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Comment by J253 | Hacker News Reader

> I don’t have a credit card and see no point in it.

If you use a credit card like a debit card (pay it off in full every month) it can be rewarding depending on the card. I make $75-$100 cash back every month on my credit card.

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I assume you’re in the US given $ amounts. Outside the US credit cards are far less developed. A few offer some kind of points or perhaps promotional cash back for some period of time but there’s nothing like the level of competition between cards in the US.

Where does the $75-$100 come from? Is it that prices are generally more expensive, or is it a transfer from people who get into terrible debt?

It's mostly from merchant fees. This means that it's being paid by consumers who use other payment methods - but then, those come with their own costs.

It's a 1-3% tax on the merchants. This effectively makes doing business more expensive. You would think that prices in the US would be 1-3% higher than elsewhere in the world, but the "buy first decide later" carefree spending attitude makes for quite a different consumption landscape.

Credit cards in the US offer all kinds of perks. My card covers my purchase for damages or theft/loss for 120 days. This reduces the friction in consumption.

US card transaction processing fees are higher than in most peer nations. That creates a nice profit stream in the credit card industry in the US, which largely doesn't exist eg in Europe. It funds the points & benefits systems that cards offer here.

It's how Visa ($540 billion market cap) can be worth more than the world's most valuable banks (eg JPMorgan $453 billion), and has an almost unbelievable 64% operating income margin ($14.6b operating income on $22.6b sales). Visa has one of the greatest businesses ever conceived, it's almost nothing more than an intangible floating brand toll bridge (they do operate an enormous global processing network, their primary cost center).

And then there's Mastercard, worth $380 billion. And American Express, worth $135 billion.

It's how Capital One - a credit card issuing company in the US - can be worth more than Barclays and Deutsche Bank combined.

HSBC is a giant for example, the second largest bank by assets in Europe, and is worth $113 billion.

And although some might jump to the conclusion that Americans must be drowning in credit card debt, that's not the case. US household finances are in decent shape and have been for most of the past decade. The ratios of household debt and debt service payments vs disposable income remains at historic lows (lower than 50 years ago). US household debt as a total sum hasn't increased in the past 20 years inflation adjusted. It's the processing fees that keep the card industry thriving. The switch from cash to cards for everything here was a bonanza for the industry.

I don't even see the issue with debt, tbh. It's not like people aren't riddled with it in the form of taxes for their whole lives.

Some private debt on top isn't changing much in the end.

Barring extreme cases where people go on a spending spree, usually for mental health reasons.

Besides, rich people in Europe always leverage credit/loans/debt.

> US card transaction processing fees are higher than in most peer nations. … It's how Visa ($540 billion market cap) can be worth more than the world's most valuable banks

I’m sorry you are just wrong. Classic HN Dunning–Kruger.

Visa and MasterCard make their money two ways — network and cross-border transaction fees. For ordinary (non-cross-border) transactions, V/MC have a very small take, on the order of .1-.2%. The vast majority of the fees go to interchange collected by the issuing bank and then to transaction fees to the merchant acquirer (eg Square). Interchange is paid back out to customers in the form of rewards at very low (or zero) margin; issuing banks make their money when customers revolve on their lines of credit.

To me, the greatest benefit of a credit card is that I’m doing business with JPMorgan Chase’s money and not my own. When I got an alert for an $1100 charge at a home improvement store hundreds of miles from where I was currently located, the representative happily issued me a new card number and voided the transaction.

Meanwhile, when someone had stolen my Schwab checks from the mail and written themself fraudulent rent checks for several thousand, it took nearly 3 months to get the money back. And the account was empty at the time, but Schwab’s (unknown to me) overdraft protection helpfully pulled liquid from my investment account. A debit card like using checks. The bank cares way less about your money than they do their own.

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