It's clearly more complex than the story these authors are telling, in particular the highest income consumers get the worst returns on their interchange payments. So stores and services catering to wealthy consumers are actually subsidizing an opportunity for savvy customers, many of whom are not wealthy

mchusma 15 hours ago | parent | next [-]

One note on patio11’s opinion on this is that he really overweights the ongoing work and innovation required for electronic payment processing. It WAS a great novelty and deserves to have made a lot of money for 30 years. But the reason they make so much money today is monopolistic low behaviors to lock in their advantages. It’s not a free marlet because of deals over time, some of the most famous of which are their prohibition on charging different rates for cards or even disclosing the rates on cards.

I think the most simple piece of legislation to solve a lot of problems is to allow merchants to pass along the interchange rate to their customers. If they could do this legally and operationally, this would solve most issues here. If a credit card wants to be expensive, fine the consumer should pay for it. Because of contractual and operational limitations, credit card companies have gotten themselves into the current arms race.

If stripe implemented this, it would make me appreciate them as a force for good instead of being a part of the problem.

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gruez 15 hours ago | parent | prev | next [-]

>in particular the highest income consumers get the worst returns on their interchange payments

That's not what the article says:

>High-income consumers with high FICO scores benefit the most from reward credit cards compared to mid- and low-income consumers with high FICO scores. At the lower end of the FICO distribution, however, this pattern is reversed. On average, net rewards are far more negative for high-income consumers with low FICO scores than for middle- and low-income consumers with low FICO scores.

>Or, to put that another way: if there is redistribution happening, it necessarily includes redistribution from unsophisticated high income customers to sophisticated low income customers.

While it's true that wealth customers with low FICO scores are getting hosed, it's not clear whether that is enough to cancel out the effect that richer people (presumably) have higher FICO scores on average

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ngriffiths 14 hours ago | parent [-]

To be clear though, the higher FICO scores get hosed the most, see the graph earlier on. Your quotes are conditional on FICO so they don't take that into account.

The only way I can put these things together is that at the high FICO end, both wealthier and poorer consumers get hosed a lot but wealthier consumers not quite as much. On the other hand, lower FICO band doesn't get as bad of a deal overall but it is worse for wealther people (plausibly because they have high interchange fees and don't use their rewards).

It's complicated, but... this is not a wealth transfer right? It is a transfer mostly just from consumers to credit card companies that provide them a service.

	▲	gruez 4 hours ago \| parent [-]
		>To be clear though, the higher FICO scores get hosed the most, see the graph earlier on. Your quotes are conditional on FICO so they don't take that into account. Are you talking about "Consumption by income decile" graph? That doesn't show them being hosed, unless you think everyone should pay a flat rate to access the credit card system.

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swed420 14 hours ago | parent | prev [-]

Discussion of patio11's article:

https://news.ycombinator.com/item?id=39928604