Who actually pays for your credit card rewards?
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- čas přidán 14. 02. 2019
- Here’s why you’re paying for credit card rewards - even if you use cash.
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Shoppers love credit card rewards. Banks promise offers of cash back, bonus miles, and cash bonuses to get you to sign up and spend. In 2018, 92% of all credit card spending was made on a rewards card.
Some people, like Brian Kelly, a.k.a "The Points Guy," have even made a career our of maximizing these rewards. But who ends up actually paying for all these rewards? (Hint: it’s probably you.)
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Okay so every time I go to the store I'm paying for this guy's trips to South Africa
not unless you join the dark side and pay with your rewards card
Taikamuna That’s why you need to sign up for credit cards so you can get the rewards you’re rightfully owed. Of course it’s only free if you treat it like a debit card and pay it in full every month
@@josmalig-on2907 Imagine local businesses. I'm basically taking money away from small businesses just to get a free vacation. I'm basically just being one of the causes of income inequality, no thanks.
@@dom1abc1mbc at small local stores I pay cash.
@@GoBlesstheSky thanks for the free south africa flight
The moral of this story: 'People with lower incomes pay for your credit card rewards, so use a rewards card.'
I honestly don't know how to react.
Yeah I don't know how to react either, even if I was wealthy I wouldn't use credits cards unless if absolutely necessary like serious emergencies.
Everybody pays for it. I make less than 15,000 dollars and as a student I have the best cash back no annual fee cash back reward cards.
What? No. That's not the moral. Not at all. People who spend a lot of money on credit cards (and thus cause a lot of transaction fees) pay for the credit card rewards. Those are also typically the people who USE the credit card rewards. That is the moral of the story. That C.C. rewards are stupid - a sort of forced savings for nearly ALL spenders that causes slightly higher retail prices, and allow banks to skim off a bit as their profit.
The people with credit cards cause, pay for and 'profit' from the interchange fees. The people without a credit card, those who maybe can't get them because of low incomes, just pay more is stores. Now the people without a credit card don't directly pay for your C.C. rewards but they are disadvantaged by this system. Right? Now Vox clearly says to go use a credit card. To me that sound like, 'go abuse this system and make poor people pay more for their regular shopping so you can get a free trip to Ghana'.
People who live beyond their means and pay interest pay for my rewards***
Now I know why Chinatown grocery shops be like cash only
That and tax fraud
Cash only, and maybe 3/10 employees on a recorded payroll.
@@casonc4158 Yeah... some Asians would literally work under the table in those Asian restaurants. For the Asians, they make some money without ever having to get a work visa. For the restaurant owners, they have more power and money into their own pockets.
In Australia we would assume it's a front
It is totally a prisoner dilemma problem. If you do not use a points card, you are paying for others' points and you lose benefits. If you and everyone use premium cards, then all stores have to increase their prices, and everyone has to pay more for products. Everyone loses.
Exactly!!!! It’s a feedback loop
Well, not everyone loses. Banks win. Banks always win.
EXACTLY! I would upvote this twice If I could.
That's why they have some basic limits for getting a premium card with their pay scale. So technically, not everyone could subscribe to it.
nope. If you use a credit card, you statisticly spend more as if you would pay cash. Its not worth a 2% benefit if you buy 20% more useless stuff
So the concluding answer according to this Brian guy is: "Who cares? As long as it's not me!" What a nuanced take...
I got that vibe too, but on the other hand, he is right that you are paying for these rewards either way, that you simply aren't going to receive when you use cash. Seems he's taking the perspective of "here's how you make the most of your money in the system as it currently exists" rather than "is this system right or fair, and how do we fix it"
Which isn't surprising given that his way of life rests on these rewards existing so that he can use them and teach others to use them. I wish Vox had another guest on this video to talk more about the implications of this.
Like you would say no to those rewards in his shoes because of the ethical dilema of it. Not his fault you're here and he's there.
Pwasma Dwagon He reached the obvious conclusion this should be illegal, but instead went the other way.
It's called a "rewards" program.
Shouldn't people be rewarded for using the rewards program?
Some just put more time and effort into it then others. Same with coupon hoarders. There's people bagging 300-500$ worth of groceries each week for 0$. At that point it's a full time job. It's a matter of time and motivation.
Credit cards are selling your purchasing information to third parties. Is your privacy worth the rewards points?
Studies show that if you use a credit card you are more likely to spend more money than you expected. Having the discipline to stick to a budget and pay off your credit card debt in FULL each month is the key.
you probably missed the part where they said all the prices are marked up to pay for these rewards. Doesn't matter if you have a budget and you pay it off every month. You are still paying for it.
@@waheebchaugule9901 yes, some gas stations have a cash price and a card price.
Use your credit card like a debit card and you’ll not have this issue
@@DanielLee-qz1yd it's a bit more nuanced. The thought process should be that. But the thing is, when you use a debit card, you physically see your balance reduce and that has an impact. Doesn't happen with credit cards.
