The Insanely Lucrative Business of Credit Cards
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- Опубліковано 27 чер 2024
- In this video we look at how credit card companies generate billions of dollars of profits every year.
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0:00 - 1:17 Intro
1:18 - 3:15 History of Credit Cards
3:16 - 5:39 How Do They Make Money?
5:40 - 10:26 Marketing Gimmicks
10:27 Conclusion - Фільми й анімація
Walmart once said that the credit card companies makes more off of each transaction at its stores then Walmart does 😮
The +20% interest will do that
They had a net profit margin down to 1% in 2018, so it's true for that time.
Which is most likely the reason they are voiding their contract with Capital One and will try to get a better deal that benefits them more than the credit company.
They are also a volume based store with probably products in low margin while the credit company gets the benefit of the 3% of the ENTIRE price of the product walmart probably only gets a low margin (or even lose in term of trying to get high volume of people buying).
That’s a lie. Supermarkets make 30% margins on food etc. credit makes 1-5%
@@samsonsoturian6013it’s the swipe fees
Make the banks work for you. Take their cash back and pay your bills in full every month. I am what credit card companies refer to as a deadbeat. Thats because I pay in full every month. They hate that because they have to pay me my cash back but make zero in interest.
no you're not a deadbeat, you're using the card exactly how you're supposed to lmao
if you never use CC, how is your credit score and how can you be given home loan?
😊😊😊😊
@@user-ig5fl6wk4lhe does use his CC. He just pays off his balance in full every month.
I agree. But if this was reality they would not be a trillion debt or ANY credit cards. and i'v never carried a balance.
No shout out to Diners Club 😂
I really love that credit cards are not really a thing in europe to buy stuff. If i buy something with my card the money is leaving my bank account in the same second. I only got credit cards for USA travel and it really sucks to use them with weird amounts beeing "blocked" and refunds from hotels for securty deposits needing ages.
Also, we don't usually get any benefit from our cards, to me the idea of a credit costing a fee and giving out bonusses sounds so strange
@@giacintoboccia9386debit cards have higher fees and are still processed through the credit card payment network. Banks allow visa, mastercard, etc to handle the transaction and then accept updates from them to apply to your balance. The store is not communicating with your bank.
That depends on what card you have and how you use it. I’ve not paid interest on my card in 3 years!
Is this not just a bank card or a debit card? Harder to get your $$ back if you are defrauded. Credit card companies for Americans are kind of like a proper middle man like PayPal to which you can appeal if your data gets leaked. Credit card perks can include insurance on the product or service purchased, and have helped me re-book missed flights, extended product warranties, etc.
While everyone is balls deep on credit card debts, expensive car loans and mortgages I'm just chilling without any of those. Pay in full for everything, save up, live by your means. That's the way forward.
Idk man I understand what you are saying but credit card/ personal loan debt is really not people living above their means a lot of the time. Sure there are plenty of people out here with 80k in cc debt they racked up at the mall but there are far more people that needed money for something they could not go without such as a car repair, medical procedure, or even food for their kids after losing a job that had no other option to turn to other than high interest debt. Add in the fact that financial literacy is very low in the US and it leads to people getting into debt they can only afford the minimum payment on and end up stuck in a cycle. Try to have some sympathy is all I am saying, just because you see people living above their means does not mean there are not people struggling to just get by while doing everything they possibly can in much larger numbers.
@@Wopwopwopfuckitupvery well said! xx
@@Wopwopwopfuckitup using credit card is an excuse for not being prepared
That is a less stressful, wise & prudent approach to managing your finances, therefore managing your quality of life.
But It also completely avoids & ignores that entirely transparent additional charge that so many of us will continue paying despite any advice or changes.
The "Live fast, die young & leave a good looking corpse" charge. Known among others as the "drive your life like you stole it" charge.
In 2017, I bought a '16 Ford Fiesta. A friend asked about the dealership's loan process. I told him if I'd wanted to take out debt to buy a car, I wouldn't have gotten a Fiesta.
Even if consumers indirectly pay by higher prices in retail, there is no discount offered if the consumer pay by cash instead, at least in India or other parts of Asia (including Middle East, for Americans).
One exception is gold bar/coin purchase.
I remember gasoline stations did offer discount if you paid cash here for awhile (this are not the price, just example but if paid with credit it would be 3.00 a galon, but cash it would be 2.90). People did not like it as they felt scam, thinking back on it I wish they were allow to do it.
The main problem was the ATM in most gas station were third party ones which did not help the consumer as they would still be charge some 2 to 3 dollars for retriving the money to pay cash. But with time one could get use to it and always have cash in hand for gasoline. Of course as you could imagine credit company loved that people did not like this and attach quickly to it been a scam and that the gasoline station were 'robbing you' and campaing for it to not happen and well...now the only option is the 3.00 price (be it cash or credit)
Meanwhile in Europe: there's a law which says transaction fees cannot exceed 0.3%.
