In Australia millennials, are allergic to credit cards. Credit card usage in that demographic is really low. Instead they prefer BNPL services as a credit mechanism. Banks have also responded and offer credit cards that don’t act like normal credit cards[1]
Myself and most people I know (early twenties) use what the banks give by default which is a "Debit Mastercard/Visa" which lets you shop online like a credit card, perform chargebacks, or pay in-store, but the money just comes out of your savings account like a debit card - not on credit (they get declined if your account is empty too AFAIK but haven't tested it ;P). Are these common overseas? I rarely see reference to it on here or Reddit which is presumably predominantly people from the US or Europe.
> they get declined if your account is empty too AFAIK but haven't tested it ;P
Not always, at least some banks will allow you to go into overdraft and then charge a fee (e.g. $15 for Commbank) - so it's worth being cautious about running out.
I remember miscalculating and going into overdraft by a very small amount (e.g. a dollar or two) and then being slugged the overdraft fee - I would've much preferred the transaction to be declined, but that isn't/wasn't the default behaviour.
Well yeah, most cards in Europe aren't 'credit' who would want that. If you want a credit, take a loan... Or use the store-financed 'free payment plan' for a fridge or a dishwasher...
One thing we have is deferred payment (usually 1 month). And looooooads of credit companies...
Some payment cards here (usually with 'store points') are with 'revolving loans' which is considered quite predatory... Wouldn't want to touch this with a space-elevator-sized pole.
Maybe I’m wrong but I have the feeling that credit cards as a norm is really just an American thing. In Europe where I live, I know nobody who buys anything with a credit card or barely if there is a 0% rate promotion. Credit cards do exists here but they are the card some shop gave you for whatever reason that you’d better never use.
What is interesting is that we use the term « credit card » to speak about our debit cards so I needed a long time to acknowledge that in America, Credit cards really meant that you paid your coffee with a real credit and not with your money.
Interesting product from CBA.
Doesn't afterpay act more like a loan? From looking at this it looks like CBA is trying to get people to splash their money and manage the payback themselves. Those management fee's are also based on the idea you can get the card paid off in the month (CBA also use a rolling bill day. so they have a 30 day month and a 25 day payment period for that month. And those details are pretty opaque to newbies with cards. ).
You're effectively paying a somewhat high interest rate. From the looks of it CBA's low interest card would be comparable or cheaper if you were young and held a bit of rolling debt. And right now they have 15 months interest free on their 'low' rate card.
I think the difference that's better for afterpay customers is being able to have your purchase chunked into installments, effectively making it more like lay by.
Also, cba should have made it black so it didn't look you were holding a learners plate credit card.
Yes the chunking into 4 payments, is the primary benefit of BNPL. It allows you to buy something significant (i.e. a laptop) and spread the payments over time.
The downside is its very easy to overspend and get stuck in a debt spiral
If someones cashflow is pushed to the edge with BNPL purchases it's so easy to get toppled over by an unexpected emergency. It really is quite scary thinking about it. Is it financial irresponsibility causing people to overextend themselves and their cashflow on frivolous purchases, or is it out of necessity and a wider issue such as poor economy / job market / wealth distribution causing people to turn to these services? - Either way, they feel rather predatory to me...
Yep. Buy-now-pay-later services are just short term loan providers. Part of what they're selling to merchants is the fact they are regulated as lenders. We use Klarna in the UK to offer BNPL for exactly this reason, even though we could likely offer it ourselves.
I'm an early 20s Kiwi zoomer, so somewhat similar demographic.
I don't have a credit card and see no point in it. I use a debit card for everything. I don't think most of my friends have credit cards either, but maybe they do and I don't notice.
Insurance, points, cashback, chargebacks. It's also a one month interest free float of your funds if you pay in full each month, meaning you earn some interest.
I know some debit cards are getting closer to credit cards in these areas but at least when I first got one, they were just plastic cash. You spend it you lose it, the bank won't support you with clawing it back.
I read about this online, but it seems to be mainly a US only feature. Credit cards in my country have very very little benefits of using them apart from the usual feature of paying a lot and paying it back later. There is very little incentive to get one. Our banks are probably more risk-averse or don't want to bother with partnering with airlines, insurances, etc for points.
