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Comment by theandrewbailey | Hacker News Reader

> We estimate an aggregate annual redistribution of $15 billion from less to more educated, poorer to richer, and high to low minority areas, widening existing disparities.

This is why I stay away from credit cards that offer rewards. Did you really think that big corporations give you pennies out of the goodness of their hearts? They might be people (according to Citizens United), but they have no heart.

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Using a credit card that doesn't offer rewards doesn't mean the corporation offering it is any less greedy... it just means they aren't cutting you in on the greed.

If anything, using a credit card that doesn't offer rewards is even worse for redistribution... since it's redistributing credit card fees straight into the pocket of the big corporations. At least if you use a rewards CC properly, a portion of it is given back to you.

I don't feel bad about extensively using these rewards cards. If you are a net recipient in this distribution, your participation doesn't directly correlate with any higher participation by any of the victim groups. We simply make it more costly for the bank -- if anything, discouraging them from issuing such cards.

However I do withhold recommending these cards to others because they only make sense for people who don't carry debt or spend recklessly, and I usually cannot be certain that others meet those criteria.

> We simply make it more costly for the bank -- if anything, discouraging them from issuing such cards.

No, you aren't making it more costly for the bank. Banks would be stupid to offer such a setup. The banks pass that cost on to the merchants, who have no choice in the matter.

The percentage that the bank charges merchants is fixed (for e.g. all Visa credit cards.) If you have a non-rewards Visa credit card, the bank just pockets the entire processing fee. With a rewards credit card, you get some of that fee back.

That's actually not quite true. Depending on the Visa card 'tier' (non-branded, Signature, or Infinite), there are fees that go up. If you have an 'Infinite' card, you're costing a merchant more than if you have a regular unbranded Visa. The difference is really small, like 0.2-0.3% between base and top tier, I think, but there is a difference.

This is not true, interchange fees depend on the credit card type and rewards offered.

https://merchantcostconsulting.com/lower-credit-card-process...

Although, yes, banks pass costs to merchants... the thing is, banks do in fact lose money if you are savvy enough with rewards usage/sign up fees/etc. Take a look at the churning forums some time; it would be impossible for banks to actually be making money on this and also pass it along to merchants. The money is coming the ratio of consumers that pay interest (at ~20% or whatever outrageous fee they get) on their credit card bills.

> No, you aren't making it more costly for the bank.

I sure am; almost all of my spending earns a rewards percentage that exceeds the rate charged to the merchant. (This is not even counting the significant sign-up bonuses.)

Anyone (with good credit) can do the same with a modest amount of research.

> No, you aren't making it more costly for the bank.

No, you are. Think about it, you as an individual can't change how this system works. But if you use a card with 0% rewards, you're gifting that extra 1-2% to the credit card company. If you use a 2% back card, you're taking that 2% that's on offer away from the bank.

Of course they're still making money, the fees are higher. But they make a tiny bit less if you use the rewards card. So might as well.

The reforms needed everywhere in the world:

1. Fees related to mode of transaction (credit, debit, cash) are separate from price of product.

2. Cash-backs need to be banned altogether to prevent this pseudo-regressive tax.

FedNow instant payments go live this year. This will allow bifurcation: if you need immediate settlement for commerce, you’ll be able to get it for a few cents per transaction. If you want to charge the customer who wants credit card float, you can pass along a credit card surcharge and let them pay for the feature. This should shrink this vacuum of value from those of less means to those with the means to efficiently use rewards cards.

Due to US politics and the financial services lobby, it’s unlikely we’ll see interchange caps like Europe enacted, killing most rewards programs, so you’ll have to rely on merchant economics to drive the change.

I don't have a moral problem with using a rewards card. If past me could avoid credit card debt while scraping by below the poverty line on disability, with nothing but a high school education, I believe everyone could with the proper discipline. It's basically a transfer from spendthrifts to savers.

By you staying away from reward cards doesn’t reduce your costs.

> This is why I stay away from credit cards that offer rewards.

Why punish yourself like that?

I understand taking a moral stance even if makes your life harder, I do that with various things. But I guess I don't see it on this one since the vendor doesn't even know if you get any reward back when you hand them a credit card, so it doesn't show your posture in any way. All you're doing is gifting extra money to the credit card companies.

While understandable, game-theoretically, this approach seems like a non-starter for effecting change in the status quo.

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