I am an European, so maybe it's different in US, but is too many cards problem that people actually have? Judging by the top 2 stories on HN right now, it probably is.
I have a card. It is hooked up to my bank account. It works.
The reason is U.S. banks have been getting creative with reward programs lately. They entice you with "5% back on gas" or "100,000 points" which all seems very grand. So naturally us nerds want to hack the system for maximum profit.
The reality though is that these programs are not sustainable if fully exploited. Interchange (the fee U.S. merchants pay when you run a card) is under 2%.* A bank can't reward you more than that without losing money. Well, they can make up for it on the interest they charge on debt, but presumably if you're optimizing cards then you're optimizing where you hold your debt too. The way banks make these programs viable is with marketing, tricks, rules, time limits, etc. that make you think you're doing better than you really are.
Smart consumers figure it out. But not everyone bothers to, and so there's enough "dumb" ones to make it possible. Kind of like how gym memberships work.
Long story short: If a service like Wallaby takes off and levels the playing field, then these programs will disappear. So if you're one of those "smart" consumers that enjoys exploiting cards to make an extra buck or two, then you're better off not rocking the boat.
*Europe's interchange is a fraction of that, which is why you don't see this rewards phenomenon there.
I have a decent number of credit cards, but most of them are cards that I opened and just used to hit the minimum spend, claim my signup bonus, and then go back to using my regular credit card that has the best day to day rewards (I also only open cards that waive my annual fee, and cancel any that try to make me pay to keep it open. Keeping them open for free is good for my credit utilization and age). Sometimes, however, a specific card will offer 5x (or something similar) on certain categories for a limited time. If I could give Wallaby detailed information about how I value rewards, it would be nice to just have one card that I carry around.
I pay all my credit cards off monthly, and basically treat them as cash (so I'm not the target consumer of a rewards card, I know).
This is true. However, the point of these offers is to rope in people who think of credit cards as "free money." I don't think Wallaby will drastically reduce the number of marks for these companies, since the people using Wallaby are going to skew smarter.
Majority* of people I know that use credits cards and pay minimum required amount are not dumb people. If anything they do not have a choice. Living from payday to payday will do that to you. Unexpected event? Time to pull out that credit card. It sounds so easy to just bunker down and break the cycle, but then whammy unexpected event.
Santander UK give 3% on fuel, 2% on department stores and 1% on household bills. It looks like Lloyds are going to introduce a similar scheme soon too.
Read the fine print. There's a £24 annual fee, fuel rewards are capped at £9/month, and you only get rewards at select stores which they have no doubt negotiated a promotional deal with.
Meanwhile UK interchange is no more than 1%.
Perfect example of what I'm talking about. Those figures are based on a certain model of reward utilization which is retarded by rules and limits. If that model changes and more people exploit the reward program, the program will change. The math has to add up.
The low interchange fee would appear to make these programs more viable in Europe, not less. The interchange fee is an operating cost that US banks cannot avoid. If they're giving me 1% back, and they're paying 1.65%, that's a net cost of 2.65% Take the same program in Europe, where transaction fees are < 1%, and the maximum cost to the bank is 2%; probably less.
The prevalence of these programs in the US would have to be attributed to some other factor(s). I'd posit that it is due to the American obsession with credit, and the intense pressure for growth in the US financial industry.
The point I was trying to make was that we don't have as many rewards programs in Europe because we're behind curve, and they are starting to appear, not because of low interchange.
But those restrictions are significant and prove that low interchange is a big factor. It's why the only way to do it in Europe is with even more tricky rules and promotional deals, which limits its appeal.
For example, my Chase Sapphire card gives me 1% cash back everywhere and 2% on restaurants.. all of them. Whereas Santander only offers it at certain chain stores. That's because of interchange.
Australia here, definitely wouldn't catch on (IMHO). Nearly everyone I know just has 1 major card, their primary bank card, which works as a debit and credit card in 1. Some people (like myself) have a 2nd card, a credit card for major purchases, that has better interest rates etc, but that one isn't used as much.
Most the other cards we carry aren't bank cards, they're Medicare (if we get hurt), drivers license / ID, and RFID cards to get into work or your apartment building (I have 2 of them)... and all these cards, these "one card" startups can't replace.
