I used to think the only argument in favors of credit cards is that they offer credit.
However, from a purely selfish perspective, they also reward people who pay on time - if you play the "rewards" game, which I have avoided throughout most of my adult life. I regret that now. The rewards are pretty substantial and based on my math they almost make up for the transaction fees (I would say you can get 2% cash back - which offsets most of the 3% the card company takes).
The question is will merchants offer discounts for dwolla? I doubt it. Instead Dwolla will have to offer cash back or other rewards to customers. Given their financials as described in this article, I don't see why they couldn't succeed. Clearly their model works better for merchants. Does it work better for consumers? Only if they offer rewards, which would cut into their attractiveness for merchants. Still with a flat $0.25 they could gain serious traction with large item merchants.
I am hoping the likely outcome of this is a further weakening of the conventional financial industry.
It will be fun to watch. I wish them the best of luck.
I think it will be a slow process but they will certainly succeed as a business. The rent payment use case alone should be enough to keep the company afloat indefinitely. Rental companies can very easily say we only accept cheques every month or if you want automatic payments then dwolla, no credit cards.
The real reason I wouldn't use dwolla for a consumer web transaction over my credit card is not the credit aspect but the risk aspect. With a credit card I'm protected against fraud fairly well whereas with debit or dwolla the protection isn't nearly as good.
They don't really offset the fees because the fees are higher! At least in Canada, the high points cards actually cost more for merchants to accept. Merchants are charged different fees per card but by the rules of the credit card companies are not allowed to refuse the high cost, high point cards.
Yes, really the optimal plan is to use an Amex that has higher rewards due to its higher merchant fees. Yes, the fees get passed on to the customers, but they get passed on to ALL the customers, so the people using Visa or MasterCard or cash are subsidizing my Amex fees. Not particularly nice, but optimal!
Not just rewards, having a credit card with a good history is so valuable. I've just turned 20 and my credit rating is the highest possible because of how I've used credit cards (and other sorts of credit) in the past, they are a fantastic way to prove you're a good person to give credit to.
However, from a purely selfish perspective, they also reward people who pay on time - if you play the "rewards" game, which I have avoided throughout most of my adult life. I regret that now. The rewards are pretty substantial and based on my math they almost make up for the transaction fees (I would say you can get 2% cash back - which offsets most of the 3% the card company takes).
The question is will merchants offer discounts for dwolla? I doubt it. Instead Dwolla will have to offer cash back or other rewards to customers. Given their financials as described in this article, I don't see why they couldn't succeed. Clearly their model works better for merchants. Does it work better for consumers? Only if they offer rewards, which would cut into their attractiveness for merchants. Still with a flat $0.25 they could gain serious traction with large item merchants.
I am hoping the likely outcome of this is a further weakening of the conventional financial industry.
It will be fun to watch. I wish them the best of luck.