For a while, i wondered why Americans tend use their credit cards instead of debit cards but then it occurred that they are encouraged to use credit cards because you cant get into debt using debit cards and debt is very profitable.
Also debit cards don’t earn cash back or points. I visit my cousins on airline points. Monitor your cards and make sure you don’t exceed your budget, same as a debit card.
They do if you use a credit union. I bank through two, and both offer cash back equivalent to any credit card, multiple overdrafts without fees, higher intrest rates on both checking and savings, access to better loan intrest rates, and I’m keeping my money in my community.
You also have to have credit to get loans. I ran into this issue when I bought a house. I hadn’t had a credit card in years because it was too easy to get into debt. The only thing that saved me is I am on one of my folks credit cards for rare emergencies if I’m watching their house and something goes awry (like the dehumidifier shits all over the basement floor and needs replaced).
Do you understand why there are so many incentives to use credit cards? Your reply and those under you are listing why credit cards are the better choice, however I wonder if they all know they are being played.
Those that use their credit card and pay it off in full are subsidized by the number of people that spend beyond their means.
Right. So the extra features are paid for by swipe fees. So why don’t debit cards have the same set of features? Because banks want you to use the type of card that has the most return potential. Not wrong, just a difference of opinion.
How exactly is someone who uses a card and then pays the bill in full every month subsidized?
Receiving a service for free means it is subsidized.
The Durbin Amendment capped interchange rates [snip]
I’m sorry, you have mistaken me for an American.
You make multiple factually incorrect statements.
You have yet to convince me that.
It is obvious that banks have the ability to make more off their users bad choices when using credit cards than they do debit cards. It is also obvious that it is in the banks best interest to push credit cards more than debit cards. Just because you and I are capable of managing our funds well, isn’t the case accross all. I worked for a UK bank for 4 years (2004-2008), however the opinion I am portraying here doesn’t need any inside knowledge, its just common sense.
I see it glaringly obvious that banks make more money from credit cards than debit cards and therefore offer incentives to use them.
In fact in /any/ business, if one product is being pushed with incentives, its because that product has the best ROI. Its just economics, and the consumer should be aware of that. Nothing is free in this world, and most large companies are predatory.
Yes, it is my opinion, I didn’t state that I have hard evidence. I didn’t interview a bank CEO.
I get the feeling you think this is a personal attack on you and others like-minded, not at all. I’m sorry you don’t see things the same as I do and that is fine, I don’t mind. I like to try and learn from these exchanges, maybe not from this one… yet.
So far I’ve understood:
Banks receive an “interchange” fee per transaction
The interchange fee was reduced considerably in US law
Banks incentivise the crap out of credit cards
Banks receive a marginally increased interchange fee (~0.1%)
That last two points, can you help me understand why banks incentivise credit cards when interchange fees for cards are so similar? Or is that 0.1% the big deal?
You’re getting played if you don’t use one. All those rewards are not from the people racking up credit card debt, it’s from swipe fees.
If you don’t use a credit card you pay the same price as the ones paying with a card, except the ones with a card get rewards. The ones without pay extra since stores charge extra to cover the fee
They even lobbied successfully to prevent merchants from passing this on to credit card customers. Which means they pass it on to all customers instead.
The fees are currently capped at 2.5% but that’s just for the swiped. There are other fees as well that end up costing the merchant more.
If you’re responsible with them you get a number of perks. Many cards have some mix of the following:
extended warranties on electronics
fraud protection (I had a credit card stolen and $17k charged to it, all forgiven)
pretty easy dispute system if someone fucks you (Iceland Air fucked me real bad on a canceled flight/voucher bs scam they were pulling on people during Covid. I filed a dispute and got all my money back)
% back on all kinds of purchase categories
free road side assistance
air miles
upgrades in flights
iirc some hotels and rental car companies require them
etc etc
I’ve never paid interest on a single card in my life because I always pay my balance in full. Works out great for me. If you’re bad with money, I’d stay way.
There are a lot of consumer protections on credit cards that do not apply to debit cards. I pay for basically everything with a credit card. I pay the card off every month.
