card infra that lets you pay using those numbers on the card like they are phone numbers.
Stripe don't do handle their own payment, they just wrap someone else's API, and pay them in percentages and dollars per API calls(idk about the ones behind Stripe, but I think I saw somewhere that those middlemen often charge both? Egregious, but they're literally old boys money men and they have lots of leverages against you).
What are truly different to credit/debit card systems are things like PayPal, Apple/Google and such gift cards with scratch areas, and Chinese QR payment apps. Those are the ones that don't (always) go through the CC ecosystem.
Stripe connects directly to Visa/MC, there’s nothing “behind them” in terms of some other card processor API they’re wrapping.
Stripe is a credit and debit card processor (and also a card issuer). They are NOT a bank, but do control some BINs (notably 4242 which is used for the famous test card 4242x4)
PayPal and Apple Pay use my debit card so they somewhat do use it.
Debit cards aren't that, in practice, because as you say they typically get the same 3% fee whenever I've asked. Toast and other point of sale networks just charge it based on the network and not the card type.
But even so, I still prefer the credit card instrument, used as a "charge card". For those that don't know, a "charge card" is common with businesses and is expected to be paid off every month. But it helps with managing your cashflow - e.g. you can keep your money in a savings account all month and make one transaction at the end - and it keeps your actual money from being at risk of fraud.
Most Europeans seem confused with how Americans use credit cards for everything, but about half of us use them as charge cards, paying them off every month.
That is a benefit, so I can see paying a small percentage for it, but I don't think that benefit alone justifies the 3-5% of a transaction that credit cards charge now.
As a Canadian , I thought that was the expected de facto way of using credit cards: you pay everything with it so you get rewards (ie money) at the end of the year as a function of how much you used the card during the year. At the end of the month, you pay whatever the outstanding balance is, otherwise you pay high interests.
Many of us use it exactly that way, though the rewards (in my personal experience) are immediate as soon as a transaction clears and not yearly. Carrying a revolving balance is a quick way to spiral into bankruptcy because the rates are so high (and the minimum payment is typically 1% of the balance).
I thought this was how credit cards were used the world over. It's certainly how I use them. How do Americans use them that differs from this? Color me confused.
(Also: installments. They are often the norm in my country, but I understand they are less common for Americans).
There are fees thou and i cant imagine they are losing out as a business
Debit cards are not subject to surcharging, and any merchant doing so is violating Visa/Mastercard regulations. (And possibly state law in several places -- Colorado where I live caps surcharge at the lesser of 2% or the cost of payment processing.)
Correct, Toast specifically will not allow it under any circumstance.
Debit cards issued by smaller community banks or credit unions are exempt from the cap and carry higher interchange rates (often 1.0%–1.65% + $0.10).
All merchants should either do Surcharging or Cash Discount.
You say "Correct", but Toast works the opposite of the person you're responding to. They charge the same fee regardless if it's a debit or credit card. They charge based on the network, and most debit cards in my experience use the Visa or Mastercard network. Yes, this is contrary to the Visa/MC terms, but I've never seen it enforced.
https://support.toasttab.com/en/article/Are-customers-charge...
It’s not just community banks or credit unions. The cap is $10 billion in assets.
There’s a whole industry of mid-sized banks just below that which are offering their services as sponsor banks to fintechs that want to earn the orders of magnitudes higher interchange rates while still getting debit acceptance/less surcharges and being allowed to offer a debit product.
It’s 2% or actual cost for credit cards.
Under subparagraph f)A seller or lessor shall not impose a surcharge if a customer elects to pay for goods or services by Check, cash, debit card, processing as a debit payment, or gift card.
eCheck is considered a check.
https://colorado.public.law/statutes/crs_5-2-212
What even is an “eCheck”? I keep hearing that word but haven’t found a sane definition. Is it just a weird term for an ACH debit transfer?
Sometimes it is a synonym for ACH, but it could be processed more literally as a check, with a check image and everything, and something like "Pre-Authorized Payment" written on the signature line. Usually they also let you specify the check number, if you wanted to have it follow your own sequence. Amazon Business was doing this with invoice payments up until January of this year.
