That’s why you don’t see the same kinds of credit card deals in the EU compared to the US.
The EU limits for card fees prevent this in Europe, which is very good.
Do you mean a higher corporate tax paid by companies like VISA and Mastercard?
Either way, the solution is already on the horizon: Digital Euro.
Pix, UPI, and a few more
It tries to argue that higher reward rates are necessary to attrach customers that pay a lot (for credit card companies) and that lower income people are generally subsidized by taxes (obvious but unrelated), but at no point (until where I read) it seems to address the issue of merchants having to generally increase prices due to these cards.
Pretty flimsy argument to begin with. Because the rich then argue to lower their taxes and/or simply not pay them and the whole system falls apart. Not to mention that lower income people paying more to keep afloat debt than taxes (which at worst is a much better interest deal for an installment plan) is a much worse model for society.
What that article explains, is that the system of credit card fees and rewards that is used in USA is extraordinarily complicated, variable and obfuscated in comparison with other countries, so it is extremely difficult to discover who gains most and who loses most.
So the conclusion is more like "there is insufficient evidence because we cannot access all the required financial information" for the claims of the other article and the refutation itself presents no evidence that the claims of wealth redistribution are incorrect.
Similarly, the "whales" in a casino get lots of "free" benefits, but only because they're losing a lot of money gambling. They paid for them.
Contrast with frequent-flier miles where businesses pay for plane tickets but the points go to individuals. That's pretty clearly siphoning off business expenses.
one cash, one credit?
the credit payer is clearly paying less, with the difference paid by increased prices overall. That is the cash purchaser paying the credit one
Similarly, we do not say that October shoppers transfer wealth to Black Friday shoppers, even though the only tangible difference from your scenario is an irrelevant temporal one.
You are spending money, but you are spending far less money than the poor spend when paying for exactly the same products or services.
If I want to buy a few server CPUs or a few server computers or a few "datacenter" GPUs, I have to pay at least 2 or 3 times more than billionaires pay for them.
The same if I want to buy any other kinds of components that can be used to build things, e.g. power MOSFET transistors.
There is no "economy of scale" here, because those products are already fabricated in the high volumes that reduce their production costs.
For shipping, the costs are typically the same, regardless if the recipient is a big company or a small company or an individual, so they do not justify the price differences.
Even when the handling and shipping costs were bigger for small quantities, a small business or an individual could just pay the difference in handling and shipping prices, but that does not happen in reality, when the discounts given to the rich are many times higher than the shipping costs.
This policy of huge discounts is one of the main causes why all the markets end up in being dominated by monopolies or quasi-monopolies, because it is impossible for new entrants to compete with the incumbents, who pay much less than them for everything. Thus the biggest companies end up selling mostly between themselves, excluding any others.
Huge numbers reduce manufacturing costs, but only because they justify investments that are uneconomical at lower volumes. The business would still go bankrupt if they don't read breakeven.
Economies of scale are a real thing and not just because of monopolies wanting to deny new incumbents.
Are you saying it is intentional? Is it not more simply explained as simple greed by two companies colluding to keep competitors out of their market?
Personally I "like" or prefer V-pay because it made payment in the EU more easily for me without the need of a credit card even 8 years ago. Since the pandemic, I only pay for a (real) credit card (with daily billing) because some goods or services can only be paid with a "real" card, like more expensive cars at a car renting company or sometimes hotel rooms and the like.
In general I try to pay with cash so nobody needs to pay extra fees. But more and more smaller businesses prefer electronic payments. Then I use the banking card with V-pay and to state it again, the real visa card is only used when no other options are available.
Processing cash is by far >not free<! In fact, it costs a lot of money due to all the things involved (counting/collection/recycling etc). Anf it inwolves additional risks for the handling party.
Or is it more binary that you have to decide, you either handle any cash and have the cost associated with it, or you refuse to take cash at all? If the latter is the case, then avoiding cash altogether seems somewhat unrealistic where I am from. And if it doesn't scale then it makes a lot of sense cost-wise to try to do as many of your transactions with cash as possible.
Think about all the supermarket chains, handling millions of cash daily; in my region, those are relying heavily on outsourced cash recycling companies - why? Its more effort/cost if they would do this themself.
Yes, it sounds weird but it does
- Providing change is a pain and it's a "fixed time" cost
- Moving money around (also some banks charge for money deposits for commercial accounts)
- Dealing with "shrinkage" in various ways (even if you have insurance)
Yes handling cash is not free. But compared to some charges or fees it's often quiet cheap.