Sure, but that’s just how it goes. Businesses take their transaction fees and roll that up into their overhead expenses and then factor out their retail pricing with that in mind.
Knowing that, you can try to claw some of that back by utilizing card benefits or not. It’s basically the only thing you do have control of in this situation.
Eh, the more you claw back, the more they jack up their overheads.
Never wonder why credit cards never became that popular in other countries, or why lots of places abroad have signs saying “American Express not accepted”?
You’re getting robbed, and walking right into it.
Debit cards have the same consumer protection as credit cards in Europe, the only “benefits” you’re getting are the ones you’ve paid for
Credit card transaction fee percentages have remained about the same for quite a while, so the overhead for businesses running cards has not really changed. And interest rates for carrying a balance change all the time, but I have never once in my life paid said interest because I pay my balance off every month. That’s the only responsible way to use credit cards.
In any case, credit cards aren’t going anywhere for the time being. So if you’re in the US or some other country where they’re prevalent, you can participate or not. That’s your choice. But you’re paying for it anyway, as you yourself pointed out.
Lol that’s cute. They’ve recently started changing this shit, but at least when I was in college, banks were 100% putting people into debt and making tons of money on overdraft fees. For using debit.
They had a program called, “overdraft protection” that customer service loved to sign you up for if you accidentally overdrafted. That should fix things right?
Lol no. Turns out what they meant by “protection” was “protection from your card being declined.” In other words, if a purchase was going to put your account into the negative, instead of simply declining the transaction and preventing the customer from incurring a fee, it makes sure the purchase goes through, and the customer is charged $35 for overdrafting.
They also had a practice of re-ordering a customer’s transactions in order to maximize overdraft fees. I believe this one has been illegal since Obama though.
It’s also because a lot of people see the rewards as ways of getting free money. However that’s really only the case if you pay your card regularly. As well some Americans truly don’t have the required income to live. So they go into debt. It’s terrible, sad, and wrong on so many levels, but it’s a major part as well.
For a while, i wondered why Americans tend use their credit cards instead of debit cards but then it occurred that they are encouraged to use credit cards because you cant get into debt using debit cards and debt is very profitable.
There’s that, but there are also more legal consumer protections against fraud with credit cards than with debit cards.
Also debit cards don’t earn cash back or points. I visit my cousins on airline points. Monitor your cards and make sure you don’t exceed your budget, same as a debit card.
They do if you use a credit union. I bank through two, and both offer cash back equivalent to any credit card, multiple overdrafts without fees, higher intrest rates on both checking and savings, access to better loan intrest rates, and I’m keeping my money in my community.
I love my credit union, and while my debit card does get points my credit card gets more points
This is not a thing at any credit union around me.
6% on groceries adds up.
You also have to have credit to get loans. I ran into this issue when I bought a house. I hadn’t had a credit card in years because it was too easy to get into debt. The only thing that saved me is I am on one of my folks credit cards for rare emergencies if I’m watching their house and something goes awry (like the dehumidifier shits all over the basement floor and needs replaced).
I would totally use my debit card more if it has the same level of fraud protection that credit cards have.
It’d be nice to be able to do a chargeback on a debit card transaction.
Do you understand why there are so many incentives to use credit cards? Your reply and those under you are listing why credit cards are the better choice, however I wonder if they all know they are being played.
Those that use their credit card and pay it off in full are subsidized by the number of people that spend beyond their means.
deleted by creator
Right. So the extra features are paid for by swipe fees. So why don’t debit cards have the same set of features? Because banks want you to use the type of card that has the most return potential. Not wrong, just a difference of opinion.
deleted by creator
Receiving a service for free means it is subsidized.
I’m sorry, you have mistaken me for an American.
You have yet to convince me that.
It is obvious that banks have the ability to make more off their users bad choices when using credit cards than they do debit cards. It is also obvious that it is in the banks best interest to push credit cards more than debit cards. Just because you and I are capable of managing our funds well, isn’t the case accross all. I worked for a UK bank for 4 years (2004-2008), however the opinion I am portraying here doesn’t need any inside knowledge, its just common sense.
deleted by creator
I see it glaringly obvious that banks make more money from credit cards than debit cards and therefore offer incentives to use them.
