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PaperclipPerfector  7d ago (text post)   29419 thread views

Culture War Roundup for the week of January 12, 2026

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That set up a twitter folly of the high rate people are subsidizing low rate people with rewards backed by a fed paper.

I see in your edit that you understand that rewards are funded almost exclusively by interchange. So what does limiting the rate/fees accomplish?

Then the store I go to doesn’t pay a processing fee. So they cut prices. And it probably saves me more money than getting 2% cash back.

Well sure, if you essentially appropriate the credit card networks and force them to operate it nearly for free, then we can all enjoy the enormous benefits it confers without paying the owners. This is not a sustainable equilibrium though.

Also, you should look up or ask your most trusted LLM what the average cost to a retail business is for accepting/processing cash. The interchange for electronic payment (plus the benefits of immediate settlement) is competitive to the labor/logistic overhead of processing cash, especially for smaller businesses.

We have been regulating natural monopolies like water and power companies for decades. One of the key test would be rather the product degrades when you fix price. It’s unlikely we would would see worse transaction processing unlike housing where price fixing leads to shitty housing.

The price of processing cash is not what the interchange should be. That basically assumes the CC company can take 100% of the surplus which implies a monopoly exists. In a lower barrier to entry market that doesn’t have monopoly power (shale oil, airlines) the businesses themselves will run at basically costs and have zero economic profit. These are the type of businesses we want to create in society.

It’s unlikely we would would see worse transaction processing unlike housing where price fixing leads to shitty housing.

We would surely see reduced rewards, reduced perks and reduced consumer protection (e.g. worse chargeback terms), worse settlement terms (today it's ~daily, you'd see net-90).

The price of processing cash is not what the interchange should be. That basically assumes the CC company can take 100% of the surplus which implies a monopoly exists.

The price of a good is determined in part by the price/substitutability of substitute goods. This is a feature, not a bug.

It's not that they should be exactly equal, but the cost of processing cash is a good marker by which to understand the value provided by interchange to the merchant.

Moreover, the counterfactual here isn't giving any surplus to the merchant anyway -- in the absence of credit card companies they would process cash and be approximately equally well off.

Sure the terms would be worse. But I don’t get back in rewards what I pay in fees. And it’s a huge time dump to play credit card reward games.

Sure substitutes matter. I would pay infinity dollars for oxygen. But the market price is not infinity dollars for oxygen. That alternative is just one of a thousand metrics for setting prices. Europe actually does have fixed fees. Their payment system works fine. You can just fix these fees and CC firms still make more than enough profit to stay in business (this is a strong sign of monopolistic pricing power)

The European payment system works fine because it appropriated the property of US multinational firms.

Americans could have very cheap Louis Vuitton handbags if we mandated that they license it to American manufacturers for a $10/piece licensing fee.

There are a lot of things that do not work fine with price fixing. Actually very few markets work fine with price fixing. Venezuelan Oil production collapsed when the expropriated. Housing of course is well studied.

Anyway whether we should limit interchange fees isn’t the primary subject of my posts. That was mostly to facilitate discussion on Trumps 10% interests cap and the debate on whether poor people subsidize rich people benefits. Which they don’t. And what I thought was interested that there is a well-respected Fed paper on the subject saying they do. There is a false economic paper on everything I guess.

Yup, agreed on that.

The Fed paper you cited does not say poor people subsidize rich people benefits. It says people with poor credit subsidize people with good credit at similar income levels. It's still a bad paper, but it doesn't come to the conclusion you object to.

These are the type of businesses we want to create in society.

You haven't solved the planning problem.

I am just saying low barrier to entry businesses then to produce high consumer surplus and are generally good for society.

You've got your idea of how things should turn out, you've declared that since the way they have turned out doesn't match that they're a monopoly (they're not), and have a government solution (treat them as a utility) which you swear will work fine based on a "test" that you've executed only in your head.

Do people consider European payment systems broken? Because they do fix these fees in Europe and the system works. We actually do have a real world example.

Credit cards are a lot more popular in the US than Europe, making up 42% of point of sale purchases in the North American and only 18% in Europe. So Europe is doing something that's hurting credit card uptake.

Europe has a much simpler credit risk rating: Are you bankrupt? Do you have a job? Is your salary enough to cover your existing expenses plus another loan? Has any bank reported you for missing your payments or defaulting on your loan? Here's your loan.

This results in a much narrower band of available APR's, but this also means you don't need a credit card to build up your credit score. If you don't ever dip into overdraft anyway, you can just use your debit card for everything. And yes, debit card rewards are still a thing.

That has an obvious reason. You get a 2% discount using credit cards in the US which is only partially refunding our high interchange fees. There is no other way to get the refund without using a card.

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