Sure you need to think a head like how much small change money you will need or how much cash for change in general. You also need kind of routine and flow for counting and handling but even if I had to count up to 10k EUR in small bills t does not needed more then half an hour incl putting it into the safe or on the way home putting it into the banking machine... At least in Germany it's not that big of a deal breaker.
I know of a large restaurant chain with some "bigger" branches: They often have to count two or three times with different people to be sure, that the amount is correct. Every evening.
Then you have transport companies which pick up the cach (or refill ATM) - you pay there for every time they stop, and you pay a tiny fraction per bill processed etc. (though, most restaurants do not use these services)
Then you finally have the very high risk of getting robbed.
I know: It is just hell! There is a gas station near my location, which closes the door from 23.45 to 24.00 for just doing this and handing over to the group.
After school I've worked at a gas station as well and we did not need to close because the shift swap was the same as over the day.
You exert your cashier(?) and the next one inserts the new. And you count in the office and take the time you need.
Half an hour incl. Some other minor takes was part of the shift. Simple as that.
In 2009 Sweden had 58 armored car robberies, in 2018 there were 1. This used to be a big concern in Sweden, now it's basically a nonissue.
There were 1154 store robberies in 2009, in 2018 there were 515. Muggings are also down considerably. 2022 was the first year with zero bank robberies. This is mostly thanks to the much lower use of cash.
https://www.riksbank.se/sv/betalningar--kontanter/sa-betalar...
https://bra.se/download/18.54e1fb8a19c479963d63601e/17731372...
2.5% for credit and 25c fixed for debit is the usual ballpark.
That being said, I do get that for US individuals it is completely rational to use cc's. I would do that too. If you are paying 3% Visa/MC tax anyway, then you might as well use their perks.
In the US, a charge on your bank card results in at least a hold on your bank account - money you can't spend on anything else until the hold is lifted. Worst-case, there can be significant fees associated with this (overdraft, declined payments, etc.).
For most of us, that's a much bigger problem than a debt we may or may not end up paying interest on.
From personal experience, getting a credit card company to quickly resolve fraud cases is also much easier than getting a bank to do the same, even when it's ultimately the same institution.
Now, if you DO manage to that threshold... you still want to delay finances. Because installments now become ways to give your money more time to make money and offset whatever you are paying for. The models and incentives are completely at odds.
I’s bet the proportion is way higher than 5% even if the overwhelming majority use their credit cards the same was as debit.
Other than that, I've rented cars, rented other things with a "X will be charged to your card if you return it late", unattended gas stations... all the usual places you'd think need a credit card. It's fine.
We do have a "negative limit" that banks often give you, which means you can go into the red and pay it back later, but that has nothing to do with the card, it works even for normal bank transactions.
I too have a real credit card to be able to rent for instance "bigger" cars like even an Audi A6.
Most often hotels also block 500 Eur, or they state upfront that you need a proper/real credit card and not just a debit card.
That's for me the only reason I have VISA and use it like 3 or 4 times a year...
Usually, there is a deposit pre-authorized on the card. The additional insurance plans would lower the deposit (to a few hundred for fuel basically). I usually take the insurance plans anyway because I've had bad experiences that made me happy I had it.
Now, I was in a place where rental companies required credit cards except for the lower end models. It took me a few attempts for one to realize that I would take the additional insurance anyway.
That said as a French person with a ssn living in Asia, I don't have a french credit card because it's so expensive and foreign conversion fees are very high, whereas I use a us card because the currency conversion rate is very close to the market rate and it costs a lot less to maintain the account.
In the countries I've been to in the EU (Belgium, France, Spain, Luxembourg), when they give you cards they give you typically both a debit and a credit card. It's extremely common to have both. I've got debit cards, a pre-paid debit card (which I top up when I plan to spend) and credit cards.
And getting up to 2% cashback in the EU (even if the fees vendors can add in the EU are maximum 0.3) is not that hard.
It's very common to pay for mostly everything with a debit card and then use a credit card to, say, book a plane or vacations or to open a tab when you check-in at some hotel.
Heck, I don't even know if you can book a plane with a debit card!? (and anyway then you probably don't get the cancellation insurance etc. that you typically automatically get with a credit card).
For safety reasons I never use a debit card for anything but an ATM.
The big difference is that with a debit card, it's your money that is hit by fraud. The debit card is basically just a proxy. You have to go file a police report. You have to hope the bank will give you the money back.
