Why are we all paying a tax to credit card companies?


21 bookmarks. First posted by mrshl 8 days ago.


... a foundational payment technology — the clearing house, which settles payments across all its members at the same time. Instead of every party having to negotiate with all other parties individually, they settle with the clearing house, which calculates net obligations across the whole group. So where bank A might have owed $50 to bank B, been owed $40 by bank C, and owed $5 to bank D, instead it just owes $15 to the clearing house, which in turn calculates the net payments or obligations for all the other banks as well. Most payment systems are at bottom some type of clearing house.

The American payments system specifically has six fundamental pillars: cash, checks, credit cards, debit cards, wire transfers, and the Automated Clearing House (ACH). They all developed separately, but they also overlap and support each other in fundamental ways. To understand how Visa and Mastercard are raking in so much cash, it's helpful to get a sense of the underlying infrastructure on which they rely.

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economics  credit  cards  money 
4 days ago by ernie.bornheimer
Illustrated | 13ree_design/iStock It's fat times for credit card companies. Visa made $10.3 billion in profits in 2018 on just $20.6 billion in revenue, up from…
from instapaper
5 days ago by dylanc
They act as middlemen, skimming fees off transactions and using their size to bully businesses into accepting their terms — who then raise prices on all consumers. The associated profits, both for Visa and company and the issuing banks, are effectively a tax on everything Americans pay for.

HATE THAT I DIDN'T BUY THEM WHEN THEY WENT PUBLIC
money 
6 days ago by maoxian
Illustrated | 13ree_design/iStock It's fat times for credit card companies. Visa made $10.3 billion in profits in 2018 on just $20.6 billion in revenue, up from…
from instapaper
6 days ago by johnrclark
This is the same thing that happens with insurance. Anytime you add a buffer layer, costs inflate.
getrichslowly  creditcards  consumerism  spending  APEX 
6 days ago by jdroth
did a deep dive into the US payments system and the huge monopoly profits raked in by Visa and Mastercard today
from twitter_favs
7 days ago by nvalvo
did a deep dive into the US payments system and the huge monopoly profits raked in by Visa and Mastercard today
from twitter_favs
7 days ago by mayonissen
Despite the tangle of institutions, most of the American payment system is quite cheap, efficient, and reliable — the result of well over a century of sustained government pressure and institution-building. Conversely, the immense profits of Visa, Mastercard, and the card-issuing banks are sheer parasitism. In an age of worldwide computer networks and near-instantaneous communication, it ought to cost virtually nothing to buy something. With just a little more public effort, that could become a reality.
creditcards  payments  Visa  Mastercard  review  critique  finance  USA  TheWeek  2019 
7 days ago by inspiral
All this arcane history points to an important lesson: American payments systems only function as well as they do because of state institutions and extensive state regulation. Cash is straight-up produced by the government. The U.S. dollar in general (as the vast majority of dollar transactions do not happen with cash) is a state creation. The Fed controls the national money supply, in addition to running the biggest wire transfer system and the biggest check clearing house in the country.

Government action has also been key in pushing improvements in payment efficiency. Universal check clearing only came about because of state pressure. Banks technically own the ACH, but it is extensively regulated to ensure stability and consistency, and prevent fraud — what's more, the Fed operates one of two ACH "switches" (which coordinate payments between ACH member banks). Moreover, the banks themselves are backstopped by state power at every level. Federal deposit insurance prevents bank runs, and protects savings when banks go under. And as we saw in 2008, when the financial system blows itself up with irresponsible lending and fraud, the state has been there to save it.

So, how do card networks fit in, and why are credit cards so ludicrously profitable?
credit_cards  finance  financial_services  banking  ryan_cooper  federal_reserve 
7 days ago by perich
RT : did a deep dive into the US payments system and the huge monopoly profits raked in by Visa and Mastercard today
from twitter_favs
7 days ago by AramZS