Yeap, Americans love to pay monopolist extra.
Better for small businesses, worse for consumers. American credit cards give fantastic rewards to those that use them responsibly.
Doesn't seem to apply online where PayPal and Stripe charge small merchants 3-6% to process payments
@piotrp5668 it's not necessarily monopolistic so much as it is about lawmakers having more incentive to maximize corporate profits than to protect the American citizen and consumer
America is dystopian in so many ways
1. Don't charge what you can't pay when the bill comes in.
2. Without exception pay the full amount due when the bill comes in.
(Pro tip: this is like getting a 21 to 51 day interest free loan).
3. See 1.
4. See 2.
Best business is being a middle man I guess
Parasites
Yes, tech companies like AirBnb follow the same middle man business model.
During a gold rush, sell shovels.
First time I was here right at upload time-- can't wait for another banger video
Same 🥳
8:28 I recognise that Thai mall! 🇹🇭
My three favorite channels: Wall Street Millennial, Stock Brotha, & How Money Works. Make my week complete! 🔥 🔥 🔥
These companies have strong moat. Also bank provision of credit card is lucrative as the interest rates on the credit is around 20% so the net interest margin on “the credit loan” is quite high boosting the income of the banks providing credit cards. The financing may be this expensive for the client if not paid in time. They may also charge other fees to the clients.
Rates on credit cards are usually around 30 to 34% right now.
@@tripplefives1402 based on different web sources I see average interest rate on credit card at around 20 to 25 %. It is average taken from the population.
Major credit card networks like Visa and Mastercard represent a complex financial infrastructure that facilitates global commerce. Their establishment required significant investment and ongoing development. I could be wrong but it reminds me of the current system for companies like Amazon or Uber. Amazon was unprofitable for years before it became the unstoppable force it is today. Companies do deserve some sort of financial benefit for creating system like this. The only question is how much and for how long. The Pharmaceutical companies might give ideas of how long. Pharm companies keeps rights for 20 years so that they can recoup the cost of researching and developing drug. Maybe the credit card companies deserve the same benefit. Ultimately, there needs to be a balance between allowing credit card networks to recoup their investments and ensuring fair pricing for consumers and merchants. Regulatory measures and competition can play a role in achieving this balance.
Good content and a decent breakdown. I would suggest not using the term credit card companies at all. Visa and MC are payment companies that run the switches where all authorization and settled transactions must pass (with the exception of PIN debit). As you pointed out, Visa and MC do not issue CC’s. Only financial institutions e.g., banks, credit unions, and savings and loans issue CC’s with an issuing license granted from either or both Visa/MC. Visa and MC do not charge interchange, they set the interchange amount to be paid to card issuer’s. Interchange reimbursement used to contain some fifteen categories, today, there are more than 300 between Visa/MC/Discover/AMEX. Visa and the others do charge fees equal to roughly .15% plus $0.03 to $1.00 on each transaction, but the issuing bank makes by far the largest amount. Only banks with an acquiring license may offer card acceptance to merchants, the largest banks have both licenses, meaning they make money on both ends. There are additional participants in card acceptance and they generally take the smallest cut of fees.
Amex also allows banks to issue amex cards. They typically dont because the terms are uncompetitive and annual fees to customers. But its one way to get an amex without having a perfect score.
@@tripplefives1402 you are correct, banks can issue Discover as well. This is due to a successful lawsuit filed by the DOJ some years back which invalidated Visa and MC rules prohibiting this.
Charging 2% of every transaction for network usage in the internet age is either genius or downright criminal. The credit card company (almost) duopoly doesn't get nearly enough flak for that.
Well, the third guy charges like 6%. This is why some stores block amex.
@@tripplefives1402 Merchants can decide if they want to accept Amex and their high fees or not, and many don't, so that's fine.
But they effectively have to accept Mastercard and Visa, because virtually everyone has one, because it's a duopoly. Plus in many places it's illegal to charge different amounts for different payment methods, so the 2% just gets added to the price for all of us, it's not a choice.
But apparently we're cool with it, because Visa sponsors the Olympic 🤷
Or you can accept Discover or Am Exp ... Or just take cash.
No one is putting a gun to your head to accept. If they are providing you value, why should they not charge for it. This is capitalism.
If you don't like the deal, just say No.
@@JosephWen01 this is an incredibly naive outlook to have
solid content, keep it up!
This is Why India launched Rupay and simply took over 70% of the market share.
Great video, i have been preaching Visa stock for a long time now. Awesome to see a video putting my logic into words.
Honestly, i prefer indias upi system. Its at 0 cost for most transactions but even if it begins to be charged, it wont be very much.
You can tell Visa/MC/Amex are upset whrn they complain to the us govt about indias actions.
