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Comment by ceejayoz | Hacker News Reader

All those bonuses are coming from somewhere, though. In this case, it mostly comes from higher fees on merchants, which leads to higher prices.

You're getting some points, sure, but everything you buy is a percent or two higher to pay for it.

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That's all true, but as a consumer I think a percent or two is worth the conveniences that cards offer. I pay for virtually everything with cards. I rarely even carry cash. Cash is bulky, dirty, inconvenient to get, and has absolutely no loss protection.

I pay my balance in full every month, so I don't pay finance charges. If you can't do that, then don't use cards. They will eat you alive. Understand that most of the benefits/points that are offered are paid for by people who carry a balance.

If you can manage them and keep the balances paid, the points are just icing on the cake. I rarely pay for hotels anymore, for example.

> If you can't do that, then don't use cards. They will eat you alive.

I like to think as credit cards as tax on the poor to feed the rich.

I would call it a tax on those with poor financial planning skills.

Also, yes. But not only.

I recommend this wonderful essay into the trials of being poor, which isn't necessarily because you're bad at financial planning:

https://whatever.scalzi.com/2005/09/03/being-poor/

Also this recent HN posting and discussion, about the "Vimes [from Discworld] Boot Theory":

https://news.ycombinator.com/item?id=18793259

Read the "being poor" article.

Conclusion: I'm poor.

That would be great if it weren't a prisoner's dilemma at that point.

There is no getting away from the fees, so I must get a credit card, but that means that all of my purchases are tracked.

If you don't think this is important, you haven't been paying much attention.

> but as a consumer I think a percent or two is worth the conveniences that cards offer

Yes, but we're also paying for that guy's international flights. I don't care how little it is: I don't want to pay for that. Buy your own vacation.

For the record: good on him for taking the points. 100% his prerogative. My problem is purely with the eventual cost being amortised across other customers, even non-CC customers.

I think the bonuses are primarily paid for by the interest charged to people who carry a balance, since the entire point of the rewards programs is to create customers who carry a balance.

At least some of the cost is borne by merchants - rewards cards have a higher interchange rate.

https://www.nerdwallet.com/blog/credit-cards/money-credit-ca...

Yes, if there were a law requiring the consumer pay all fees for their specific card, this form of freeloading wouldn't exist.

This is true. The fees pay to run the program including all the front-end companies that sell card products to the market; the banks financing it want those big, juicy 20% APRs

Sure, but very rarely can you pay less by not using credit cards. There are some exemptions like "cash discounts" but in my experience they're rare.

>Sure, but very rarely can you pay less by not using credit cards

Only if you pay the full dose immediately at the end of the billing period. Anytime you've haven't paid your cc bill in time, you're charged way more in interest. People have crushed under cc debt.

That's tangential at best to a discussion of credit cards as a payment processor.

The encouragement of the use of credit cards goes hand in hand with "spontaneous purchases" without the money, added interest, and cc debt.

So, it's only tangential in the NRA sense of "guns don't kill people, people do".

Hooking people to using credit cards for payments plays into this whole system.

In Germany and France, for example, the equivalent payment systems are still online, through cards, etc., but they involves debit cards almost exclusively.

I think it is a given that ironically you should never use credt cards for credit but like a debit card.

The point about paying less is that the merchants who often complain of the processing fees and delays seldom give a discount for paying in cash to offset the lack of fee surcharges bundled into sale prices.

Everything everyone buys is a percent or two higher. This behavior should really be considered antisocial. GP is taking advantage of the system for their own personal (moderate) gain to the (very small) detriment of everyone else.

Sadly, that pretty much describes most successful businesses on the internet today.

Seems like a good example of "concentrated benefits versus diffuse costs."

https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action

The problem isn't the consumer who takes advantage of the system. the problem is the regulations that prevent consumers from choosing whether they want to pay that extra 2-3% that credit card companies charge the merchant. Right now, if i want to pay with cash, I still end up paying that extra 2-3%, even if the merchant wants to give me a 2-3% discount, they're not allowed, due to those regulations.

It's payment network agreements, not regulations in the government sense. E.G. If you accept Visa, you cannot mark up credit transactions & discount for cash per your agreement with them. It's nuanced (gas stations do it compliantly by advertising both prices next to each other).

More info: https://www.pymnts.com/visa/2018/non-compliant-cash-discount...

But that is a sign of a lack of regulation, as that is obviously anticompetetive behavior (demanding that a competing product cannot be sold cheaper).

It's the same product being sold, not a competing product. And as a merchant, you aren't required by any law to accept Visa, or credit cards of any kind. Many merchants don't accept Amex, for example, because their fees are a few points higher than competing networks.

Cash and Mastercard are competing products, and Mastercard requiring the merchant to sell payment with cash at the same price as payment with Mastercard is obviously anti-competetive. Whether the merchant has the choice to not offer a particular product is irrelevant.

Tragedy of the commons.

That assumes the cost of cash handling is zero (or close to it), which isn't true. When I worked retail around the turn of the century, here's an estimate of the time added by cash handling:

- 5-10 minutes at beginning and end of shift to count cash drawers in and out, and make deposit bags, per employee

- 10-15 seconds per cash transaction to count payment and make change

- 60 minutes to prepare daily cash bank deposit and restock change (once, done by a supervisor)

- Employee theft from cash drawers, while not a common issue, did happen probably at least once a year

Now, I couldn't say if that all adds up to an extra 1-2% overhead, but I think its disingenuous for people to suggest that merchant fees charged by credit cards have little to no benefit to retailers. I think we'll see way more businesses go to electronic payments only within 10 years or so.

Three of the four problems in your list of cash-handling downsides are solved in some places through self-service checkouts where the machine automatically counts the cash and dispenses change, so a human doesn’t have to. Sometimes there is an actual human at the checkout, but when you wish to pay with cash, you are directed to put the money into a machine placed there, so that the cashier does not have to actually handle cash.

In recent months I have seen the latter system (human cashier + cash-handling machine) in a Madrid airport restaurant and a Romanian hypermarket.

If the company servicing these cash machines charges 0%, sure. I'd bet they end up charging fees close to what credit cards charge, though.

You can look at it as interest that's not disclosed or as a service fee for handling transactions. It's not obvious that an explicit fee for either would be lower.

I think people have claimed that when the experiment was done by capping fees, things don't get cheaper, so your viewpoint may not be accurate.

A tax paid by those without the same strategy, presumably. For instance, I hate the idea of CC points and do not participate. I still use my card and pay the same prices.

Isn't this only true if you assume profits are constant (hence competition effectively not happening)? They could we be paying for some of it by sacrificing profits, and judging from the fact that some of the best deals get discontinued, I don't assume they all end up making money.

The money still came from somewhere.

Yes, I don't think anyone claimed money comes from nowhere.

Well, you kinda did when you implied that profits aren't paid by the customer. Just because a company "sacrifices profits", doesn't mean those profits would be the same at the same price in a market where there is no credit card quasi-monopoly.

But everyone pays the higher prices while very few hustle CC rewards programs. Just like that superman movie plot or Office Space, the GP is gathering up all those fractional pennies and using them to buy first class air travel.

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