Prices reflect the credit card merchant fees, even if there's no separate surcharge. People pay higher prices and anyone who doesn't use a credit card to recoup some in "rewards" is effectively getting taxed.
There is some nuance there. Cash is hardly free to process, and I have seen arguments that it is not far from the same overhead as credit card fees. So people who pay in cash are not subsidizing credit card users. Maybe it could be argued that debit card users are, though.
You get charged higher prices and then have to use a credit card to recoup the loss, so that rent-seeking monopolists can make money. And Americans are also seemingly baffled by the idea of regulating this away, as if other countries doing this don't exist. Credit cards are the USA epitomized.
It was regulated away in the Durbin Amendment of the 2010 Dodd-Frank law:
https://www.congress.gov/crs-product/R41913
https://www.ftc.gov/business-guidance/resources/new-rules-el...
American sellers have had the option to collect however much extra they want from people paying with credit cards, and many do. The government, utilities, mobile network providers, insurance, schools, healthcare, gas stations, home contractors, etc all usually collect at least 2% to 3% more if a buyer wants to pay with a credit card.
I am down to only using my credit cards for retail purchases, restaurants, and travel. Otherwise, the extra cost of paying with credit cards don't make sense and I pay with debit card or electronic money transfer (ACH/Zelle).
Basically, the sellers that continue to collect the same price from credit card users and non credit card users are those who believe that incentivizing credit card usage will result in sufficient people paying sufficiently higher prices such that it offsets the processing costs of the credit card transaction (and the chargeback risk).
It is interesting the breadth of experiences in this regard. I pay basically everything on my card, to the tune of 5-6 grand a month, including utilities. The only time I have ever seen a surcharge is for things like contractors doing work at my house. The gas company, electric, the city, all take the card with no extra charge. I rack up a lot of airline miles just from day-to-day use.
None of the utilities for my house take credit card without surcharge.
Most stripe transactions do use cost-plus pricing. The flat pricing is popular with smaller businesses, but larger companies graduate from it pretty quickly.
Also debit cards run by smaller credit unions charge credit-card like fees (and then are used by fintechs to earn fees while making it harder to pass those fees on to end users).
Hah! Good to know, makes total sense.
You have to wait for the investigation to complete to receive compensation if you’re hit by fraud on a debit card. Credit cards don’t share that issue. If you’re poor or living paycheck-to-paycheck, debit cards are potentially a risk to your livelihood.
As someone who has been hit with fraud on a debit card and a credit card, the process to recover money from fraud on a credit card is so much easier and more hassle-free than a debit card.
The big difference is that with a debit card, it's your money that is hit by fraud. The debit card is basically just a proxy. You have to go file a police report. You have to hope the bank will give you the money back.
When the credit card gets hit, it's the credit card company's money and they will seemingly chase the fraud to the ends of the earth to recover it.
This depends heavily on the country you’re in. In the UK banks are required to refund you within a single business day if they don’t have any evidence that the customer isn’t trying to defraud the bank themselves.
They try to squirm out of that of course. But in general getting your money back isn’t too tricky even with a debit card.
Oh yeah. I should definitely caveat: I am in the US. I think banks here are required to cap your loss to $50 USD if you report unauthorized fraud within two business days. But still, the onus is on you. Meanwhile, virtually all credit cards in the US offer $0 liability protection. Which means at most you pay nothing.
2 business days is a lot more strict than credit cards, which at the very least would not blink an eye at 2 weeks.
Er what?
You don’t even pay for the fraudulent credit card transactions in the first place! There’s no money for them to return!
> The big difference is that with a debit card, it's your money that is hit by fraud.
I kind of disagree. I think what's happened is the bank would prefer you to believe that. Imagine I kept my money at the bank, and deposited $10000 with the teller. Immediately afterward a robber follows in and steals that $10000 from the teller. Does the bank say "oh no Mr. TheChao! A robber stole your $10000!". I mean, no? The bank got robbed. Just because the bank's digital security is more tied one-to-one to dollars and its easier for a robber to steal from "my till" doesn't mean it was me who was robbed. It's the bank's job to stop that.
