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Americans rack up $19 billion in credit card debt in one month (www.newsweek.com)

submitted 1 year ago by [email protected] to c/[email protected]

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[–] [email protected] 3 points 1 year ago (1 children)

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?

[+] [email protected] 1 points 1 year ago (1 children)

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[–] [email protected] 3 points 1 year ago (1 children)

Wow Americans really get shafted if those are the rates. VISA and Mastercard in Europe is 0.2% for Debit and 0.3% for Credit for consumer transactions.

Every for profit company tries to incentivize their product. I know there are grocery stores in the UK. When they run a sale, promotion, or discount like I’ve seen posted online for items close to expiration they are incentivizing the purchase of that product.

Yeah, they could be incentivicing the product that gives them the most return.

You made a claim that people who use cards responsibly and take advantage of rewards programs are being “played”. How? You also seem to blame-shift the choices of those who spend beyond their means to those who don’t. A person chooses to apply for a card, a person chooses to use that card, a person chooses to spend more than they can afford. That choice is on the individual making it, not some other person who doesn’t make bad choices.

Whoa, I think you've misnterprited the spirit of my original comment. Do you take offense to the term "played"? There is no blaming, or shunning of choices, its just economics. The guys selling the product /want/ people to be irresponsible with their finances. They are like "yea, spend more than you have, I don't mind, more where that came from"

Debit and credit cards have their benefits and drawbacks but either is a viable choice when used responsibly and a bad choice when used irresponsibly. The thing you’re upset with is poor banking regulation, not responsible card owners. The fact that a bank can charge multiple $10, $20, $30 dollar overdraft fees on a debit OR usurious interest rates is an example of a private entity not being kept in check and being allowed to exploit people.

I'm not upset with anyone. I think the problem here is the differences between the US and Europe banking systems. In Europe, overdraft fees are capped and the interchange rates are fractional in comparison. But credit cards are still what banks incentivise, and makes me question their motives. I don't trust banks or any large company for that matter to put my own best interests first. I have seen friends and family get into credit card debt over the years. Sure its their bad life choices that cause their own problems. No blaming between different types of people. However no-one denies that banks spread gold glitter on credit cards in an effort to bring in more punters. Debit cards, not so much.

I did learn something today. US banking seems more hostile to consumers than Europe conterparts. Is it because of regulation? I have read in the past that US politics are reluctant to add more regulation to services like banking, relying on "free market" and the lark.