If you're in the US this sounds like a normal card. If you're in a lot of other places you won't have heard of it because it's not available and it sounds amazing because it wouldn't make any money in more regulated countries.
Considering the impact on prices, cashback is basically reverse redistribution. It makes the situation worse for the poorest customers to give money to the banks and their richest customers.
And if you don't use a card, the business takes 2c from your left pocket and keeps it.
It's a great trick though, people really buy into the whole points/cashback thing and don't realise they're being paid with their own money
Nowadays though, many sellers are offering at least 3% or higher discounts for not using credit card. My mobile network provider, home ISP, daycare and kids activities, insurance, taxes, healthcare, tradespeople, and even Target offers a 5% discount if you do not use a credit card.
It’s basically only travel, restaurants, and non Target retail that earns credit card rewards. Although sign up bonuses make it worth paying the additional credit card fees sometimes.
Merchants rarely offer cash discounts in the US.
Even if the merchant pays the sticker price for card acceptance, it's usually just below 3%, unless international cards are involved. Add to that the fact that cash transactions in restaurants are often accounted for in "more tax efficient ways", and it feels even more icky.
The counterfactual isn't getting or not getting 2% cash back, it's the merchant paying or not paying ~3% in fees, a part of which you get back from your issuing bank as a kickback to keep participating in and advocating for this scheme.
Of course this would require regulatory action. Absent that, the status quo represents the stable equilibrium.
Admittedly that is overstating it a bit because not everyone uses a rewards card. In reality the 2% cashback is 1% your own money being given back to you and 1% money from people paying in cash being transferred to you (normally regressively as someone else pointed out).
If you get a discount for paying cash, then it really is just your own money
Next time you have an independent contractor do some work, after they give a price, ask them if they will accept 90% or even less if you pay cash.
My barber has a sign with a cash price, a Zelle/Venmo price, and a credit card price.
I'm not disputing they exist, just that it's exceedingly rare and not the norm.
> My barber has a sign with a cash price, a Zelle/Venmo price, and a credit card price.
I'm half joking and half serious, is he intentionally trying to confuse customers? Why do Zelle/Venmo have their own prices, and what price do I pay if I just want to pay with the debit card on my phone?
Think contractors. They also do it all the time. When I did a remodel a couple of years back, he asked for cash. It was a small amount so I did not think much until my accountant told me I will need receipts if I wanted them added to my house's capital /cost. I asked the contractor and he stalled me for weeks while also saying I will need to pay more for receipts, until one day I forgot chasing (and am thinking of it now) and just let it go I guess.
He is sharing some of the savings from tax evasion with the customer.
I do not know if he can accept electronic payments from a debit card on the phone. I presume Zelle/Venmo is simpler than figuring out a system to separate debit cards and credit cards.
>just that it's exceedingly rare
Discounts for non credit card payment methods (such as ACH/debit card/Zelle/Venmo/paper cash) seem more and more common to me. Bigger businesses likely won't engage in tax evasion allowing for bigger discounts for paper cash, but fewer and fewer of my expenses are worth paying with a credit card.
I've also seen it more common as a credit card surcharge (at the bottom of a menu) than a cash discount.
What annoys me is debit card fees are supposed to be capped in the U.S. But for unclear reasons many payment processors don't honor this, even large processors like PayPal and Square. Merchants tell me the debit card fee is same as a credit card.
My local government charges a 2.9% fee for use of credit or debit card as well.
> It's a great trick though, people really buy into the whole points/cashback thing and don't realise they're being paid with their own money
Even better, they become poorly-paid lobbyists for the entire scheme, since it successfully makes them feel like they're getting "luxury" items/services for free by "gaming the banks", when they're really just participating in a loyalty scheme exactly as designed.
Sure, it's possible to eke out a net cash profit here and there, but all in all, it's just a great counterexample to homo economicus.
They have a little more consumer protection but not a lot.
Here in Spain cards don't tend to provide any cashback, also they hurt your credit rating (in contrast with the US where they improve it and people end up shuffling cards). They're pretty unpopular here, most people just use debit cards. I prefer it too, if I don't need credit to buy something I don't want to use it. I currently don't have any loan or credit active which is the best situation in case I'd want to get a mortgage.
We do have some cards like revolut which provide some benefits but you have to pay a monthly sub. It's more promotional stuff like 'free' Uber one, perplexity, tinder etc. I don't find those terribly useful except for perplexity but they give that away free with a lot of things. Uber one in particular really sucks because it's way more expensive than local alternatives (cabify for rides, glovo for meals) even with the discount.
So, if you move to the US, getting a credit card, even if you never intend to carry a balance, is a wise idea.
- You cannot be held responsible for more than $50 of fraudulent charges
- You are not required to report a card missing within a short period of time to claim that charges are fraudulent
- Because your bank account is not directly linked to the credit card, fraudulent charges occur with the credit bank's money, not yours, so you do not have to fight to have them declared fraudulent before you can use money in your account
> Debit cards do not share these protections by law
No, debit cards are covered by Regulation E, which also caps liability for fraudulent transactions, requires your issuer to provide provisional credit until the dispute case has been resolved etc.
The only practical difference in terms of the minimum fraud protections afforded by law is that you're out your own money instead of the bank's until you get that provisional credit, which can be a problem if it causes other transactions (utility bills etc.) on your checking account to bounce.
Where the two really differ significantly is for non-fraud disputes (goods/services not as expected etc.): Reg Z has explicit protections there; Reg E doesn't really talk about these.
But practically, it also doesn't really, because...
> though many banks offer some of them).
No, both Visa and Mastercard require require issuers to extend zero liability protections going beyond these regulations, so it's effectively all banks. (Capital One might be able to relax their own rules now that they own Discover, but I highly doubt they'd risk the consumer backlash for questionable benefit, since they can also just make merchants pay for card-not-present lost/stolen/card credential theft fraud and cover card-present fraud like everybody else in the US.)
Point #3 doesn't really play here because the credit card is simply a loan in your name and you are liable for the full amount regardless. You could simply not pay the bill but then the insane interest builds up.
I will never move to the US though anyway. I won't even visit until the situation improves.
I was using the generic "you", not you specifically. Many people don't understand this about credit cards in the US. If an entire nation of people use something that nobody you know does, then either they are all idiots in a way that nobody you know is, or there is something that makes it uniquely valuable there. The consumer protection angle is the unique value proposition (and it covers quite a lot of things).
Don't forget this system already collapsed in a big way in 2007 and it had massive global ramifications.
https://www.usatoday.com/story/money/2024/10/09/fraud-protec...