Comment by rb2k_ | Hacker News Reader

Comment by rb2k_ | Hacker News Reader

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Maybe slightly off topic to the post, semi related to their idea of an "active" customer:

I really like the way simple presents themselves. I don't think I'll join them any time soon though.

The incentive to use a 3rd party credit card is way too strong. I get things like cash back (depending on the card, up to 6% for e.g. groceries, 3% on gas, ...) and it helps building my credit score which the debit transactions on simple won't help with at all.

I do like Fee-Free ATMs, but on both of my current checking accounts (e.g. Charles Schwab) I don't have to try to find a special one that, judging from the map, usually means a 10 minute walk. I can just go to any ATM since there are quite a few banks that will reimburse costs for ANY of them.

Photo Check Deposit is pretty standard these days as well, both my local bank as well as Charles Schwab had apps that allow me to do that.

Most of the integration that simple provides (the "budgeting" part) , I probably also get with Mint. Only that Mint actually takes ALL of my accounts (Brokerage, Credit cards, ...) into account.

Besides that, the last time I checked they only accepted “Type 1 Social Security Numbers”. Sadly, as a resident alien, I only have a type 2 number (“for work”). This seemed a bit strange since pretty much every other financial institution didn't care about the specific type of SSN so far. I didn't even know there were different ones. They mention on twitter that they've "processed a few exceptions", it would probably still be very inconvenient.

You understand that the "rewards" you get when you use a credit card are somehow paid for by you yourself, in spades? Visa posted a profit of $1.6 BILLION for the first QUARTER of this year. That's your reward, right there, watching them make their oligopoly profits off of you.

I meet founders quite often who think they can get their customers to use their product because it is a better deal for the customer. Unfortunately, many of these ideas are not viable because of the way many people focus on short-term gains rather than all-in, lifetime cost. It's too bad that many (most?) people would rather have some immediate gratification from a company that intends to screw them at the first opportunity than a long-term better proposition from a company that is trying to help them.

A great example with Simple is when people say they're sticking with their higher-interest account at a traditional bank. While finding the highest interest rate may appeal to their competitive instinct, the extra 0.5% or so on an average balance of even a couple thousand dollars does not even begin to make up for the surprise fees the bank charges when that person makes a mistake. The usual rebuttal is "Well, I don't make mistakes." The revenue split between fees and net interest margins at the retail banks shows that this is just not true, on average. The argument, then, must be that YOU don't make mistakes because you're better than everyone else. That's just an unattractive attitude.

Someone should build some wearable tech that whenever you make an irrational decision, it beeps angrily at you.

</rant>

You are so very, very wrong. They make money off of interchange fees and carried balances.

These "rewards" are rewards for the consumer if you: 1) Never carry a balance 2) Pay the same price as cash and the merchant eats the fees [as most merchants do!]

Its perfectly rational if you make fewer mistakes on average. So far, in the 10 years of using credit cards, I've recovered about 2% of every dollar I've ever spent and never carried a balance. This amounts to half a paycheck.

Its perfectly rational to assume that my rate of 'error' will remain roughly the same as it has been historically and that I want to continue to use credit cards and force merchants to effectively give me a larger discount that they would otherwise.

You say that the merchant "eats the fees," but what actually happens is that they price their goods higher to compensate for the fees.

What's worse, because the vast majority of merchants charge you the same price whether you're paying cash or credit, people who pay cash are, in effect, charged these hidden fees as well.

If people stopped using rewards cards, and the merchants didn't have to deal with the associated fees, the cost of the merchandise would arguably drop by the same percentage as what you're getting back in rewards.

And if people stopped using rewards cards and the merchants lowered their prices, I'd stop using credit cards.

However, I'm not going to fall on my sword and give up 2% in the hope that that will happen.

You even admit in your post it would cost me money to stop at present :/

You're absolutely correct, and the credit card companies know they've got a good thing going for them. Everyone would be better off if the whole "rewards card" phenomenon died out, but nobody's willing to stop because they assume that nobody else will.

Perhaps we need a pledging system with a Kickstarter vibe -- I pledge to stop using rewards cards if X% of the market also makes the same pledge.

I think the best solution is to offer a better payment system to merchants and consumers. Merchants accept rewards cards because it is what their customers have and want to use- customer shave and want to use them because they are convenient (accepted by most merchants) and the reward is an extra. If you can offer a secure payment system that is adopted by a significant portion of the market (make it even more convenient than rewards cards), while offering merchants significantly lower fees, eventually most merchants will accept your payment method- and as more consumers use it, many merchants will begin to stop accepting rewards cards and paying the high fees.

This is a long haul strategy, and likely a costly battle to fight. Is it worth it?

Good luck with the pledging system. :) I'll do it at 75%.

> What's worse, because the vast majority of merchants charge you the same price whether you're paying cash or credit, people who pay cash are, in effect, charged these hidden fees as well.

Their merchant account agreements actually require cash/card prices to be the same. (Credit card purchase minimums are generally not allowed either - of course that doesn't stop many merchants from trying.)

This is not true any more. The Dodd-Frank act of 2010 allowed retailers to set up to $10 minimum purchases and lower cash prices.

In addition, as of January 2013, merchants are allowed to add a surcharge.

http://usa.visa.com/personal/get-help/checkout-fees.jsp

I think what jawns is getting at is precisely because you can't price-discriminate on the payment method, you might as well increase prices for everything in order to cover transaction fees (operating under the assumption that most customers will pay with credit card), which effectively means that cash-paying customers get stuck with those fees.

That is incorrect as of 2010 and was incorrect for several states before 2010. :/

Agreed.

I was with you until you got to the part about the usual rebuttal.

So you're saying that the average person makes mistakes that result in bank fees, and so anyone who doesn't or seldom makes mistakes that result in bank fees must think they're better than everyone else and have an unattractive attitude? And how does an unattractive attitude equal an irrational decision?

1. It's like saying "I don't need auto insurance because I never have accidents." That may be true, so far, and you may be a careful driver, but it's still irrational (that's why they call them accidents, after all.) Insurance against low-probability, high-cost events is rational. (In this case, it's even worse than insuring yourself because insurers make money when you don't have an accident, banks make money when you do, so the incentives are totally misaligned: banks actively try to make it hard for you not to screw up.)

2. If you have a couple of thousand dollars in the bank and you're getting an extra 0.5% on your interest, that's $10 per year. That's far less than the time-cost of just reading your bank's fee schedule every time they change it.

The fact is, retail banks make most of their money by charging fees which come as a surprise to the people who pay them. Those people would avoid these fees if they could do so in a reasonable way. Comments that imply that this is not so have to be either misleading, irrational, or just not generally applicable. I went with irrational as the most charitable reason.

I have type 2 ssn and I am a simple customer. I am not sure how that worked though.

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