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Comment by slackerIII | Hacker News Reader

As a taxpayer, I'd just like to say, "screw you".

But he is just a piker in ripping off US taxpayers compared to banks that borrow from the Fed at 0.25% and turn around and buy treasury bonds paying 3%

How is that a rip-off? In the general case, this is how banks basically work. They borrow short term from depositors and lend long term to mortgagees and businesses.

In this specific case, they are exposing themselves to risk from the time value of money, the capital price of the bond. If rates rose 0.5%, they lose 3% on a 7 year bond.

I don't begrudge him the few hundred dollars he made. There was a loophole, he exploited it non-malicously. So did a bunch of other people; eventually the loophole got closed. I am personally out a miniscule fraction of a cent, and I got more than that's worth of entertainment out of reading this article.

This exploit wasn't at the expense of the taxypayer; it's net-zero for the Mint. It's at the expense of the airlines who have to back the miles generated from nothing.

Edit: Ok I admit defeat here. I don't think the costs are anywhere near interesting from a where-does-my-tax-money-go perspective, but I concede that the Mint must spend some amount of money on it. I won't delete the comment for historical purposes but consider it retracted!

Doubtful. Credit card companies charge a percentage of the transaction cost to the seller. Usually sellers just mark up their goods accordingly, so the buyer is the loser. The buyer's only recourse is to use a rewards program to get some of that markup back. The credit card company lost little if anything, and probably profited on the transaction.

The mint was eating the entire credit card transaction cost, so that $300 came from the mint, and probably more as well. Not to mention the shipping charges, and the cost to re-process all of those coins when they came right back to the mint. The line item profit to the mint is still positive since it cost way less than $15,000 to make those coins and they can re-sell them. But in reality, it just means that either the mint prints more dollars to make up for the loss (taxpayer loses in inflation) or more taxes are raised to pay for the loss (taxpayer loses more directly).

The bank where he deposited the coins also was forced to eat processing cost and shipping charges to return the coins to the mint. If lots of people started doing this, the bank would end up having to raise rates, charge for the service, or put significant limitations that would hurt legitimate usages (ex: laundromats).

All in all, this is a naughty hack. The hacker came out ahead, the credit card company came out ahead. The bank lost a little, the US government and taxpayer lost big. The economy as a whole loses as well - a lot of busywork was created, but no net value.

Not sure why you were downvoted, you made good points.

How do you think rewards programs work? It comes out of the interchange fees that merchants pay. The Gov't paid a small percentage of the order to the credit card processor, the credit card processor paid a percentage of that out as rewards. The mint was technically always going to lose money, but it was trying to get the coins in circulation. This meant they lost money and failed at their goal.

Oh and there's shipping. 300LBs anywhere isn't going to be cheap.

If the government thinks it can get coins into circulation by having people order them from the government it's going to fail no matter what. Not saying this makes the guy's scheme is OK, just that the mint doesn't have a chance.

Why won't depositing these coins into the bank get them into circulation? It has to be either because the bank won't hand them out unless you specifically ask for them or because people don't want them. That's a sure sign that a coin is DOA.

I never said it was a bright idea to make the offer, just that the rewards money didn't come out of nowhere. It specifically came from the merchant, in this case the US government.

The Mint offers free shipping on coin purchases of greater than $300, I believe. Shipping 300lbs. worth of goods tends to be an expensive business.

After setting up my first merchant account for online credit card processing this year, I have to disagree whole heartedly. Rewards program cost the seller of goods. The fancier the card (platinum, cash or frequent flyer programs) the more it costs the seller as a percentage of the transaction. This is why many places refuse to take AmEx. They have high monthly account fees, and their per transaction percentage is considerably higher than a plain old visa.

My AmEx merchant account carries no monthly charge. I do pay a higher discount rate for American Express than I do for MC/Visa/Discover - roughly 1%. I certainly don't pay higher rates because someone uses a rewards card. Nor do I pay a higher rate because someone uses a Gold, Platinum or Black AmEx Card. My discount rate is affected by qualifying discounts, i.e. AVS, AVS+Address, non-AVS.

I find it in my best interest to make it as easy as possible for clients to pay me. If I have to pay a percentage point to make it easy for a client to hand me money, I'll gladly take that as a cost of doing business.

Actually it is at the expense of all cardholders (which would be most tax payers) since they aren't really doing any of these "programs" for free.

oh no! The Mint had to pay a processing fee?

Iraq|Healthcare|Welfare|NEA|USPS

Better a taxpayer get back some stolen funds from the government than have it thrown away in another country, or on bloated pork.

He hasn't really cost anything to the US government or the mint. There's no real harm to taxpayers here.

The people he's getting his money from is his bank/credit card company. If you want to say "screw you" say it not as a tax payer, but as a consumer of credit cards, who will eventually have to deal with higher rates/restrictions/limitations on rewards.

It cost the US government approximately $450 for the 3% or so transaction fee that they paid to the credit card company, and another $500 or so that they paid to UPS.

He gained about $200 worth of airline points, and taxpayers are out about $1000. Sounds like a good deal to me. Or not.

That's the US government's fault, not his. They're the ones who decided to make the offer to sell currency at a loss to the taxpayer.

First, I don't pay 3% interchange rates and I'm not nearly as large as the US Mint so that's surely an inflated number.

Second, if he only got $200 out of the deal, his fault. I personally make $20 per $1000 in cashback.

The credit card companies pass on these perks to the merchants. Transaction fees for card purchases are actually higher for cards with rewards.

I hadn't realized this before. How is this type of thing structured in the merchant's agreement with the card processor?

Could they in theory issue a 100% cash back card that the merchant gets charged 100% on? How is the merchant supposed to know what they are getting charged when the swipe a given piece of plastic?

The fees depend on what merchant provider a company is going through. Braintree is what I use, and they charge a flat, albeit higher, percentage for all swipes, rather than have a huge list of the percentages. Here is an example of their breakdown of Costco's fee structure (yeah, you can get a costco merchant services account).

http://www.braintreepaymentsolutions.com/blog/Costco-your-ma...

I have no idea if what you proposed is possible, but my guess is that no one would accept that card :) I don't accept amex because I think it represents a fraction of actual users, and those users have other cards because they are used to getting told "nope, sorry don't accept amex".

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