Comment by ianhawes
15 hours ago
There is, it's called debit cards, but Stripe et al. "simplified" pricing by charging a percentage regardless of card type instead of the traditional interchange-plus pricing. Merchant banks "used to" make money by tacking on fixed fees, i.e. a set-up fee, terminal fee, monthly fee, etc, but then Stripe came along and provided (1) a better dev experience, (2) better onboarding, and (3) simplified pricing.
For US readers - in my country in europe I'd say that 95% of people have only debit card, not credit card. it's very not common to have a credit card here. Card payments are extremely common, but everyone uses debit card.
The EU caps all card interchange fees at 0.3% for credit cards and 0.2% for debit, which is an order of magnitude lower than some of the fees in the US.
That’s why you don’t see the same kinds of credit card deals in the EU compared to the US.
Note that the caps were introduced because the EU already had widespread use of bank cards, but local schemes were being replaced with Mastercard/Visa debit - the caps were brought in to prevent the duopoly from profiteering. (Apple/Google pay also use Mastercard/Visa virtual cards in the EU.) Before the cap, credit cards had way higher fees and there were some reward cards, which led to merchants simply not accepting Mastercard/Visa. Local schemes included Mastercard-owned Maestro (used in Germany, The Netherlands and for some reason Brazil) but also local schemes like Belgium's Bancontact/MrCash. It's unfortunate some of those schemes didn't just merge and started competing in foreign countries as well.
6 replies →
I think that there was a recent HN thread that linked to an article which argued that the credit card system of USA has the purpose of taking money from the poor and giving them to the rich, and the estimated amount of the money transferred in this way was huge.
The EU limits for card fees prevent this in Europe, which is very good.
22 replies →
Yes, it’s because Americans have to build credit or otherwise optimize their credit score to finance large purchases. In most other countries there either isn’t a credit score concept or your credit score does not have to be built up over a long period to be effective like it does here. It doesn’t help that a third of Americans dont really have savings either; credit helps them to work around this
I use credit for the purchase protection (I believe many debit cards have this as well but it’s easier when you haven’t yet paid the charge, and seems better enshrined in law for credit), for the rewards (which including signup bonuses can be huge), for the float period, and for security — if somebody fraudulently uses a credit card versus a debit card, there’s no actual money missing while the situation gets resolved.
In germany a similar scheme exists (Schufa) but it's less important.
Yeah, it's all a huge con. The best fiscal habits involves not spending money you don't have, so you should never need a CC to begin with. But if you take that route, you end up being unable to finance a car or apartment because companies can't snoop into how you spend money. So you're forced to either play the game or be so rich you can buy everything you need in cash (which, ironically qualifies you for the best kinds of CC's anyway).
Now, if you DO manage to that threshold... you still want to delay finances. Because installments now become ways to give your money more time to make money and offset whatever you are paying for. The models and incentives are completely at odds.
This is not a universal, however. In the UK, two-thirds of adults have a credit card.
> For US readers - in my country in Europe I'd say that 95% of people have only debit card, not credit card. it's very not common to have a credit card here.
In the countries I've been to in the EU (Belgium, France, Spain, Luxembourg), when they give you cards they give you typically both a debit and a credit card. It's extremely common to have both. I've got debit cards, a pre-paid debit card (which I top up when I plan to spend) and credit cards.
And getting up to 2% cashback in the EU (even if the fees vendors can add in the EU are maximum 0.3) is not that hard.
It's very common to pay for mostly everything with a debit card and then use a credit card to, say, book a plane or vacations or to open a tab when you check-in at some hotel.
Heck, I don't even know if you can book a plane with a debit card!? (and anyway then you probably don't get the cancellation insurance etc. that you typically automatically get with a credit card).
I don't know for other European countries, but in France a lot of people call them "Cartes de crédit" AKA Credit cards, even though, like you said, they are actually debit cards for 95% of people, so this adds to the confusion
Yup and even when they are credit cards, "cartes à débit différé", they behave more like automated charge cards. The amount is automatically taken out of your account at the end of the month, you are supposed to pay in full and don't have the option of making minimum payments. So the poor banks cannot make nearly as much money with interest rates and instead are forced to have relatively high account maintenance fees (that are published and much more transparent to the customer).
That said as a French person with a ssn living in Asia, I don't have a french credit card because it's so expensive and foreign conversion fees are very high, whereas I use a us card because the currency conversion rate is very close to the market rate and it costs a lot less to maintain the account.
How do any of they rent cars when they travel? I think that still requires a credit pretty much anywhere in Europe.
I’s bet the proportion is way higher than 5% even if the overwhelming majority use their credit cards the same was as debit.
The only time I "needed" a credit card is when I tried to sign up for some US company's service. It rejected my debit card because it wanted credit, so I just took my business elsewhere.
Other than that, I've rented cars, rented other things with a "X will be charged to your card if you return it late", unattended gas stations... all the usual places you'd think need a credit card. It's fine.
