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Comment by jjav | Hacker News Reader

> The merchant just raises prices so you can pretend like your points are saving you money.

No, you are saving money, because while the merchant raises the price to account for it, everyone gets the higher price regardless how you pay. At least with a card you can get some of it back.

(With rare exceptions, some vendors do give a cash discount. In which case I always pay cash.)

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So, in other words, fraud insurance is a socialized cost paid by all consumers.

Where's the incentive to minimize fraud though...

The networks have a massive incentive to minimize fraud. That's not to say that they are wildly successful or anything, but I do know from first hand professional experience that card networks spend a lot of time, money, and research into detecting and preventing fraud.

- Payment networks drop accounts with a too-high fraud rate.

- They and similar businesses (e.g. Stripe) offer automated tools to deal with fraud… for a price.

Outcome: the incentive to minimize fraud, which is often a result of crap security from the payment network, is on merchants, who also get charged extra protection money to get payment networks to do stuff they ought to be doing in the first place.

Ultimately, that incentive is the legal system, which can legislate against allowing fraud and forcefully impose penalties for it. (And operating it is a socialized cost, such that your first sentence is still correct.)

Yes, because the merchants raise prices because people pay with credit cards (which take fees), you take back a little (though of course not all) of extra markup via points, assuming you use a 2% cashback card (at least) on your purchase (which assuredly many people don't).

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