Fintech is making credit cards weirder
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All fintech relies on two things: A bank and a payment network (Mastercard/Visa). This makes fintech an inferior product and most fintech I have tried have an abysmal customer service. Also, because fintech does its verification thing over the Internet, it seems that they rely more on their AI to block/ban people than a phone call. Fintech also seems to be more down to lick regulation, banks and mastercard feet at the expense of their customers.
This explosion of credit cards/offers/rewards is hardly innovation. It has already happened with banks (every big store has its own credit card) and it's usually a bad deal for customer as it requires "loyalty" to that brand.
That's it folks. The market has been cornered by a couple guys and it seems the regulatory barriers have been lifted high enough that nobody can enter again. Remember when MasterCard/Visa used to send these cards for free without any KYC whatsoever?
Fintech is much bigger than credit card networks. Bitcoin may be the most obvious fintech example that requires neither, but there are many others.
From https://en.wikipedia.org/wiki/Financial_technology: "[Fintech] is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. Artificial intelligence, Blockchain, Cloud computing, and big data are regarded as the 'ABCD' (four key areas) of FinTech."
In contrast, the credit card networks which have been with us for decades are considered to be "traditional financial methods". Even Visa thinks about itself as a company that partners with "fintechs" and "fintech enablers" rather than being a "fintech" itself, e.g. "Our worldwide network helped fintechs like Chime, Rappi and Airwallex deliver on their vision". (https://usa.visa.com/partner-with-us/info-for-partners/info-...)
True progress would be CBDC or actual usage of cryptocurrency
I'd expect more out of UniPay at this point -- I do actually see that quite often.
An open, permissionless, and GLOBAL monetary network for final settlement and small payments (and micropayments) which no single competing nation state has unilateral control over would be a game changer for fintech innovation. The function of everything from Visa/Mastercard, Fedwire, SWIFT, Paypal, Western Union, etc, all rebase onto one global network with countless businesses competing on top of it to provide the most appealing user experience.
BTC and Crypto at large don't seem like a viable alternative solution, or even a solution to any real problem at all.
The solution was in the message you replied to.
https://www.youtube.com/watch?v=7bOo3zLFhEk
For small payments, lightning is instant and extremely low fee. For larger payments that you want certainty of settlement, even a few hours confirmation time is drastically superior to traditional settlement networks that take days if not weeks internationally. FYI, your credit card payments are instant, but not finally settled. That happens in periodic bulk batches between banks.
https://www.swanbitcoin.com/a-look-at-the-lightning-network/
Even the Fed is on top of trying to understand this, https://www.clevelandfed.org/~/media/content/newsroom%20and%...
Money arrives instantly, and as far as a retail customer is concerned, it settles instantly. Under the hood their regular batch settlement between banks, but that doesn’t matter to a retail customer, because the money is instantly withdraw-able, and covered by government deposit protection the moment the faster payment appears on your bank statement (which is milliseconds after the payment is initiated by the sender).
Why would I want to mess around with Bitcoins, when I already have access to fast, secure, cheap, money transfers to any UK bank account?
With the exception of stores that are cash only, 100% of my money movements in the past 10 years have been digital, from my perspective. The actual money movement technology doesn't really matter to me, as long as I can do it online. Excluding settlement times (which I don't notice, unless I'm doing a wire transfer), as a consumer there's no difference.
> without fees
With bitcoin, you're paying fees per-transaction for bitcoin itself, and both parties are paying fees to move money to/from fiat. Wire transfers for large transfers may be slower, but they're absolutely cheaper than bitcoin. Bitcoin is considerably more expensive for small payments.
> with a fair exchange rate
With the fluctuations in price in bitcoin, the exchange rate is rarely fair and almost always worse than fiat. Note that there's lots of cards that don't charge foreign transaction fees, and have quite competitive exchange rates.
To point it out again, using bitcoin requires two fiat exchanges, each of which charge fees and each of which has an exchange rate that the exchange is profiting from. If you're transferring fiat of the same currency, there's no fees and no exchange rate. Even if your transaction is between two fiat currencies, bitcoin is worse, because there's one extra layer of fees and exchange.
> With no limits on transaction sizes
I can't think of a time in which I've hit a transaction size limit. Who is this feature for? Transaction size limits exist primarily to protect people. If my card is compromised, it won't result in 100% of my money immediately (and irreversibly) being transferred away.
> with complete finality
This is an anti-selling point. If my money is stolen, I want to be able to get it back. If I typo an account number when I send a payment, I want to be able to reverse that payment.
Or else what? They'll deposit some money into your account? The biggest reason bank accounts are semi-secret in the US is free-for-all ACH pulls; a minimal threat in other countries due to the fundamental differences on who is liable for unauthorized withdrawals (not the depositor!)
What’s wrong with share bank details? You can’t do anything with them, except send me money.
Most countries have similarly capable local payment systems. The US is the only developed nation I’m aware of that’s missing such basic financial infrastructure.
but the point remains that just because the legacy system exists doesn’t mean no alternative should ever exist.
If bitcoin needs a similarly hierarchical trust-based settlement systems as banks, how is that different from traditional banking?