Unless they can replace my entire wallet with a single card, that works as a drivers license, medicare, debit/credit card, and RFID card for my house, then you're not really offering anything special.
Australia is a regulated market that abolishes the high interchange fees that power the reward programs in the U.S. This is specifically for the U.S. market.
> Australia is a regulated market that abolishes the high interchange fees that power the reward programs in the U.S. This is specifically for the U.S. market.
Another Aussie here, and I could maybe be interested. I typically carry at least 3 cards on me: credit card, AmEx, separate bank keycard / debit card, plus coffee loyalty cards. I can't always remember if a store takes AmEx (high Frequent Flyer point earnings), or if they do take AmEx but impose a 3% surcharge (negates the FF points benefit). It would be nice to have just one card, that automatically knows the best card to use at each store.
But without support for PayWave / PayPass / Chip & PIN, it's DOA in Australia. I want a card I can use when traveling to Europe as well (requires Chip & PIN). And Coin has a sleeker Uber-esque look to it as well - that rainbow on the Wallaby card doesn't exactly say "luxury" or "exclusive". (Not that it has to be, but it'd be nicer to drop a black / carbon card as an early adopter, not a plastic thingy called "wallaby" with a rainbow.)
US card-issuing banks compete by offering varying bonuses for using their card. Typical offers will be 1% cash back or 1 frequent flier mile per dollar spent, but this can flex up to 5X in whichever category that particular card specializes in, often linked to a particular merchant.
If you can shift the lion's share of your purchasing onto rewards cards, you can bank hundreds of dollars per year, especially if you use the card for business travel and expenses. There's an opportunity for that to increase by 2X or more if you can put your purchases on the "best" card.
I live in the US and I don't get it, either. It can't replace my whole wallet - I see the utility there - so instead my wallet is.. a few mm thinner? With x extra added points of failure?
I'm a single data point, but no, it's not a problem I have. My wallet is thick, but getting rid of the charge cards (only) in my wallet doesn't solve any pain point I have. But then again, Snapchat doesn't solve a problem I have either, and somehow they're worth Billions, so what do I know?
Living in the UK, I have only 1 debit card, which works just fine. I don't need to build a credit history and credit cards don't offer much in terms of rewards so there's no incentive to live in debt instead of only paying for what I can afford.
What is the problem is all the loyalty cards. I sign up for any loyalty cards even if I don't plan on going back. Design a way for me to have all of them on me, and remind me to use the right one when I'm in the location, and I'm sold. Currently I just leave most at home, leading to under-utilization without careful planning.
I've got a United airlines CC, an Amazon CC, a dining rewards card, and then 2-3 other legacy credit cards without fees, and three debit cards for different bank accounts.
I'm european too but I've been living in the US for a few months now and let me tell you I haven't seen in Europe
anything even closer to what they have here with the cards. Some people stock rewards/bank/miles cards like who stocks cans of soup in the supermarket.
I know it's not directly related to the consolidation card topic but I even have friends who use their father/mother card using their own signature which I don't think is safe because, even if their parents authorized them to use the card,
the usual way to verify that you are really you is through the signature and I doubt nobody checks you signed with the
right signature in a greasy reastaurant check, so basically I'm pretty sure anybody could steal your card, use it and
you would realize just after seeing the charges on the bank statement.
A consolidation card is maybe a way to solve the problem. Another way which to me makes more sense is not to sign up for every damn card in the country which most of the time end up collecting dust in the wallet.
I do have several cards (even if most of them are rarely used). I think a big difference is, that we still have coins. I see all those wallets on kickstarter that are useless for Europeans as they have no space for coins.
I'd want a single card and I'd want one of those sleek wallets if all I had were cards and bills.
a debit card, a credit card, a backup credit card and my corporate card
I would love a positively fail safe solution to get this down to one card, but to be honest, neither of these top stories offer that. Because at the end of the day, the most common reason for failure in my standard use case is user error on my part.
Oh so your bank issues a debit and credit card merged together? How does that work? This sounds fascinating.
I am from India, I have multiple cards but most because there is a surge of credit card offers in India, most banks are providing free credit cards and offers to get people signed up.
So many of those cards are just used to utilise those offers to get discounts and a certain select websites for discounts.