The principle is also using the bank's money, not your money. So you make a purchase and now you owe the bank. Unless I am very strapped for money or there is an incentive program, I see little use in using one.
Dutch here. We don't have points or cashback. Purchases are insured with standard bank debit payments as well, as are chargebacks. I do own a credit card but that is purely for the occasional (usually US) webshop that doesn't accept European debit cards, or as a backup payment method on vacation (my debit card once broke on vacation and my family had to send me money through Western Union)
Also you are paying for that insurance.
People don't really dig into just how expensive creditcards really are because in many countries it's really the only way to pay for things online.
The only time I ever use a CC is when I'm dealing with an American company- because it's either CC or PayPal with them.
European (or at least Dutch) debit cards are not Visa or Mastercard. They are either Maestro or V Pay.
These cards don't have a 16 digit card number and CVV that you can in online shops and pay with those. This has the advantage that these numbers also cannot be "stolen" and then used by criminals to buy things.
Debit cards are really just for physical payment, where you either use contactless payment or by using a PIN. For online shopping, the shops talk to the banks by using an OAuth-like API that can be used to either pay once or set up a monthly payment. There's a few different of these APIs throughout Europe, in each country usually only 1 or 2 are used. Some examples of these APIs are: Bancontact, iDeal, Giropay and Sofort
European webshops usually only support the ones in the country that they are located in, and for all others they either support credit card or bank transfers (which are free and standardized within Europe). American webshops usually only support credit cards, so that's the most common reason for people to have one.
Errr depends on the area. Sometimes they have EC but not VISA and then you look like a cashless moron (I literally only ever have minimal 'not a vagrant' cash in France, and never use it, especially since they added touch-pay for <20EUR and increased it to <50EUR during first lockdown).
Points for most people are a zero sum or losing game.
I worked for a points loyalty program, and the customer always pays. The bank knows their market well, they know the redemption rate of points for different demographics and they set the annual fees on points earning cards appropriately.
For a small number of very diligent points hack customers, the bank loses money on this and the customer wins. For a larger proportion customers get back roughly what they paid in fees.
Then for the remainder the points eventually get written off or redeemed for value that is far lower than the fees they paid.
It’s so painless on the Apple Card. Automatic x% back into an Apple Cash account depending on the specifics of the purchase (phone vs card, Apple store vs other store).
When you pay off the card, it can automatically debit the Apple Cash account first. Basically all my purchases are 1% cheaper on that card than my other ones. Sure, spending $9,900 instead of $10,000 doesn’t sound like much, but it’s painless free money.
That "free" money comes from fees paid by the seller to the credit card company, and is passed along to you in the form of higher prices. Unfortunately, paying cash seldom lets you opt out of these credit card driven price increases.
Chargebacks atleast exist in NZ - this is what I mainly use credit cards for - if the company goes bust before delivering (or before you take a holiday etc), or the product isn't as described, or the company starts quibling about their unconditional money-back guarantee - the credit card company will pay (by law)
You should check what's the difference if you get frauded. In Canada, with a debit, it's mostly your loss, but credit cards you can make a fraud claim and they will reimburse you.
That's my main reason for never using my debit and always using a credit card, to offset the risk of fraud.
They do, although it's not a common feature for a basic credit card - for example, the BNZ Platinum Visa card comes with travel insurance, and you can either earn points or get a 1% cashback, depending on which reward scheme you choose.
Your comment inspired me to check out a bunch of other banks to see what the deal is.
It seems like a few of them have some perks like travel insurance, cashback or airpoints/reward points, but most of them have no or very tiny perks on their cards. A lot of the airpoints are also locked behind a minimum spend in the first 3 months.
For me personally even the "good" cards aren't that great because I just don't spend that much money. Though travel insurance would be nice once the world opens back up.
The better ones do have an annual fee, so also take that into account. But for us while we were travelling more frequently, the flyer points and insurance made it very worthwhile.
Chargebacks are useful depending on consumer protection laws. I'd guess in NZ they're less useful like here in Aus, but if you buy from foreign companies it can be a useful stick to wield as otherwise you'd have little legal recourse.
In NZ there are some solid benefits to paying with a CC - I generally toss a direct-debit authority to pay it off automatically monthly.
