Hacker News Reader

Comment by pawelos | Hacker News Reader

Meanwhile in EU the interchange fee is 0.3% on credit and 0.2% on debit cards: https://www.visa.co.uk/dam/VCOM/regional/ve/unitedkingdom/PD...

View on HN

The EU caps interchange fees by law, the US doesn't (except on debit cards). As a result, credit card fees are much higher in the US because they can be. Credit card issuers kickback some of the fees collected from merchants in the form of rewards for using the credit card.

This is also called the "poor people tax", because the merchants all bake these fees into their prices, which rise accordingly for all customers, including those who pay cash, or use debit cards or credit cards without those kickbacks. In order to evade the "tax", you are basically forced to pay with a credit card that has good kickbacks (>= 2% is acceptable if I remember correctly) so you recoup those 2% that are implicitly included in any price of any good in any store. Those who lose out are people with poor credit rating, because they either have no access to the best cards or have to pay ridiculous fees to get them.

In my eyes it's useless circulation of money in the best case (when recouping via kickback) and a tax on the financially illiterate or poor in the worst case. In any case it is creating a lot of expensive administrative overhead for no economic purpose whatsoever, and thus a healthy capitalistic society should want to get rid of it - which is even relatively easy to do in this case, as the European regulation demonstrates.

Surcharging is becoming more common with a couple companies like CardX focusing on it: https://thepaypers.com/expert-opinion/credit-card-surchargin...

Particularly driven by https://en.m.wikipedia.org/wiki/Expressions_Hair_Design_v._S...

This is an interesting development. I didn't know about that Supreme Court decision. So it effectively allows merchants to communicate a credit card surcharge as exactly that to customers, letting them know that it is caused by using a particular card?

Does that also allow merchants to put an additional surcharge depending on the card used onto a receipt? Or has that been deemed legal in an earlier ruling? Because I always thought the big card networks had some kind of legally binding contract with merchants which prohibits the addition of surcharges that only apply to their particular payment method - contract clauses that they could only muscle through because merchants effectively didn't have the possibility to just not accept Visa or MasterCard payments, while most of their competitors accepted them.

Credit card issuers also kick back millions to politicians to keep this status quo. In most places in Europe, this would be called bribery and corruption. To us, it's just lobbying. But a rose by any other name ...

My Czech bank (Equabank) also made withdrawals free anywhere in the world a few days ago; I was worried that this would come with hideous rate increases, but apparently not.

Weird instance of banking actually getting better with time?!

Check what is the currency exchange fee - while you might not pay for withdrawal, they can still add a few % of the exchange fee (that’s at least the case for some of Polish cards).

More and more traditional banks are getting rid of these fees too.

Mastercard rates are very good (typically better than Transferwise's), and Visa has been catching up as well.

It is definitely the case for Czech banks. GP's Equa has about 2.5 % in fact. Worse, there's basically no banks that have under 2 %.

Schwab's currency exchange fee (via withdrawal at non-US ATMs in local currency) has basically been the spot rate in my experience, for a decade or more that I've been using it. And there's no other fees so it's basically free forex (for small amounts I presume, they're not going to let you do that for $1M I bet).

Same - I’ve found Schwabs rates to be better than virtually any other option

Given that the daily forex volume is around $5 trillion[1], I wouldn't be surprised if they'll give you $1 million at the same rate as $1000.

[1] https://www.quora.com/How-much-volume-is-traded-per-day-in-t...

How do you find out what exchange rate they use and how it compares to the spot rate? I have cynically assumed that they make money on this (despite claiming “no foreign transaction fee!”) but never knew how to check one company versus another.

I google “USD to GBP” or whichever currency right after I get the money. My BoA/Chase credit cards also give me basically spot rate conversions. Although this article explains why it might not make sense to use that number:

https://www.thinmargin.com/blogs/why-comparing-against-excha...

With HSBC, the bank rate they use at their ATMs isn't as good as the interbank exchange rate I would get if I used some other bank's ATM.

I think that's due to pressure from a number of fintech-companies such as revolut, monzo, transferwise, and what not. They focus on exactly just that, lower exchange rates and simpler money transfers.

A friend went to a talk from a large swiss bank and there was also this question, why they did not go faster forward. The answer was pretty short. Why kill a cashcow.