This was also the subject of a brief sketch on That Mitchell and Webb Look:
> Bank official: Sit down Mr. Coleman, I'm, I'm afraid I've got bad news about your account.
> Mr. Coleman: Really?
> Bank official: I'm very sorry to say that someone's stolen your identity.
> Mr. Coleman: Oh God! Do you know who it was?
> Bank official: Well -- they said they were you, but uh--
> Mr. Coleman: Of course. So, um, what happened?
> Bank official: Well it was on the bank website, someone logged in, and committed identity theft electronically.
> Mr. Coleman: I see. Did they take anything else?
> Bank official: Uh, no.
> Mr. Coleman: Oh good, so all the money's still there...
> Bank official: What?
> Mr. Coleman: Well: it's just my identity that's gone -- none of your money?
> Bank official: Well no, they did -- they, they, emptied your account. It's identity theft, they took all the money.
> Mr. Coleman: That sounds more like a bank robbery.
[continued] -- see https://www.youtube.com/watch?v=CS9ptA3Ya9E for the full skit.
Just as a handy thing to chuckle over and then link others to, if the topic comes up again.
Eh when you deposit money with a teller, it gets added to your account, which is in physical terms probably just a big storage and a database who has how much.
But in the case of debit card, the card ties the money to your account. It is actually that.
It's as if someone would steal from a personal safe at the bank.
Except that you have strong statutory rights and commercial agreements between your bank and the card networks making it very likely that you’ll be made whole.
> likely
> will
Which is why the credit card is still the better option. Especially given that the max liability on a credit card is always $50 if caught within the first 60 days, while the max liability on a debit card is $50 only if caught within the first two days, then up to $500 if reported after up to 60 days.
They may post a provisional credit when I report the fraud on the debit card or they can wait up to 10 days to do so. With a credit card, no money has left my account and I get the final say on whether I want to part ways with my real money. If the bank really wants to fuck me over by saying it's not fraud, I get to make it as unprofitable as possible for them, which includes forcing them to sue me if they really want the money.
I will take the ding to my credit report and a lawsuit over actual money taken directly out of my account any day.
This is where you find out which banks suck, and which do not. I will say that while USAA is a long ways from perfect, when someone swiped my wife's debit card and took $5000 from our checking account, they put that money back within a day while the investigation was pending. No police report necessary, either.
I don’t thing Regulation E allows banks to require a police report before processing an unauthorized payment, nor can they outright refuse to do so.
Practically, Reg E is essentially as strong as Reg Z.
> Practically, Reg E is essentially as strong as Reg Z.
Not even practically, but that's beside the point. The point is that with regulation E, I am potentially put in a position where I have to work to get my money back; I have to file a lawsuit against the bank if I think their determination is wrong (and that's assuming there isn't an arbitration provision, but many people don't realize they agreed to binding arbitration).
With regulation Z, the bank has to work to get their money back. They have to file the lawsuit against me if they really want the money. And it's $0 liability under many circumstances mandated through the regulation, not just a revocable promise from the bank.
The underlying problem is that the whole concept of cards is insane. Basically, you go around telling every shopkeeper the code for your safe, and ask them to take however much cash you owe them out of the safe.
Sane ways to organize payments:
- Merchant gives you a bill-id. You input it into your bank website - where you see the bill amount being charged. You accept, and bank pays merchant.
- You give merchant your card number (that's the only information - no expiry, no ccv, no name). A notification pops up on your bank website asking if you want to pay what the merchant is requesting. You accept.
- You go to your bank website and obtain a random number, either allowing a single transaction or a recurring transaction. You give the merchant the number. After merchant charges it, no other merchant can charge the same number.
This would also solve a major annoyance I have with card payments, which is no way to link a particular purchase back to a transaction.