The second link follows the Wadsworth Constant in fabulous fashion.
https://www.swanbitcoin.com/a-look-at-the-lightning-network/... is almost exactly 30% of the way down the page.
> 1 hour 31 minutes read
In rhetoric we call this 'assigning homework' and it's considered deflecting, aka, trying to get out of jail free, aka, poor form, aka, you lost the argument.
I'm sure we can do better than either of these for educational material. If that's the best that exists, which I hope is far from the case, then this is essentially a "git gud scrub" situation and you have yourselves to blame for the unwashed masses still not understanding things.
At this point, and given HN's POV on BTC, I can't take these statements serious unless you are willing to post the tx hash?
Most of these criticisms seem to be unfounded and only speculative, or you deliberately put a low priority mining fee and feel the need to blame the protocol for that.
The truth is a 30 cent mining fee was clearing all day in the next block, so I struggle to see how this is the fault of Bitcoin mainchain. With that said, as someone already mentioned, LN txs are instant and near free.
This is not ever going to happen.
Witness today the Ethereum tumbler getting sanctioned. When a payment method gets significant enough it will either be regulated or squashed by the state.
It is also quite easy for a state to exclude themselves from cryptocurrency networks, to the extent that the only transactions taking places are enabled by black market in person exchanges for cash, and no legal business entity could use that currency so you're left with the only thing bitcoin was really ever good for, evading legal controls to do trivial things or illegal things. Nothing more.
You'll continue using a service that obfuscates their use of bitcoin and lightning, like you do now with services that obfuscate their use of Fedwire and SWIFT. They'll provide you with consumer protection services, either for a fee or in exchange for harvesting and selling your data, like they do now.
I'm not suggesting that everyone is going to use raw bitcoin and have to manage their own keys. I'm suggesting that nation states and corporations (and many individuals) will all rebase their money operations on an open network, digital protocol. Bitcoin.
That bitcoin's biggest proponents still haven't embraced lightning is a pretty clear admission of defeat by bitcoin apologists that bitcoin doesn't actually solve anything, and isn't actually very useful for anything, even with the fix that was supposed to finally bring bitcoin into the promised land.
Crypto being filled with scams is a feature, not a bug.
Do you even know what you're talking about? The energy concerns are real, but please avoid exaggeration to win arguments.
>By far the most power-hungry crypto in our study, we found that a single Bitcoin transaction uses an average of 1,173 Kilowatt Hours (kWh). If we consider that the average monthly electricity usage for a UK household is 350 kWh, that’s enough to power the typical UK home for more than three months at a cost of roughly £125 ($173), based on a fixed cost of £0.11 ($0.148) per kWh
>In the U.S, it would equate to roughly 6 weeks of electricity based on an average household electricity usage of 877 kWh per month (U.S Energy Information Administration).
Not quite an entire year, but definitely a number of months.
Also according to digiconomist's latest figures, it's currently at around 1500kWh per transaction. So even worse.
Even if they do rebase on top of one global network, what incentive do these companies have to change their product offerings or their fees? Consumers will not care what Visa/Mastercard or Western Union use on the backend, could be carrier pigeons as far as most people are concerned.
What would cause fintech to become more competitive? I'd love to see every transaction fee, loan rate, etc. go to zero. But would "one global network" lead to that?
It’s a fundamentally hard market for anyone else to enter because Mastercard and Visa basically have natural monopolies.
The value that both Mastercard and Visa bring to the table is:
1) if you’re a bank, most merchants accept their cards
2) if you’re a merchant, most banks provide a card from one of them.
So any new network has the classic chicken and egg problem. How do you convince merchants to accept your card (and potentially additional payment processing terminals) when none of the merchants customers have the card. And in the inverse, how you get a bank to invest in integrating with your network, when no merchants accept your card?
The EU tried to force a fox on this issue by creating EuroPay. Which ultimately failed and was bought by… Mastercard. But on the upside, part of the purchase deal require that Mastercard provide “at-cost” access to its network for a new card network to piggy back off, to help solve the above chicken and egg problem. But atlas’s, even that doesn’t reduce the barrier to entry enough, especially when coupled with the EU rules capping maximum interchange fees.
In Russia banks and merchants were convinced to use the national payment system basically overnight.
Well, at least at the national scale, it can and is done. You start with terminal providers or select the niche that doesn't use them at all (online payments). Then you need top 5 banks to support your new method in their mobile apps/transaction systems. All is left is massive advertising campaign, and if it is successful, other banks will join. https://en.wikipedia.org/wiki/Mobile_payment contains a huge list of attempts that worked out (or not).
It is going international where things get very tricky. Even Paypal and Stripe had to be based on Visa/MC, there are no other worldwide options than credit cards. It is a bit better if you want to only cover EU(thanks to PSD2 banks had to provide APIs), but that is all. Google's and Apple's payment systems could become independent from Visa/MC but people just don't want to top up some weird accounts when they can just "connect" a card instead.
Because markets are never anti-competitive on their own, oligopolies are only ever due to big bad regulators, right? Uh-huh. Some alternate ideas about why the CC payment processors are an oligopoly:
1. They have a card in every wallet and a reader in every aisle.
2. They can force merchants to hide the fees they charge.
3. They don't just process payments, they arbitrate disputes.
(1) could be addressed by standardization (see: Europe). (2) could be outlawed. (3) could be replaced with better consumer protections or smoother small-claims process.
