Here's the kicker: In the US, if you don't buy with a credit card that earns you "rewards", then you are subsidizing those who do use credit cards with rewards. The reason is because many credit cards give around 1%-3% back, but the prices for everything remain the same regardless of whether or not you pay with a credit card that gets you rewards. As a result, built into the cost of nearly everything, is the cost of providing the airline miles, points, or cash back rewards.

On top of this, credit cards provide you with protection because you can dispute charges, and if someone fraudulently uses it, you do not lose that money immediately. Also, some cards (like American Express) provide 1 year of extra warranty for anything you buy.

TL;DR It's better to buy with a credit card, it costs nothing (individually), and you get benefits. There is a cost to society (everything costs a few % more), but I don't see that changing anytime soon.

I can't find an actual link to that study, unfortunately, but here's an article based on the info in that DNB study: http://seekingalpha.com/article/20333-guide-to-credit-cards-...

FWIW I use a debit card most of the time because it is much more convenient than cash with the knowledge that I am spending more than I otherwise would.

But more importantly may be that this 1-3% that you "gain" is all lost by getting used to the idea of credit and spending too much and getting in to very costly debt.

In the US the average is US$ 7,194.[1] Significantly higher than in the UK, US5,082 (£3,175). [2] Which is higher than the average for the EU US$ 2,495 (£1,558) (somewhat old EU/UK data, but the general point I think holds.)

[1] http://www.nerdwallet.com/blog/credit-card-data/average-cred... [2] http://news.bbc.co.uk/2/hi/business/5380718.stm

No, no ... no. The cost is not to "society", the cost is to merchants. They just earn less profit. (Think about it, if the cost wasn't to the merchants, they wouldn't care about credit card fees).

What cards are giving over 1% back? I noticed some other commenters talking about 2%. I just get 1% + the occasional special 3% promotion.

As for what cards have higher payout... here's a list I made so I know which card to use where:

# Amazon * 3x amazon.com * 2x gas * 2x restaurant * 2x office supply * 2x drugstore

# Chase Sapphire * 2x travel * 2x dining * travel bonus booked via ultimate rewards * no intl fees

# Discover (open road - apparently no longer offered?) * 2x gas * 2x restaurant

# Citi Forward * 5x restaurants * 5x entertainment * 1 point ~ $0.008

# Virgin * 3x virginamerica.com * 1 point ~ $0.024 towards flights

I also have an AmEx (blue) which has utterly crap rewards. I use it only for Costco and some electronics to get the extended warranty they provide. Other AmEx cards have much better payout.

So basically I use the Citi Forward any time I go out to eat, bars, bookstores, etc. While the points are worth only about 80% of most points, the multiplier more than makes up for it. Incidentally because Amazon is classified as a bookstore, it actually has a better return than the Chase Amazon.com card. If I'm buying anything that doesn't have an actual multiplier (which is fairly rare; most of my purchases are restaurants and Amazon) I put it on the virgin card since the points are worth over 2x what other points are worth - typical of most airline cards.

Australia limited interchange fees around 2003 (cut them in half), and as would be expected, merchants did not lower prices.

"Interchange fees are paid by the merchant, and there have been studies done in Australia that said that consumers have not saved a penny by lowering interchange rates — that the merchants have not reduced prices at all."

"Why use Cedit Cards at all?"

Maybe because, uh, iDEAL only works for Dutch shops?

"I am amazed people would lend to buy a new car."

Yeah well apparently you fail at math, because (depending on circumstances) borrowing money to buy a car can be cheaper than paying in cash, because of promotional rates and opportunity cost. Might want to re-think your ideological hangups.

(plot twist: I live in the Netherlands and paid cash for all cars I've owned up until now.)

" permutation of '<country I live in X> doesn't use credit cards, I'm so much smarter than those Americans'."

He just said that he hardly ever uses credit cards, and didn't make any sweeping statements about either the Netherlands or the US.

"Yeah well apparently you fail at math, because"

I'm not sure if you are aware (perhaps it was unintentional) but your reply is agressive. This sort of baseless personal agression is not welcome at HN - it might be worth familiarizing yourself with the kind of behavior that is accepted and expected here. It seems a bit strange to react so aggressively and personally to what was a benign comment.

It seems even stranger when you consider the OP didn't even mention some of the points you are berating him with - in fact, your post reminds me of Clint Eastwood addressing an empty chair at the Republican conference last year.

Back on topic - I can't wait until there is some kind of global iDEAL system, it is so much more convenient than credit cards. I know Germany and Poland both have similar systems - hopefully the UK/US will introduce something similar too.

I'm a British expat in NL, perhaps this has been introduced in the UK since I left.

"and didn't make any sweeping statements about either the Netherlands or the US"

Well I disagree, there was definitely an assuming undertone in the post. I guess we can go 'did so/did not' on this one, but instead let's agree to disagree.

"but your reply is agressive"

Oh yeah, that was intentional, because I felt angry at the post, and in a way that I feel vindicates an aggressive attempt to restrain posts like the one we're talking about. Whether or not making aggressive posts on the internet serves that purpose is another question, although I guess the answer is "no, plus it makes you look like a douche" ('you', in this case, being me, just to make sure I'm being clear ;) )

"it might be worth familiarizing yourself with the kind of behavior that is accepted and expected here."

Sorry to pull that card on you, but I've been posting here quite a bit longer than you have, and lurking long time before that - and I long for the days where the type of comment like we're talking about now wouldn't have been posted at all, or the days just after those, where that type of comment would have (rightfully) been down voted into near-unintelligible grey right with the 'LOL', 'me too' and 'ur a faggot' posts. Sadly, those days seem to be long gone, and irrational ideologies seem to have become an accepted basis for posts.

