With cash back and points incentives, withholding the non trivial value of the insurance of which you speak, the only rational reason to not use a credit card is bad credit. Now, for the merchant….
> The merchant just raises prices so you can pretend like your points are saving you money.
No, you are saving money, because while the merchant raises the price to account for it, everyone gets the higher price regardless how you pay. At least with a card you can get some of it back.
(With rare exceptions, some vendors do give a cash discount. In which case I always pay cash.)
The networks have a massive incentive to minimize fraud. That's not to say that they are wildly successful or anything, but I do know from first hand professional experience that card networks spend a lot of time, money, and research into detecting and preventing fraud.
- Payment networks drop accounts with a too-high fraud rate.
- They and similar businesses (e.g. Stripe) offer automated tools to deal with fraud… for a price.
Outcome: the incentive to minimize fraud, which is often a result of crap security from the payment network, is on merchants, who also get charged extra protection money to get payment networks to do stuff they ought to be doing in the first place.
Ultimately, that incentive is the legal system, which can legislate against allowing fraud and forcefully impose penalties for it. (And operating it is a socialized cost, such that your first sentence is still correct.)
Yes, because the merchants raise prices because people pay with credit cards (which take fees), you take back a little (though of course not all) of extra markup via points, assuming you use a 2% cashback card (at least) on your purchase (which assuredly many people don't).
Merchants don't automatically pass through all costs any more than they'd pass through all savings if all their customers moved to debit cards. It depends who has the pricing power.
Not really, because the "tax" applies to competitors as well. In an uncompetitive industry the merchant has pricing power and can just raise the price, true. But in a competitive industry, margins are thin and they have to raise the price or they go out of business, and so do their competitors, which is what allows them to.
There is nothing stopping stores from offering a discount if you pay in cash or debit. Businesses most often choose not to, so they must feel like they are getting somthing out of the deal.
As a small merchant I can tell you: cash sucks to deal with and it costs money too. I went to cashless years ago. The 2.x% I eat in processing is more than made up for in not having to deal with shrinkage (either due to theft or inaccuracy or counterfiet bills), security, having to count money and go to the bank regularly, etc.
It's probably different when you're at a much larger scale than I am, but even Wal-Mart (who I was employed by in my late teens) has all sorts of cash-handling procedures to mitigate the risk of money just walking away. Even a their scale, they spend 1% on CC processing, but by the time they added up all of the labor and expenses of cash handling,it might be comparable. And for a small business it's likely more.
And then there's the data collection which has value too.
People act like accepting cash is free, it is not.
Thanks, this is an interesting opinion to read! I went through a period where I asked most small/local businesses I happened to be shopping at whether they preferred cash or card, as I had both to hand. It was a small sample size, but the vast majority said they didn't care either way, and a handful said they preferred cash. I never experienced card-only or a card-preference. That did surprise me, as I expected at least some to feel as you do.
Humorously, there are laws against credit card surcharges but not against cash discounts.
Realistically, the price difference is probably not worth the hassle of needing two prices and card sales are probably affordable enough and common enough to not bother.
They basically said a surcharge for credit is effectively the same thing as a discount for cash, and because of freedom of speech, merchants are free to communicate the difference to their customers either way.
Gas stations do the cash discount for a particular reason - to get you inside the building where you might buy profitable convenience-store items, which you won't if you just stay at the pump. (Though yes, the differential might be less than the kickback from a card rewards program.)
somewhat true but the reality is far worse - points/rewards are mostly subsidised by the poorer folk who get caught paying the > 25% interest on their carried credit card balance.
you could just as well say that the mortgage interest payments the bank takes in are subsidizing credit card points, or HELOC origination fees, or account maintenance fees are subsidizing points. you could also say the bank's profits from trading securities, or their lucrative wealth managements services are subsidizing points. but none of that would be accurate. The banks have a range of services and some are big wins and some are marginal and some may even be losses, and of course the wins help balance out the losses, but unless you can show that points disappear if poor folks manage their credit better and pay more reasonable interest rates, it's not reasonable to frame points as being subsidized by the poor.
High-end rewards cards are quite profitable on their own, thanks to the annual fee, high volume of interchange fees, and the high probability of successful collection.
Low end cards aren’t expensive because they are subsidizing high-end cards; they are expensive because they need to cover the collection costs
Which means if you want to "pay less", you have to play the credit cards rewards game to its fullest. We don't get to set the prices, merchants do.
Some merchants offer cash discounts (or a credit card surcharge), and you can make use of that if you want to. Ultimately I use cards for the convenience, regardless.
more than some. pretty much every small biz in my town does so (around 3%). not to self: carry more cash. My B2B business charges a 3% surcharge for credit cards over ACH or checks.
Not really, I've tried numerous times after negotiating the sale price of a vehicle to pay for it on a credit card. They won't do it. What they will do is allow a fraction of the payment to be made on a credit card and the rest via a wire transfer
Yeah, same. As a matter of policy, I don't take incentives, commissions, kickbacks, etc, for anything. My dad was super into points-related financial games, so I get it, but I don't need to give the professional manipulators of the world any more headspace than they already have.
Credit card network operators brag that accepting their network means customers will spend more. If spend increases even 1.6%, you are on net spending more.
CC acceptance decreases "friction." Some part of it is unlinking paying with the feeling of depleting resources when you pull cash out of your purse or wallet. Maybe running low on $20 bills and having to go to an ATM makes you decide to put one item back on the shelf. Or one's bank account is nearing bottom. In younger generations the opposite ironically can happen. They feel digital numbers fully but cash is spent more freely.
A cash back reward is a reward for not behaving badly enough that your account gets closed (or the bank shuts down). If you want to get rid of all ability to consume things, you could stop working so you don't get paid.
Actually, I think points are more like a savings account than a consumption reward, since the best deals are on international flights you have to save up a lot of points for…
> I find it pretty damn rational to deliberately remove CONSUME MOAR incentives like points/miles/cash-back rewards from my life.
Can you explain why is it rational to willingly pay more for things when you could pay less?
I also wish we didn't have to play these games, but we don't get that choice. But we do have a choice to pay less (with a credit card) or pay more, so take the rational choice.
It’s rational because you see these gamification schemes as distractions that trick you into bending over to pick up pennies off the ground while the banks pick your pockets. The credit card system is ludicrous. The payments system is a natural monopoly, so it should be operated as a public utility (e.g. FedNow I guess) with much lower fees for all. No more points, but lower prices and simplicity for all (especially for merchants).
