Comment by aurareturn
16 days ago
I always wondered why people in America would ever pay by cash or credit card - unless they are laundering that cash.
Otherwise, you're giving up 1-3% discount.
Set auto-pay on your credit card to pay in full every month. I've never once paid for credit card interest. I think there's a term inside credit card companies for people like me: leeches or something like that.
When I and my (still fairly young) family needed to move cross-country, my wife and I accepted a credit card offer with 0% APR for the first year and put all our moving expenses on it. Then once we settled, we paid it down a bit at a time each month, and then right before it would have started charging interest we paid the rest as a lump sum.
Really helped us float the moving company and also some DIY renovations on our house that we didn't have all the cash on hand to pay for outright. And we didn't pay a thin dime for the privilege.
> I think there's a term inside credit card companies for people like me: leeches or something like that.
They genuinely don't care because they offer different products for different groups of people.
Poorer people typically use credit cards to borrow money. The amount they spend in a month is typically much lower than the balance on the card. This means that the company makes most of their money from interest payments. Cards meant for this audience typically have few or no rewards, and instead use the interchange fees to allow for a lower APR.
Meanwhile, wealthier people typically use credit cards as a payment instrument. They pay off the balance in full each month like you do. This group of people is responsible for the majority of credit card spending, and the credit card company makes most of their money from interchange fees. Cards meant for this market have higher APRs, and use some of the interchange to pay for the rewards. The cards meant for the top end of the market with the best rewards (i.e. Chase Sapphire) even charge retailers more in interchange, with the argument being that it's worth it because you get to bring in wealthy people who will buy more stuff.
Well, one reason is the one described in TFA —- credit card rewards amount to a regressive wealth transfer, and if you think that is bad, you may not want to participate in it.
Another reason is that credit card companies sell your purchase data to aggregators and advertisers, and cash affords more privacy.
This presupposes the ability to get a credit card and the confidence of sufficient funds when that auto payment hits.
If the alternative was paying cash, cash has an even more demanding level of confidence of sufficient funds required and it applies earlier with no flexibility.
No it applies at whatever time you choose - it's the most flexible option for a person whose wealth fluctuates frequently around a low baseline.
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How is this different than paying with cash or debit?
Because cash and debit allow you to pick the time in the month when you happen to have the ability to pay for something.
Frankly these questions astound me, do y'all really know no low income folks?
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Credit card companies are still charging merchants a transaction fee for your purchases though. The fact they're only charging one side of the transaction is probably annoying for them, but you still make them plenty of money.
Most people can’t optimize for 1-3%. Life is flooded with 1-3% choices.
Even as someone who is a credit card optimizer, I also ignore numerous 1-3% choices a day.
Many people also spend more than they can cover on it.
I paid a lot of credit card interest, as a yute, but, since getting married, I have paid in full. Been over 30 years. Leeches rule!
At one time, credit card companies forced vendors to charge the same, whether cash or credit, but that seems to have fallen by the wayside.
The problem is, is that cash is becoming less and less acceptable.
In a nearby town, you can't pay for parking, with cash. I have seen credit-card-only vending machines. A lot of restaurants have iPads at the table, and you never see anyone but the bus[boy|girl|whatever], bringing you your food.
Credit cards are cheaper than cash for most merchants. Most people forget about all the costs of cash because they are hidden, but they add up to more than the couple % credit cards cost.
> Credit cards are cheaper than cash for most merchants.
Huh. I always thought it was the opposite. I know several restaurants that refuse to accept credit cards. They are great places to eat, but I won't go there. I don't think they miss my custom, though. Refusing to accept credit seems to be a signal of excellence, around here.
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> At one time, credit card companies forced vendors to charge the same, whether cash or credit, but that seems to have fallen by the wayside.
I miss that. I really dislike that it is allowed to charge extra for a credit card. It shows that the company doesn't understand the cost of cash.
> I think there's a term inside credit card companies for people like me: leeches or something like that.
that's some odd classism there.
credit card companies love your data. they can package it, sell it, analyze it.
this is real data of actual behavior, not whatever people say or click -- money where the mouth is.
even if they never make a cent off of you from an interest perspective they 1) still get fees from the merchants, and 2) get all of that juicy juicy transaction info -- and that info alone might be worth the costs.
FYI, Chase Sapphire Reserve made their rewards drastically worse recently. They were losing money on people like me.
Prices don't go down, they only ever go up.
There is no situation in which interchange fees get slashed and prices go down across the board by 3% to make it worth it for card users.
Prices do, in fact, go down. For example, eggs in the USA went down from $6 to $2 in the past few months. https://www.macrotrends.net/3052/us-egg-prices
Long term average? Sure, it goes up, that's inflation. But do you know what causes inflationary pressure? Visa and MasterCard adding unjustified fees because they're a duopoly and control most of the payments market, and your government won't regulate them and cap fees.
The UK and the EU both cap debit card fees at 0.2% and credit card fees at 0.3%. When the UK left the EU, Visa and Mastercard jacked up their fees over 5x for UK-EEA payments. Not because they had to, but because they could, and they love sucking money out of other peoples' businesses. https://www.psr.org.uk/our-work/market-reviews/market-review...
Retailers in competitive industries absolutely do use a reduction in card fees to lower their prices. Maybe not all the way, but they definitely don't give it all to themselves as margin; their competitors don't.
> Long term average? Sure, it goes up, that's inflation. But do you know what causes inflationary pressure?
An economy that relies on growth, yep.
> Prices don't go down, they only ever go up.
Well, there was that time in the 1930s.
I prefer my debit card because I'm more aware of how much I'm spending. Money taken out of my account is immediate and feels real. Ultimately, I spend less.