Most markets have a substantial undergrowth of perverse incentives and anti-competitive strategies. Killing the gardener doesn't make the weeds disappear.
Doing that doesn't actually depend on eliminating Visa/MC, so the fact that it hasn't been done suggests that there are other barriers.
If you want to argue that eliminating Visa/MC will also eliminate those barriers, some details would be nice.
Actually, one of those two isn't necessary – the payment network.
It's possible to build a payment platform _just_ on top of banks. We're doing exactly this at Sway.
In Europe this is driven by Open Banking initiatives. In the US, this will land next year with the FedNow service.
In other parts of the world, like China, Brazil, and India, instant (and free) payment networks have existed for a long while.
https://standards.openbanking.org.uk/customer-experience-gui...
https://www.frbservices.org/financial-services/fednow/about....
They got rid of all the fees and BS the banks had been abusing me with for decades. There have been a few times traditional banking was better so I used a credit union I kept open. All my other traditional bank accounts have been closed for years.
For me, this is only because I will be locked out of access to certain essential financial products as the result of having no credit history. The advice I hear is to get a credit card and use it like a debit card, always paying off on schedule. Why can't decades of debit card use and living within my means demonstrate the same thing? It seems ridiculous to me. The starter credit cards also offer, in my opinion, rather measly rewards, so there is very little upside. It really feels like I'm just being forced to do a dance for the banks.
And can someone explain why credit scores aren't just visible in every bank's (web) app? I acknowledge that it is ultimately possible to obtain your credit score free of charge, but how is it not anti-consumer that doing this requires you to jump through hoops and use a service like ClearScore?
I believe there's a strong case for saying that credit scores exist in a similar space to criminal records, in that they're often used to further marginalise those most vulnerable in society. Or at the very least, that is the result of their existence.
For the avoidance of doubt, I do not believe myself to be a vulnerable member of society and I do not feel as though credit scores are wielded against me in the way I describe in the paragraph above. I also do not think that the marginalising effect due to credit scores is as great as that of having a criminal record.
The US system is both inequitable and exploitative.
So basically after some sort of check of credit worthiness?
I think the attitude is known as American exceptionalism or naivete or ignorance. Take your pick.
Having a history of using a debit card to only spend as much money as you have does not really reflect much about how you will behave when given the ability to spend money that you don't have (credit).
my 90-years-old credit union shows FICO score in both the web and mobile app (mobile app even plots this over time). actual scores too, from one of the big three: not some second-order estimate.
not namedropping because discussion of this article in particular seems at risk of devolving into promo/self-interested discussion. but if this is a thing you care about when choosing a bank it absolutely is possible to find with a bit of searching.
as for regulations, and why aren’t banks required to display FICO scores prominently: as the article discusses, the link between FICO score and borrowing rates/eligibility isn’t always direct (an 850 FICO doesn’t magically open the door for a $1M home, business, or personal loan: you still need proof of income, etc). i don’t know that FICO is actually encoded into law anywhere: more relevant would be requiring lenders to justify why they do/don’t approve loans, and at what rates, IMO. many do this already to some degree, but i’m not sure to what extent that’s regulated.
You mean like, crappy consumer credit products?
Solution: Don't use credit. The double plus extra gold platinum card with cashback isn't really improving your life that much anyway.
A credit card isn't gonna make that big of an impact on the kinds of purchases you truly need credit for (land/housing/business/capital). You're not locked out of accessing those products. They just cost a little more. God forbid that you be forced to be more selective about the kinds of things you buy on credit as a result of this.
Edit:
Unlike most people who spew internet advice my money is where my mouth is. My only credit is my mortgage and my rate was refinanced to the low 2s a couple years ago. The initial loan was low 3s ~6yr ago and I did 20% down by pulling money out of investment funds I had contributed to over the years. "Costing tens of thousands of dollars over the life of the loan" my ass.
Yes it will.
I know a few people who avoided credit cards well into their 20s. They ran into trouble with credit checks for renting apartments and buying cars. Imagine being nearly 30 years old with a good income and no debts, but needing to ask your parents to cosign on a car loan simply because you have no credit history of any kind. That does happen.
source: dave ramsey.
Dave Ramsey caters to people who need unusually strict financial discipline to avoid getting in trouble. For everyone else, responsibly using debt is often better than paying cash.
For example, paying cash for a car is often worse than taking a low-interest loan. Liquidity is important -- locking up a bunch of money in a car means you can't use it for other things, like investments or emergency savings.
Another example: taking out a loan for a large purchase, rather than liquidating investments to pay cash, can cost less overall because the interest paid on the loan might be lower than the capital gains taxes on the investments.
Pretty much every bank offers a credit card with a 1% cash-back rewards rate and their underwriters are more generous to their customers with no credit history to help address this exact problem. Get one, use for like 6 months and build up a credit history then go get an AmEx or whatever
My wife had her debit card compromised and some money taken and that money is gone. She filed a police report and disputed it with her bank and, after sometime, was able get her money back. If there is fraud on a credit card, the situation is very different because you haven't lost any money. There may be some fraudulent charges that need disputing but during that time you're still entirely whole.