With checks, you write a check and can write down the check number with a note about what the payment was for. When the payment posts, the check number is part of the transaction. With a card payment, they charge your card and, sometimes days later, there's a pre-authorization with some obscure transaction description. So many scary transaction descriptions that make me think "wait is this fraud".
With this method, the approval flow would also allow people to add a blurb for what the transaction is for.
> You go to your bank website and obtain a random number, either allowing a single transaction or a recurring transaction. You give the merchant the number. After merchant charges it, no other merchant can charge the same number.
That's basically how Blik works in Poland. With the exception being that the number is random 6 digits randomly generated when you open the app, that is active for ~2 minutes. So you don't deal with the issue of very long and error prone numbers to copy.
Much better way to pay online.
https://en.wikipedia.org/wiki/Blik
Cards have supported strong, positive cardholder authentication at the POS (chip and PIN) and online (3DS) since the 90s.
It’s entirely the US credit card industry and its regulating bodies’ fault that it has made neither mandatory in the way that e.g. the EU did, and is in fact fighting any attempt to do so tooth and nail (please think of the conversion rate!!)
Can you guys still write a check at the supermarket checkout? No pin credit cards are small potatoes next to personal checks in terms of weirdness. But I wish we had that trust culture everywhere.
I've always had fraudulent debit charges automatically reverted. Typically the bank's fraud detection disables the card and you clear up the matter on the phone. Or they call you to verify if a suspicious charge outside your profile was actually yours. The banks aren't required to do this but they can choose to provide this level of service.
the cc fraud (and fraud protection) is THE main selling point of Visa/MC credit cards.
it is that different treatment of debit/cc fraud that pushes people towards high fee cc.
it is cc fraud protection that justifies high cc processing fees.
without cc fraud there is no need in visa/mc duopoly.
Eh... I guess YMMV, at least for a low amount it took me literally an afternoon, I just froze my card, walked to the bank, explained the issue, and they refunded me on the spot (also switched out the card for a new one). They said technically it could be clawed back after investigation but they never did.
Weird take, credit card debt is much more of a risk to that demographic than debit cards ever will be
Fun fact: Visa owns some of Stripe.
It boggles my mind that the government has privatized currency to these people.
Crazy-person-but-actually-really practical-idea:
Nationalize one if these networks. Maybe Discover.
The US government should provide us digital currency. The simplest way is to force the current systems to do that. All that rent they collect in terms of transactions fees shouldn't be profit for a private business but fees of the government.
No Chance in hell, the US government is even going after Brazil because they've done the right thing. See https://en.wikipedia.org/wiki/Pix_(payment_system)#United_St...
UPI in India too. Why are they targeting pix specifically? Yappy in Panama and alipay in China but those are privately owned, as the us wants.
>It boggles my mind that the government has privatized currency to these people.
That's the banks (lenders), not the payment networks.
>Crazy-person-but-actually-really practical-idea: Nationalize one if these networks. Maybe Discover.
The central planners want to. It's called FedNow.
FedNow is the backend behind the "instant" transfers you see between some banks these days.
Each of those networks carry a lot, a lot of ancient stuff. Gov is better off building a brand new network from scratch and promote it as a standard for banks to join.
There are plenty of great examples from this century all over the world.
Even Iran has a better payment infra than the US.
> Even Iran has a better payment infra than the US.
That is a big claim. What would prevent someone from setting up something equally as good in the US, aside from the network effect and users unwilling to try something new for uncertain gain?
End-users don't have much agency here, network needs banks.
In Iran, they simply don't have much choice, so banks use the only network available to them. It just happens to have been built in this century, so it's not as archaic as Visa.
Here in the US, I guess only regulators could realistically create a new network and have enough power to convince banks to adopt it.
Nothing, of course, stops anyone from creating a new network. But the network effect is THE driving force here, it's not a minor factor.
Yes, let's bring the experience of waiting at the DMV or dealing with the IRS to payment systems. Great idea
My experiences with the DMV have actually been pretty decent. I think a lot of their negative reputation is from how it used to be, but that they have improved substantially since then?
