Credit Cards Users just got SCREWED | Total Reset.

It's soon possible that your credit card

that you get rewards on could get

rejected by the stores you go to. Take a

look at this. There's a new Visa and

Mastercard agreement that took 20 years

to litigate. The Wall Street Journal

first reported on it. It's since been

covered a lot in financial media because

people are wondering how does something

first of all take 20 years to litigate?

Attorneys made literally a whole career

off of this. But apparently the idea is

that right now companies

uh based on the credit card that people

use get charged different interchange

fees. That's sort of like that disguised

fee that the merchants pay when you go

buy something. So you go to a local

coffee shop and you use a certain

preferred card, you might pay 2.4% or as

much as 2.8% on a credit card. on uh

lower expense cards, maybe cards that

don't really offer you that many perks,

the merchant may only get charged, let's

say, 1.6% or maybe as low as 1.3%.

Well, there are three buckets of cards.

The buckets of cards are commercial,

premium, and standard consumer cards.

And it's possible that companies might

now, businesses that you go to might now

say, "Hey, we're not interested in

taking your Chase Sapphire card or your

MX Platinum. We'll only take a standard

card." Now, Moody's makes the argument

that you end up by doing this,

businesses might end up risking pissing

people off and then people don't end up

spending at those businesses, which is

possible. But most of the higher income

credit card holders have multiple credit

cards. So theoretically they can switch

to another credit card and pay. Now

what's wild about this is really what

you do by doing this is you kind of

screw small businesses. Again, I wrote

this. I'm not going to actually post it,

but I wrote this comment. I sort of just

wrote it out on the Wall Street Journal

as a little template thing here in the

comment section of the Wall Street

Journal. I wrote that the competitive

advantages of the big companies is that

they can just go make their own credit

cards. I mean, look at Robin Hood for

example. Robin Hood's 3% cash back card

is not a sustainable credit card

business. We know that because even in

their financials, they tell us that

they're basically losing money

handoverfist on this credit card

program. I mean, look at this. If you

look right here, you could see on this

lower section, you could see that

Robin Hood, which offers to, you know,

certain customers who qualify for it or

get it. Robin Hood offers a 3% yield on

their credit card, which is great. You

get 3% cash back. It's amazing on

everything. No limits, right? It makes

you want to sign up for Robin Hood and

hopefully get off the wait list. Well,

their revenue on the credit card net is

$24 million.

Their expenses related to these credit

cards, possibly with some other credit

facilities. They're not very clear about

that, are $24 million.

So assuming most of this is credit card

here, they make $0 on the credit card.

But wait a minute, that doesn't even

account for the loss reserves that they

put aside for people not actually paying

the $200 million that are outstanding on

Robin Hood gold card credit cards. So,

what you find is that Robin Hood

actually takes a $55 million allowance

for credit losses, which means that

Robin Hood is basically losing $55

million on the Robin Hood Gold card,

which if they have $200 million

outstanding on the card is basically a

fourth of all Robin Hood gold card

balances they're writing off for an

assumption that there will be losses on

these cards.

So, why would Robin Hood do that? Well,

to get you to sign up for Robin Hood, of

course, and hopefully get the card

because 3% back is good. Like, if you

were at Robin Hood, why would you not

use the 3% card? It totally makes sense.

Like, otherwise, you use like the Apple

card and get 2% back, maybe 1% back. You

use the City Double Cash card and get 2%

back. You use the Venture X card and

get, you know, a little bit more than 2%

back. Bank of America, if you have like

six figure deposits, they'll give you

like 2.5ish% back, right? Uh but the

standard for cash back right now is

somewhere between two and two and a bit

percent. Well, big companies can

subsidize that. Like, think about this.

One of the big advantages of a company

like Amazon or if you think about it,

Target is that these companies can

actually incentivize you to get a 5%

back store card. Like I personally have

a store card with Amazon, with Target,

and with Lowe's because when I go shop

at Lowe's, I get 5% back on top of the

other discounts we get to Lowe's. Uh if

I go shop at Target, I get 5% at or 5%

off the ticket price, right? 5% back at

Amazon. If I go buy something on Amazon

that's $100, let's just for simplicity

not include sales taxes. If I buy

something for $100 at Amazon and I get

5% off at Amazon, it cost me $95.

If I go to a local store, a local

business, and I buy something that's

$100, and then the charge or or the the

local company, excuse me, tries to pass

on like a 2.5% credit card fee, then

they're really charging me $102.50.

Well, the difference between paying 95

and 102.5 is 9.7

or sorry, 7.9%.

A little dyslexic there.

That's a lot.

So, who loses in all of this is probably

the small business that's like, "Dude,

we can't afford all these these credit

card fees anymore. We're going to start

rejecting premium cards or we're going

to have to charge people for the credit

card transaction fee." Well, that just

makes it even more expensive to go shop

at a small business compared to like an

Amazon, Target or Lowe's where they've

actually or Robin Hood where they could

totally take a loss on the credit card

to basically step on small businesses

and destroy small businesses.

That sucks. So all of a sudden you've

got more of a reason not to go shop at

small businesses. And it sucks because

these are hardworking, you know,

American businesses who are trying to

compete. See right here, more and more

merchants, especially small businesses

in recent years, have begun passing on

the interchange fee to consumers. Now,

some small businesses are starting to

try to collect money through like PayPal

or zel, which maybe that's good for

PayPal. Uh, and you know, I just I was

just saying for house hack, I was just

paying for quartz countertops with Zel

and there's no credit card fee there,

you know. So, I mean, like good for them

because I just, you know, when I do like

Zel or even PayPal or Venmo, I always

put it like as friend because I don't

want them to have to pay the fee and

it's like I don't need the the payment

protection bull crap. So, I just say

they're my friend and then I don't pay

the fee and they don't pay a fee and

they're happy and I'm happy and it's

like I'm not trying to dispute the

charge with them because like I got the

countertop, I'm looking at the

countertop, it's in my property, right?