I've developed a system where if I play with CC, I transfer an equal amount of that to my 2nd bank account. And when the bill comes, I use that account and square it off
I don't buy the "Dave Ramsey" school of thought on this thing. Credit cards are very useful and in my current existence, I can't think of a single situation in which I'd spend more. I literally can't physically spend more on gas, I'm already thrifty when I rarely go for fast food, and to top it off, when I go get groceries, I stick to lists or the reduced section with frozen foods or fruits in-season. Bills are self-explanatory. I thoroughly believe that Dave Ramsey is great for people without financial discipline who are prone to having oodles of credit card debt destroying their lives, but it's absolutely possible to take advantage of them.
I do think it's a little dishonest to exclude the fact that "The Points Guy" doesn't earn his rewards from spending, but from referring people to sign up for these credit cards. They basically receive a referral bonus (in points or in cash) for each sign up through their site/promo.
This video makes it sound like he got all those trips just by spending, which is ridiculous.
@0:26 he never says he got the points thru spending only using points. And all those signing up thru him (as you say) will spend to get points and prob think they’re free. Subject of the video is how card rewards really work.
"I won't get into the ethics, but I will maximize my part of it" is a really sucky justification for anything.
It's human nature. And you can't fight it. People 'always' act in their own self-interest. And in doing so, they product higher outputs to benefit society as a whole.
Welcome to the real world.
@@Astrobucks2 Higher outputs that matter only in the short-term and in the long-term help sustain the whole capitalist system where the poor have to work the hardest, to reap the least amount of rewards.
@@V1Pin That's not really good argument if you're a rich person trying to pinch more pennies when you've already got plenty.
Listen man, hate the game, not the player
I pay for them, thank me later
Thanks bro
Be a frugal and disciplined spender. You’ll be glad in the end.
Then you can use rewards credit cards 💳
Thx you sooo much lol
@@nicolascage5323 rrrrrr
I guess it's easier to blame the guy in the video than it is the credit card companies and the government. If that's your stance, nothing will change.
I don't really disagree with you, but companies do what they have to do in a capitalist world. If it weren't for the greed of people who want stuff for "free" when it's not *free*, then this business model would fail. Likewise, if you have a sensible government like in the EU, they can put restrictions on this.
My problem with Vox is that they are not addressing these points. When the chap says "I won't go into the ethics of that" - they could have said "but we will: ..."
It's easier because he puts a face on it. He had a chance to go into the ethics and criticize a system that exploits the power banks have over retailers and he chose not to do so, instead recommending viewers support the system driving prices up. Obviously he's not at fault for the system existing but no one is saying he is. He picked his approach intentionally and the video all but spells out that we as consumers, especially consumers using debit or cash, are paying for his extravagant vacations. So I don't think the hate being tossed his way is unfair.
He didn't make the system but he is definitely promoting it.
@@YensR in a real-world situation, you can't just expect EVERY wealthy person to consider all angles of the problem and generously not take the opportunity they've been given for the good of everyone. It's on governments to mandate that
@@McBenjiBoo hes promoting a system thats used by 93% of the people with credit cards? Doesnt seem like it needs promoting
"I'm not going to go into the ethics of it."
Of course not, otherwise you wouldn't have ever used it; it's an unethical system. No wonder they ended it in Europe. I can only hope the rest of the world follows in capping this.
I m unaware. What did they end specifically in Europe?
Lmao we most def still have this in Europe.
They clearly stated that in Europe the fees were capped at 3%, not that the entire system was ended. Listen
Fun fact: successful people always describe their experiences as a series of challenges to overcome, not in a larger context. I remember hearing from a national-level official at a tech firm talk about how she realized that, as the only white girl in the room firing executive meetings, she could surprise her co-workers with ideas. Like, her voice would wake people up because it wasn't a droning old make voice. She didn't complain about female lack of representation, she leveraged it to gain power. Moral: you as an individual need to understand the systems around you not because you personally should change them, but because you can then better understand what is necessary to succeed
Edit: so yeah it's totally reasonable for him to take advantage of a system he didn't design, he just shouldn't be shocked when the rest of us stop this bullshit
@@leonxl @4:12 listen again. They clearly say point three percent.
"I won't get into the ethics but I will maximize my part of it"
what's wrong with the world is people like you thinking about something for .5 seconds or using quick easy soundbites because by proceeding like this you inevitably end up with a stupid answer like "if just everyone was not after their personal gain it would be all great" which is pretty much like saying "if mosquitoes would not suck the blood of people with malaria then malaria would be gone " yeah thanks nostradumbass
turing Yeah, if everyone would just be selfish then they would simply help themselves? Not having empathy and just calling a person with opposing views stupid is unintelligent and doesn’t really help the discussion. I’m guessing you have $ and it doesn’t make u happy 😔
Ok but now you have that information as well, are you going to do anything about it? If not, you're no better and you're also what's wrong with this world.
how about PAY YOUR DEBTS ON TIME TO HAVE THE SAME CREDIT SCORE
Like the man said, if you use cash or debit you’re effectively paying for the points others are receiving. The ethical debate really should be directed at the banks who provide a financial disadvantage to people with lower credit scores. The flip side of this is that businesses have the choice to refuse credit card transactions but risk reducing business because people like getting there points.
The rich gets richer, the poor gets poorer.
Well stop being poor then
@@zjschulling amazing. Here's your All Time Nobel in Economics.