But I practically use my debit card, a credit card hooked to online payment services ( paypal et all ) and a backup credit card when I cross the limit of my other credit card. That's all.
One other card I use is just when dining out in which I get some % discount/cash back offers thats all.
Okay. The chip based cards. So you need to have credit and debit account(s) in the same bank, right?
That sounds good and very handy.
The chip based cards ( EMV ) are being introduced in India, rather RBI ( Reserve Bank of India - Controls monetary policy of India) has made it mandatory for all banks to replace the present cards and make them all as EMV.
But its not to merge them but to reduce the frauds.
In the US, a debit card can be charged like a credit card but the funds are obviously deducted from the balance on your bank account. It also lacks the protection and rewards that a typical credit card would have. I just want to clarify that you indeed have two separate things here on one card and its nothing like how the US does it correct?
Yes they are separate, debit uses my bank account directly and credit is invoiced every month separately.
The selection process is very simple, you just put your card into the machine (almost all the cards nowadays are chip based nowadays but there is also a magnetic reader usually on the right), something like this
I'm an Indian living in the UK and don't have this figured out yet. What's the difference when you select to pay by credit, if the balance is paid automatically from your account at the end of the month, instead of being debited immediately from your account? Or do you have to manually pay back your balance?
Well, there's the obvious difference, that the money stays in your account for longer with a credit card.
There are legal differences, too: credit cards are regulated by the Consumer Credit Act, which makes the card issuer jointly liable in many cases. So, for example, if you order a product with a credit card, and the retailer goes bust before supplying it, the credit card issuer is also liable. If you'd bought it with a debit card, you'd be out of luck.
Finally, if your card details are compromised, you've slightly longer to sort things out with a credit card: with a debit card, you could find yourself with no cash at all.
I've seen this in some countries in mainland Europe. Problem was it asked me on my regular UK debit card, had no idea what to choose, trial and error until one of them didn't spit my card out... Thanks for enlightening me
Most American banks offer a debit card which is functionally identical to credit from a seller's perspective, but it is still debit (and thus does not attain rewards or build your credit history, also disappears from your bank account immediately).
I used to use my credit card almost every day in America, but now that I'm in Japan I don't even have any credit cards. A lot of places don't accept them, so I just use cash everywhere. The one card I have is a bank card that I use to withdraw money from ATMs, mainly at 7-Eleven. I don't really like having to buy gift cards to use on Amazon, but it's just a minor annoyance.
A nice thing that we have here in Portugal are "virtual credit cards", offered by the banks, which act like a credit card for the merchant but as a debit transaction for the user.
So the bank gets to charge the store a transaction fee and you don't get the benefit of the bank floating the charge for 30 days? That sounds like a good deal for the bank!
I'm living in the UK right now, and I'm the same as you with having only one card. However most of my friends have several credit cards, which I find really strange. I wonder if it's a symptom of how broken the economy is... It's too easy to get multiple credit cards and use them all to pay each other off, so you're essentially living in constant debt.
I don't think it's a symptom of "how broken the economy is". If you're paying each off when it's due, it can be a good way to make a small chunk of change.
Well, I have a debit card - which I use for pretty much everything that isn't a business expense. I also have a personal credit card which I use very occasionally in situations where a debit card won't work (e.g. getting Euros from a ATM in Schipol airport) and an "emergency" personal card that I use in situations where neither my debit or main personal credit cards work (about once a year so far).
If you do not have at least two cards here, you do not understand how the domestic credit bureaus work. It is a major factor in determining your credit-worthiness for everything else you do. In countries with higher levels of home ownership and expensive education, it matters a lot, and it is not necessarily all about using them for consumption.
I'm European too (if you count UK, some don't), and I have way too many cards, like 30+. I've add to trim down to 4 and keep some more in my bag. Tried some of the apps that let you put in the cards and it shows a barcode, but that barcode doesn't always scan on some of the barcode readers so you actually need the card.
It's not really an issue for me. I have four cards and don't mind having them all in my wallet. What seems to have happened is a bunch of people with the same idea panicked and put out releases at the same time to avoid looking like copycats.
