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1. For the consumer, paying off the balance due at the last minute gives you an interest-free loan on your spending for an average of 6 weeks. Let's say you spend $1000 per month. At 5% interest, that saves you about $30 a month.

2. It gives you an itemized list of what you spent.

It reminds me of an article long ago that explained how Amazon could make money selling items at cost. a) they get paid by the customer right away b) they don't pay the vendors for 90 days. Thus, Amazon gets paid interest for 90 days on the volume of business they do, which is very large.

Not many people seem to understand the time value of money, certainly it isn't taught in school. It's not just about mortgage interest rates. It's everything that involves money.

> 1. For the consumer, paying off the balance due at the last minute gives you an interest-free loan on your spending for an average of 6 weeks. Let's say you spend $1000 per month. At 5% interest, that saves you about $30 a month.

Saves you versus... taking a 5% loan for the 6 weeks? You need to actually invest the money versus paying the credit card to earn interest. The average consumer is not walking around picking up pennies in front of a steamroller trying to get $30/month with clever interest rate arbitrage.

> Not many people seem to understand the time value of money, certainly it isn't taught in school

Realistically a person will take out loans for like 4-5 transactions in their life where this actually matters. House, car, student loans, maybe a small business. If you look at personal finance advice they usually use the "snowball method" of simply paying down the highest-interest debt first and reducing expenses.

> taking a 5% loan for the 6 weeks? You need to actually invest the money versus paying the credit card to earn interest.

And I do. I don't have any actual money. It's all invested. I look for ways to borrow money at a lower rate and invest it at a higher rate.

> Realistically a person will take out loans for like 4-5 transactions in their life where this actually matters.

Every time you buy something with a credit card, you take out a 0% loan for 6 weeks.

If you pay attention to what a bank does, if the bank hands you a check for borrowed money, they start charging you interest immediately. If you pay off the loan by handing them a check, they charge you interest until the check clears. I.e. the bank works the float both ways.

The pennies add up.

If you're not aware of this for a large transaction, the other party surely is and is taking advantage of you.

A few years ago, it was commonplace for late night TV to run seminars that I call "Make Money By Real Estate Scamming". I decided to watch one and see how it went. The presenter presented a series of transactions that ended up netting the buyer $15,000. It was complicated, so I set about figuring just how the $15,000 from nothing came about. It turns out it hinged on giving the sucker a bond that paid $X upon maturity in lieu of paying $X today. The $15,000 was the interest on the time to maturity. The complications were all about hiding this.

For example, I'll get flyers in the mail offering mortgages for an absurdly low teaser interest rate for the first year, and after the first year the interest rate goes above market. I carefully read the contract. If there's no prepayment penalty, I'll get the loan. A year later, I refinance and pay off the first mortgager.

I asked my loan officer "why do they do these contracts?" He laughed and replied they were playing the odds - the vast majority of people are too lazy to refinance, or didn't read the contract.

Once I bought a new car, and they offered 0% financing after we agreed on a price. I asked, why would they offer 0% financing? The dealer said the terms of the contract were if you are late on a payment, you get hammered with interest. I said sure, I'll take the loan, and set up an automatic payment plan.

This is all basic stuff. The credit card thing is mostly just for practice.

> You need to actually invest the money versus paying the credit card to earn interest. The average consumer is not walking around picking up pennies in front of a steamroller trying to get $30/month with clever interest rate arbitrage.

They should be. Interest bearing checking is out there. No real danger there. It's not glamorous, but depending on how much interest you're getting, paying with tommorow's dollars for today's purchases gets you about 0.4% off (based on bad math of apy is 3.25% * 45 days / 365 days in a year; I know this isn't the right way to use an APY, but you can also find better interest checking than my credit union)

Cash isn't necessarily cheaper for merchants. They have to deal with depositing it, there's a risk of theft during transport, employees are more likely to steal it, there are losses from counterfeit money, and it might take longer to process the transaction.

Cash is not the bonus you think it is. Few have calculated the risk of robbery, (both employee and otherwise) counterfeit money, miscounting, and all the time spent counting and recounting cash. Having been mananger of a fast food in a previous life just my time to count cash was 1% of gross income and the other clerks similar - divided over each customer.

Related to charge backs, it's a security wall between theft and your actual cash. FCBA covers credit cards but not debit cards. While many banks will work to resolve fraud, your cash will still be locked up during that time.

Debit card interchange fees are limited to 21 cents per swipe and 0.05% of the transaction.

https://www.federalreserve.gov/paymentsystems/regii-about.ht...

> 1. Purchase protection (insurance) 2. Chargeback protection

These are available on debit cards as well. (Both by law, i.e. Regulation E, and both Visa and Mastercard requiring issuers to provide zero liability policies to consumers.)

> 3. Rewards either points or “cash back”

Which consumers more than pay for themselves – all consumers, including those paying cash.

> These are available on debit cards as well.

The UX for chargeback protection is not quite the same, though.

Say someone commits fraud and charges $1000 to my credit card. All that happens is 1. Some time later, I see the charge on my list of other charges, and 2. My bill is $1000 higher this month, which I dispute. Some time later, the CC company confirms it's fraud and the $1000 (and the interest) disappears from my bill.

Say someone commits fraud and charges $1000 to my debit card attached to my checking account. Between the time the fraud happens and the time the bank confirms its fraud (or otherwise restores the funds per their fraud-reporting policy), my bank account balance is now $1000 lower. Maybe some checks start bouncing. Maybe I needed that $1000 for an upcoming purchase, and it's not available for a short period of time. Yes, the numbers will all eventually be correct, but it's mayhem in the mean time.

I also hate having to carry a brief case of money around. Seriously though while the purchase protection is nice, so is the ability to cancel a lost or stolen card. And if course the cats is slightly smaller than one million dollar bills

But of course we didn't. We used checks.