In fact in /any/ business, if one product is being pushed with incentives, its because that product has the best ROI. Its just economics, and the consumer should be aware of that. Nothing is free in this world, and most large companies are predatory.
Yes, it is my opinion, I didn’t state that I have hard evidence. I didn’t interview a bank CEO.
I get the feeling you think this is a personal attack on you and others like-minded, not at all. I’m sorry you don’t see things the same as I do and that is fine, I don’t mind. I like to try and learn from these exchanges, maybe not from this one… yet.
So far I’ve understood:
That last two points, can you help me understand why banks incentivise credit cards when interchange fees for cards are so similar? Or is that 0.1% the big deal?
You’re getting played if you don’t use one. All those rewards are not from the people racking up credit card debt, it’s from swipe fees.
If you don’t use a credit card you pay the same price as the ones paying with a card, except the ones with a card get rewards. The ones without pay extra since stores charge extra to cover the fee
They even lobbied successfully to prevent merchants from passing this on to credit card customers. Which means they pass it on to all customers instead.
The fees are currently capped at 2.5% but that’s just for the swiped. There are other fees as well that end up costing the merchant more.
I’m gonna wait and see if you can figure out how your statement relates to credit cards being more profitable for the ruling class than debit cards…
If you’re responsible with them you get a number of perks. Many cards have some mix of the following:
I’ve never paid interest on a single card in my life because I always pay my balance in full. Works out great for me. If you’re bad with money, I’d stay way.
This!
There are a lot of consumer protections on credit cards that do not apply to debit cards. I pay for basically everything with a credit card. I pay the card off every month.
I don’t think people realise that, you are actually paying for all those things, just in a roundabout way. Even people without credit cards are
Sure, but that’s just how it goes. Businesses take their transaction fees and roll that up into their overhead expenses and then factor out their retail pricing with that in mind.
Knowing that, you can try to claw some of that back by utilizing card benefits or not. It’s basically the only thing you do have control of in this situation.
Eh, the more you claw back, the more they jack up their overheads.
Never wonder why credit cards never became that popular in other countries, or why lots of places abroad have signs saying “American Express not accepted”?
You’re getting robbed, and walking right into it.
Debit cards have the same consumer protection as credit cards in Europe, the only “benefits” you’re getting are the ones you’ve paid for
Credit card transaction fee percentages have remained about the same for quite a while, so the overhead for businesses running cards has not really changed. And interest rates for carrying a balance change all the time, but I have never once in my life paid said interest because I pay my balance off every month. That’s the only responsible way to use credit cards.
In any case, credit cards aren’t going anywhere for the time being. So if you’re in the US or some other country where they’re prevalent, you can participate or not. That’s your choice. But you’re paying for it anyway, as you yourself pointed out.
Lol the percentages remained the same cos all the prices went up 😂
Guess why a part of that increase happened
Uh, sure. Ok.
We also can’t get cashback rewards with the vast majority of debit cards. It adds up.
Lol that’s cute. They’ve recently started changing this shit, but at least when I was in college, banks were 100% putting people into debt and making tons of money on overdraft fees. For using debit.
They had a program called, “overdraft protection” that customer service loved to sign you up for if you accidentally overdrafted. That should fix things right?
Lol no. Turns out what they meant by “protection” was “protection from your card being declined.” In other words, if a purchase was going to put your account into the negative, instead of simply declining the transaction and preventing the customer from incurring a fee, it makes sure the purchase goes through, and the customer is charged $35 for overdrafting.
They also had a practice of re-ordering a customer’s transactions in order to maximize overdraft fees. I believe this one has been illegal since Obama though.
It’s also because a lot of people see the rewards as ways of getting free money. However that’s really only the case if you pay your card regularly. As well some Americans truly don’t have the required income to live. So they go into debt. It’s terrible, sad, and wrong on so many levels, but it’s a major part as well.
Frankly I use my credit card as my debit card. Hell I don’t even have a physical debit card. Why you ask? Rewards points.