When the credit card gets hit, it's the credit card company's money and they will seemingly chase the fraud to the ends of the earth to recover it.
They try to squirm out of that of course. But in general getting your money back isn’t too tricky even with a debit card.
You don’t even pay for the fraudulent credit card transactions in the first place! There’s no money for them to return!
I kind of disagree. I think what's happened is the bank would prefer you to believe that. Imagine I kept my money at the bank, and deposited $10000 with the teller. Immediately afterward a robber follows in and steals that $10000 from the teller. Does the bank say "oh no Mr. TheChao! A robber stole your $10000!". I mean, no? The bank got robbed. Just because the bank's digital security is more tied one-to-one to dollars and its easier for a robber to steal from "my till" doesn't mean it was me who was robbed. It's the bank's job to stop that.
But in the case of debit card, the card ties the money to your account. It is actually that.
It's as if someone would steal from a personal safe at the bank.
> will
Which is why the credit card is still the better option. Especially given that the max liability on a credit card is always $50 if caught within the first 60 days, while the max liability on a debit card is $50 only if caught within the first two days, then up to $500 if reported after up to 60 days.
They may post a provisional credit when I report the fraud on the debit card or they can wait up to 10 days to do so. With a credit card, no money has left my account and I get the final say on whether I want to part ways with my real money. If the bank really wants to fuck me over by saying it's not fraud, I get to make it as unprofitable as possible for them, which includes forcing them to sue me if they really want the money.
I will take the ding to my credit report and a lawsuit over actual money taken directly out of my account any day.
Within two days of learning of the fraudulent use or the loss of an "access device" (i.e. a card). Otherwise you have 60 days from the statement date as well.
> I will take the ding to my credit report and a lawsuit over actual money taken directly out of my account any day.
That's definitely true for many people, but probably not for many others, e.g. anyone wanting to buy a house or even rent an apartment.
> Bank official: Sit down Mr. Coleman, I'm, I'm afraid I've got bad news about your account.
> Mr. Coleman: Really?
> Bank official: I'm very sorry to say that someone's stolen your identity.
> Mr. Coleman: Oh God! Do you know who it was?
> Bank official: Well -- they said they were you, but uh--
> Mr. Coleman: Of course. So, um, what happened?
> Bank official: Well it was on the bank website, someone logged in, and committed identity theft electronically.
> Mr. Coleman: I see. Did they take anything else?
> Bank official: Uh, no.
> Mr. Coleman: Oh good, so all the money's still there...
> Bank official: What?
> Mr. Coleman: Well: it's just my identity that's gone -- none of your money?
> Bank official: Well no, they did -- they, they, emptied your account. It's identity theft, they took all the money.
> Mr. Coleman: That sounds more like a bank robbery.
[continued] -- see https://www.youtube.com/watch?v=CS9ptA3Ya9E for the full skit.
Just as a handy thing to chuckle over and then link others to, if the topic comes up again.
When someone steals your debit card number and uses it, it's your money that is debited from your account, not the banks, and debit card transactions have much different rules than credit card transactions where you're generally not held responsible at all for fraudulent transactions)
But with debit card transactions, you can be responsible for up to $50 of fraudulent transactions reported within 2 days, and $500 for those reported within 60 days. And the bank is not required to return the money while they investigate the fraud.
Though many banks waive those liabilities and treat debit card disputes the same as credit card disputes (but still may not return your money while they investigate, so you could be bouncing checks when someone makes a $1000 fraudulent transaction if you can't float the $1000 yourself while they investigate)
I refused to allow the bank to issue me a debit/ATM card against my primary checking account, fortunately they are one of the few banks that still offer a dedicated ATM card so even if I lose the card, it's useless without the PIN.
Practically, Reg E is essentially as strong as Reg Z.
Not even practically, but that's beside the point. The point is that with regulation E, I am potentially put in a position where I have to work to get my money back; I have to file a lawsuit against the bank if I think their determination is wrong (and that's assuming there isn't an arbitration provision, but many people don't realize they agreed to binding arbitration).
With regulation Z, the bank has to work to get their money back. They have to file the lawsuit against me if they really want the money. And it's $0 liability under many circumstances mandated through the regulation, not just a revocable promise from the bank.
Yes, but you potentially have to work to get your credit back.
> And it's $0 liability under many circumstances mandated through the regulation, not just a revocable promise from the bank.
Debit card liability is also largely mandated to be $0 under card scheme rules.
it is that different treatment of debit/cc fraud that pushes people towards high fee cc.
it is cc fraud protection that justifies high cc processing fees.
without cc fraud there is no need in visa/mc duopoly.