I've got reasonable travel insurance protections when I pay with the CC, I get airpoints, and some chargeback options, as well as fraud detection. Additionally, it's been easier and more reliable to set up online payments with a credit card.
Sure do, I've got those on my NZ CC. Worth it for the travel insurance if you are travelling overseas etc. The points are hand too, usually cash them in for vouchers each christmas.
Protection with a credit card is so much better than a debit card. If you prepay for a service that is not delivered, then the credit card company will refund you.
Most of those things are US only as in most other places the fees are much lower so there is less money to give back. Free float is worth very little when interest rates are about zero. Insurance is a benefit in most places still.
You can do chargebacks on debitcards and you've been able to for at least 20 years.
Some banks might ask you to contact a merchant before trying a chargeback, but if you don't get your money back the bank will either do a chargeback or cover the cost (as they do with fraud).
I'm in the UK, and use one (IMO) sensibly. If there's a larger purchase I'll often find a 0% credit card and use that, then pay back. I only do this for stuff I could afford to pay back immediately if required.
Secondly, I'm not sure outside the UK, but we have something called Section 75, if I buy something and spend just £1 on a credit card, they are jointly liable for compensating me if something happens. If I'm buying a car, or large purchase I'll often pay £100 on a credit card just for the extra protection.
I've received roughly $3000 in rewards from my credit card usage over the past six years. Not a life-changing amount, but not completely insignificant, either. I think the biggest thing that I've lost is data privacy, but I would think that debit cards incur the same cost. I've never used any of the benefits like extra insurance/warranty, but it's nice to know they exist.
Chargebacks on debit cards are also much more painful than on credit.
Assuming NZ is like Europe, the are no rewards thanks to fees being low due to regulation. Chargebacks exist but are not as strongly defaulting on consumer side; to succeed, you need real proof of merchant not holding up their side.
It might be different in different countries, but in the US you do not pay additional to use a credit card. As long as you pay on time each month many credit cards have zero fees or interest. Rewards can range from 1-5 percent cash back, which does add up.
Now if you are making a larger point about credit cards increasing the general cost of goods across the board as merchants incur the cost and pass along to the consumer to maintain margin, sure, but that ship sailed a long time ago. The only reasonable reaction from the consumer is to leverage the convenience, protections, and float afforded by credit cards, while maximizing any rewards afforded by said cards.
> I don’t have a credit card and see no point in it.
If you use a credit card like a debit card (pay it off in full every month) it can be rewarding depending on the card. I make $75-$100 cash back every month on my credit card.
I assume you’re in the US given $ amounts. Outside the US credit cards are far less developed. A few offer some kind of points or perhaps promotional cash back for some period of time but there’s nothing like the level of competition between cards in the US.
US card transaction processing fees are higher than in most peer nations. That creates a nice profit stream in the credit card industry in the US, which largely doesn't exist eg in Europe. It funds the points & benefits systems that cards offer here.
It's how Visa ($540 billion market cap) can be worth more than the world's most valuable banks (eg JPMorgan $453 billion), and has an almost unbelievable 64% operating income margin ($14.6b operating income on $22.6b sales). Visa has one of the greatest businesses ever conceived, it's almost nothing more than an intangible floating brand toll bridge (they do operate an enormous global processing network, their primary cost center).
And then there's Mastercard, worth $380 billion. And American Express, worth $135 billion.
It's how Capital One - a credit card issuing company in the US - can be worth more than Barclays and Deutsche Bank combined.
HSBC is a giant for example, the second largest bank by assets in Europe, and is worth $113 billion.
And although some might jump to the conclusion that Americans must be drowning in credit card debt, that's not the case. US household finances are in decent shape and have been for most of the past decade. The ratios of household debt and debt service payments vs disposable income remains at historic lows (lower than 50 years ago). US household debt as a total sum hasn't increased in the past 20 years inflation adjusted. It's the processing fees that keep the card industry thriving. The switch from cash to cards for everything here was a bonanza for the industry.
> US card transaction processing fees are higher than in most peer nations. … It's how Visa ($540 billion market cap) can be worth more than the world's most valuable banks
I’m sorry you are just wrong. Classic HN Dunning–Kruger.
