Comment by eastbayjake

PayPal was a counterparty so if one side didn't pay or there was a dispute then PayPal was stuck in the middle. Visa and MC are just payment networks and have minimal risk. The only risk I think would be criminal liability (handling drug money) or maybe if the bank goes bankrupt before the payment is due to the merchant (but even that might be borne by they merchant - not sure).

MC/Visa do drop merchants who do bad stuff (remember CSAM on PH) so I guess they bear some of it.

Mastercard and Visa also use immediate settlement models and basically always have done. The settlement buffer between end parties is created entirely by entities that are all basically banks.

There’s nothing special about Mastercard and Visa rails that prevents you recreating all the functionality that the broader ecosystem provides, without Visa and Mastercard. Hell all of that functionality could be provided by exactly the same companies and banks that provide it for Visa and Mastercard networks.

> grow up in a financial risk averse society.

It is not risk taking, it is a system that not just normalized the debt, but punishes people for not taking it. When you are recommended to use credit card, so you can function on debt, so that you can get better mortgage later on, then the thing in play is not just "risk aversion".

It's amazing. Meanwhile your fellow Europeans wouldn't trust to lend you their power drill for a weekend, even if you've known each other for 30 years.

My European business banks have never offered any kind of line of credit. Of course they probably would if I needed, and went there to grovel and prostrate myself. In contrast, my American business bank just sends unprompted e-mails sometimes asking if I would like to borrow a bunch of money.

American trust is based on rationality and intuition, while European trust is based on rules and authority. That's why business can flourish much more in the USA.

The availability of credit is a positive imo. Sure, it's possible to trap yourself in debt, but being able to pull that lever in an emergency is valuable. Imo US is better on this front than Europe.

These are historically called “charge cards” in the US and are common for corporations who give employees “credit cards” for travel and the like.

American Express is big in this market - what looks like a normal Amex Business Platinum card can very well be a charge card that needs to be paid in full at the due date every month.

There are minor differences but the big one is no carried balance between months is allowed. Payment in full due each month.

It's more taboo to talk about revolving credit card than crack addiction for a french. I don't know a bank that offer them, even the shady online bank.

Visa and MC have basicly all of these configurations, depending on country & legislation: - Direct Debit - Deffered Debit - Rolling Credit - Installment Credit

And if you are a $MegaBigCorp customer of them, you can customize even more.

This is not the only difference in the banking system; 25-year fixed-rate mortgages are also a feature that is rarely found elsewhere.

The minimum 10% deposit is mainly there to cover taxes, which cannot really be recovered by the bank in the event of default.

In UK, consumer protection for Credit Cards is guaranteed by law (Section 75 of the Consumer Credit Act), but not for Debit Cards (that's contractual).

with a debit card your cash is gone from your bank account in that moment, even if you get it back later (hopefully). With a credit card they are not able to drain your bank account, the risks are entirely on the cc company and they will be significantly more motivated to get that back than a bank would. it's entirely their problem, not yours

Just by their nature, that is inherently untrue.

If your CC is stolen, you are not out all the cash in your account until the dispute is resolved.

If your debit card is stolen, you lose that cash, making it more difficult to pay whatever other obligations you have that period.

Not true. At least not in Sweden. There are different laws from credit cards and debit cards.

Others have said it but I will pile on as this is dangerous misinformation.

It’s sort of true in a legal sense, but not a practical one. If you find yourself in a dispute (even outright fraud sometimes) you might end up stuck for weeks or months with your disputed funds frozen.

If you are a highly paid software engineer with considerable assets and transaction volume at your bank it’s likely you will never experience hardship with disputing a transaction. If you are someone scraping by and that $200 depends on you paying rent on time that month you will find your experience to perhaps be different.

I’ve helped friends and family with such disputes in the past. Credit cards even when it “goes wrong” are much better to deal with. Your credit limit being reduced a bit is immaterial to your life most of the time. Having your own money tied up during an investigation that demands more and more paperwork like police reports etc. can be incredibly damaging and if nothing else quite stressful. The experience some of my friends had in these matters is nothing like I had when I had my wallet stolen and I no longer recommend anyone use debit if they can avoid it.

Heck, I had a friend who doesn’t even have a passport dispute an ATM transaction in a country he never visited. The bank initially denied it and it took weeks to eventually get it resolved in his favor.

In the end having the banks money tied up vs your own money at risk is always better if you can handle the responsibility of a credit card.

