The EU has capped debit interchange at .2% and credit at .3%, Australia in the low 1s if I recall correctly. They just don’t really have rewards.
We don't have them in Europe, and some people in the USA think they have them.
What they have is crazy high credit card fees and the need to juggle a bunch around to get a few things credit card companies decided to buy for you en masse.
When I buy a $5 latte, I give Visa $0.01. When you do the same, you pay $0.15.
Come the hell on. "REWARDS". Smh.
My regular Chase card gives me 1.5% of everything I spend back as cash. That's typically about $1k/year.
I pay nothing in (direct) card fees at all.
Just on credit cards we get:
- 7-10% back on flights (Amex Platinum and transferring points to airlines)
- 10%-14% back on hotels (Amex Hilton Aspire)
- 5% - 8% back on dining and groceries. (Amex Gold)
- 4 - 8% back on Uber (Amex Green)
- 2-4% back on everything else (any of the above cards).
This doesn’t count hotel and airline loyalty points.
Yes, I’m taking into account annual fees. But all of the cards above have enough perks that they more than make up for annual fees - Uber credits, Clear credits, credits for hotels and airfares etc.
I’ve estimated that’s about 6.5% back a year on our budget. That’s more than we were paying in state taxes before we changed our official residence to a tax free state.
I also work in consulting, while I only travel 5-6x per year for work, many of my coworkers spend 40 weeks a year traveling a rack up credit card rewards by putting expenses on their personal cards and getting reimbursed. But they keep the rewards.
There is also an entire culture of “churning” credit cards for their sign up bonuses.
But I agree, for most people it isn’t worth it.
[1] we do have investment property that we have to pay the mortgage and a few bills on.
> This doesn’t count hotel and airline loyalty points.
Can you show your calculation for this? Hilton pesos get devalued on a daily basis in my experience, and they even nerfed their free weekend night with the Aspire credit card so that it is only useful for “standard” reward nights and not “premium” reward nights. Of course, all the nice hotels like Waldorfs and Curio will require premium reward nights.
I have never seen Hilton points worth more than $0.005 per point.
But I’ve literally been looking at points vs money in every major city in the US and a few in Canada as I’ve been creating our itinerary.
With Hilton, when you pay with all points, you don’t pay taxes and fees and if you stay five nights and use your points, you get the 5th night free.
We stay exclusively at Embassy Suites, Homewood Suites and as a last resort Home2Suites so we can have two separate rooms (Embassy and Homewood) or at least have more space and a full refrigerator (Home2Suites). I work remotely and need the separate room to work.
You can’t really stay at a Waldorf or Curio when you are staying at hotels 280 days a year. During the winter we stay at our 2nd home/investment property.
Next year, we will be staying at the following places with all points for 7 days and getting values between .7 cents and 1 cent each: Los Angeles, San Diego, Santa Fe, NYC, Chicago and San Juan. This is just staying in mid range Embassy Suites. San Juan is at the Caribe for 10 days.
We won’t make it to the following cities until 2024. But I’ve seen good values in New Orleans, DC and Hawaii.
I was just referencing credit card rewards above. But you get 10x per dollar at Hilton, 10x for being a Diamond member (automatic with the Aspire card) and 14x with the Aspire.
The calculation was based on .007 * 14.
There are a bunch of free 2% cash back credit cards, so people would at least break even if they wanted to.
This is correct. But it's a far cry from "nobody really has rewards." Framed a bit differently, our credit card system is a regressive tax on consumption.
I am going to have those same investments anyway in VOO at one brokerage or another, so there is no opportunity cost.
You are correct that it is sort of a wealth transfer from poorer to richer. But merchants are free to offer discounts for non credit card purchases, and they do many times.
Which credit card do you have? I'd like to ugprade to that one.
Interchange benefits merchants too - there's real costs associated with holding cash, and average cart sizes are significantly bigger for credit cards. They also miss out on fewer sales.
You may not value rewards programs but customers, card issuers and certainly those who operate those programs do. They're massive business. Frequently the only profitable part of a US domestic airline is its frequent flyer program - which gets the bulk of its money from credit card reward programs.
Credit card companies have even provided debtor in possession financing for airlines in the US by pre-purchasing multi-billion dollar blocks of frequent flyer miles. Here's when Amex did it for Delta in 2011. [1]
[1] https://www.eastvalleytribune.com/money/american-express-rea...
