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Comment by jedbrown | Hacker News Reader

"Check cards", or whatever name is used for bank cards that you can use as a credit card (instead of only with a PIN) are unequivocally a worse deal for consumers. You don't get any of the benefits (cash back/miles, insurance, etc) and in the case of fraud, the money is gone until the claim is processed. The physical form (card) is irrelevant, but it will be very hard for any system to compete with rewards credit cards. Since the card companies do not allow the merchants to pass on the fees to the consumer, unless you can make a system so pervasive that merchants can afford to _not_ accept credit cards, I don't see how you can compete on the basis of low fees. You have to give at least 1% back to the consumer (more to get people to switch), and then you have only removed a tiny bit from the status quo. The people who subsidize the rewards cards, those who carry a balance, probably aren't interested in a system that doesn't offer credit.

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I agree with this 100%--debit cards and check cards are a bad deal for consumers, compared to credit cards, and I only use mine at an ATM I trust.

I want to make this comment just so people reading these posts aren't confused--charge cards, which I talk about in the above post, aren't the same as debit cards; charge cards are much closer to a credit card that you have to pay every month. These are a great option for people who want to avoid revolving credit and can afford the annual fee most of them charge (but they come with perks). Anyway the charge card demonstrates it's possible to do easy electronic payments, in a way safe for consumers, without tying them to credit.

Yeah, this was my thought too. Since everyone else who uses a credit card pay no fee, and I have to pay 25c to Dwolla, I'm actually subsidizing everyone else's credit card fees.

If the credit card fees were passed through to the customer it would work, but with the current "socialized" model there is no customer incentive.

Credit card fees are passed on to the customer. They are included in the price of everything you pay. The merchant is the one saving money with Dwolla, and hopefully passing on the savings to you.

Except that the CC companies forbid merchants from passing the extra costs on to CC users.

Yes, in the sense that they can't charge customers paying with a credit card a different price. However, because payment fees are an expense to their business, merchants absolutely pass on that cost to customers - it is reflected in the final price of whatever they are selling. In a sense, the non-credit paying customers subsidize those paying with a credit card.

Of course they/we do. But, the Nash equilibrium is at 100% credit card use: if I stop using credit cards at vendors, I lose out on the benefits (interest-free loan, chargeback ability, rewards, purchase tracking through Mint), in return for a savings of 1 - N/(N-1) * transaction fee = zero. I have an incentive to keep using charge cards.

But merchants are allowed to give customers a discount for paying "cash" (actual cash or debit as the debit fee can often be passed onto the customer).

The parent comment was actually talking about charge cards, not check cards. Those predate debit cards and credit cards. With those, you agree to pay your bill in full every month, so they are not tied to a line of revolving credit like a credit card, nor do they directly debit from a bank account like a debit card.

They are rare these days as they usually charge a significant annual fee. This is probably since there are no over-limit fees nor usurious interest rates (unlike a credit card).

Check cards issued by banks today, with the Visa and MasterCard logos, are fully equivalent to credit cards minus the line of credit. When used as credit (anywhere Visa/MC is accepted) they offer reward programs, fraudulent payments are refunded the same day, etc.

In 2002, my MasterCard check card was stolen and my bank account was cleaned out by the time I got down from my climb and discovered the theft. It took three weeks (including closing my original bank account and reopening with a different account number) before the money had been refunded. This was inconvenient considering that I had just started a year of exchange in Canada. Unless the rewards/benefits/insurance is _better_ than a credit card, it still doesn't seem like a wise choice.

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