Patrick McKenzie rebuts this here: (podcast) https://open.spotify.com/episode/2E2KRPcDvh1LcRw5bIsBms or here (article): https://www.bitsaboutmoney.com/archive/anatomy-of-credit-car...

The intuition being: people who carry balances and pay interest don't actually spend very much; they are not wealthy.

I gave up long ago trying to optimize any rewards, it just ended up being stressful and not really worth it ultimately.

Now I just use my apple card everywhere, pay it off every month and get whatever rewards I get.

It feels like a weird situation, those that stand to gain the most from credit cards are also the ones that should feel a difference of under $100 in rewards the least.

The one exception I see is bonus sign up rewards since those can be fairly significant, or making sure you use an airline card at the airline since those bonuses can be fairly significant (with sometimes other benefits). But outside of those exceptions, just choose a card with good rewards and stick with that and pay it off every month.

I'm 46. I've never had a credit card. I have a bank account and a debit card. If I can't afford something, I don't buy it.

You can just opt out of using credit cards.

Credit isn't negative sum, it is a positive sum game. "Negative sum" has a specific meaning here and just because wealth is being transferred isn't that significant; positive sum games also have wealth transfers.

It is risky and it is very easy to lose great amounts of money on a bad decision when credit is involved. Arguably that makes it bad. But still not negative sum.

Why is it so hard lol? I have the Bank of America Rewards card for 25+ years. 2.62% cashback on everything, 3.5% on dining/travel. Maybe there are better ones out there but this is good. I have auto-pay setup so I don't have to worry. I have not spent a second of my time optimizing anything in last 15 years

countries ditching those companies are making themselves a favour.

Why do you think it’s a negative sum game?

I don’t have any data, but my intuition is that overall high-fee, high-reward cards increase propensity for consumer spending by at least a few % beyond the fees/rewards.

The merchants think so, too, or they wouldn’t accept the processors that let their banks hand out these cards.

Assuming you have sufficient income, paying your balance off in full every month and instantly redeeming the rewards each month doesn’t take a whole lot of time. I just use a card that gives 1.5% cash back.

I don't have to invest any time at all. I just use the (US) card that gives me the greatest benefits, be it cash back or services. Usually I just look at the reward rate, which is a base 2% for me right now going up to 5% for some things.

I love it. As someone who never carries a balance I get paid by banks for doing pretty much nothing at all.

And I don't worry about US retailers, I don't live there.

I should add that rewards are not the best benefits. Sign up bonuses are much more lucrative, running to hundreds of dollars per card, and can often be repeated. Same applies to bank accounts.

Alternatively CC companies could cut off people over certain credit risk and then be able to charge interest in line with the lower overall credit risk…

Borrowers can also keep from overextending their credit and go on debit cards instead…

Obviously these things can have an impact on people but before the 80s credit cards were not widely available to people with high credit risk and the world still functioned.

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It has no relation to paying interest, only to making transactions with the credit card.

There is literally no time involved in avoiding interest. You pay your complete balance when it's due. As far as rewards go, I can't be bothered with them so I always just opt for cash back which I do maybe twice a year. Time involved: 5 minutes / 6 mo.

That is a spurious argument. You have a choice in whether you pay interest, you do not have a choice about a purchase including the cost of paying payment processor fees since the price is the same if you use paper money.

One of the most corrupting yet hidden forces in America today are the payment networks MC/Visa etc. due to their bribing and corruption of the government in order to prevent things like making payment processor fees separate/independent of the cost, i.e., similar to how taxes are added after the fact, not included in the price; and also preventing merchants from having two different prices, cash vs card.

I’m a bit surprised that HBR does not seem to even really have an accurate mental model if the matter, unless they’re making an editorial choice to speak in vernacular turns to relate it to the audience.

The problem is not really the cards, it even credit cards, it’s actually the payment processing networks that are the corrupting force.

If America has a legitimate government, there would have been a federal alternative payment processor that charges nothing as an accompaniment and based on the authority to mint the currency, which is what a payment processor today is, a digital currency mint.

To put it into perspective, when you purchase something by credit card, a merchant may have to l pay a little under 3% on a $100 purchase. When you purchase something cheaper let’s say $5, a merchant may pay 6.5%. And no, they don’t just say “awe shucks, I guess I’ll lose that money”, They increase the prices by some averaged amount.

Some may say that they can’t do that because competition, well, because there is no real competition and because the payment processor de facto monopoly/cartel has basically every single company in lockdown and you have no real alternatives, especially in places like Europe where they’ve foolishly and enthusiastically started forcing everyone into digital payment, all the merchants simply roll what is effectively a kind of organized crime/mob extortion into the prices of the goods and services the common person pays and never knows is paying.