And that applies to any number of goods and services as well. If you paid cash for something and didn't receive what you paid for, you're out that money. On credit card, you're whole until you make a payment.
In my opinion, nobody should be using debit cards if they have the option to use a credit card. It's safer, there's usually some rewards, and there's often added purchase insurance. I broke an expensive phone one week after purchasing it and the repairs were covered by my credit card.
You may not value the additional protection that credit cards have but other people do.
I get cash back from my credit card. This is partially paid by the merchant fees. So one way to look at it is that I'm getting a discount at every merchant by using my credit card. Anyone not using a credit card is not getting that discount.
This is kind of a non-statement because every market collapse ever was preceded by "people who appear to understand the market making heavy investments" right up until the crash when it becomes obvious they didn't understand anything.
Basically it's saying "following the herd is smart, unless the herd turns out to have been wrong"
The purpose wasn’t for engagement, it was just to modify search results and ping a few specific people’s google alerts, specifically the competitor.
One benefit is that the competitor would be intruiged that they were noticed at all, and be keen on being invited to an interview or seen on stage in a fireside chat at a conference, and the continued interaction meant more partnership and deals got done.
The point of all this being that you can collect more resources together. And it doesnt matter that any of our solutions didnt have product market fit. I periodically quizzed my co-founder “we’re still in the ‘make-money’ game, right” just to make sure.
Back in the early days of payment cards, settlement took days or weeks and checking whether the customer had enough balance in real-time wasn't possible. The technology to make a debit card just wasn't there, so it makes sense that payment cards started as being credit.
In this day and age, there is no functional difference between a debit or a credit card - both are processed online in the vast majority of cases, and even debit cards will typically allow offline transactions up to a certain amount if the terminal can't check the balance online. Banks now issue both and your current account and credit card account can very well be rows in the same table of the same DB if you obtained both from the same bank. There are regulatory differences (in regards to fraud protection for example) but those are just because the law didn't catch up (or doesn't want to catch up - see last paragraph) rather than a technical difference.
Nowadays there is no reason why credit should be tied to a specific card & account with very rigid rules regarding repayment schedules and fees. If you want to lend, just put the money into the customer's current account and let them use that amount with their debit card. Even better, we already have real-world implementations of this - most accounts offer an arranged overdraft which allows the balance to go negative and automatically repays itself as soon as you deposit money in. Some banks will even "helpfully" authorize transactions despite the lack of an arranged overdraft, just to immediately slap you with an unarranged overdraft fee. Clearly the technology is there and has been proven.
The reason credit cards persist is because their rigid, often complex, and nonsensical - why should the same bank charge different fees or interest depending on whether it's a CC vs overdraft usage? - rules allow these banks to offer "free" money (in the forms of 0% interest or benefits) to those who know how to play the system to their advantage, subsidized by the poor and less financially-savvy who don't know or can't afford to play the system and end up getting played by said system instead, incurring late payment fees and/or interest.
Yes. In the US, laws favor the credit card holder in scam situations.
Most of fintech runs on "screw the customer, we have an EULA!"
Thankfully, finance is an area where in most countries the law is actually still enforced and will trump whatever EULAs or ToS you may have.
Most of fintech runs on "screw the customer!"
FTFY
In addition, keep in mind that when it comes to payment cards, there are 2 levels of fraud protection. One is offered by the card networks and in the vast majority of cases doesn't care about the bank or the account type. This will cover the vast majority of fraud and in most cases fraud disputes end there and thus would also apply to debit cards (I've used debit cards for all my life and the few instances of fraud I've had have been resolved by card networks just fine in a timely manner - in fact if the bank is willing they are able to credit you the amount immediately while they investigate, though unlike on credit cards they aren't obligated to by law).
The second level is country-dependent and usually specific to credit cards - this is where laws enforce stronger protections and would force the lender to eat the transaction even if a card network dispute isn't successful. This is a purely regulatory difference, and there's no reason the law can't be updated to also apply to debit cards.
There is one huge difference: credit cards the bank or vendor takes the risk/liability of fraud and chargebacks. Debit cards mostly I take the risk/liability (fraud, bad vendor/product).
And a minor difference: credit cards have better integration for selling data about your purchasing patterns. Two of my banks have replaced VISA with Master Card recently: I presume because Master Card is monetising my data stream more effectively (so can afford to give banks slightly better profits).
But again, my point isn't that there currently aren't any advantages to credit card, but rather that those advantages are purely artificial - there's no reason they can't apply to debit cards as well if there wasn't an interest to preserve the status-quo.
No, it isn't. Having a financial intermediary between you and entities you buy things from is a genuine benefit to you as a consumer: it means you don't have to give everyone you buy things from direct access to your bank account, as a debit card does. It also means that if your credit card info is stolen, you have a third party that deals with the issues involved instead of you, and you don't have your bank account funds tied up while the issue is being resolved, as you would with a debit card.
Of course, in a sane world this genuine service would be sold as what it is--financial intermediation--and the market price of this service would be determined in a free market. It's quite true that we don't live in that sane world, but that doesn't mean financial intermediation isn't a genuine service that is worth having even in the insane world we actually live in.
