> but calling that "extracting rents" feels like pure rhetoric.
How? Because you just spelled out oligopolistic rent seeking behavior to a T...?
Oh but you like it because you get a kickback. Jeez. Credit cards are literally a tax on the poor but people don't want to hear that. Don't get me wrong, I use the hell out of my credit card, and feel guilty knowing that system specifically means less well off folks are paying higher prices to subsidize card usage.
How is credit a tax on the poor? My very poor family members all are able to access credit cards. They have lower limits, and higher interest because of their credit scores. But they can use them exactly how I do for gas and groceries.
Because when you have decent savings. It's easy to never pay a credit card late fee in your life.
When you are living paycheck to paycheck, it's a lot harder to avoid going over. Then, even a small amount over can incur late fees, and if you can't pay it off for even a month, it results in a decent amount of interest.
I don't think that is getting at the main confusion. It is pretty clear how, if someone can't pay their debt back, they're worse off. The confusion is that a credit card is a short-term smoothing tool. The point is to let merchants assume customers are good for it instead of going through the whole process of checking with a specific bank or expecting people to carry physical proof that they have the money. Using a card can't get someone ahead, the bank is expecting to charge the customers more than they give them.
So why is it necessary for these people to be using a credit card if they can't pay it back? Especially if they have an average income that is sufficient to cover their lifestyle. If they're going to be strictly worse off after engaging with a system, why are they engaging with it?
>The point is to let merchants assume customers are good for it instead of going through the whole process of checking with a specific bank or expecting people to carry physical proof that they have the money
I lost you there a bit. Why can't debit card serve the same purpose?
It can and does in my experience. I suppose my question is me basically asking for a reminder of why rational poor people are using credit cards. I've always assumed they were a tax on people with no impulse control and/or poor mathematical understanding.
It is easy to see how someone with no money would take out a loan via a credit card and be unable to pay it back at all. But if they can pay it back, then outside of very rare instances why can't they arrange their affairs so they have the equivalent amount of savings up front? Their income is at least equal to their expenses on average in the short term, they can't be using credits cards to cover long-term imbalances because the interest is too punishing. If their expenses are experiencing variances then there must be opportunities to put aside an emergency fund.
I don't see how the math checks out that they need and can afford a credit card if they can afford to pay some sort of "poor tax". If you can afford the extra cost of credit card interest, you can afford not to have one. Otherwise where are the bank's profits going to come from?
That was kind of a whirlwind. You seem to be saying 1) "rent seeking" is specifically about passing savings on to third parties, 2) credit cards are bad because they're a tax on the poor, 3) you use them because (like me) you are incentivized to, but 4) you "feel bad".
I don't think I can unpack all of the social good / feel bad stuff, but there is no way credit cards are the definition of "rent seeking" unless we combine the HN dogma that "rent seeking = bad" and your opinion that "credit cards = bad" to get "credit cards = rent seeking". Which I don't buy.
How? Because you just spelled out oligopolistic rent seeking behavior to a T...?
Oh but you like it because you get a kickback. Jeez. Credit cards are literally a tax on the poor but people don't want to hear that. Don't get me wrong, I use the hell out of my credit card, and feel guilty knowing that system specifically means less well off folks are paying higher prices to subsidize card usage.