Oddly, for me, the killer feature on the "Coin" card is the proximity alarm if you leave your card behind. I've repeatedly left my card at restaurants after paying, or left the house in the morning without my wallet. Err. However, I would hate to have to bring my credit card with me when I go for a jog.
Personal debit card, business debit card, personal credit card(s), business debit card. Loyalty cards, gym card, even drivers license (although the magnetic stripe for the drivers license is of limited use - airports and car rentals)
I would say there is a difference in mentality, from what I have seen in the US, they like to hoard stuff, and they always take credit for everything like there is no tomorrow.
They don't really have this idea that you should avoid credit, and should you take one it should only be for (hopefully) productive investment, they buy TVs, clothing and food with credits.
Not uselessly using borrowed money for everything can actually hurt you the day you actually need to borrow money because they will consider your econ. 101 attitude (save before buying if it's not an investment) a "risk".
You can have a credit card and carry no debt on it. One way is to simply not use it. For example I have a card that I rarely use but in an emergency I could spend up to $X without tapping my bank account. This can be very handy since you can use a credit card to pay for a hospital bill, a tank of gas, or a hotel room, but you cannot use it to pay rent (typically done with a check).
The second way to do this is to take advantage of the grace period. Every purchase you make gives you a roughly 30 day period where no interest is charged. Pay off the full amount during that period and you simply use the credit card service for free. If you do this you end up ahead: typically credit cards offer benefits for using them. For example American Express gives you an extra year of warranty on most items. Lots of them give you cash back (1% or more) or "miles" or "points" you can redeem for various goods. Most cards do not have a yearly membership fee either so you end up getting everything you buy for a small discount.
It is true that some portion of Americans do "carry a balance": do not pay off their balance at the end of the grace period and must pay a finance charge proportional to the amount they did not pay off. However, this is usually not done by choice but out of necessity. I would do this too if for example I had to pay for an emergency trip to see family but did not have enough savings, etc. As long as you pay things off quickly, you are not really getting trouble in terms of losing substantial amounts of money.
But can't you just have one emergency thing on your bank account like we have in Europe? it's an overdraft authorization, it's linked to the bank account, you have only one, your card is linked to it, and it doesn't enter into the picture as long as you don't need it. But for emergencies, it's mostly the whole point of saving accounts, an umbrella for rainy days (and a downpayment for when debt will be right tool).
Moreover, I think the grace period it still a debt even if it carries no interest, it's the bank tempting people. You can still accrue it more than your account size, it's still borrowing without thinking about what the revenu the spent money will bring.
Debt is a financial tool like others (like selling capital for example), but I really think its use should be restricted to productive investments, and its overuse is a big problem. It's a useful dangerous tool, like a chainsaw, if you're not a lumberjack there is not reason to use it everyday, but it's practical if you make your own wood.
In the US overdraft is usually very high rate and carried a flat fee too. Accredit card would cost you much less.
A credit card is not automatic debt. It is a line of revolving credit. Think of it as an abstraction on top of the money you already have on your bank account. Additionally, credit cards provide additional protection, such as fraud prevention and charge backs. Yes you can misuse them but... Don't?
Edit: I guess a better way to phrase that is that a credit card is the ability to take out small short term debt in real time. And potentially pay it off for free.
Almost everything I buy is on my credit card. All my bills, all my food, gas, insurance. Everything except my mortgage payment. I make hundreds a year in rewards points, get great warranty protection on items I purchase, get automatic rental car insurance, and other benefits I can't remember now. I also get to yank my money back from unscrupulous vendors if I need to, instead of hoping they'll return my money. AMEX will go to bat for it's members.
The only thing I have to do is pay the bill in full each month. I can't imagine letting people have access directly to my bank account.
That's not really an option in the US. So to once and for all address your main point:
1. Yes, the US system overall is less than ideal. Banks could take initiative to simplify the system and the consumers probably should demand that they do.
2. American consumers are not somehow more stupid than people elsewhere. Introduce the same incentives elsewhere and people will follow the same pattern. The only reason other countries seem not to get into as much personal debt is mostly because loans are not as widely available and ones that are cost much more. In the US this used to be the case during the majority of the 20th century. Since relatively cheap credit became available, americans started taking advantage of it. This has nothing to do with whether they are smart or stupid.
I have a card. It is hooked up to my bank account. It works.