> In this day and age, there is no functional difference between a debit or a credit card
Yes, there is, there is a huge functional difference. See above. Ask anyone who has had their debit card info stolen and had funds fraudulently taken direct from their bank account.
I disagree that this means "giving someone else access to all your money". First off, you're authorizing a single transaction, and second, your bank is still the one mediating the transaction - if you experience fraud, what's actually happening is that your bank is the one who got defrauded by someone pretending to be you (by stealing your card/PIN/etc) and fraudulently convinced the bank to give them your money.
I disagree that a debit card doesn't involve financial intermediation. The bank is still the intermediary and holds the money, just that the hold duration is seconds instead of a month (well technically settlement or presentment happens a few days after authorization, but that's all transparent to the cardholder). There's no technical difference, the difference is purely regulatory and there's no reason the regulations can't be amended to give debit card holders the same protections as credit card holders.
> Ask anyone who has had their debit card info stolen and had funds fraudulently taken direct from their bank account.
I don't know about you but all instances of fraud I had on my debit cards have been resolved painlessly. Most fraud gets resolved by card network disputes which don't care about the card type. The only time credit cards get preferential treatment is when card network disputes fail and the law forces lenders (but not debit card issuers) to eat the fraudulent transaction anyway, but those instances are relatively rare.
It means giving someone the information that is required to withdraw money directly from your account. Yes, they're only supposed to withdraw the amount you specifically authorized for that transaction, but the fact remains that you have given them direct access to your account. The same risk exists when you write a check. Mitigating that risk by having a financial intermediary involved is, as I said, a genuine service. If you personally don't value that service, then of course you would not use it. But others do value it.
> all instances of fraud I had on my debit cards have been resolved painlessly.
That's fine, but I have known plenty of people who did not have the same painless experience.
But there's still only one transaction involved: the bank pays the merchant directly from your bank account. With a credit card, there are two transactions: the credit card company pays the merchant and you pay the credit card company in a separate transaction (and of course you pay once for multiple purchases made with the card). That's the intermediation that is not present with a debit card.
For cards, I agree 2FA for card transactions is not common in the US (I've never seen it). The US theory for cards appears to be to depend on chip cards, but of course that doesn't help with online transactions, only transactions where the card is physically present at the point of sale.
I heard from friends in Israel that there's a fancy custom of writing 12 cheques to landlord when one rents an apartment dated for every month of the rent. This way you never see your landlord for the entire year, which is neat, can't argue with that.
Debit card transactions, legally and financially, withdraw money from the associated bank account at the time of the transaction. The only limit on the amount that can be debited is the amount of money in the associated bank account. If there is insufficient money, the transaction fails. The debit card user is at risk for losses due to fraud or payment disputes. Basically, a debit card is the same as cash but in a convenient thin plastic card form.
A credit card transaction, legally and financially, withdraws money from the issuing bank, who then adds that amount to a debt ledger of money owed by the card user to the bank. The transaction only fails if the transaction would exceed an arbitrary credit limit as determined by the bank. The credit card user pays back the debt at the end of the month, or over time, based on the terms of the credit card agreement. The issuing bank is at risk for losses due to fraud or payment disputes. Basically, a credit card is the same as a short-term instantaneous loan agreement, but in the form of a single convenient thing plastic card instead of a dozen or more paper loan agreements.
They are fundamental differences in what debit cards and credit cards are. One is a cash equivalent and one is a loan equivalent, and no amount of handwaving are going to make those the same thing.
My point is that the credit card concept now survives because there's no will to kill it off since it's a convenient way to siphon money from the pool/less-financially-savvy to the well off.
This is simply false and indicates a lack of understanding in what loans are or how credit cards work. Credit cards survive just fine in Europe without the points and other benefits.
From what I've seen, in Latin America and much of the EU debit or even cash is the default.
Even in the UK, there are no weird, arbitrary reward points programs like in the US - it's standardized.
In my experience only the US and Canada have these crazy credit card deals and programs. Which is good for me I guess, I get my points as I can still use my Visa credit card around the world. But man, unless you do the research and understand your card, credit cards can really be shady (especially exploitative for those with low financial understanding) and I do think we should get rid of them.
Or, promote better financial literacy.
Basic financial literacy sufficient to manage credit is well within the abilities of those with average intelligence. If the Public Schools are unable to teach that then we should reform them. It's not like credit cards are the only financial pitfall that people desperately need help to avoid.
The OP called for the abolition of credit cards, whereas you're describing the regulation of power tools which is all well and good albeit inadequate as people still cut their fingers off and break things all the time with power tools. Power tools are still around and no one is calling for them to be abolished, although there are efforts to train people in power tool safety. People need financial safety training too, and not just for credit cards.
On the other hand, credit cards' pitfalls are intentional rules that have no other purpose other than to explicitly be "sharp" and "cut" careless people.
You already mentioned one way to ameliorate this that worked for power tools, regulation, that doesn't involve abolishing them. That might work, but far better is to reduce the number of careless people through education.
> far better is to reduce the number of careless people through education.