@@nelsonth well if your homeless,buy a house duuuuh
Actually travel hacking cost the bank money not the customer
@@zjschulling Just be rich 4Head
I'd spend more to get rewards...if I had that much money for it
You don't need a large income per say, just decent credit... If I can apply for some cards while my credit score is garbage, then you can too!!
@@daniespry1186 I know how this works haha. It was joke ;P
Don't do that. Just buy what you regularly buy, don't pay for a couch, pay for your groceries. Buy what you know you'll be able to pay back.
That idiot doesn't realize he is paying higher prices on everything because of the fees retailers pay for his rewards. Can he buy a new car or groceries or pay his utility bills with points? Travel is nice but i want otherthings too.
He's a socialist liberal. We've been trying to warn you about them.
Pay cash if you can. Especially when it's a small vendor or shop. It helps the local economy. Cc fees suck.
100% agreed. The store pays interchange fees to the bank only if you swipe a card. If you pay cash, then the store gets to keep the extra that they are charging you.
Majority of the small stores I go to charge me an extra fee for using credit card/debit card.
Work the fees into your prices, if you can't accept cards you can't afford to run the business.
@@applausenu I sell kratom. I have never accepted cards, as they will not work with vendors. But this is why small businesses suffer, as they are paying the fees.
@@ArmandoGore Yes many of the small gas stations and shops do that, as they should. It is better than raising prices for everyone.
"I know this isn't ethical, but I win, so I don't care" -points guy
Hate this guy... "Yes, you paid for my 5 trips to Ghana. Thanks, peasants! Low income losers don't have access to credit and I'm not gonna get into that today. Greetings from Dubai!"
I think that is a bit extreme. He is just using the system that is given to him. Him not using those points would not result in better prices in supermarkets, and he did name the negativ points.
do not project your anger towards credit card companies at him.
@@mouyeii Him not using those points (and especially him not doing everything in his power to get as many points as possible) *would* result in lower prices in supermarkets according to the video
@@andreasstergard4057 Yes, you are actually right, "but everyone does it, and me not doing it would not change anything" is one of the bullshit arguments one often has to hear. Still, hating him for it is kind of extreme.
Nope
Vox: makes 5 min vid
Vox again: we didn't have time to include...
Der Dings capitalism baby. Even socialists are on in it
Seriously...there is no "time limit" on CZcams . If you want to sell something - sell it. Don't lie about the reasoning 🙄
Der Dings
They have a limited amount of time to make the content, which would include research, narration, animation, editing etc, so they probably didn’t have enough time to include more information because it would take too much time to actually create the animation or example
Liliann Ulysse please don’t be naive
@@TyIceT "eriously...there is no "time limit" on CZcams ." If something is 10-15-25 minute longs. i aint watching it. if it's 2-5 minutes... okay.. it's not that much time lost. ill decide if i wanna lose more
"I won't get into the ethics, but I will maximize my part of it"
Bruh, that's called being unethical.
It's not though, he's playing inside the rules
@@davidyang6074 Ethics is a moral justification of your actions, he is indeed playing along with the rules but it doesn't justify him being ethical by doing these actions.
@@Percutien it was not his duty to reap his rewards. He took an opportunity offered by the bank and you think it was unethical?
@@muhiddeny.misbak542 you're confusing something that is ethical with something that is legal.
For example, eating meat is legal, though there is a very strong case to be made that it is unethical from the viewpoint of animal welfare and/or environmental issues (disclaimer: no, I'm not a vegetarian).
Well, people would still be paying for it anyway, so he's not doing extra harm by maximizing his part of it.
"My factory vents toxic chemicals from its stacks. Where do they go? I don't want to get into that, but I'm going to keep my factory at maximum production!"
Vox fans are a trip. Every single one needs to be put on a no fly list.
Silly comparison but keep to your little corner. Thanks
If you dont like to use credit cards because its unethical just dont use it. And, by the way, thanks for paying my rewards 👍
@@paulogualberto8526 your attitude is basically why America is such a basket case
@@jmckendry84 Ikr, and then they complain about high medical costs and crumbling infrastructure. LoL
Errr... was this an ad?
If you actually look into who owns Vox (NYT) you'll keep going up and find a significant amount of pro banks\anti credit union pieces which would suggest that right up the top (Ochs-Sulzberger family from memory) have ties or are at least friendly with Wall Street and the America banking sector. So yeah basically this is an ad.
an ad for what?
rentamobtv kinda seems like it paints credit in a negative light to me
ad for what? "and now you too can exploit peons unable to get good credit cards!", this kind of ad? you sure you don't suffer from psychopathy?
They are too positive about using credit card so yes it a ad. Negative, fall to paid for your credit card monthly and you will fall into hell. In the end, depend on where you live. I live in Japan so the store do have their own reward system that don't need credit card. And it is cheaper than the store that allow credit card.
Brian depend on which country you are in... in Countries such as India/UAE.. if you pay Cash - one gets an instant Cash discount, equal to interchange fee.. I see the video is only from US perspective. As said, when in Rome, do as the Romans do.. when not in US.. ask for Cash Discount.
Also, India's Maximum Retail Price (MRP) system ensures retailers cannot increase product prices as they like to make up for the cost of accepting credit cards as mentioned @ 3:16.