We do have a "negative limit" that banks often give you, which means you can go into the red and pay it back later, but that has nothing to do with the card, it works even for normal bank transactions.
1 reply →
IIRC then normal bank cards and debit cards can be charged with these future payments up to 500 Eur. So for small and normal cars this works.
I too have a real credit card to be able to rent for instance "bigger" cars like even an Audi A6.
Most often hotels also block 500 Eur, or they state upfront that you need a proper/real credit card and not just a debit card.
That's for me the only reason I have VISA and use it like 3 or 4 times a year...
You pay a deposit with your debit card and get it refunded afterwards ?
Debit cards still go through the same credit card infrastructure. The practical difference at this point is whether the card company backend defer payment until collection date for the benefit of customers, or don't wait and just call APIs on the spot. There's a whole "internet" of credit card infra that lets you pay using those numbers on the card like they are phone numbers.
Stripe don't do handle their own payment, they just wrap someone else's API, and pay them in percentages and dollars per API calls(idk about the ones behind Stripe, but I think I saw somewhere that those middlemen often charge both? Egregious, but they're literally old boys money men and they have lots of leverages against you).
What are truly different to credit/debit card systems are things like PayPal, Apple/Google and such gift cards with scratch areas, and Chinese QR payment apps. Those are the ones that don't (always) go through the CC ecosystem.
Debit cards aren't that, in practice, because as you say they typically get the same 3% fee whenever I've asked. Toast and other point of sale networks just charge it based on the network and not the card type.
But even so, I still prefer the credit card instrument, used as a "charge card". For those that don't know, a "charge card" is common with businesses and is expected to be paid off every month. But it helps with managing your cashflow - e.g. you can keep your money in a savings account all month and make one transaction at the end - and it keeps your actual money from being at risk of fraud.
Most Europeans seem confused with how Americans use credit cards for everything, but about half of us use them as charge cards, paying them off every month.
That is a benefit, so I can see paying a small percentage for it, but I don't think that benefit alone justifies the 3-5% of a transaction that credit cards charge now.
As a Canadian , I thought that was the expected de facto way of using credit cards: you pay everything with it so you get rewards (ie money) at the end of the year as a function of how much you used the card during the year. At the end of the month, you pay whatever the outstanding balance is, otherwise you pay high interests.
Many of us use it exactly that way, though the rewards (in my personal experience) are immediate as soon as a transaction clears and not yearly. Carrying a revolving balance is a quick way to spiral into bankruptcy because the rates are so high (and the minimum payment is typically 1% of the balance).
I thought this was how credit cards were used the world over. It's certainly how I use them. How do Americans use them that differs from this? Color me confused.
(Also: installments. They are often the norm in my country, but I understand they are less common for Americans).
There are fees thou and i cant imagine they are losing out as a business
Debit cards are not subject to surcharging, and any merchant doing so is violating Visa/Mastercard regulations. (And possibly state law in several places -- Colorado where I live caps surcharge at the lesser of 2% or the cost of payment processing.)
Correct, Toast specifically will not allow it under any circumstance.
Debit cards issued by smaller community banks or credit unions are exempt from the cap and carry higher interchange rates (often 1.0%–1.65% + $0.10).
All merchants should either do Surcharging or Cash Discount.
2 replies →
It’s 2% or actual cost for credit cards.
Under subparagraph f)A seller or lessor shall not impose a surcharge if a customer elects to pay for goods or services by Check, cash, debit card, processing as a debit payment, or gift card.
eCheck is considered a check.
https://colorado.public.law/statutes/crs_5-2-212
2 replies →
Prices reflect the credit card merchant fees, even if there's no separate surcharge. People pay higher prices and anyone who doesn't use a credit card to recoup some in "rewards" is effectively getting taxed.
1 reply →
You get charged higher prices and then have to use a credit card to recoup the loss, so that rent-seeking monopolists can make money. And Americans are also seemingly baffled by the idea of regulating this away, as if other countries doing this don't exist. Credit cards are the USA epitomized.
It was regulated away in the Durbin Amendment of the 2010 Dodd-Frank law:
https://www.congress.gov/crs-product/R41913
https://www.ftc.gov/business-guidance/resources/new-rules-el...
American sellers have had the option to collect however much extra they want from people paying with credit cards, and many do. The government, utilities, mobile network providers, insurance, schools, healthcare, gas stations, home contractors, etc all usually collect at least 2% to 3% more if a buyer wants to pay with a credit card.
I am down to only using my credit cards for retail purchases, restaurants, and travel. Otherwise, the extra cost of paying with credit cards don't make sense and I pay with debit card or electronic money transfer (ACH/Zelle).
Basically, the sellers that continue to collect the same price from credit card users and non credit card users are those who believe that incentivizing credit card usage will result in sufficient people paying sufficiently higher prices such that it offsets the processing costs of the credit card transaction (and the chargeback risk).
