How credit cards make money

Re:How credit cards make money by TorKlingberg on Friday November 05, 2021 @02:00PM (#29122670)

I take it interchange fees is the reason some small stores will not take credit cards for small purchases, and low-margin stores will often not take Amex.

Separately, is the "credit score" system a particularly American concept? In the UK the credit report companies will give you a number, but it seems to be something they make up to fill a consumer demand rather than something card issuers actually use. Do you know how the FICO score became such a central thing in US consumer credit, and does Japan work differently?

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Re:How credit cards make money by patio11 on Friday November 05, 2021 @02:06PM (#29122751)

Substantially correct on the first part. In particular, and depends on the region/processor/card brand, many SMBs will have interchange which has a fixed-per-transaction component in addition to a percentage fee, and that can be prohibitive at small "basket" sizes.

The U.S. has the world's most developed and widely relied upon credit reporting infrastructure, by a substantial margin. The history of FICO doesn't quite fit into the margins of this comment but I'd love to do an issue on it someday. Credit scores per se are less a thing in Japan but there are cross-issuer I-can't-believe-its-not-bureaus which have information sharing agreements, the dominant purpose of them being identifying fraudulent actors and account takeovers rather than credit risk (nearly zero in Japan, historically).

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Re:How credit cards make money by TorKlingberg on Friday November 05, 2021 @02:15PM (#29122864)

Thank you. It matches my impression that lenders in other countries do share information, but mainly negative factors such as defaults. Than means "credit building" does not exist in the same way.

> nearly zero in Japan, historically

That surprises me actually. I know Japan has a very, let's say, high conscientiousness culture but do they never get into economic problems and are simply unable to pay card bills?

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Re:How credit cards make money by patio11 on Friday November 05, 2021 @03:00PM (#29123416)

"Never" is a strong word, but you're welcome to read the English-language reports of Japanese lenders which break this out for their consumer businesses. Factors which generally tend to depress it include low revolving credit use, relatively high underwriting standards for credit (not solely a positive thing—ask your favorite Japan-resident foreigner for stories sometime), formal or informal risk transfer, outsourcing collections to the yakuza by policy [0], etc.

[0] I feel it necessary to say "I am not making this up. It happened at first-rate financial institutions many times within the last 20 years."

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Re:How credit cards make money by njwi332 on Sunday November 07, 2021 @10:54PM (#29146005)

Yeah, I'm currently going through the process of getting a mortgage for a property in Tokyo. I'm also interviewing about a potential job - nothing unusual there, moving around every 2-4 years is common in the software industry.

I was told in no uncertain terms by my real estate agent "Do not move company until your loan is approved. You're already impacted by the fact you work for a foreign company, and you will probably get declined if you start somewhere new."

The fact that I'd likely be looking at a substantial raise and therefore be in a better position to pay off any mortgage is irrelevant, the bank just cares about stability.

(I'm sure you already understand this, this story is for the benefit of other curious thread-readers)

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Re:How credit cards make money by jasode on Friday November 05, 2021 @02:41PM (#29123198)

>Credit scores per se are less a thing in Japan but there are cross-issuer I-can't-believe-its-not-bureaus which have information sharing agreements, the dominant purpose of them being identifying fraudulent actors and account takeovers rather than credit risk (nearly zero in Japan, historically).

Not debating you but a random reddit commenter says a (pseudo) "credit score" in Japan is implementation and semantics. The CIC, Zengin, and JICC organizations' credit histories data functions very similar to a USA credit score.

https://old.reddit.com/r/japanlife/comments/goy0vv/are_credi...

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Re:How credit cards make money by dangrossman on Friday November 05, 2021 @07:45PM (#29125915)

I feel bad about the stores that don't take Amex. Either their owner is relying on knowledge that's decades out of date, or they have a very bad merchant account provider. Amex cards cost no more to charge than Visa/MC cards these days. There are even Visa/MC cards with higher interchange fees than any Amex card.

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