The cynic in me wonders how long before they devalue them. It's easier to start changing the rules for "points redemption" when they aren't saying outright "You have $112.75 in cashback value" on the statement.
They recently had a promotion-- use the points directly to buy on Amazon, but if you paid that way, it was debased-- something like 120 to the dollar. It was actually better for me to buy what I wanted on credit, redeem the points as a bank transfer, and settle the bill at the end of the month.
Wells Fargo Active Cash is the other such card that I know of among big banks.
Chase - United
Citibank - American Airlines
AMEX - Delta
You're wrong, the rewards (cash back) is real.
At some philosophical level you're correct. Sure, the merchant is being charged extra fees and the cash back is less than that.
But pragmatically, the merchant already included that cost in the price of the item so it is what it is.
You buy that $5 latte cash, it costs you $5. You buy it with a debit card it costs you $5.
I buy it with a credit card it costs me $5 but I get 10 cents back at the end of the month.
Its annual fee is a seemingly ridiculously-high $550.
However, it automatically offers reimbursement for the first $300 in "travel". The definition of travel is very broad - we're not just talking airplane tickets, this can be taxis, parking lots, trains, buses, highway tolls, hotels, and many other things. And I do mean automatic - I don't even need to log in and select which charges, it just happens.
As such, the annual fee is really $250.
Still too high? Let's say you ignore other specialized perks (reimbursement for TSA Precheck/Global Entry, premium memberships such as Doordash (through 2024) and Lyft (in the past, expired now). Let's ignore real perks such as PRIMARY rental car coverage that means you can decline the pricey loss/damage waiver when renting vehicles and Chase takes care of any claims before your insurance - there have been years when I made most of that $250 back from that single perk alone. Let's just look at cash back.
At an absolute minimum, you're getting 1% back on everything. 1% means 1 Ultimate Reward point, or UR. At an absolute minimum, you can redeem 100UR for $1.00 in straight up cash/statement credit. The actual value is higher (we'll get to that later) but we'll start with this baseline.
You get 3% when dining or travelling (with the same broad definition of "travel" above that probably covers some of your commute to work if you take transit, pay to park, or pay tolls). If you pay attention and use Chase's portals for various travel purchases you can earn 5-10% back (to be honest I'm lazy and almost never bother).
So we're already at the point where depending on your lifestyle, if you put 15-20K on credit cards each year (that's less than $2000 per month) you're probably breaking even - assuming the absolute lowest valuation of points. But why do that? It's trivial to redeem the points at 1.5x for travel by booking through Chase - that is, if you use their portal you can book a $150 hotel room for 10000 UR points. So now we're at 1.5% on everything or 4.5% on travel, and needing to spend only more like $12000-16000 per year to come out even. During the pandemic they made it even easier and let you get reimbursed for various purchases such as restaraunts at that same rate, so even when I wasn't travelling I was getting that full benefit.
If you want to minmax and are flexible on your destination/time, you can transfer UR to various airline/hotel portals and get higher values: https://thepointsguy.com/guide/sweet-spots-chase-ultimate-re...
Did I mention that when you sign up, if you spend enough in the first few months you get a bonus of enough UR to more than make up for the first year or two of fees?
I've had a CSR for quite a few years now (back when I signed up the bonus was 100000UR) and have redeemed the points I've earned each year for more than the annual fee. That is, every year I've had this card I've profited to the tune of hundreds of dollars.
In response to other complaints about spending requirements, the Chase Freedom line earns UR points (without the 3X dining multiplier or the ability to redeem at 1.5X on travel) with no annual fee and no deposit requirement.
We do have a non-Visa/MC payment system here in 'eftpos', which is ubiquitous. AFAIK this is exclusively debit not credit, but this isn't my area, I'm just a consumer.
I don't know when I last used EFTPOS.
There's a terminal, I wave my [phone|watch|card] at it, it beeps, I walk away. Happy days.
In that case if it's a Visa card, is Visa the processing entity?
So, if you have a Visa credit card, and the money comes from your credit account, like many, then it is clearly using Visa Paywave.
But historically, it was Visa and Mastercard that started it with "no pin required" as an opt-out thing(IE it was enabled for you by default), and their main market is credit. Most people just rolled with it.
Using the phone NFC however should give you more control I would think. But I honestly have never set it up.
[1] https://www.bankrate.com/finance/credit-cards/why-american-e...
They do of course make money by charging a high annual fee, but another commenter already explained how the rewards offered by this card can still give more in value than the annual fee costs. This is absolutely true in my case.