It's just now how it works in most of Europe. I've lived in four countries, had accounts with lots of banks, paid for countless plane tickets and booking reservations, and only had a credit card once when I was issued one at work. I don't expect I'd ever get a personal one, and can't think of anyone that regularly uses one.

The only time I even considered it was to build a credit score in the UK to eventually apply for a mortgage, but even then it's not really necessary.

Those 'protections' have nothing to do with the purchase being credit or debit. They're just artificial incentives from the banks for you to pile on the debt. We frown on that behaviour here in the EU so it doesn't really happen. The same with the cashbacks american banks offer on credit cards, they're just paid by the extortionate card processing fees that vendors pay. So essentially, you are paying for your own cashbacks because the vendors just include it in the price in the end (and usually for everyone, not just those paying by credit card)

Besides, if you want insurance just get a 30€ per year rolling package.

In Europe you typically have travel insurance on debit cards as well.

Are you talking about the same thing?

Sure, in Europe people will subscribe to a credit to buy a car or materials to improve their home.

But buying your groceries or lunch with a credit card is quite a rare exception.

How much is it?

You could draw all of it and put in a a 2x leveraged SP500 ETF :-D for 3 month and then return the money :-D

Your link counts all types of debt including mortgages which is the reason why Luxembourg comes up first.

Just because you have to use Klarna doesn't mean you pay later as you can just select your debit card or even bank account directly.

Sadly I’ve noticed that comments on this topic usually devolve into tribal comments about how ‘things are done in the EU’ which always seem to not be actually that representative of the 27 different countries of the EU, but of course must be better than the US.

The latter is allowed now - after the backs of the credit card processors were broken.

They fought tooth and nail against cash discounts OR credit surcharges and they finally lost. In some areas it's rampant that you get a pretty substantial discount - often 4 or 5%, better than cash-back - and many places post "cash prices".

You can get even more if you're willing to ride the hassle of the gift card train.

The credit card companies know people spend more if they use credit cards, and they turn around and sell that to the merchants.

Surcharges are permitted in some states.

Colorado law recently changed permitting merchants to pass on the actual cost of processing, except for cash, check and debit payments.

https://colorado.public.law/statutes/crs_5-2-212

This law overrides any prior contractual agreements with banks/processing companies that prohibit surcharges. This is previously how MasterCard and VISA coerced merchants into absorbing the processing fee, by contractually requiring credit same as cash pricing.

Not true. A chain of restaurants near me does not accept cash, and charges 3.5% markup from their list price to cover CC fees. Texas.

Yes this is exactly what GP is talking about (he just phrased it the other way round).

> Chip and pin and NFC transitions took off much quicker outside the US because merchants generally owned more of the chargeback risk than in the US, and therefore were willing to update their POS equipment accordingly.

Not really. The risk of all fraud is initial borne by banks issuing the cards, after all they’re only parties that have an actual financial relationship with the person providing the cash/debt. If something which results in that person cash/debt being stolen, it’s between that person and their bank to figure out who’s liable for the lost money. Chargebacks are just a mechanism for banks to recover some of that lost money, once the liability between the card holder and the bank has been settled.

One of the big reasons why Chip and PIN etc took off outside of the US, is that the US is very accepting of fraud, and charging crazy high interchange rates (up to 10x what they are in Europe) so the cost of fraud is spread over many individuals. Other parts of the world have regulations capping interchange rates, and providing better consumer protection, demanding that banks and payment networks tackle fraud, rather than increase the cost of everything by 1-2% to cover fraud losses.

Just to put another perspective there. In Brazil, chip and pin took off immediately (from non-existent to ubiquitous in about 6 months) after the government decided that the bank and card issuer were responsible for all the fraud risk.

I have no idea what policy made the US hold into signatures for that long. But the seller and the buyer are the least powerful people on that entire chain, so I don't think it reasonable to look at them.

You can have instant settlement while still maintaining fraud safeguards (e.g. daily payment limits) and remediation mechanisms (e.g. reversing fraudulent transactions). With modern 2FA and device-based security, this risk is extremely low. Not a risk that justifies a 2.5% tax on every transaction plus all the other disadvantages of the credit-based system.

You don't have to, that's mostly a benefit for merchants. Although it does translate to lower prices and greater competition.

But but my CC literally said "it's more secure" (I asked and complained about the contactless feature because it interfered with my transit card)

Doesn't it depend on the country? Payments with Visa and MasterCard work very differently in various countires. In Poland you can pay 0.01€ with credit card and the seller will happily oblige. In Germany even few Euros they prefer to be paid in cash.