Hello, whinevers. My name is Jesse Meek. I'm with another episode of the whinev podcast,

where we teach you four rules to help you stop a paycheck to paycheck, get out of debt,

and save more money. The great debate, the debate of all debates in personal finance is,

do you spend more when you use a credit card? That's the great debate. And yes, you do. That is

the answer. That is the answer. You do spend more. Now, in order to get there, we have to probably

back up a little bit and take a slightly larger view than just a single individual.

But here's how I know we spend more when we use credit cards, because the banks make money from it.

And I don't mean from the interest. I don't mean from late fees. They make money from the

interchange fees, the little spread. Every time you swipe, you pay. And that is how we know

that we spend more when we use a credit card than when we use a debit card. But you could take it,

perhaps a step further. Why do banks, these smart banks, with hundreds of millions of

dollars of research money, why do they offer rewards for using credit cards? Is it because

they want to lose money? No, it is because they want to make money. And they know that offering

rewards helps them make money. So who pays it? We do. We do either as the user of the credit card,

or as the merchant paying for those fees, or somewhere in the middle. If you have a very competitive

market, then those fees are going to obviously be paid by the consumer, because the merchant can

simply just tack on the fees. You would have to assume there's no collusion among merchants. But

you know, online global competition, I think it's a fairly free market and that competition drives

prices down and that merchants can't just tack on fees willy-nilly. So yes, the consumer,

you end up paying for that interchange fee. You pay for the convenience. And that just is what would

happen if we didn't pay that, the merchants would end up eventually passing it on to the consumer.

Not immediately, because markets don't work instantaneously, but they do work if they're allowed to.

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