1:18 I have accounts and previous employee IDs with all 3. As a New Jersey resident I can say Visa (V) is the Tony Sopranos of commerce. Love this channel, thx.
Love the content!
Meanwhile me who has 18 CCs yet has never paid a single cent in interest and just takes all the rewards lul
In India we have upi .. money moves from debit account to shop owners
This is why I love investing in Visa! 💪🏾
I've no objection to the credit card system per se, it accelerates the circulation of money in the economy and has the same effect as a mass injection of funds. However, everyone who gets access to the system for processing rights greedily charges excessive fees for their piddling effort. Really needs a strong and dynamic regulator to save capitalism from itself.
Like first, watch after.
You've been programmed well 🤖
Like first, think later, stay stupid
Two words: Payment Strike
dope vid as aslways
I'm so used to debit cards I just automatically think of using my credit card as spending my own money.
????
I’ve had visa amex discover but never yet Mastercard. Very convenient juz pay off balance end of each month 😮😂😊
I mean it's not like credit cards are all evil like this video says. You basically have to have a credit card these days if you want to buy anything from most online stores. And debit cards use the same network as credit cards, so they're basically the same in my book.
And the thing is if you ever try to start payment processors outside this loop they will have the government shut you down
Visa made $22.66bn in Operating income (Revenue - Operating expenses) and Netflix made $26.67bn. How is that 3x more. Am I missing something
Insanely lucrative business of student loan
i would invest in bank stocks instead of visa or mastercard
Just buy it all with an etf
Not sure how much more I pay but I never pay interest as I pay them off every month. It does make it easier to balance a budget as you can print records of your spending. Does that make it better? I never carry more than $20 just in case...? I guess my question is am I paying more by using a card than cash? I know at gas stations in the US the have different prices for cash price vs card (I never even thought about calculating) . Either way I get 3% cash back at gas stations and 6% back at grocery stores (AMEX @ $125 a yr annual fee ($0 for me)) on one card and 2-3% cash back one another (VISA @$50 a yr annual fee) I use for everything else. I just got an Amazon one as well, not sure if its worth the hassle yet or not but giving it a shot (as I order most things through them).
What about Discover? Are they not big cheese?
they're pretty small compared to the others. capital one wants to buy them out so who knows if they'll grow to be more competitive
what I think, is I wished I owed American Express or Visa.
Go buy stock. They are public companies.
And then to think that their economy fully relies on consumer spending. Only downhill from here. But hey we can always print more cash because that doesnt create inflation 🤡🤡
Economies always rely on people buying things, else what are you doing with the economic output? Butying it in the sand?
@@tripplefives1402 sure but in the US, almost all the GDP growth is consumer spending (imported goods). While for the economy it's much better to also for example export. So in conclusion if the US wants GDP growth they need the consumer to spend. What better way to make them spend more than by handing out free money. Surely that won't matter 🤡
Do a study on Rupay and UPI
They have been strangling freedom of expression recently and deciding what can be made on the internet and what cannot be.
alrighty!
And THIS, ladies and gentlemen, is why I use a debit card instead!
Good points, but ultimately it’s up to the consumer to be more financially responsible. We make the final decision, to swipe or not to swipe.
If you don't use credit cards and pay the same for a product as someone who does use a card, you're subsidizing their purchase. The credit card ecosystem harms even those of us who choose not to use it.
@@IAMNOTGOODWITHCOMPUT which goes back to my point… the consumer or being more specific for you, the consumer that uses credit cards have to be more financially responsible to make the decision and not use the credit card. if people stop using credit cards than the business would not be lucrative, therefore these credit card companies would not invest their time or money… use critical thinking skills before you type under my post.
I posted a comment explaining that these companies also colluse to determine what speech is permitted anywhere on the Internet and who has access to that speech.
UA-cam deleted the comment 4 seconds after I posted it. Must have used a word they don't approve of or mentioned something they don't like.
They have collectively passed "morality policies" that ban a huge variety of content from being hosted, and classify another huge variety (such as queer content) as Adults-Only.
Any bank, website, secondary processor, political candidate, or content creator who doesn't cow-tow to their language & speech policing gets blacklisted from the global financial system. Including access to bank accounts anywhere that Visa, MasterCard, or Discover handle payments for. Which is all of them.
Also none of these companies were founded by, run by, or owned by, Jewish people.
One was founded by an Indian family, another by a very rich group of White Protestant Men, and the other two by pre-existing publicly traded companies which were both well established as pro-segregation, pro-american-imperialist, pro-white-christian-supremacist and anti-woman (like set a morality clause banning women from accessing any banking of any kind without a male legal guardian unless they were widowed kinda anti-woman).
So yeah, most online censorship and age-gating of queer, sex-ed, and pro-egalitarian content is so heavily limited. Especially of the spicy variety.