I believe actually there was EU regulation that forced this...

When Monzo made EU withdrawals completely free (again), they said

> After a change in EU regulation on cross-border payments we've decided to remove ATM fees and limits for countries in the European Economic Area (EEA). This means in all EU countries (and a few more) your cash withdrawals are now free! You can see the full list of countries here.

What I hear from people in the traditional banking sector, they actually don't mind the newer fintech companies such as Revolut, N26 and so on because they'll mainly attract the kind of customers that the traditional banks would rather not have. If you don't have a mortgage, loans, credit cards, stock or so on, then you're not really worth the hassle of having you as a customer. The fintech startups offer none of those things.

No surprises that shortsightedness pervades the traditional banking sector. These services appeal to people who like to travel, i.e. people who are relatively more well off. Then they hope to upsell other financial products to them.

A Fintech banking startup in Switzerland (Neon) recently did the same. They also removed the surcharge on the exchange rate and now give the official MasterCard exchange rate.

The interchange rates are governed by EU rules. They’re not up to the banks.

Still ridiculous, considering it's just updating balances in a few rows of a database.

Cryptocurrencies, except BTC and a couple of others, are doing it right. A transfer should cost a fraction of a cent.

Bank transfers in Europe are now typically free. Cards expose the bank to a certain (small) degree of risk Nd administrative cost, so they’d probably stop offering the service if rates were regulated to zero.

But unlike bitcoin, visa doesn’t create an enormous carbon footprint every time somebody buys a pack of gum at a gas station.

Every time you Google something, you create an enormous carbon footprint. Every time you drive. Every time you eat. Every time you watch a movie.

I'm out of the loop on this stuff, but are others doing things to prevent the situation Bitcoin had a couple years ago, when it hit $37 per transaction?

That seemed to happen due to a massive price and volume increase, so is hard to design for. At the same time, at peak, it was still doing a tiny fraction of the volume that any of the credit card networks do.

Yeah, BTC limited the block size, so transaction cost went through the roof. Thankfully there are many alternatives. BCH is great.

Blockchain scaling is still a very active area of research, and anyone (like GP) telling you there's a battle-tested solution available today to replace Visa is lying to you.

On the precise issue of transaction cost predictability, I think most solutions would revolve around creating a market for the ability to execute future transactions. There's a hackish project on Ethereum doing just that: https://gastoken.io/

>Cryptocurrencies, except BTC and a couple of others, are doing it right. A transfer should cost a fraction of a cent.

Most people would prefer to not be out all their life savings if someone swipes their card number. Combating and refunding fraudulent transactions takes some cost.

Well, that's kind of an unfair strawman. Cryptocurrencies are best used as transactional currency instruments to buy with local cash and then immediately exchange for goods/services, rather than savings currencies to hide money in, risking high-beta loses from day-to-day.

What would be superior is if every nation's national post office provided basic banking, debit card and mobile payment services for free (think similar to China's amazing system), so that no one would have to be unbanked except by choice. If people are in the "gubberment shouldn't exist" camp, then there should be a trans-national, independent, non-profit credit card system that provides credit card processing and transfer of money at about the cost of delivery: no surprises and no exploiting a basic human need to hand over as much cash as possible to short-term interested stock speculators.

In the EU, you have a right to a basic bank account including a payment card and online banking.

In terms of developed countries, again, the US is an outlier in its treatment of people with no good options.

Do crypto currencies have fraud protections like credit cards and debit cards?

I bet the banks lose money on credit cards in EU. They are loaning out money up to 60 days for only a 0.3% fee. Interchange is meant to cover these loans.

That’s 1.8% annually. Better rates than European banks are getting on most low-risk lending.

It's even better, 3 month euribor rates are currently negative. So it's a safe way to use their money without "paying" the negative interest rate.

You can get home loans in EU with 1.8%? That’s the lowest risk since it has collateral. These are unsecured loans.

(A) Yes, in many countries. (B) that card loan is only at effective 1.6% for 60 days; if it’s not paid at that point it turns into potentially 20%. (c) Most card payments are debit anyway afaik; no loan longer than a day or so involved.

Reply on news.ycombinator.com