Just FYI, lots of businesses (small, "mom & pop type businesses that is. *_CERTAINLY_* not giant corporations like Walmart or something like that as they couldn't get away with it) do, in fact, do something similar here in the U.S. but it is illegal.
They will offer a discount when you pay cash, largely to allow them to pay taxes on a smaller amount of profit, but it's still the same thing in principle; and part of the reason they do it is to avoid the interchange fees as well.
And people might complain about that as they're "dodging taxes" and "not paying their fair share". But 9 times out of 10 (if not 10 out of 10...), these businesses are in direct competition with some *massive* corporation, like Walmart. And while a few simple things like that may not be the difference between staying in business or not, when they don't have the benefit of the unconscionable amount of corporate welfare these giant corporations get, any little bit helps them.
What about with discover credit cards? Like you have a certain amount of points you can exchange for cash,or use points toward a gift card. Usually they are $45 for a $50 gift card. Sometimes they are $20 for a $25 gift card. Not everyone would use this deal and presumably discover has a deal with this large handful of companies that help pay for this difference in money. I exclusively use my discover rewards for gift cards, and I try to hold out for the high value ones as long as I know I will use it.
In other words, I imagine this may be a better deal than cash discounts with the added element of getting more for your money with the gift cards. Could be wrong, but I'm simply speculating. I'm American though, so either way this makes sense for me to do since I wouldn't get a discount for paying with cash.
One of the smaller shops I go into, has a cash price and a card price, that is how they offset the fees. They are upfront about it. I didn't take a calculator out to figure the percentage difference, but I use a card for everything, never have cash on me. I like that they are upfront about it.
Edit: It was like a $0.13 difference, nothing major - I could only remember the difference and not the price though, sorry :)
Used credit card responsibility.
3:51 "I won't get into the ethics, but I will maximize my part of it" - late stage capitalism in a nutshell.
Late stage capitalism is a Socialist's myth.
Capitalism has always be like this. Private property comes first, self interest comes second, everything else comes third. It's by far the best system in the world.
Harshit Madan Pardon me, but i see a few flaws in your reasoning
Astrobucks2 socialism is a capitalist’s myth.
Harshit Madan yeah um, this is what we call a sociopath. Thanks capitalism!
The premium MC/Visa fees being the same as AMEX fees makes me laugh when a retailer tells me they don't take AMEX due to the fees. I then pull out my World Elite MC which I know has some high fees and pay for my purchase. Once the fees get regulated, the points game will change. However, I don't see that happening for a while.
Signaturr Visa and Visa Infinite have higher interchange fees then AMEX. With AMEX the interchange fees are the same from the no annual fee AMEX to the AMEX Platinum and AMEX Centurion. I do the same when a store doesn't take AMEX. I drop my CSP on them.
Disappointed in the lack of depth of research and investigation, Vox, especially with that tease of credit tips in a separate, paid, video at the end.
You didn't seem to challenge anything this guy said, including his one facile tip of just getting your finances in order. Is it truly that easy for everyone? Can the poor in America really just afford to get multiple credit cards?
I totally agree with this but I feel like maybe that should be a separate video... this one was just answering the question who pays for all those rewards and I think they did that.
The poor can't afford credit card because the poor needs certain wage to apply for it
sabiq rusydi credit cards are stupid anyways.... debit or cash is the way to go
@@suuwooski6416 what's really stupid however is that you need a credit card to indicate you have a good credit rating for when you want to apply for a mortgage or loan
Vox isn't really focused on journalism. They're just a bunch of extremist snowflakes pushing their own agenda and trying to make money off their advertisers.
.
Short answer: everyone
Longer answer: the merchants, paying processing fees, who pass that along as what amounts to a hidden tax.
.
I'm also pretty sure that the agreements that the merchants have with card processors forbid them from offering a discount for cash payments. I'm not sure how that is even remotely ethical.
Rich Marceau what is unethical about it?
I've seen gas stations that have separate prices for cash versus credit. Cash being slightly cheaper.
@@isaacng123456789 forcing me to pay for someone else's reward without being up-front about it.
In Brazil, stores are allowed to charge less for services payed in cash. This is somewhat controversial, as some experts say it could facilitate tax evasion. (Brazil’s taxing is much different from the US)
@@disorganizedorg you're not paying for someone else's reward. It just happens that they're taking the money from the fees to pay for those rewards. If you want you piece of the pie then get those points.
This video was silent on the fact that retailers can now tack on a "convenience fee" to credit card users. That way, cash and debit card users and merchants are not subsidizing your rewards. I've seen this going on at gas stations and also for major purchases (e.g., tuition payments).
that's right; imagine paying for a car using credit car and the dealer instantly loses $1000
In the UK you only pay the transaction fee when using a credit card, when using a debit card or cash there is none - therefore if it were the UK, you would effectively be paying for your own points. This is good because it incentivises consumers not to use credit and only use the money you actually have. Stay out of debt kids - it’s not good for anyone.
Preach bro
this sounds really logical and honest
So that guy is a BIG part of the problem...