Maybe. If there's no safer way to achieve the task at hand (like with power tools - the tool is inherently designed to cut things and will cut limbs if misused), sure. But when the danger is intentionally introduced into the system with no other purpose than to subsidize perks for the well-off, is it worth keeping?
Why not also extrapolate this and make fraud and scamming legal and instead blame victims for their lack of care and education?
That's not true. Amex have a full family of rewards cards available. There's a bunch [0] of non-amex cards available too.
[0] https://www.moneysavingexpert.com/credit-cards/best-credit-c...
Also, from my link it's not just amex. Most of the supermarkets have MasterCard rewards cards, and a few of the "new" "banks" have rewards/time limited rewards (e.g. Chase, curve, revolut).
So no, it's not only amex, and yes these schemes exist in the UK.
In the US, interchange is up to 10x higher than the EU. And interchange + reward programs act as a form of regressive tax where people with low credit scores have to pay the full cost of those high interchange fees. Whereas high value customers with good credit scores (who are normally the most wealthy in society) get a rebate on those interchange fees in the form of rewards.
Are credit cards really as complicated for most people as this article claims? The explanation I got as a teenager was something like, "Instead of paying with cash you can use credit from a card, then at the end of the month you pay off all of those charges to the bank at once. Technicaly you don't have to pay it off immediately, but if you wait you'll also pay a horrible amount of extra fees; which you never want to do".
It was pretty easy to grok at the time, and is how people should approach credit cards 99.999% of the time.
Once a person gets older and has built up some credit they can look for a card with good rewards, which for most people will just be looking for the highest cash back percent they can get.
Which major card issues offer this?
This is a feature I've wanted for a long time - but AFAIK - none of my cards have it.
0 - https://www.banktech.com/core-systems/mbna-offers-single-use...
https://www.idownloadblog.com/2019/04/01/apple-card-virtual-...
https://www.cardbenefits.citi.com/Products/Virtual-Account-N...
https://www.capitalone.com/digital/eno/virtual-card-numbers/
Been really satisfied with the product since Simple died. https://www.one.app/
Genuine question, I don't know how it works with credit cards. But you can't "cancel a contract" by voiding a direct debit authorization (where you allow a company to charge your bank account directly) and expect everything to be fine, so I would assume that also applies to credit cards?
They'll send the collection agency after you for the missed payments till the end of the contractual agreement, which for most gyms is 3 to 12 months! Gym chains here are absolutely predatory.
The same goes for any other kind of subscription too like, telcos, etc.
Which is good in my book. Being forced into auto-renewing subscriptions is nonsense and takes advantage of consumers.
- cancel subscription using the same method I used to sign up (if it is broken - that is not my problem)
- cease providing them money
I would consider it as preventing fraud by scammers that make harder to cancel subscription than it was to create it.
Doing both is fine (and I do the same), but only removing the payment method does not invalidate the subscription contract, right?
I would not assume it to be invalid form of terminating subscription, I would also not assume that it is valid if someone has not even tried official unsubscription method.
On attempting to cancel - by stopping use of the service, by trying to cancel on the website, by emailing them, by calling them during your work hours and sitting on hold for an hour of my time that's worth more than the entire value I got out of the service, and recording the 2 minute interaction with the 'customer service' agent, by calling again the next month after they still didn't cancel, by escalating to a supervisor and recording that interaction, and getting billed again - it often turns out that it's impossible for mere mortals to cancel.
In that case, cancelling by changing your credit card number is reasonable. Yes, there's a small chance they'll chase you to collections and attempt to harm your credit score if you do actually owe something (if they shipped you something physical, for example), but often they just drop it.
The network may disallow the behavior but networks are slow to regulate and in theory are consumer focused.
I once had a trial with a company and added my Privacy.com card that would expire in a day. I've canceled that trial and forgot about it. Then some time later I had to use the same company, but I've totally forgotten that I had an account with them (I've also changed the email I use). Anyways, privacy.com suspended my account because using their cards to get trials over and over again is against their ToS.
Your only recourse would be filing a complaint with Visa, and hoping they investigate, but "google closed my account" is not gonna be something that's super high on their priority list to investigate, I'm guessing.
This hasn't been my experience. I've had Grubhub refuse to accept a privacy.com card for buying a gift card.
I use a Revolut card exactly that way, and it made my life so much easier. No need to phone someone between 8:30 and 9:45 on the first Saturday of the month to cancel subscriptions. No risk of paying for a month extra or lose access for a week after in-subscribing (all of this happened to me). So there are real benefits to this approach.
Now, I use Revolut because I like my online purchase to be completely isolated from my main bank accounts, but both my French and my British (traditional and old-fashioned) banks offer the same single-use virtual cards for a modest fee. So filtering by issuing bank would not be really effective.
I don’t know if these cards have numbers that can be used to recognise them, though, but I never had any trouble using them.
To be fair, though, even without the subscription thing, it’s a useful element of defence in depth when buying stuff online: how secure a random e-commerce website is becomes much less relevant if they haven’t a working card number in the first place.
Wouldn't a contract that locked you into paying a certain amount per month for a set time essentially be a loan? Are those reported as liabilities on the companies balance sheet? Seems like they are trying to have it both ways.