One isn’t more real than the other. They are both numbers in an online database. In one case your assets are going down, in the other your liabilities are going up. The net result is the same.
The parent isn't explaining it well, largely because it's not rational.
I think of it like alcoholics who can't be near alcohol. It's some deep seated degeneracy or fear.
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I agree with dougdude. I like debit cards better because you see the balance change immediately. The thing I dislike about credit cards is payment is deferred by a month.
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It's a world of difference if one of them gets stolen vs the other.
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Problem with a debit card is that if something goes wrong (product broken, or worse, debit card skimmed) it's my debit card, and thus my money.
Credit card? I file a charge-back which is a forcing mechanism for the vendor. Credit card skimmed? I get a new one, and I don't need to wait for my $ to be re-imbursed.
Debit cards on Visa/Mastercard have chargeback protection too, but yes, the money leaves one's account until the chargeback is successful.
it's just as easy to check a debit balance as a CC balance.
and once debt is spent you cannot get it back. you get scammed you can dispute the credit card, and if the CC gets stolen you can fight any charges.
debit means the money is gone and that's it.
> Otherwise you're giving up 1-3% discount.
I always ask for a discount but for some reason I almost never get it.
The rational move then is to pay in as many installments as I can get without any additional interest. Then time itself gives me the discount. My actual money stays invested and I only pay later. My credit card gives me 1.1% cashback on all purchases. Inflation too does some of the work.
You shouldn't get a cash discount - cash costs the merchant MORE than credit card fees. You have to count all the costs of cash that credit cards don't have: counting, and recounting the cash and change. Then the manager counts and recounts everything in the back room at the end of the shift. Then the manager counts everything twice again to write up the deposit forms. Plus you need a cash register with the extra cash drawer that acts like a safe. Plus other security systems just to prevent robbery (this can get elaborate in areas where robbery is common). Those all add up.
That's like a 4-5 seconds of low paid work for each transaction, though. 10 seconds, if I'm being generous. Counting a lot of cash is a long process, but each separate banknote is counted in a fraction of a second.
So, about 4-8 cents, for 30$/hour if we talk about grocery store.
Restaurant might take more time to process cash, but pays lower salary.
I do not think it's a higher cost than current credit card fees
> You shouldn't get a cash discount
Maybe, but "should" has nothing to do with it. Either I get one or I use my credit card.
> cash costs the merchant MORE than credit card fees
That's not my problem.
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> Otherwise, you're giving up 1-3% discount.
I would be curious what percentage of people actually qualifies for a card with over 2% cashback especially without a monthly fee. My guess is that that percentage is very low.
High earner/spender, sure but that's not most people
It's not hard at all. Citi Custom Cash has 5% on the highest category spend each month for the first $500 (I use it on groceries). American Express Blue Cash Everyday has 3% on groceries/gas/online purchases for up to $6000 purchases each year. Chase Freedom Flex and Discover It have rotating categories every quarter, sometimes groceries, gas, Amazon, PayPal, etc. None of these required much income to be approved.
I know that Discover has a card with a 5% discount category that changes once a quarter. Everything not in the category gets 1%. It's not hard to get the card (or at least wasn't) and was frequently advertised to college students.
If you combine that with a card that gives 2% on everything than it wouldn't be hard to average over 2% cashback as long as you were mindful about using the discover card for qualifying purchases and the 2% card for everything else.
> as long as you were mindful about using the discover card for qualifying purchases and the 2% card for everything else.
And that's the rub. Credit card companies know most people won't be too mindful most of the time about their spending habits.
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If you have Amazon Prime, I recommend getting the no-fee Chase Amazon card. 5% on Amazon and Whole Foods; 6% on some Amazon “no rush” deliveries.
No affiliation; just a happy user.
I treat the Amazon Prime membership as the "card fee". The cash back accumulation per year is always greater than the membership fee for me. (The original main benefit of savings on shipping is of course also nice, though if I'm honest with myself I'd say the majority of my purchases didn't actually need 2-day/1-day/same-day shipping. Very nice luxury however.)
I have a 2% cash back credit card from my bank, with no monthly fee. It started as a 1% cash back card around a decade ago, and slowly crept up to 2%. It's a nation wide credit union that has certain requirements to join though.
My first US credit card was a 4-3-2-1% rewards program and I had literally zero income at the time. I was told by the banker, "oh you can't do that right away, you must first get a secured card to build your credit score, after a year you can try applying for real", but I told them I don't care and to send the application anyway, and I've got it.
Ever since then, I wondered how much of the "not qualifying" is due to misinformation like this.
Most true not qualifying are either
1. People with proven bad credit.
2. People asking for a lot of money without proven good credit.
3. People asking for more specialized credit, such as lines for businesses or lines for high earners.
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A lot of it is to enable the small business owners to hide their real income. At least that's how it works in immigrant communities.
That's how it works in established US communities, too. Contractors often give cash discounts (off the record).
My lawn mower asks me to write "gift" on checks when I can't pay in cash.
Huh?
Based on the downvote and your reaction, I assume I misread something. We're talking about why Americans sometimes prefer paying with cash over credit card, no?
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I've heard such people referred to as deadbeats.
Once in a while. However the truth is the large people who collect the 1% and pay off their card every month are the people who don't. These people are customers year after year, and often spend more on their cards (they tend to be higher income), and the bank gets their 2-3% from them (2-3% after rewards)
People who don't pay their card off also are on the look out for lower interest rate cards and switch all the time. they in reality are not paying the very high rates on cards, they are paying the lower introductory rates (which is still a lot of money). These people are also more likely to default and stop paying leaving the bank to write everything off. Combine that with the fact that they typically don't spend as much over several years (they hit their credit limit and their income won't allow an increase so they have to stop spending), and they are not as profitable as it seems.