DMV is a state level agency and varies a lot depending on where you are. It's partially privatized here in Oklahoma and mostly painless (you only need the actual DMV for driver's tests, CDL background checks, etc.) but when I lived on the Illinois side of St. Louis I routinely heard of people spending hours in line.
Normally I'm not a huge fan of privatization but the way it's done here works great. The fees are set by the state and the agency gets a percentage, so if an area is underserved someone just opens another one.
Naturally, it varies by state. But yes, the Department of Licensing in WA state is also one of the least onerous bureaucracies I interact with
I’ve never had a problem with the IRS or DMV, because unlike Visa or Mastercard they are government agencies with accountability to the people.
Visa and Mastercard are a cancer.
Discover was JUST purchased by Capital One, so I think they'd hate for it to be nationalized
It's not about US consumers but international trade. The US likes taxing the world's B2C activity.
That's what systems like Pix fixes. It's managed by the state, it's low cost and it's universal... which is why the US is against it so hard.
If we look at this in a non US-centric view, then many other areas have solved this, partially since decades.
For example, in Germany we used to have a bank card, "EC Karte", it is now called "Girocard".
So, if you are a shop and accept Girocard, you pay 0.2% of the transaction plus a fix 0.05 - 0.10 €.
And in Germany virtually everyone has a Girocard, it's part of getting a bank account. The cards are free to the customers.
So assume you're a small Café with 8000€ per months, 70% via Girocard and 30% via credit cards. Then you'd pay ~ 17€ per month for Girocard, but 95€ if you use "blended sum" - a contract with a payment provider to accept all cards. But you don't have bureaucracy. With you do an extra contract with a credit card only provider it's still 41€ for just the 30% of your monthly business.
That creates the effect that in Germany lots of shops don't accept credit cards. The market speaks.
I know that other countries also have payment methods, e.g. Netherland or China. It's just the US banking system that is decades behind what is possible.
I used to think "I should be nice to merchants" and pay everything in cash.
That was 15 years ago. Now, living costs have gone up, I'm getting taxed to death by not just governments but increasingly more by businesses themselves ("benefits fees", "installation fee", "convenience fee", guilt-tip screens, sneaky price increases, etc.) so now I feel no guilt in playing the system to get at least some of my money back. Now I just churn 1-2 credit cards a year to pay my taxes and get some of it back in the massive sign up bonuses, which more than cover the transaction costs, fees, and then get me another few thousand back.
If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
Deal? No? Okay, you continue paying your merchant fees and I'll continue reaping the credit card bonuses to the maximum possible.
> I used to think "I should be nice to merchants" and pay everything in cash.
That is only "nicer" as it allows to evade taxes. (Which some may consider nice)
But cost for cash is comparable to card payment if looked at seriously
* You need working time to count it
* You need working time to bring to bank (or request pickup, which costs)
* The bank will charge the deposit
* The bank will charge for the change you need
* In the shop the cash has to be protected (safe? Protection against robbery)
* This requires procedures for shift change etc (thus training time and prolonging working time)
* There is a risk of fraud (counterfeit, swap tricks etc.)
* Employees might have sticky fingers
I own a business that does about $10-$15k mo USD in cash and card transactions and most of what you've said here doesn't ring true to me.
Unless you're handling huge amounts of cash, cards are WAY more expensive to deal with IME, especially because the fees scale as a percentage of revenue, so you can't just increase sales and lower your margins.
I bought a cheap cash and coin counter for about $400 on Amazon, which means it takes me about 2m to count whenever I need to balance the register.
For reference, with my POS I pay about $400 per MONTH in card fees (square).
It does take time to bring it to the bank, maybe 5-10m a week for me.
My bank does not charge for deposits or change; this would be insane and I've never encountered this in the US.
Counterfeits aren't generally an issue for small bills in practice; for $20+ we use a 50c testing pen that takes about 2s per transaction.
Sticky fingers are easily caught by balancing the register after each shift which is again about a 2m operation with cash and coin counters.
Overall I would be taking home about $500 more a month if all my customers paid cash, which is a big deal for a low margin business.
