from Hacker News

Why are credit card rates so high?

by Vox_Leone on 4/1/25, 10:26 PM with 131 comments

• by golergka on 4/1/25, 10:53 PM

  Looking from the outside, it seems that people in the US are always using credit cards as opposed to debit cards, and I don't really see a good reason for that. I have owned credit card in the past, and I could get one easily now, but I don't see any reason to: I have money in the bank, I want to spend it, and I don't need to lend anything.

  Why and how does _credit_ becomes the first and default way of payment?

• by crazygringo on 4/1/25, 10:59 PM

  This article is actually really interesting and has non-obvious findings.

  The tl;dr is that it's not mostly due to defaults or for rewards programs.

  But rather due to very high operating expenses (4-5% of dollar balances!) driven by marketing.

  And also because the lending banks can't diversify. The risk of default is essentially magnified because you can't do anything if the economy turns bad and everybody starts defaulting together at the same time.

• by hx8 on 4/1/25, 10:58 PM

  I wonder if there is a market for secured credit cards with low interest. Maybe backed by a HELOC or stock portfolio. By lowering the default risk significantly lenders should be able to offer loan values closer to car loan numbers than loan shark numbers.

  I think people with enough assets to secure such a card might be those less likely to carry a balance, but maybe a lower interest rate would entice them.

• by andrewmcwatters on 4/1/25, 11:04 PM

  If you remove credit scores, which are a scam, then credit cards aren’t meaningful products outside of a payment method for low-income users.

  Debit cards have the same liability protections, and there are debit cards with cash back as well.

• by 486sx33 on 4/1/25, 10:54 PM

  Let’s just say you’re a wealthy consumer with a million dollars in the bank. You’d still buy things with a credit card, why? 1. Purchase protection (insurance) 2. Chargeback protection 3. Rewards either points or “cash back” 4. Merchants hardly ever give cash discounts anymore, credit card fees are baked into the price of everything so you’re going to pay for the advantages above and receive nothing in return, plus have the burden and liability of carrying cash.

  Merchant side. 1. CC fees are high so we add 3.5% to the retail price of everything. Someone pays cash? Good, a small bonus. 2. Merchants are being charged the same for “debit” cards which allow electronic payments from bank accounts, coming with the same chargeback risks and fees as a CC.

  So what the heck assume the worst for every transaction.

  How to fix this. Does it need fixing? If the gov is going to push everything to electronic payments, you might as well get the rewards.

  The trap, if you’re not paying off your balance every month, the rewards are nothing and the interest rate is crippling.

• by methou on 4/2/25, 2:15 AM

  I feels weird that US businesses and affiliates usually don't welcome debit cards as much,

• by tobinfekkes on 4/1/25, 10:53 PM

  Obligatory: https://m.youtube.com/watch?v=R3ZJKN_5M44

• by Perenti on 4/1/25, 11:29 PM

  Greed. Capitalism.

  Mostly because people keep agreeing to pay a premium for the convenience of spending before the money comes in.

• by matt3210 on 4/1/25, 10:44 PM

  If everyone suddenly developed self-discipline with money over night, the need for credit cards would disappear. Emergency use? replace emergency credit card with emergency savings and a bit of self discipline. Buy now pay later? wait until later.

• by AngryData on 4/1/25, 11:24 PM

  Because credit cards are a scammy middleman that has dug their nails deep into the political and financial worlds that lets them bully merchants into using them while pretending to be a benefit to consumers. In reality they just drive the price up for everyone, and then push a few percentage of the markup they pocketed onto consumers to appear useful. Consumers lose in paying higher prices, merchants lose by money being siphoned away to a 3rd party.