It drives me crazy that people think credit card points are “free” benefits. You’re just getting your own money back! If you get 2% cash back or whatever, it’s obviously only possible because they’re charging merchants more than 2%, raising prices for everyone. It’s basically a hidden tax on everyone.
What’s worse is that it’s a regressive tax. The better credit cards with more benefits are available to the rich, not the poor. But the elevated prices are paid by everyone.
Credit cards have always charged retailers though, even before rewards were a thing. Rates vary, generally 3% or 4%, but some cards like American Express, can be a lot higher (which is why a lot of places don't take AmEx).
I’m not sure what you’re arguing with your comment. Of course there’s a charge — the payment processing itself is a service that costs money — but are you implying that therefore credit card points really are a net benefit to consumers? With vague comments like yours, I will respond and people sometimes reply “I never said that”, but, then, what are you saying?
The “rewards” are costs passed down to the merchants over and above the cost of merely processing the electronic transaction. With the state of technology now, payment processing itself should cost fractions of a penny per transaction. Besides fraud protection, everything else is mostly skimming off of the top. This is why these sleazy companies are some of the most profitable on Wall Street.
No, what I'm saying is the article argues that rewards points are a function of credit card fees, when in fact credit card fees pre-date rewards programs.
Yes, some credit card fees are independent of funding the rewards programs, and some of those fees existed before widespread use of rewards programs. But so what? Today, some significant portion of those credit card fees definitely exist because of the rewards programs.
Societally, it is bad.
But since people lose their god damned minds over seeing the credit card fees, everyone pays them regardless of payment method.
So you really are getting a discount if you take advantage.
You’re not getting a discount, you’re just getting less screwed.
Word it however you like. It is still free money considering the state of the world
OK, I think we mostly agree. The wording is still important because there are, sadly, a lot of people who defend the practices of these credit card companies, fooled into thinking they're getting a "deal".
If I pay my credit card off every single month, then I pay no interest and I get 'rewards' that works out to money back. Sure, retailers pay 1-2% in fees (assuming they're a large retailer, and not a Square customer), and the people that don't pay their card off get hit with 18% APR interest. But I get a check for a few hundred each year. Plus 'discounts' at certain merchants, or for specific goods and services.
My rewards are paid for in overall higher prices across the board, and by people that don't have the financial luxury to pay off their credit card every month. The system rewards me for being lucky--although it claims that it's 'hard work' and 'smart financial choices'--and punishes other people. Not using the system as it exists doesn't end up changing the system, because individually I have no leverage. So the best I can do it try to convince my legislators to change the legal structure, which can have unintended consequences.
IMO, credit/debit card payment systems should be handled by the US Treasury, so that there's no profit involved at all.
IMO, credit/debit card payment systems should be handled by the US Treasury, so that there’s no profit involved at all.
Now that would be a nice change. Companies get a deal: Get regulated and play fair, or the government takes it over and you get nothing.
But it if there is no escaping the ubiquitous credit card industry, shouldn't I take advantage of the points so I'm not paying the 2 percent with no benefit to myself?
Don't get me wrong, I heavily use and pay off my credit cards fully to get points. But that's precisely the problem. They've set up a "tragedy of the commons" where they extract economic rent: Individually, we are incentivized to use the cards, even though, collectively, it costs us all more for no benefit to the economy or society. (I am talking specifically about the rewards program portion. The transaction processing is useful, but should not cost that much.)
Imagine if this was a functioning market: using your high rewards credit card would cost more at the till. Say using a 2% cash back card means your purchase costs 2.1% more than baseline. Would you do that? Of course not. But because of corrupt pro-Wall Street laws, it's actually illegal to charge different amounts to customers for different cards.
I hear you. But I think it's one of those things where it needs to be a regulatory or legislation change. If this is all permissible, I don't think there is really a moral choice for the consumer to make in choosing to use a rewards generating credit card or other electronic payment option. I think the consumer in this scenario is only making the rational choice to maximize individual ends if these are the rules of the system, because regardless of what they do they are paying for it.
Agreed. I thought it would be evident by the fact that I admitted to using these programs myself that I’m not blaming consumers for using them.
That said, we do need to call out people who defend the credit card reward system, even if they do so out of ignorance. Otherwise, regulatory change is impossible.