Many businesses, including restaurants, in California are going cashless and it makes my weekly budgeting harder (cash in wallet is my budget).
I know, it sucks. I didn't intend to do cash before I started my business because it seemed like a pain but now that I've figured it out I'm really glad I did.
I love being able to transact without the payment processors knowing anything about my customers, and they appreciate it, too. My cash payers are usually very grateful.
> My bank does not charge for deposits or change; this would be insane and I've never encountered this in the US.
Some smaller banks in Australia do but the big ones all have cash and coin ATMs which are free for account holders.
> That is only "nicer" as it allows to evade taxes. (Which some may consider nice)
Card only business can definitely evade tax too and many do.
> If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
Where are you not getting this? You mean taxes on top of the retail price? You would pay cash, if the merchants colluded with you in evading taxes?
You could just do what all of Europe does and just include the tax in the listed retail price, rather than only tacking it on at the end.
> If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
This seems to still be pretty reliable for most things in brick-and-mortar stores, FWIW.
The real shittiness begins when having to deal with them as a business. If you’re classified as high risk, which could be whatever the fuck, you’re deplatformed or need to deal with Byzantine merchants.
In my case, it's literally free money. I travel a lot for work. I pay for everything with my card, and I'm reimbursed by the company. I rack up points, and whenever I travel for pleasure or as an independent contractor, hotels are free. I'd get free airfare like my coworkers do if I didn't avoid flying and drive everywhere.
The system is broken. No one with the power to fix it has any incentive to do so. Might as well get what you can.
Another thing to consider is your credit card rewards cash back etc are really trading your privacy for a little rounding error worth of discount in comparison to using cash.
You may also save far more money going cash only. E.g. some local restaurants near me give you like 5% off paying in cash. Gas is generally cheaper cash price vs card price or debit fee. You have a big job with a contractor, tell them you might be interested in paying cash and they might offer you a substantial discount.
Many more restaurants and grocery stores don’t, and then it’s 2-5% of cashback vs. 0% cash discount. Doesn’t sound like a rounding error to me.
There are a lot of good reasons to dislike the market structure and game theory of card payments in the US, but please don’t accuse consumers of being short-sighted or irrational.
The only way to break the cycle of self-reinforcing incentives would be swift regulatory action. Absent that, playing the game is the rational move at the individual level for both merchants and consumers.
> Another thing to consider is your credit card rewards cash back etc are really trading your privacy for a little rounding error worth of discount in comparison to using cash.
How much privacy really? If I get mostly $20s from the ATM, and the merchant does daily deposits of most of the $20s they get, why wouldn't banks start scanning and tracking serial numbers (if they don't already), if my purchasing habits are actually valuable?
In a theoretical sense, you are right.
The life of most currency notes is bank to customer to merchant to bank, and the bank could just track serial numbers to figure out your spending habits.
Practically, it would make little sense. The actual life of most currency notes is bank1 to customer to merchant to bank2, and there is a large probability that bank1 and bank2 are different entities. And then, so many more people use the credit card system, and it is so much easier to track people there, that the ROI on tracking people using cash would be low.
I would be very surprised if any bank tried to scan currency note serial numbers.
Serial number scanning is a common feature of electronic cash counters (also networking!) I'm pretty sure all incoming serial numbers are scanned and checked against a database to find stolen banknotes. I don't know if any banks are tracking outgoing serial numbers, but it would be pretty trivial to implement. I've noticed when I go in and withdraw cash from a human teller that the cash no longer comes from a drawer, but rather is dispensed by an automatic cash handling machine and then handed to me.
Is the probability that large for bank1 vs bank2? There’s only a few major banks left. Chase has so many ATMs it’s hard to compete with the access.
Make change with your local under the table taco stand
https://www.wheresgeorge.com/
> The site was officially launched on December 23, 1998.
Contractors, but also cosmetic health work. Invisalign, veneers, plastic surgery, etc. Probably most big-ticket items or services that you're not buying from a megacorp.
Sometimes they'll give even more than 5% because they can keep it off their books completely, but in those cases, they want physical cash--not just a check to avoid credit card fees.