Predatory services should be avoided. It seems more likely that predatory services would be aggressive about collecting.
maybe banned from multiple providers: not really sure as i only found out years after the fact when i wanted to use this particular vendor for something else.
Another thing I've noticed is some apps (for example Allset) are blocking virtual phone numbers, for the same trial-abuse issues
I wouldn't rely on this feature unless the virtual card had the same BIN as the non-virtual card.
0 - https://www.banktech.com/core-systems/mbna-offers-single-use...
They discontinued it with the rationale that they didn't need it anymore because their fraud prevention worked well enough by itself or something.
This seems overly pedantic. It’s still a loan regardless of whether one pays it back within the grace period. A better way to describe it is a 0% interest loan that escalates to a usurious rate once the grace period date is reached.
> Fintech is painting way outside the lines and consumers are benefiting from the resulting innovations.
I am baffled at both assertions - that banks have barely invented any new financial products in the past century, and that Fintechs are creating new financial products. Both statements seem so far out of line that I suspect the author has little to no knowledge of the financial sector and believes the tiny number of products used by most retail consumers represent the full universe of financial products.
The reality is that banks have been extremely creative in creating new products in the decades up to the financial crisis (MBSs, CDOs, CDSs,...). And if you look what happened to those products, you'll be thankful that they've mostly been kept away from retail clients. The 1.5 decades since the crisis have seen less innovation from banks because regulators put their foot down. I've yet to see a genuinely new product offered by a Fintech (unless you count crypto/DeFi among Fintech, which is usually considered to be separate).
Oh no! Anyway[1]... :)
But on a serious note, personally I'm glad that those fintech pseudo credit card products exist. I would be happy to be able to just pay with my normal bank / debit card everywhere on the web. I can't, not even with a third-party like PayPal, but I can with a virtual fintech "credit card", without needing a "real" credit card.
Currently I have virtual Visa card provided by my bank in EU. I can load this card into Google Pay and pay with NFC in phone, use it on Amazon/AliExpress/other eshops etc.
where is your money coming from? and where is it going?
Worked once, payment refused ever since. Randomly locked and needed to call support to unlock it, so it can be locked again after few days. Similar problem with all other eshops for ordering parts/material.
After an argument with the boss, I have forced using of virtual debit card directly from a bank account, never had any problem since.
From experience which I got, I don't even understand how anybody can take PayPal seriously.
Like the credit score system is dumb, sure, but I don't make the rules and playing the game can save me about a hundred thousand bucks off my mortgage.
The cited part in the article "mourns" that part, that consumers get better scores even though they didn't have an "actual" credit card, doesn't it?
Also benefits society in general -- injecting junk into the credit agencies data should reduce the viability of their parasitic business model (although unfortunately it is only a tiny amount of junk).
Just like UPI, Rupay is taking over India like wildfire. US can take a page out of India's technology adoption ( except may be for crypto )
I'm probably being Captain Obvious, but seems to me the credit card industry took this psychology and ran with it, essentially creating the modern consumer experience, which is basically this: https://www.youtube.com/watch?t=64&v=EAyJmIXcyMg
Then recently I hired a car and they forced me to take the zero-excess insurance (50% of the cost of a one week hire for a convertible) because I didn't have a credit card.
I'm now in the market for a credit card, but I have no interest in any of the credit features, I just need it to be accepted as a credit card worldwide. Unfortunately all comparisons online focus on the interest rate that I couldn't care less about.
So, I think you can just pick whatever card doesn't have an annual fee, maybe choose one with rewards you'd use if you care.
Keep it simple and just get one from the bank you already use for checking -- then you will only have one online banking portal to use for both your card and your checking account.
Set up autopay for one of your monthly bills to use the card. Set up another autopay from your checking account to pay off the card's balance every month.
Do that, and you will have a credit card that is regularly used, with a history of paying the bill on time, without spending any money you would not have spent anyway.
The Internet says “US adults age 18 and over, grew to 258.3 million in 2021” (paraphrased).
I presume there is some power law where some residents have many cards, but there is presumably a constraint on the most cards (bank credit checks, number of different cards).
Aside: i wonder who in the US has the maximum number of credit cards assigned to them in one year, or concurrently?
I'd guess the limit is ~400 right now since you'd have to start collecting decades ago.
That said, I'll answer your question: One component of your credit score is AAoA (average age of accounts) and it takes a hit when you close an account and it gets deleted from your credit history after a couple of years. So if you wanna minmax an 850 and get very favorable terms (well below inflation) on every loan (cards, cars, mortgages, etc), having very old accounts with a small/zero balance is optimal.
(For the same reason, closing recently opened accounts can improve your score after they get deleted from the credit report a couple of years after you close them)
https://old.reddit.com/r/churning/
I would imagine those people are in the 99th % of cards per capita...
Free cash, travel credits, hotel stays, lounge access when travelling etc. just by diversifying your credit card portfolio, spending the money you would anyway.
There are lots of websites are out there focused on this topic, but most of them are optimized to shill affiliate links since credit card companies pay out $75-150+ per card signup. doctorofcredit.com is a good site I reference that doesn't shill links, but they have a lot of good curated content.