Not really, he's making the most out of a situation that he has literally zero control over. The big issue is a lack of laws to control the banks charging so high of a percent. If you want things to change, the US would have to pass a law. Otherwise consumers love those points, and everyone will keep getting those cards.
@@David-kd4qr Using your credit card each time you buy something litterally cause the problem. Whatever your goal, you still use it, and sellers have to pay credit card for you to use it. So yeah, he's a big part of the problem. I use money whenever I can, so I'm sure I won't miss on a credit card payment.
@@Shawouin that's like saying that me doing my taxes perfectly so that I pay as little as possible is immoral because poor people don't have accountants
He a fool. One day he going to make mistake and fall into credit card debt.
@@andrewjohnstone7943 Very bad analogy, it's nothing alike. Using credit card cost seller money, so the price go up for everything he sell. Not like taxes, it's the opposite actually.
The video is 5 minutes long and they say they didn't have time to include the extra content LOL.
well, it's a long video if you consider the average attention span for millennials.
Millennial here.
Am not a goldfish thank you.
Go level up your trolling skill a bit more.
They just didn't want to say
"we've now created a paywall for our actually valuable content because
like every other corporation we have to be profitable and our margins aren't cutting it"
I don't think you comprehend how video editing works...
But to make another video :P
Luis VCSilva I hope you know long form content is what’s trending on CZcams these days and Millennials and Gen Z have the highest penetration on this platform.
Thanks, people with no credit/bad credit. You have been funding pretty much all of my vacations for years.
a lot of people hating on this video and I'm not sure why... they merely asked the question "who actually pays for your credit card rewards?" and then answered it. I didn't know the answer to that question and actually found it interesting. People keep saying they should get into this broader discussion about the ethics of the entire credit card system or whatever. That wasn't the point of the video...
This video was half-assed, Vox .
An other potential solution is to put the interchange fee on top of the transaction instead of taking from it, so the stores don’t have to pay for it. This can lower prices for those that don’t use the rewards cards and make the stores more willing to accept the premium cards.
👌
This won't happen because the world is corrupt.
The banks probably require it be hidden this way. Come to think of it, this is probably why sales tax is enumerated, for the opposite reason: the wealthy want you to see when you're paying taxes so you're more likely to resent it, and not when your getting nickle-and-dimed by the wealthy.
@@JD-jl4yy apparently this is how it works in the UK
I am surprised not to see anyone mentioning what I think is in the end the real source of income: data. The more you spend with your card, the more your bank can build a very accurate profile on you. They know what you buy, how much, when you buy it. And the best thing is: it is just straight forward since they have your real name, address and phone number! Advertisers do pay big bucks for this kind of info... which in turn also drives up the price of things you buy. People paying cash do not lose it all, at least they keep (part of) their privacy.
This video was brought to you by *Master Card.*
A paywall to see the video about how to be good with money....right
ThatDaniSaid hehe
I used my Mom's Credit Card to buy V-Bucks
I mean Virgin Bucks
When ever I have the urge for V bucks I make sure to indulge in Madden 08
ohhhhh
Good thing I have my own prepaid card with no fees
You can demonize EU bureaucracy all you want but it does do a lot of good for all people even if they don't know about it.
In Australia, it's pretty common that a lot of places (even medium to larger chains) won't accept premium credit cards. And it's not uncommon for cafes and small businesses to be cash only, and an extra 10%-20% fee is common for credit card purchases across the board. One of the only reasons places will accept premium cards or be card only is it means less or no cash on site, otherwise, it's preferred to not accept premium cards.
As a marchent in Brazil we pay here the same fee for any card from the same brand. We receive the money after 30 days of the date of the purchase or we pay extra fee to receive the money earlier.
If you want to save money in Brazil (applied I think to any other country) you can negotiate the price if you want to pay in cash instead of credit card. In this case you save the seller some money.
I'm 38 years old and I've never used a credit card in my entire life. It's been a great way to keep out of trouble.
I wish I could say the same.
@@potmki6601 My elders advice was: "Credit is a way of paying even more for something you can't afford".
So you have no discipline?
@@vegetalover1009 Yes. Avoiding credit is discipline.
Now vox will cooystrike any CZcams video saying credit cards are bad because of the risk of debt
how hard is it to treat credit cards as you do with debit? do you people have 0 self contorl???
my first reaction was: OR maybe stop getting the cards so the banks stop offering them and the retailers lower their prices. but would they? once we're used to the new high price, what would be their incentive to bring it back down?
Exactly, prices are going up. regardless of the current excuse. Greed. Companies want to make more and more money. Prices will never stay the same because companies are not content to keep making the same amount of money. They are making billions and are controlling our lives, I have no sympathy for them.
Please don't copystrike my comments. I know you own everything via fair use.😬
I already collect travel points that way, I only use credit for my purchases for the points, but it takes sooooooooooooooooooooooo long to collect the points, unless you're rich and your spending budget is huge.
It'd be easier if you opened a business where you spend regularly. For example, a print-on-demand business where you pay only for the products you sell. You'd also be spending money on ads, which would then help you sell more, make more money, spend more money on products, and gather more points.
You'd basically be making profit and earning points at the same time.
The best way to spend money on a credit card is through a business, because you should be profiting from spending money.