2 replies →
Most stripe transactions do use cost-plus pricing. The flat pricing is popular with smaller businesses, but larger companies graduate from it pretty quickly.
You have to wait for the investigation to complete to receive compensation if you’re hit by fraud on a debit card. Credit cards don’t share that issue. If you’re poor or living paycheck-to-paycheck, debit cards are potentially a risk to your livelihood.
As someone who has been hit with fraud on a debit card and a credit card, the process to recover money from fraud on a credit card is so much easier and more hassle-free than a debit card.
The big difference is that with a debit card, it's your money that is hit by fraud. The debit card is basically just a proxy. You have to go file a police report. You have to hope the bank will give you the money back.
When the credit card gets hit, it's the credit card company's money and they will seemingly chase the fraud to the ends of the earth to recover it.
This depends heavily on the country you’re in. In the UK banks are required to refund you within a single business day if they don’t have any evidence that the customer isn’t trying to defraud the bank themselves.
They try to squirm out of that of course. But in general getting your money back isn’t too tricky even with a debit card.
3 replies →
> The big difference is that with a debit card, it's your money that is hit by fraud.
I kind of disagree. I think what's happened is the bank would prefer you to believe that. Imagine I kept my money at the bank, and deposited $10000 with the teller. Immediately afterward a robber follows in and steals that $10000 from the teller. Does the bank say "oh no Mr. TheChao! A robber stole your $10000!". I mean, no? The bank got robbed. Just because the bank's digital security is more tied one-to-one to dollars and its easier for a robber to steal from "my till" doesn't mean it was me who was robbed. It's the bank's job to stop that.
4 replies →
This is where you find out which banks suck, and which do not. I will say that while USAA is a long ways from perfect, when someone swiped my wife's debit card and took $5000 from our checking account, they put that money back within a day while the investigation was pending. No police report necessary, either.
I don’t thing Regulation E allows banks to require a police report before processing an unauthorized payment, nor can they outright refuse to do so.
Practically, Reg E is essentially as strong as Reg Z.
1 reply →
The underlying problem is that the whole concept of cards is insane. Basically, you go around telling every shopkeeper the code for your safe, and ask them to take however much cash you owe them out of the safe.
Sane ways to organize payments:
- Merchant gives you a bill-id. You input it into your bank website - where you see the bill amount being charged. You accept, and bank pays merchant.
- You give merchant your card number (that's the only information - no expiry, no ccv, no name). A notification pops up on your bank website asking if you want to pay what the merchant is requesting. You accept.
- You go to your bank website and obtain a random number, either allowing a single transaction or a recurring transaction. You give the merchant the number. After merchant charges it, no other merchant can charge the same number.
This would also solve a major annoyance I have with card payments, which is no way to link a particular purchase back to a transaction.
With checks, you write a check and can write down the check number with a note about what the payment was for. When the payment posts, the check number is part of the transaction. With a card payment, they charge your card and, sometimes days later, there's a pre-authorization with some obscure transaction description. So many scary transaction descriptions that make me think "wait is this fraud".
With this method, the approval flow would also allow people to add a blurb for what the transaction is for.
> You go to your bank website and obtain a random number, either allowing a single transaction or a recurring transaction. You give the merchant the number. After merchant charges it, no other merchant can charge the same number.
That's basically how Blik works in Poland. With the exception being that the number is random 6 digits randomly generated when you open the app, that is active for ~2 minutes. So you don't deal with the issue of very long and error prone numbers to copy.
Much better way to pay online.
https://en.wikipedia.org/wiki/Blik
Cards have supported strong, positive cardholder authentication at the POS (chip and PIN) and online (3DS) since the 90s.
It’s entirely the US credit card industry and its regulating bodies’ fault that it has made neither mandatory in the way that e.g. the EU did, and is in fact fighting any attempt to do so tooth and nail (please think of the conversion rate!!)
1 reply →
I've always had fraudulent debit charges automatically reverted. Typically the bank's fraud detection disables the card and you clear up the matter on the phone. Or they call you to verify if a suspicious charge outside your profile was actually yours. The banks aren't required to do this but they can choose to provide this level of service.
the cc fraud (and fraud protection) is THE main selling point of Visa/MC credit cards.
it is that different treatment of debit/cc fraud that pushes people towards high fee cc.
it is cc fraud protection that justifies high cc processing fees.
without cc fraud there is no need in visa/mc duopoly.
Eh... I guess YMMV, at least for a low amount it took me literally an afternoon, I just froze my card, walked to the bank, explained the issue, and they refunded me on the spot (also switched out the card for a new one). They said technically it could be clawed back after investigation but they never did.
Weird take, credit card debt is much more of a risk to that demographic than debit cards ever will be
Also debit cards run by smaller credit unions charge credit-card like fees (and then are used by fintechs to earn fees while making it harder to pass those fees on to end users).
Hah! Good to know, makes total sense.
Fun fact: Visa owns some of Stripe.