"It seems even stranger when you consider the OP didn't even mention some of the points you are berating him with"

Not sure what you mean specifically - although to be fair, I did cover my ass by not berating him directly, and instead cowering behind a generalization of unspecified 'other' posts, only indicating that his 'falls in that general class'. Still I stand behind my point that my understanding of implied statements is completely in line with the content of my reply.

"Back on topic - I can't wait until there is some kind of global iDEAL system, it is so much more convenient than credit cards."

How so? Look, I use iDEAL myself (I used it 3 times just yesterday, even), and like it in the cases where it works, but two months ago I rented a car in a New Zealand airport terminal from a guy who had his whole office in his backpack (you know, the old-fashioned stencil paper credit card processing machine). How would that work with a direct debit system? I paid with credit cards in remote villages in Peru and I can pay or make reservations across the world with credit cards on the phone by just passing them my CC number. Furthermore, I have never paid a cent in interest charges on a credit card, payments are done in full, automatically, from my bank account. I'm not sure what the aversion against credit cards is, it's incredibly useful in many situations. I'd be perfectly happy traveling the world with just a Visa card (provided I can withdraw some cash locally in some places...), I have yet to see anything remotely as convenient as that. I paid more for withdrawing cash with my Maestro card in Spain last summer as I would have had I just paid for everything with my credit card FFS!

Here, let me throw in some more ranting against my country: you know why merchants don't accept credit cards in the Netherlands? Because it costs money, and the merchant mentality here is not 'the customer is always right and his convenience is something I need to think of', but 'I need to make sure I get paid, and as much as possible'. Merchants (not only online, I'd even say 'less so online') think of themselves much more as superiors to customers than those in more customer-oriented markets. There is a reason that 'boter bij de vis' doesn't have a direct similar construct in other languages such as English and Frech (that I know of) (it means: pay directly when items are received, no credit allowed). It probably also stems from the Protestant ethic: credit is a sin. Which I think is an even more daft reason to be adverse of credit.

(so it looks like I didn't manage to restrain myself after all - so be it)

I'm guessing not ;-)

Thanks for taking the time to write a reply. I don't usually make posts complaining about people's posts for the same reason - as you said, it makes one look like a bit of a dick - but yesterday I read a number of consecutive posts that didn't really do much but add to the general level of negativity. I appreciate the same accusation applies to my post too ;-)

I completely agree re credit cards being more useful globally than iDEAL. Although I live in hope that, one day, something slightly more secure will be the norm instead.

Cheers,

Mike

I can only guess by your comments, but it would seem you're not very happy in the Netherlands? I'm probably one of the few Dutch people who bothered (visiting the US and) studying Amercian psychology, history and policy.

On the other hand I like to fully own my stuff right away. I care not for the 'discount' I might receive if I lend it. Cash also brings it own benefits (and being Dutch I like to haggle and hate lending).

True, you didn't explicitly say it, but your words did imply it. While we're being pedantic, I didn't say you said so either, I just said you said a permutation of it, which you did.

"I can only guess by your comments, but it would seem you're not very happy in the Netherlands?"

Oh I'm mostly happy right now, and the Netherlands is one of the best countries for me to live in right now. But just because I'm fairly content with something doesn't mean that I can't identify any faults with it - actually, I could name a whole list of things I dislike about the Netherlands and Dutch culture in general, yet I still choose to stay here (I guess relevant: while Belgian by nationality, I have a Dutch wife, was born from a Dutch mother and Belgian father and have lived in the Netherlands for 10+ years. I basically asymptotically approach being 'real' Dutch, so to speak, and I could list just as many things I dislike about Belgium as I could about the Netherlands - more, actually, hence me living where I do).

"I care not for the 'discount' I might receive if I lend it."

OK well if you prefer to be irrational wrt your finances, more power to you, but proclaiming some sort of moral superiority because of it is out of line.

I found that out when trying to rent a car in the US.

And mind you I had a credit card, although with a low limit (like $400 and it was almost there). I also had cash to pay for the whole thing upfront.

But trying to pay with cash was as successful as trying to pay with goats.

People walk away from a cash deposit more easily than a credit card.

But it is enough to deter a lot of people who otherwise might get tempted.

I'm just pointing out "not using credit cards" is not an option sometimes.

(But the amount they hold on the credit card is small, I think it was around $300, still)

Hilariously, in banker lingo you are referred to as a "deadbeat", without any apparent sense of irony.

I guess the card companies win either way - in interest on people who rack up debts (enticed by the benefits) and also on transaction fees charged to merchants when the card is used.

1. As you describe, a card branded with Visa/MC, where the transaction goes through Visa/MC processing. The money is deducted from a checking account, although that fact is immaterial to the merchant.

2. A transaction that goes directly to the bank without Visa/MC. This is the EFTPOS network. This type of transaction is secured by a PIN and the physical card must be swiped (not an online charge). This system was originally for ATM cash withdrawals. But then retail merchants like supermarkets and department stores entered this space for payments, because it's much cheaper for them not to give up the 3% slice to Visa/MC. Wal-Mart in particular was a leader in doing this, and that's why the terminal always prompts for a PIN (it's cheaper for them) rendering it non-obvious how to do a Visa/MC-based transaction instead (unintuitively hit Cancel at the PIN prompt.)

Nowadays, virtually all cards and underlying accounts support both types of transactions. And most customers just know it as a "debit" card, oblivious to the difference between PIN and signature verification. But there are significant differences in the back end.

At least in the UK, a CC attracts the processing fee of ~=2.5%. The Debit card, does not, or charges a fixed processing fee. Many web retailers/vendors pass on this processing fee. The bigger you are, the lower processing fee you can get (fraud, chargeback rates and other factors all being equal).

If you're able to actually control your spending a CC is very much superior to anything else in the US.