American's don't have bad attention .... OOO DONUT!
How can a credit card offer cashback if it is not cash? Merchants don’t provide me with the cashback nor does the credit card company send me an envelope with cash at the end of the year. It makes no sense!
In finance cash means liquid money not paper money, since paper money is extremely inconvenient and prone to money laundering
What are you talking about? The money literally goes into my checking account.
You missed the BTC run... lol
how is that fractional art portfolio working out?
Its been insanely lucrative for me. $60,000+ per year in luxury travel for $2000-3000 in annual fees on credit cards. 100% on time payments on CCs for 17 years and 810+ credit scores with 25+ cards. No hobby is as life changing as traveling for nearly free on credit cards!
Do you take business tickets?
confused. huh? how is it free if you pay it back?
lol, get bent.
Only Americans can proudly say they have 25 credit cards.
Your hobby is spending lots of money? Please explain
Make credit cards work for you. Buy the stock.
American Express does not work anywhere in the world lol
There are a number of places that don't accept Amex (but do accept other credit cards).
I’m putting my life savings into Visa stock
How to be a loan shark without being a loan shark..
I honestly dont get the mentality of spending more than you have, even with the payment systems there are, and how you can minimize interest, it just always is so blatantly a stupid idea
"Credit cards are more convenient than cash"
One day the USA will invent a debit card... As the normal world lives today.
They ruin that as well as they live above means and place wants before needs.
Compromised debit card -> you can lose all your money. Compromised credit card -> you lose nothing. I'll never use my debit card at places where skimmers are common, like gas stations.
Bitcoin can never do what the credit card industry does "easily".
It not suppose too nor do we need more of this shit
@@UA-camaidsreal It is supposed to do that according to many people. They literally want it to be a new currency independent from banks / third parties, used as much as credit cards. But it can't.
@@nietur Why can't it? I'm sorry I'm not very good at this stuff
@@GaryTheRCcar transaction speed
I make those lounges worth it 3-4 times a year with my significant other
Never make any credit, not even for a single euro / dollar / whatever money it is.
Why not?
@@TheRealCatof because it’s for dumb people
Those currencies are credits.
They are created only through debt.
Either the treasury sells a bond or a bank makes a loan. If that stopped, all of the currency in existance would be consumed repaying debt plus interest.
Credit cards: the ultimate example of big corporations exploiting "state's rights"
That's silly. all crimes in this space are fed jurisdiction
@@samsonsoturian6013 Why do you think they're based in Delaware and South Dakota? because SCOTUS ruled that credit card companies can charge interest rates based on what the law in their state of incorporation allows, regardless of the borrower's state of residence.
@@mikedavis6266basically every large business is headquartered in Delaware, that's more or less meaningless
@@IAMNOTGOODWITHCOMPUT How many are headquartered in South Dakota?
Number 3
Banks offer no apy on savings anymore for a reason, they just offer credit cards. Credit cards should be illegal imo
Not my favorite of your videos. Simply saying the consumer pays through higher prices isn’t really accurate. The fed did a study on the impact on prices from capping debit card fees. TLDR the merchants pocketed the savings. Why would credit cards be any different? If the merchants have the pricing power to pocket the savings then I think they are paying for cc rewards.
Bitcoin will replace credit cards!
Not unless they fix that glacial transaction speed.
That’s been said for ten years, when is going to happen.
Credit card companies should be socialized.
"...spend money that you don't have...!" There in lies the crux of the problem; I don't feel sorry for any of those folks who whine because of the exorbitantly high interest rate they slam on your outstanding balance. If I don't have the cash I don't buy! And I do ask for warranty of guarantee in writing on all the non-food items. But, I do have a DEBIT card!
Credit cards are the best tool for wealth building.
what
credit cards give you free money@@kevinbabicz
He means building the wealth of the credit card corporation @@kevinbabicz
You funny 😂
Quite the opposite. People go broke because of credit card debt.
sometimes i wonder is americans don't use debit cards which don't bear any interest
Neither do credit cards if you pay within 1-2 months (same as debit just more flexible and features)
Because a debit card is directly connected to your actual money. If someone steals a credit card and buys stuff, it is the banks problem.
If someone steals a debit card and spends your money, it is your problem.
Unfavorable terms.
I will never understand why people would EVER pay for a credit card like American Express. That's dumb
Because they get more out of it than they pay? Lol
I pay $95 a year for my American Express card, but I get at least $50 a month in cash back. 2 months of my usual shopping, and I already made that money back.
Amex doesnt allow you to carry a balance on the traditional charge cards. So they pay for the service with a fee because no interest.
We’re just contributing to inequality
Think looking backwards written in 1888 coined the concept of the credit card
Stopped you talking about credit card payments with control my business and my life you are stealers must pay total makes the lost my business money not about the mean sponsor my business .