Visa and MasterCard make their money two ways — network and cross-border transaction fees. For ordinary (non-cross-border) transactions, V/MC have a very small take, on the order of .1-.2%. The vast majority of the fees go to interchange collected by the issuing bank and then to transaction fees to the merchant acquirer (eg Square). Interchange is paid back out to customers in the form of rewards at very low (or zero) margin; issuing banks make their money when customers revolve on their lines of credit.
It's a 1-3% tax on the merchants. This effectively makes doing business more expensive. You would think that prices in the US would be 1-3% higher than elsewhere in the world, but the "buy first decide later" carefree spending attitude makes for quite a different consumption landscape.
Credit cards in the US offer all kinds of perks. My card covers my purchase for damages or theft/loss for 120 days. This reduces the friction in consumption.
It's mostly from merchant fees. This means that it's being paid by consumers who use other payment methods - but then, those come with their own costs.
To me, the greatest benefit of a credit card is that I’m doing business with JPMorgan Chase’s money and not my own. When I got an alert for an $1100 charge at a home improvement store hundreds of miles from where I was currently located, the representative happily issued me a new card number and voided the transaction.
Meanwhile, when someone had stolen my Schwab checks from the mail and written themself fraudulent rent checks for several thousand, it took nearly 3 months to get the money back. And the account was empty at the time, but Schwab’s (unknown to me) overdraft protection helpfully pulled liquid from my investment account. A debit card like using checks. The bank cares way less about your money than they do their own.
When I lived in Singapore, I got an American Express cashback card with 3% cashback on the first $5000 and 1.5% unlimited cashback for everything > $5000. They waived the annual fee and there was no minimum spend.
Another card(the annual fee got waived too) gave me free access to the airport lounge in Dubai, which was great, because I could get a free meal, free drinks, and take a shower during my layover.
Using a debit card online is not wise. If there is an issue you could end up with an empty bank account temporarily. Much better to be able to deal with such issues when you get an invoice at the end of the month.
This is obviously country specific and I don't know anything about the banking/payment environment in NZ, but here in the US credit cards offer a ton of benefit to consumers, so much so that it's almost always stupid to not use one.
In Australia (Afterpay's home market), credit card merchant fees are tightly regulated (<1% for most transactions AFAIK), so 'cash-back' offers like the US don't exist.
Airline/Frequent Flyer point conversions similarly got nerfed, so much so it's better to cycle cards (credit worthiness permitting) every year to get a point bonus up front (e.g 200K points for spending $X000 in the first 3 months) than trying to earn that amount.
That's not the main benefit of using a credit card. The primary benefit of a CC is decoupling it from your bank account - if there is an issue, CC company will fight the charge for you and almost always side on your side.
I bought a pair of speakers costing $2500. I tried to reach to the company for a return but no one would answer. No phone, no email, nada. 1 month return deadline was coming up and I called American Express. Within literally 10 mins (no wait at all), I filed a claim and was done with it. 60 days later, I got the money back. Turns out that they couldn't reach them either.
Credit cards are more consumer centric than merchant centric and they're a huge boon to otherwise rampant asshole behavior from merchants. I also run an online shop and its a pain in the neck when someome files a charge-back, we just consider it as part of the cost of doing business.
In last 20 or so years of using an AMEX card, I've filed half a dozen charge backs. It's an amazing company, it's better than any other CC company in my opinion. They also have one of the highest fees and it shows why - their customer service is absolutely top notch - red carpet, the works.
If someone fraudulently or mistakenly charges my debit card $5,000, that's $5,000 gone from my bank account until I get it fixed.
If someone charges $5,000 to my credit card in error, I've got 30+ days plus to resolve with zero financial impact to me. If it doesn't get resolved in that time, I have the option to not pay the bill (or that portion of the bill), knowing that if the error is fixed, the penalties and interest will be waived.
Have you experienced that? There's limits on charges on debit cards, usually ~2000 Euros. Credit cards are higher but then again they also have the credit limit and won't go beyond that in most cases.
I haven’t experienced it personally, but I know someone who used a debit card for their utilities on auto-pay. Gas company said they damage their meter so they replaced it and auto-debited their account for $2,500. They had to borrow money from friends until it got fixed and the money refunded.
In my experience, chargebacks with a debit card (in Europe) are a pain in the ass.
