How Credit Cards Work In The U.S. | CNBC Marathon

The paragraph discusses the flaws in the current credit scoring system and its impact on Americans. It highlights Visa's dominance in the payment card industry, with over 60% of card transactions in the U.S. being on Visa cards. The paragraph also touches on the legal challenges Visa has faced, including antitrust issues and litigation from the Department of Justice. The high swipe fees imposed on merchants are a point of contention, with merchants arguing that these fees are excessive and due to a lack of competition.

This paragraph delves into Visa's financial success, noting its consistent revenue growth and stock performance that has outpaced the S&P 500. It explains Visa's business model, which includes a four-party system involving the customer, issuing bank, merchant, and Visa as the middleman. The paragraph breaks down the sources of Visa's revenue, including data processing fees, service revenues, and international transaction revenues. It also discusses Visa's expansion into new payment methods and the potential for future revenue growth.

The paragraph covers the various legal cases and investigations Visa has faced over the years. It mentions past antitrust issues, such as rules that prevented banks from issuing cards from competitors like Discover or American Express. The paragraph also discusses a significant settlement with merchants over excessive fees and the abandonment of Visa's takeover of Plaid due to antitrust concerns. It highlights the ongoing debate over swipe fees and the impact on small businesses, as well as the arguments from supporters who believe Visa's structure benefits merchants.

This paragraph focuses on American Express (Amex) and its position in the credit card industry. It contrasts Amex's closed-loop system with the open-loop systems of Visa and MasterCard, highlighting Amex's role as both a lender and a card network. The paragraph discusses Amex's focus on premium perks and rewards to cater to high-spending customers, its historical growth, and its strategy for future success. It also touches on Amex's efforts to diversify its customer base and the potential threats from the rise of alternative premium cards and buy now, pay later services.

The paragraph explores the significance of credit scores in determining an individual's financial life in the U.S. It explains how credit scores, which range from 300 to 850, are used to assess creditworthiness. The paragraph outlines the components that contribute to a FICO score and the benefits of having a streamlined credit scoring system. It also addresses criticisms of the current system, including its potential to perpetuate discrimination and the impact of historical structural racism on credit scores.

This paragraph discusses the issue of errors in credit reports and the challenges consumers face in correcting them. It highlights the high number of complaints related to incorrect information and the difficulty in getting errors fixed. The paragraph contrasts the industry's claim of data reliability with consumer experiences and the need for regulatory oversight. It also mentions the use of alternative data to improve credit scoring accuracy and the potential for more regulatory changes.

The paragraph offers advice on how to achieve and maintain good credit scores. It emphasizes the importance of timely bill payments and avoiding excessive credit card debt. The paragraph also addresses the misconception that credit management is solely indicative of personal responsibility, noting that external factors like job loss or illness can negatively impact credit scores. It provides a simple strategy for building good credit: make on-time payments and avoid maxing out credit cards.

This paragraph examines Discover's position in the credit card industry, its business model, and its customer satisfaction strategies. It discusses Discover's focus on no annual fee cards, cashback rewards, and online customer service. The paragraph also covers Discover's history, including its launch by Sears, its legal battles with MasterCard and Visa, and its growth into a major player in the credit card market. It touches on Discover's customer base, which is primarily middle-class, and its reputation for customer satisfaction.

The paragraph discusses the performance of Discover's stock and the company's approach to building long-term value. It notes the fluctuation in stock prices and the focus on growth and stability. The paragraph also addresses the challenges faced by Discover, including a decline in revolving debt and the potential need for acquisitions or mergers for future growth. It concludes with a note on the company's confidence in its business model and position in the market.