Agreed.
I will admit that sometimes I do have fun playing the game (certainly a lot more when I was younger), but not often anymore. I feel like I "have" to do it, because there's no such thing as a free lunch, and as such stores price in the fees and so I might as well get it back in the form of traveling, but it is very weird that we just expect credit cards to do that.
Agreed. The pool hall nearby has a game of pool for $2. But if you use a credit card the minimum purchase is $6 (three games) due to fees. It works, but I thought it was a gimmick to trap people into playing more pool until I saw your comment here and realized it was from fees.
There’s a startup in Switzerland (https://www.pimpay.ch/) trying to offer no per-transaction payments (at the Swiss-level). I wish them good luck but it’s not going to be easy to disrupt the existing players in this field.
This is something governments could fix by running the payments rails.
What's really fun is when you're reselling something like Microsoft 365 and both the credit card companies and the state (through sales tax) make more than you do on each sale.
I don't get this. Use cash like me and a bunch of us if you don't want to play the game. Or a debit card. Otherwise it's just an extra game. Extra games are choice. Choice is good.
I would only use cash in situations where I'm able to obtain a discount compared to using a credit card.
Even then, you have to think twice. If you get scammed of cash, it's gone. If you get scammed in a credit card transaction, there is a fighting chance you can dispute the charge and have it reversed in their face.
You know that credit card feature of providing some insurance coverage on things like vehicle rentals? It may look like small print, but I actually used that. By some amazing fluke, I damaged the bumper of a rental car; the credit card coverage took care of it. I filled out minor paperwork and never heard about the issue.
Speaking of rentals, in many rental situations (even simple power tools at your Home Depot or whatever) you get charged a deposit on the card which comes back when you return the thing. It's just a number in database. With cash, you'd have to fork that up over the counter; very unappealing.
In india we use UPI. But people still use cards enough to be in decent enough terms with them for when you want to make a risky purchase and chargeback. In a sense, it's simply insurance. You pay extra 2% everywhere so you can dispute a txn at any point later.
Personally I make very few risky + expensive purchases, so my CC usage is non existent. I am comfortable enough to not really care if a random shady hobby electronics website fleeces me 500rs.
Another use is that sometimes you get CC offers on Amazon: "use $BANK $TIER CC to get extra 7k off" which are useful enough to justify paying extra everywhere else if you do your big shopping though Amazon festival deals. E.g you can get a 55k iphone for 45k.
> but it's ridiculous that people have this sense that shopping should somehow fund your vacation.
Some people are dumb and think tax refunds are free money when in reality they’re an interest-free loan to the IRS.
Money is fungible and instantly redeeming rewards for a statement credit is almost always the optimal way to use credit card rewards.
A person who wants to fund a vacation with rewards can simply redeem the rewards for a statement credit while simultaneously transferring that amount of cash to a HYSA or similar.
> Money is fungible and instantly redeeming rewards for a statement credit is almost always the optimal way to use credit card rewards.
Uhh I have no credit cards where redeeming for credit is the optimal play. Every single one has 'offers' that give a further multiplier on the dollar amount of the points. Eg redeem $80 of points for a $100 home depot gift card.
If you use it, that's great. If you don't use the gift card, then cash is obviously better
>I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.
This is called "Regulate the max fees" like Europe did, where they still have functioning credit card networks, including good fraud coverage, but you aren't expected to dance for the credit card company for peanuts of kickback.
Why do you play the points game?
I felt like if I didnt spend $1 on something that was the equivalent of me spending $50 to get those same credit card points
I don't play the points game, I use a cashback card.
I use a cashback card, because most merchants will charge me the same regardless of payment method, and getting a 4% discount (+ time value of money) is the lowest cost to me. If I use some other payment method, the merchant may keep more of the transaction amount, and that's great for them, but it doesn't improve my customer experience. If interchange fees are strictly capped and cashback cards disappear, I wouldn't be upset; but while they're here, I'm incentivized to use them... following economic incentives while doing economic transactions seems like the right thing to do?