@@TheBitcoinExperience agreed. I don't run a so called business but I often selling things I bought for cheaper which give me tons of points for free!
@@rohangangar6210 nice one!
What happened if everyone have credit cards and always pay on time?
then cc companies would go extinct.
@@nofood1 actually it would be the banks that would go extinct (and even they wouldn't but they'd lose all the revenue they make by changing people interest on credit card balances). The credit card companies are making the bulk of their revenue from the interchange fees which exist when the credit card txn takes place, it has nothing to do with the customer balance and paying it off on time or not.
They still got transaction fee from the venture.
@@nofood1 credit card companies dont make money off interest
@@nofood1 No danger of all humans suddenly becoming responsible.
There was a mom & pop shop in my city years ago who charged less for cash purchases that credit purchases. That would be the perfect balance between making the credit consumer pick up the tab, without making cash users finance credit consumers.
01:07
Credit Card Rewards paid for Frozone/Nick Fury’s Super Suit
With so many credit cards on the market how would a retailer know what rewards card you are using; whether it is high or basic?
An example would be Visa Signature or MasterCard Elite
In India, the interchange fee is called "Merchant Discount Rate", which the banks charge from the store for using their card.
Consumers spend 10% more because of spending habits with a credit card and In certain circumstances, you can negotiate with cash. What’s the better return? 10% or 1.5% cash back?
I’ll take 10%. Now that’s “Money left on the table.”
Cash is not necessarily cheaper for merchants, they might have deposit fees or similar for the business bank accounts. There's also the extra time spent taking cash to the bank, and the security and equipment needed to keep that cash safe. If a merchant can go card only, they might actually save money even with the processing fees. This is starting to happen in some Scandinavian nations.
Is this a US thing? Because the last time I audited a retail client, Mastercard/VISA charge flat rate around 1.25% to 1.75% merchant fee per transaction while American Express is the most expensive one at 2.5% to 4.0% fee per transaction which is why we rarely see merchants accepting AMEX, while MC/Visa are always accepted anywhere.
Premium cards are justified by their higher annual fees paid by the cardholders, not the merchants.
Credit card companies make money from bot merchant and cardholder. Merchants gets charged a higher percentage for those higher tiered card. ( Those luxury cards)
@@andrewliu2526 He's asking if this is limited to the US
It depend to country to country. But euro do cap at 3.0%. And yes AMEX is expensive everywhere.
Something that the video should have covered, which explains your observation, is an antitrust case the US Supreme Court decided last year. Several states & the federal government went after Visa, MasterCard, and American Express, claiming that merchant agreements requiring stores to accept all cards (including higher rate ones) and contractually preventing stores from incentivising use of lower-fee cards violated antitrust laws. Visa and MasterCard settled a few years ago. American Express challenged the charges in court eventually reaching the Supreme Court, where they won (5-4) and so aren't limited like Visa and MasterCard (which must still adhere to their consent agreements).
Here's a good summary of the Supreme Court case (Ohio v. American Express): www.scotusblog.com/2018/06/opinion-analysis-divided-court-defines-credit-card-networks-as-single-two-sided-market-rejecting-antitrust-challenge-to-anti-steering-provision/
And here's a link to the decision: www.supremecourt.gov/opinions/17pdf/16-1454diff_6579.pdf
The cashier just threw the card back at the customer 🤣🤣🤣 [04:00]
only use cash in places where they'll offer you discount for paying cash (yes, there are places like these).
Repeat after me:
*Cash DIS•count*
*Credit AC•count*
I always wondered why smaller shops/restaurants reject amex !
Yeah and then the people who were going to pay with AMEX use their Visa Signature, Visa Infinite, Mastercard World, or Mastercard World Elite which has a higher interchange fee than any AMEX card.
Does anyone know the background song used in the beginning of the video?
Getting a cred ad to pay my (non existent) credit card bills after this video... is just hilarious 😂😂
I actually think the Interchange Fee Regulation is one of the EU's most helpful laws.
Stop destryoing people's lives by abusing the CZcams copyright system!
Let's not forget as well that banks usually offer points rather than cash back / rebates. And like all other membership / points system, the majority of the people end up not using the points. Plus there are usually terms that cause such points to expire resulting in a lost of all that accumulated 'hard work'. I'd recommend sticking with a card that has no expiry date on points (if there is any in your country) even if the rate of earning those points are lower... especially if you are not diligent enough to be on top of tracking and using your points (which is generally most people).
I pay for everything in cash whenever possible because I don't want other people knowing what I'm buying or what I'm doing, and that privacy is worth whatever strings-attached gifts I'm forfeiting. My life is my own, and I'm not interested in having strangers scrutinizing it for the purpose of learning how to sell more stuff to me.
Interchange fees don't directly indicate fees paid my retailers. They pay merchant fees to their bank (the acquirer) which is a different rate to the interchange fee, always more expensive. The acquirer then pays the interchange fees to Visa or Mastercard.
Enjoy the points while you can. The EU has capped at 0.3%, and Australia at 0.8% meaning substantially less points earned.
I'm a retailer; and I see that interchange fee deducted from my account every month along with Merchant fees. and this other thing call Merchant Bank Discount. So Yes. I am paying Interchange fees.
