Comment by ggm | Hacker News Reader

Comment by ggm | Hacker News Reader

A recent conversation on reddit exposed me to somebody who feels its ok to say card fees are for chumps and fund his no fee high return points wins. I think predating on ill informed poorer people who incur credit card debt and fees is wrong personally. Some people think it's OK.

Herbalife is in this spectrum of product: the government is mostly financially a-moral not moral or imorral and so prostitution income is not untaxable even if prostitution is. Herbalife has to get closer to the ponzi end of the spectrum to fall afoul of the law. Right now, it's only appealing to greed.

If herbalife and flyer miles points cards predate willful stupidity then the government needs a strong drive to legislate because in the end it too is conflicted.

Its a long bow libertarian position I dont agree with BTW, I think the role of government is to protect the innocent dupes. But there are thin-end-of-the-wedge arguments a-plenty here.

If I were king, I'd ban herbalife. If I needed a kings tax income I might not.

>who feels its ok to say card fees are for chumps and fund his no fee high return points wins. I think predating on ill informed poorer people who incur credit card debt and fees is wrong personally.

Are you talking about interest for carrying a balance, or the various fees you get hit with if you screw up (eg. late fees, returned payment fees)?

I wasn't that specific. I am pretty sure the general principle here is that any fee you can avoid by rigorous use of the card sensibly, within your limit, he feels its acceptable to "share" as a benefit the fee free element, where the profit for the card company is in the late paying, over extended customer.

Carrying a balance and paying card interest rate when secured and unsecured loan rates are several if not ten or more percentage points lower (card interest was 20-23% in 2019 when bank loans were under 10% in my economy) provides the profits which allow richer card holders to avoid costs. This still feels like predatory behaviour to me.

His "i got the points be like me" is herbalife marketing of the gilt edged lifestyle which attracts the chumps who pay the cost of his fee free rewards. Its not implicit, it is explicitly why they offer him and his income bracket the deal.

This depends on the card. For subprime cards, it's true that late fees and interest charges make up most of credit card companies' revenue. But in the premium market segment that he's talking about, ~90% of revenue comes from annual fees and merchant fees. Even customers that never pay a dime of interest or a single nuisance fee are profitable.

As one case in point, most of American Express' flagship products don't even allow you to carry a balance (and thus pay interest).

Source: work in the industry

What's the cut off for premium above? I was on the Amex lower tiers for work related stuff and the no max thing was seriously useful for international travel. Also frightening.

The Amex cards with no limit are charge cards, not credit cards. They always specify what your minimum income is and run credit checks on you before you're allowed to get one.

It's a bit nebulous, but as a rule high-annual-fee/interest rate rewards cards are built around this model; the higher the annual fee, the less interest income a bank expects to earn.

Issuers tend to specialize, too. For instance, banks like Barclays, Chase and Amex only (intentionally) target prime customers. Chase has been known to fire customers that suddenly start carrying significant balances on their cards, for instance.

On the other hand, banks like Capital One and Credit One explicitly target subprime customers and make the vast majority of their income from interest. Whereas Amex makes 90% of their card income from annual fees/interchange, for C1 it's more like 90% interest/10% interchange. Chase is like 65/35 Interchange/interest, for comparison.

For Amex, the simplest rule is that any card named after a color (Amex Gold, Amex Green, Amex Platinum etc) doesn't charge interest.

Oh - and the Amex charge cards don't actually have no limit. They do have a line, it's just hidden (and somewhat larger than most credit limits). Amex actually has a 'check my spending power' tool on their website where you can plug in a hypothetical purchase and it'll tell you if they would (hypothetically) approve it.

So why isn't that acceptable? Should he start accruing balances and paying only the minimums just to support the credit card companies? Seems like he is just being practical. I've never paid a dime of interest in over 25 years. None of my cards have membership fees. Every couple years, I switch over to which over one gives me the best deal on points.

Not withstanding having been corrected above, I believe his points accrual is funded by chumps. I also pay no fees in my card, and have no points. I dont think my card is spotless either: the product can only work because there is revenue in the system. If its merchant fees we're all paying a non tax impost on purchases which is out of relation to the cost of electronic cash services, and if its the 23% apr its usery.

Some of the revenue comes from selling purchasing data about higher net-worth cardholders which is why your MasterCard Black or Visa Infinite tend to come with higher rewards.

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