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.
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 ?