I love using my credit cards. I have gotten back almost 1k in cash rewards for one year. Paid no interest since I pay it off each month.
Even if you have a really high 5% cashback card, it means you spent $20,000 that year on that credit card. At 1% (which is a typical cashback for most basic cards), that's $100,000.
I'm tired of people talking about how awesome credit card rewards are. They're awesome because you spend a ton of money on credit cards. $20,000 a year is more than what I spend throughout the year, including rent. (and I live in Canada).
2:50 PLUS they pay the bank or merchant account an annual fee, American Express charges retailers around 3% of each sale, while Visa and MasterCard charge around 2% on average. Everybodys cost goes up to cover the huge percentage going to the bankers.
The trick is to simply not spend more than you earn and to pay off at the end of each month. I setup autopay on all my credit cards to pay off the statement balance every month. So far I’ve earned 100K miles with United and 150K points with Hilton. Won’t be long until i have enough for my vacation to the Maldives!
Still don’t get it how he can for free traveling. He must be open a lot of credit cards and eventually close which lower his credit.
Anna M. You are misunderstanding credit. Once you have a long history with many cards, things you do like opening and closing cards do not affect you credit as much. Besides, a lot of cards on the market have “downgrade” options that allow you to keep the card without fee. And also, he makes most of his points through referral now, not sign up bonus.
He has his own website that talks about credit cards and travel. He gets pretty much unlimited amount of referral cap from companies on referral bonus (people sign up using that affiliated link). In a year, he probably earns minimum 500K points across all credit card ecosystem.
He does not travel for free. That's a lie. He promotes this lie to lure customer to his blog and get them to sign up to credits cards he is affiliated with.
He still has to pay a lot.... moreover, most of the time those cards have a minimum spending requirement.
If say, you get a card with a 50K bonus points once you spent 3K usd within the first 3 months. That's enough for you to go from the USA to Europe in Business class. You will still have to pay some taxes on the reward ticket (especially if you fly British Airways).
That means that you have to get 2 of this cards and spend 6K + taxes within 3 months to only get a return in business class to Europe.
I can tell you he does not travel for free. The system when used correctly can allow you to travel often at a minimum cost and in good condition (nice hotels + business or first class airline seat).
PS : I'm french so sorry if I made some spelling mistakes, we don't have this credit card system in France as retailer "only" pay 0.03% fees on all credit cards (thank god for the EU).
Sofian S This is simply false! Unless you have any evidence of him lying? He earn majority of points through referrals through his online business. Moreover he largely spends on online advertising, he has said that he clearly spends more than 100k per year on advertising with his credit cards which he would’ve spent anyway. So he has no problem meeting his minimum spending. I don’t know if it’s because you’re French and isn’t much educated with the American credit card system.
Of course you will have to pay taxes and fuel charges on different aircraft - that’s pretty obvious. If you’re paying airfare ticket with debit or cash you’ll still have to pay the ticket + taxes + fuel charges. With credit cards rewards, it simply offsets the cost of a ticket.
While not many are in a same position as him, I know many people who are just an average joe who can stay long term with credit card and get a free business round trip international or 1 - 2 business round trip in domestic every year. Rewards earn through transaction just on everyday spending.
@@lemontea000 All I said was that he lied about "travelling for free". It's NOT for free if you HAVE to spend money.
The fact that he uses his reward card on purchase he had to make anyway is irrelevant. It just shows he is not stupid.
I would also add that he does not only get points with referral links. He gets paid by credit cards companies (and it can be a lot).
Credit cards are basically their business model and it works.
Good for them.
I'm only pointing out that he is clearly biased when talking about that subject.
Even if I'm French I might know a little more than you think about your country ;-)
Always remember: If you're not playing you're getting played.
Also: If you're not paying for a product then you're the product
Question I have: when I use a premium rewards card, but at the store its linked to (eg. Wal mart credit card at wal mart), is that penalizing the vendor, or using the system as intended?
This was much more informative than I expected.
@Vox: Where is the video extra in the Vox lab? I'm a member, but I can't find it. Please include a link as a reply to this comment, or even better, in the video description.
its almost like they were more focused on signing up new subscribers than actually delivering content to existing subscribers.....
I like Vox overall but I'm disappointing in hearing that their company The Verge abused the DCMA CZcams process for what appears to be retaliation on significantly smaller creators fair use criticism of a Verge video.
In Argentina, it's more expensive to pay with a credit card than with cash (and even cash is usually cheaper than using debit) because of the interchange fee and the time it takes for the owner of the store to receive the money (and also because they have to declare the sale to our IRS equivalent). So the informality of our economy already solved this particular issue
I'm getting well rounded one video at a time 😂
This is an ad for getting us to sign up for credit cards....
I didn't see it that way... Sure that one guy made a niche thing about trying to maximize the points but I actually found the answer to the question they asked "who actually pays for your credit card rewards?" pretty interesting. It's something I never knew before.
@@Spike.SpiegeI Those reward are small amount compare to the transaction fee the credit card get.
Additionally, paying with a CC eliminates the fear of loss and activation of pain that comes from using Cash; thus leading to increased spending since it "feels" like you didn't just spend $5 on coffee.