1) payment for volume (I.e. sharing some of the transaction fees generated with customers in the form of points/miles/etc), and/or
2)credit underwriting (I.e. extending credit to profitably (in-excess of the sun of their default risk and your funding costs))
https://www.credit.com/blog/what-happens-if-i-swipe-my-debit...
No they're not.
Compared to the Chase Sapphire Reserve, it's just a step down in every way. You have lower rewards (about half) and fewer perks.
That chase card and its american express equivalent (the platinum card) give pretty nice rewards for people who travel often. This includes airport lounge access, credits for dining or taking uber/lyft, access to helpful services, status at hotels etc.
There are rewards cards across the price spectrum (some are free, some have an annual fee of $100, $250 etc).
Often for anything except the higher cost credit cards, making up the fee in rewards is trivial. American express has a CC that gives 6% back on groceries up to $6,000 annually. The annual fee is $100. That's pretty easy to make back and then some as an individual let alone as a couple or even a family.
There are several cards that offer no annual fee + straight 2% cash back, like PayPal Mastercard, Citi Double Cash, Wells Fargo Active Cash, etc. Also, they tend to have better sign up bonuses ($100-$200) compared to just a few more points.
[1] https://frequentmiler.com/x1-card-too-good-to-be-true-heres-...
And of course reddit points out they have cut that down to 0.7 cents
1) "eligible Rewards Partner transaction" statement credit
2) general "Cash Back Statement Credit"
From the link you provided, they tell you that 2) can be a lower rate, but they don't tell you what that lower rate is. But I did see the recent reddit discussion saying that it's 0.7 points.
I'm not sure you're reading it right. From what I can tell, I can make tax and rent payments and get 3% statement credits. These two categories are typically at the lowest tier, and come with convenience fees. But at 3 percent, that cancels out and then some.
I wish the blog author didn't force me to read a ten minute article as a context clue to a sentence 1/3 of the way through the article I'm reading.
There, there's your fucking fintech. I don't know what everyone else is doing.
Some reading:
It will shortly (testing phase is in progress since 2022Q1). FedNow instant payment rails go live next year and payments are required to settle within ~8 seconds. Transaction cost the Fed charges is 5 cents, up to $500k per transaction ($100k while it shakes out initially).
(Tangentially, [Transfer]Wise is very compelling for moving value internationally, and is instant in a lot of cases; they also plug into instant transfer rails in local currencies whenever possible)
https://www.federalreserve.gov/paymentsystems/fednow_about.h...
https://news.ycombinator.com/item?id=32098635 (see citations at bottom of comment)
(https://www.moderntreasury.com/learn/what-is-fednow, from your second link, is a description of FedNow that's attempting to explain it with less financial jargon.)
You > Bank/Financial Corp > Fed > Receiving Bank > Destination
right? Would banks still be able to hold transactions as pending until they do daily settlement?
https://www.federalregister.gov/documents/2022/06/06/2022-11... (control-f “Immediate Funds Availability”)
For anyone following along:
> The FedNow Service is designed for the end-to-end transfer to be completed in a matter of seconds, as described in the 2020 Notice. This means that the beneficiary's bank would agree, as provided in proposed subpart C, that it will make funds available to the beneficiary immediately after it has accepted the payment order.
"Bits About Money" is always worth a read imo. I knew of these ideas but it is both a clear explainer and a good guide to the "why".
I can only read what you type. You seem to be talking about instant (seconds is instant in finance) money transfers.
Now extend that to the internet, any amount (cap it to under a few thousand if you wish), no transaction fees (I already pay taxes).
That'd be fintech, aka using technology to actually improve the finance industry for the people, but that's just me :)
This connection seems ... tenuous.
As you note, you already broadly have the ability to do this via debit card for most day-to-day things (with fees, for seller). What can't you do that want to?
Actually not instant! Debit transactions can not settle for several hours, and even up to a few days (though usually much faster). Though your bank is typically able to say that they have the available money, settlement may not occur for quite some time.
We can disagree on the extent of regulation and KYC requirements, but preventing people from laundering money is an objectively Good Thing.
Should we have a flat tax rate for everyone?
Running all this transaction infrastructure and dealing with fraud and whatnot costs money, but so does making coins and bills. There's no reason the digital equivalent should be for-profit business aside from "this is how it happened and now the companies occupying this niche have a lot of money to wave at elected officials who could deprive them of their ability to skim a couple percent off of 75% of the transactions in the entire US economy".
"I don't want the government to know what I'm doing with my money" is not a valid objection to this plan unless you can lay out a convincing argument that a couple of entirely for-profit companies knowing what you're doing with your money is any better, and that they will not roll over and provide transaction records the instant the government asks them to.
edit: oh wow it looks like this is finally coming in the next year or two, according to another reply to the parent comment! https://www.moderntreasury.com/learn/what-is-fednow I will be delighted to stop giving the credit card companies a few pennies of every single transaction I make, and return them to their original role of providing a line of credit if I want one.
My arguments are:
- A for-profit company can't put me in prison
- A for-profit company has an incentive to keep the government out of their business
https://www.forbes.com/sites/emilybaker-white/2022/08/08/fac...
No fees? Who is building this product and why?
Why aren't you building it ... sounds like you'd get a massive percentage of the market?