Sane ways to organize payments:
- Merchant gives you a bill-id. You input it into your bank website - where you see the bill amount being charged. You accept, and bank pays merchant.
- You give merchant your card number (that's the only information - no expiry, no ccv, no name). A notification pops up on your bank website asking if you want to pay what the merchant is requesting. You accept.
- You go to your bank website and obtain a random number, either allowing a single transaction or a recurring transaction. You give the merchant the number. After merchant charges it, no other merchant can charge the same number.
That's basically how Blik works in Poland. With the exception being that the number is random 6 digits randomly generated when you open the app, that is active for ~2 minutes. So you don't deal with the issue of very long and error prone numbers to copy.
Much better way to pay online.
It’s entirely the US credit card industry and its regulating bodies’ fault that it has made neither mandatory in the way that e.g. the EU did, and is in fact fighting any attempt to do so tooth and nail (please think of the conversion rate!!)
I haven't seen checks being used to pay for groceries in either the US or EU in the past few years, in any case.
With checks, you write a check and can write down the check number with a note about what the payment was for. When the payment posts, the check number is part of the transaction. With a card payment, they charge your card and, sometimes days later, there's a pre-authorization with some obscure transaction description. So many scary transaction descriptions that make me think "wait is this fraud".
With this method, the approval flow would also allow people to add a blurb for what the transaction is for.
Stripe don't do handle their own payment, they just wrap someone else's API, and pay them in percentages and dollars per API calls(idk about the ones behind Stripe, but I think I saw somewhere that those middlemen often charge both? Egregious, but they're literally old boys money men and they have lots of leverages against you).
What are truly different to credit/debit card systems are things like PayPal, Apple/Google and such gift cards with scratch areas, and Chinese QR payment apps. Those are the ones that don't (always) go through the CC ecosystem.
Stripe is a credit and debit card processor (and also a card issuer). They are NOT a bank, but do control some BINs (notably 4242 which is used for the famous test card 4242x4)
It had chip and pin ahead of credit cards, and has lower fees. That's what powers our e-transfers, no need for venmo or other systems.
But even so, I still prefer the credit card instrument, used as a "charge card". For those that don't know, a "charge card" is common with businesses and is expected to be paid off every month. But it helps with managing your cashflow - e.g. you can keep your money in a savings account all month and make one transaction at the end - and it keeps your actual money from being at risk of fraud.
Most Europeans seem confused with how Americans use credit cards for everything, but about half of us use them as charge cards, paying them off every month.
That is a benefit, so I can see paying a small percentage for it, but I don't think that benefit alone justifies the 3-5% of a transaction that credit cards charge now.
(Also: installments. They are often the norm in my country, but I understand they are less common for Americans).
I have credit card only to be able to rent car on vacation. It is not used outside of that. For other payments I use debit card.
Under subparagraph f)A seller or lessor shall not impose a surcharge if a customer elects to pay for goods or services by Check, cash, debit card, processing as a debit payment, or gift card.
eCheck is considered a check.
Debit cards issued by smaller community banks or credit unions are exempt from the cap and carry higher interchange rates (often 1.0%–1.65% + $0.10).
All merchants should either do Surcharging or Cash Discount.
There’s a whole industry of mid-sized banks just below that which are offering their services as sponsor banks to fintechs that want to earn the orders of magnitudes higher interchange rates while still getting debit acceptance/less surcharges and being allowed to offer a debit product.
https://support.toasttab.com/en/article/Are-customers-charge...
https://support.toasttab.com/en/article/Toast-Surcharge-Over...
Any other questions?
https://www.congress.gov/crs-product/R41913
https://www.ftc.gov/business-guidance/resources/new-rules-el...
American sellers have had the option to collect however much extra they want from people paying with credit cards, and many do. The government, utilities, mobile network providers, insurance, schools, healthcare, gas stations, home contractors, etc all usually collect at least 2% to 3% more if a buyer wants to pay with a credit card.
I am down to only using my credit cards for retail purchases, restaurants, and travel. Otherwise, the extra cost of paying with credit cards don't make sense and I pay with debit card or electronic money transfer (ACH/Zelle).
Basically, the sellers that continue to collect the same price from credit card users and non credit card users are those who believe that incentivizing credit card usage will result in sufficient people paying sufficiently higher prices such that it offsets the processing costs of the credit card transaction (and the chargeback risk).