The banks themselves seem to be against it so they made me write emails explaining the situation, give the seller more time (1 month not enough) and then wait another few weeks for processing.
With a credit card (British), they just did it -_-
And let me mention how a SEPA payment means your money is gone unless the seller themselves agrees to refund.
In the US debit cards have terrible charge back, and even then, if the merchant doesn't follow through, you're the one who needs to fight for it, where as with a CC it'll be them doing the fighting.
It’s a shame the NZ market hates credit cards so much. In the UK they are widely accepted - as in I struggle to think of a shop that didn’t accept them. Including dairies and food trucks (thanks Square!).
Btw I find it weird that EFTPOS cards have no annual fee, but debit cards do, but some credit cards don’t (eg ASB Visa Light has no ongoing fees).
I sometimes have to pay £1 via card when in a shop activating a service like a monthly phone plan. The £1 is just to validate the card details I gave. They then give me a £1 coin back. I always pay with the credit card, even for such a small amount- because it’s the banks money, not mine, and the bank will always take care of their money more carefully than your own.
In New Zealand, the local EFTPOS network is basically a home-grown network that the major NZ banks established in the 1980s's and have continued operating on a shoe-string budget ever since. For the most part merchants only have to pay a low fixed cost to access the network, whereas customers usually don't pay a fee (as most banks either bundle free EFTPOS transactions in a fixed monthly fee package or even offer it for free entirely for certain account products).
Visa/Mastercard on the other hand has Merchants paying 1-3% of all transactions as well as customers paying an annual fee (usually around $25 or so for standard non-reward cards but can go up to hundreds of dollars for higher end cards) for many card products (so a tidy profit from the merchants as well as some annual top-up from the customers).
From a typical New Zealand merchant's perspective it doesn't always make sense to offer Visa/Mastercard if they can decide to only accept EFTPOS cards (which almost everyone in New Zealand has) and keep the 1-3% that they would otherwise lose to Visa/Mastercard.
Visa/Mastercard offer more modern benefits (e.g. Paywave) which is not offered by EFTPOS which I suspect is partly due to the fact New Zealand's EFTPOS network does not generate much of its own income (just the small fees merchants pay to access the network I believe) so they just continue with the minimum amount of investment.
Personally I have an zero-fee American Express card that earns Air New Zealand Airpoints. As a fallback at merchants that don't accept Amex, I have a Wise (ex TransferWise) Mastercard on my phone (for NFC payments) as well as a physical Kiwibank Visa card. When none of these are accepted I fall back on to my EFTPOS card which is more or less on par with cash in New Zealand. I estimate around 50% of my expenses are on Amex, 10% on Visa/Mastercard and the balance through EFTPOS with the occasional cash for markets and the like.
Kiwi here too, just one of the many in the UK. EFTPOS was great for its time, and yes the low fees are great, but I can’t but wonder about the security of a magstripe compared to a chip. Magstripes are long gone in Europe. Which reminds me- Revolut has great security controls, can enable/disable magstripe, so can disable until until you are in a shop that needs it still, like many places in the US.
That’s why I love Apple Pay (I’ve got UK & NZ bank cards on it, Wise & Revolut too). Now when going out for a local shop I often only take my phone and keys, no need for a bulky (or slim) wallet. Drivers license only if I expect to buy alcohol (and 90% of the time I could have left it at home).
Edit: Also to add, if the pandemic ended up hitting NZ the way it did in the UK/Europe/US, you would see a far higher uptake in contactless payments methods. I dislike touching pin pads now unless I absolutely have to!
>In New Zealand, the local EFTPOS network is basically a home-grown network that the major NZ banks established in the 1980s's and have continued operating on a shoe-string budget ever since. For the most part merchants only have to pay a low fixed cost to access the network, whereas customers usually don't pay a fee (as most banks either bundle free EFTPOS transactions in a fixed monthly fee package or even offer it for free entirely for certain account products).
Sounds exactly like Interac in Canada. Although nowadays I believe most if not all Interac debit cards are also co-branded as MasterCard/Visa debit. Which makes em usable online as well. (There is a Interac online but only a small small small handful of sites even support it.)
[1] https://www.commbank.com.au/credit-cards/commbank-neo.html