It drives me crazy that people think credit card points are “free” benefits. You’re just getting your own money back! If you get 2% cash back or whatever, it’s obviously only possible because they’re charging merchants more than 2%, raising prices for everyone. It’s basically a hidden tax on everyone.
What’s worse is that it’s a regressive tax. The better credit cards with more benefits are available to the rich, not the poor. But the elevated prices are paid by everyone.
Credit cards have always charged retailers though, even before rewards were a thing. Rates vary, generally 3% or 4%, but some cards like American Express, can be a lot higher (which is why a lot of places don't take AmEx).
I’m not sure what you’re arguing with your comment. Of course there’s a charge — the payment processing itself is a service that costs money — but are you implying that therefore credit card points really are a net benefit to consumers? With vague comments like yours, I will respond and people sometimes reply “I never said that”, but, then, what are you saying?
The “rewards” are costs passed down to the merchants over and above the cost of merely processing the electronic transaction. With the state of technology now, payment processing itself should cost fractions of a penny per transaction. Besides fraud protection, everything else is mostly skimming off of the top. This is why these sleazy companies are some of the most profitable on Wall Street.
No, what I'm saying is the article argues that rewards points are a function of credit card fees, when in fact credit card fees pre-date rewards programs.
Yes, some credit card fees are independent of funding the rewards programs, and some of those fees existed before widespread use of rewards programs. But so what? Today, some significant portion of those credit card fees definitely exist because of the rewards programs.
Societally, it is bad.
But since people lose their god damned minds over seeing the credit card fees, everyone pays them regardless of payment method.
So you really are getting a discount if you take advantage.
You’re not getting a discount, you’re just getting less screwed.
Word it however you like. It is still free money considering the state of the world
OK, I think we mostly agree. The wording is still important because there are, sadly, a lot of people who defend the practices of these credit card companies, fooled into thinking they're getting a "deal".
Unfortunately, yes.
If I pay my credit card off every single month, then I pay no interest and I get 'rewards' that works out to money back. Sure, retailers pay 1-2% in fees (assuming they're a large retailer, and not a Square customer), and the people that don't pay their card off get hit with 18% APR interest. But I get a check for a few hundred each year. Plus 'discounts' at certain merchants, or for specific goods and services.
My rewards are paid for in overall higher prices across the board, and by people that don't have the financial luxury to pay off their credit card every month. The system rewards me for being lucky--although it claims that it's 'hard work' and 'smart financial choices'--and punishes other people. Not using the system as it exists doesn't end up changing the system, because individually I have no leverage. So the best I can do it try to convince my legislators to change the legal structure, which can have unintended consequences.
IMO, credit/debit card payment systems should be handled by the US Treasury, so that there's no profit involved at all.
Now that would be a nice change. Companies get a deal: Get regulated and play fair, or the government takes it over and you get nothing.
But it if there is no escaping the ubiquitous credit card industry, shouldn't I take advantage of the points so I'm not paying the 2 percent with no benefit to myself?
Don't get me wrong, I heavily use and pay off my credit cards fully to get points. But that's precisely the problem. They've set up a "tragedy of the commons" where they extract economic rent: Individually, we are incentivized to use the cards, even though, collectively, it costs us all more for no benefit to the economy or society. (I am talking specifically about the rewards program portion. The transaction processing is useful, but should not cost that much.)
Imagine if this was a functioning market: using your high rewards credit card would cost more at the till. Say using a 2% cash back card means your purchase costs 2.1% more than baseline. Would you do that? Of course not. But because of corrupt pro-Wall Street laws, it's actually illegal to charge different amounts to customers for different cards.
I hear you. But I think it's one of those things where it needs to be a regulatory or legislation change. If this is all permissible, I don't think there is really a moral choice for the consumer to make in choosing to use a rewards generating credit card or other electronic payment option. I think the consumer in this scenario is only making the rational choice to maximize individual ends if these are the rules of the system, because regardless of what they do they are paying for it.
Agreed. I thought it would be evident by the fact that I admitted to using these programs myself that I’m not blaming consumers for using them.
That said, we do need to call out people who defend the credit card reward system, even if they do so out of ignorance. Otherwise, regulatory change is impossible.