That's up to you. Choose to be responsible. When I put purchases on my credit card, I am already thinking of it coming out of my checking account because I know I'm going to pay it off in full every month. It's the same as my checking account, except that I am 1. getting rewards and 2. building a credit score. The cards are a tool, use them wisely.
you literally throw the money away and pay for the points for others...
Speechless Orz
It sound like being kidnapped by credit cards, whether you using it or not. That's a good one, banks. 😅
Same thing happened with debit cards in the US as it did with EU regulation. Artificial rate caps stifle innovation.
Rewards has so far paid for about 4 of my overseas trips in the last 2 years. (precovid) Getting harder to find good deals, but still on track for around $150 back this month on one card alone.
Interesting video. I always was aware that merchants had to pay a fee per transaction but I had no idea what the amount of that fee was. I guess that is why most reward cards offer between 1% and 3% for rewards. I am not sure if they are technically allowed to do this but I have seen merchants deal with these interchange fees in a few ways. Primarily, some institute minimum purchase requirements and others charge the customer a non-cash fee. The non-cash fee could be either fixed or based on the purchase amount.
What I am curious to know now is how you can determine whether or not your card is a premium card. Also, what are the highest and lowest interchange fees out there? What about cards that offer more than 3%? Are those cards that have interchange fees higher than 3% or do they use other sources such as late payment fees from other customers?
Lastly, I don't think it would be as bad if merchants could choose not to accept all cards. I think the problem with the EU is that, effectively, it was the government that set the rate. I honestly think there would be a different result if merchants and banks were permitted to set the rate in more of a free market style. Although, I suppose you could argue that is how it is currently done.
Gas station sometimes have less expensive price per gallon for payment in cash.
All these complainers smh🤦♂️. If you can’t beat’em, join’em.
I got tons of cashback, thousands of points on things that I was already gonna buy. You have to be disciplined with your finances, pay them off in full each month like I do, and let other idiots who buy things they dont need or cant afford them then get slapped with interest and fines pay for you
This problem for the non-credit card using consumer is even worse than it seems...those who do pay cash at multichannel retailers almost always pay more. So what happens is those who can't don't want to use credit cards and shop online (usually lower income) will pay more at these, typically big box retailers. In a small survey I did at Target, Home Depot, and Walgreens, private label (store brand) items were 5-10% more in-store and white label (name brand) items were 10-40% more in-store (yup, you read that correctly). In all cases, the clerks were willing to price-adjust items after exact sku was shown to them from their own or their competitor's websites form my phone. I'm not sure how these markups may vary across geographic area/region. Also, I'm not sure strategically whether these retailers are trying to cover incremental occupancy and labor costs of running brick and mortar or offsetting credit card fees. My guess is both. But bottom line, is it sucks for the consumer shopping in-store and paying cash and particularly if they don't ask for price matching.
Throwback to other vox videos with the props on the shelves behind the guy :) like the circle of fifths from the John Coltrane video.
Actually i made a deal with satan
Was it deductable from your tax?
You guys guys are not really good with copyright laws, are you? Such a shame to see a professional media outlet behave so childish.
There's a flip to this: as a credit card product manager i can tell you that banks are aware of this consumer behaviour, so in a few years we might lose the points and miles in our cards. For sure.
The transaction fee is why some businesses have cheaper prices but don't accept credit cards (like some barbershops and small mall food court restaurants) or require that you buy $5 worth of goods or pay a small surcharge (small corner stores.)
Or at least thats how it happens in Canada.
All i hear is "capitalism capitalism capitalism..."
abby_0x0 what’s wrong with capitalism?
@@oscaragudelo5796 Well...
Ardit Lika I bet! I was just curious that’s all
abby_0x0 🤨
@@arditlika9388 tru
I've been on this game for three years, loving every point of it.
You realize you're paying money to get your own money back, right?
Brodie Chree what’s wrong with that? If I got bills to pay and use my credit card to pay for the bills I’ll get some money back
Brodie Chree You’re throwing money away by NOT using rewards credit cards. If you use cash or debit card, it’s the same price but you get absolutely nothing in return
Thank you for bringing your PC Build video to my attention. Never go full Streisand,
Interchange Fee is paid to Visa/MC/AX, not to Acquirer bank. The bank however charge merchant a fee.
Most people use the term to refer to the combined fees paid to the credit card network + the bank
No one ever became rich with their airline miles or the piddly $250 cash back every year. Most people WON'T pay their card off each month, that's where the banks get you. I haven't used credit cards in years, and I'm planning to pay my home off this year (20 yrs early).
Imagine you have a business and have 100.000$ yearly expenses from your credit card, with a 2% cashback credit card you would be gifted 2000$ at the end of the year. For people with small income and small expenses such cards are useless but with high income and high expenses you get gifted thousands yearly.
@@msi4887 - Imagine if your business goes south, you do not have a line of credit or can't get a line of credit because it is going south, can't pay the monthly balance and get whacked with the high credit card interest rates. The street goes both ways...
most people are idiots, how easy is it to pay on time jesus
"I know if get into the ethics I'll look like a douchnozzle, so I won't get into it"
Wow thanks for the great explanation
4:00 omg i loved that 😂