I would like to buy something that is not very “life hacking” which costs 1419 chf (iphone). If I converte the CHF into EURO to top up the Crypto.com card in order to receive 2% cashback in cronos which at the moment are also low-priced, would you think it would be worth it? Unfortunately, I just requested the amex with 1% cash back but I don’t know how long it takes to arrive once all the documents have been sent by post, in theory with the amex I would also have a 2-year warranty extension. What do you think? Wait for the amex to arrive?
Cashbacks are schemes to charge consumers (you) more in the long run, without noticing it.
Avoid using them as often as you can. That includes favoring credit cards which don’t have Cashback whenever possible.
how do they charge expenses?
Why should I not take a credit card with cashback and no fees (e.g. cembras new certo cards) compared to a credit card without cashback?
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It is perfectly fair though to say that cash back and other rewards are designed to encourage consumers to spend more.
But saying that cash back costs you more in the longrun is not entirely correct. Credit cards, and cashless payments in general, could be considered a scheme to push up prices by the amount of their merchant fees. The same is true for referrral programs (not to mention Google) which drive up prices with their advertising/sales commissions. However, we live in a society where these institutions are so tightly embedded that there is no escaping the pseudo-VAT they levy.
Credit cards with rewards do not have higher merchant fees than credit cards from the same issuer which do not have rewards. Instead, the issuer “gives” you part of their fee as a reward to encourage you to spend more (or to use cashless instead of cash). The same applies to referral programs (e.g. Poinz, Rabattcorner) which give you part of the sales commissions they earn as cash back.
If you will make a purchase anyway, and you will use cashless service to pay for it, then using a payment method with cash back is preferable to using one without cash back, in my opinion.
In the OPs case, I would focus on finding the best possible deal for the desired iPhone. Cash back should be an absolute side thought. Once your find the cheapest deal available, check whether the merchant participates in any cash back programs (i.e. Poinz or Rabattcorner) which could get you additional cash back. Then use the highest-cashback credit card option to pay. In the best case you can shave a few percentage points of the store price.
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The comparison is not quite accurate.
Google’s referral creates a new transaction, that would not occur otherwise.
Rewards cards do not. They give exactly the same service as normal credit cards, but with higher costs.
The only reason why they work is because merchants are prohibited by contract from charging the fees to the customer.
As a result, they simply raise the price.
You give up a short term benefit to avoid a long term problem.
The risk is significant. If everyone truly gets addicted to those rewards cards, then there will truly be no other way to pay.
At that point, there is little from stopping credit card companies raising fees at will.
Merchants have already been charged on average 1.5-3.5% a payment. For many that take 10% or more of overall profit away.
A little comes back in efficiency gains. But imagine if you are on a cash back scheme with 1.5% cashback. Over time that money will come from somewhere. Can you guess where?
It is paid by platinum/gold card users, who pay horrendous fees. Therfore, these users are financing the free credit card users, who only generate income if they forget to pay their bills or pay FX.
Cashback programs are nice and I think, guys like us cannot be fooled and we do not spend more money, just because the card generates cashback.
But it is a nice add on, since I use my credit card for quite all payments.
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This is simply false.
The fees are taken from general revenue from the credit card company, which comes dominantly from merchant fees — and in countries with lots of debt — from late repayment fees. Both result in higher costs from the customer, long term.
Now, this is an unpopular reality, because it’s nice to think that everyone can win (or at least YOU can) from this — but this is the economic reality of this scheme.
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Ah, just saw that this thread is two years old and you digged it out. So, I will not continue after my answer:
Cannot see the problem, based on the info you provided. People in this forum are not spending more than they have and they are optimizing.
I will never use a debit card, instead, I use foreign, insured money to pay my expenses. My assets in the meantime generate income (dividends, interest) and if I get a cashback, why not?
But enough said, use your debit card or non-cashback credit card, however you like.
Credit card rewards are financed by consumers. In the past this worked well because credit card payments were more the exception than the rule, so customers who paid with cash or debit cards effectively subsidized the credit card merchant fees. Personally, I don’t expect that setup to survive for much longer. But those who are disciplined enough to avoid rewards-incited overspending may as well enjoy the cashback party while it lasts.
This is a classic game theory problem. It’s not very complicated and it’s fairly objective so there isn’t much to discuss.
@ApprenticeCitizen does have a point that credit cards and other payments do jack up the prices since they levy higher fees to the merchant which regardless will be levied to the costumers, i.e. us.
So by playing this game we win short term and we lose long term. This has been discussed in other topics.
So we should all stop playing right? What’s the big deal?
As a collective group yes, but individually each of us should use cashback credit cards whenever possible (for purchases that would 100% end up happening anyway ofc), because that’s literally free money for you as the consumer. The price is already set and won’t change regardless of if you used a cashback card or not, neither now or in the future (just because of your purchase alone) so you might as well. However this create the current situation where we lose long term.
One can opt out by playing this game, symbolically but mathematically and from a purely financially individual POV it, unfortunately, doesn’t make much sense. Hence why the big companies win
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