[laughter] you know, so I was like,

"What's there to dispute? What do I need

a warranty on a quartz countertop?" You

know what I mean? So, anyway, the the

point of this is apparently this this

deal per the Wall Street Journal

editorial board will uh cap the fee that

could be charged for standard cards at

1.25%.

Which if you look over here, that's a

reduction cuz the some of the standard

cards are at 1.65%.

So, there's a limit on the standard

cards. So, you're going to see a

compression in the benefits that even

standard cards give you. But the risk is

that now you end up seeing premium cards

get rejected at businesses and they're

like, "Hey, if you're going to pay with

a premium card, we're we're just not

going to take it." So, that actually

hurts potentially, not necessarily going

to happen anytime soon, but it could

happen. Your MX Platinums, your Chase

Sapphire Reserve kind of cards or

whatever. Now, I'm all for Chase getting

a big fat middle finger. Like, I love

this. Look at this. Fox Business

reporting that the attorney general of

Florida is now probing JP Morgan Chase

over alleged debanking of Trump media.

They're basically saying like why did

you debank Trump like right when he was

in the middle of trying to fund raise

for the Trump media group and the stock

you know going public or or whatever,

right? Closing the merger of it because

the spa was public before that JP

Morgan's getting investigated. I don't

think we hate the big banks enough. I

think the big banks, and this is just my

opinion, but and and look, don't get me

wrong, in in 2022, at the end of 2022, I

remember saying, "Guys, there's there's

something weird going on. You might want

to be cautious with small banks because

there's something brewing." I didn't

know what the hell it was, but to be

transparent, I put money in Chase cuz

I'm like, "Well, they're too big to

fail." Then what happened? We literally

went from the end of 2022, if you go

watch my videos, like December 22,

January 23, I'm like, I don't feel good

about small banks right now. Really

eerie. But what happened in March of

2023?

Banking crisis. Who's too big to fail?

JP Morgan. So, it's a place to go to

like for safety with your cash deposits.

right now. Of course, FDIC ended up

bailing out all banks, uh, which de

facto means there's no more $250,000

FDIC limit. It's sort of like an

infinite limit because they don't want

banks to fail. They don't want

depositors to lose their money,

especially the rich tech bros over at

Silicon Valley Bank that all got bailed

out. But anyway, now what? Well, now you

look and you see JP Morgan rugpulling

companies like which maybe they deserved

it. But I wouldn't be surprised if JP

Morgan's going around rugpulling a bunch

of other people's lines of credits,

warehouse lines of credit, margin

calling people because they're getting

nervous about the economy. And that's

how it starts. That's how credit cycles

start. The banks stop lending. They

start getting more restrictive on how

they lend. And that's why I say like you

don't hate the big banks enough because

when times are good, they'll borrow.

They'll lend to you like crazy and

they'll be your best friend. They'll

take you on trips. They'll take you out

on boat excursion, whatever. They will

suck up to you if you got money and the

times are good cuz they want your debt.

They want you to borrow.

Times go bad, they rug you. This is one

of those times where we're like at one

of those teeter totters in the economy

where like you don't want to be uh you

don't want to be beholden to uh to the

banks right now. So, so like sorry

that's like a whole tangent off of the

Chase Sapphire, but I believe it. I

mean, Wall Street Journal is literally

talking about it. See, premium card

users are in for a big surprise there.

JP Morgan Sapphire Reserve and many

other rewards cards could soon get

rejected by merchants. 20-year legal

battle suggests that companies no longer

have to quote honor all cards. I mean, I

can kind of see like if you go to like

Amazon, they might just say, "Hey,

sorry, we don't take the reserve card

anymore." Makes sense to me, you know?

Or or if you think about it, like if you

go to uh somebody says, "You're making

me more and more jaded." I I apologize.

Like I feel like the more and more we

study on markets, the more you kind of

have to be jaded. But but it's good.

Like I actually think a lot of people

who invest in house hack are very very

jaded people because they're educated

and and they've been screwed before and

they're like, "All right, I mean

obviously read the solicitation there.

They there risk with every investment.

The video is not a solicitation. Read

the offering circular." But it's like

real estate back company. worst case

scenario, it's still backed by real

estate. Do we trust investing in real

estate and and and Kevin's ability to

lead that, right? But like, you know, we

get we get people that ask very smart

and savvy questions and people are very

like in I think in order to get through

the world and through life, you have to

kind of be a little jaded, right? You

like at the very least know where your

risks are, right? So, like I'm not

saying don't go bank with Chase and

don't have a warehouse line of credit,

but like let's say if I'm a roofer right

now and I've got a $100,000 payroll line

of credit, business line of credit with

Chase, do I be myself right

now? Because if in 3 weeks we get a bad

jobs report and then all of a sudden JP

Morgan goes, "Yo, I'm freezing your line

and I'm calling it due and payable in

the next 60 days." Like, bro, you're

going to bankrupt me. What's Chase going

to say to me? They're not going to go,

"Oh, sorry. will extend your line. No,

they're going to go, "Sorry, bro.

Peace." Then you're screwed. So, like,

I'm not saying they're definitely going

to do that, but I'm saying they can do

that. And so, and it has happened and it

will happen again. And so, that's why I

have this mindset of I would rather you

be jaded and aware than get blindsided.

Like, if you have the line of credit and

you're aware of the risk, great. But I

think a lot of people honestly are not

aware of how the banks can absolutely

rug you. Uh and and that's that's the

scariest part is is the real rug pull

that could happen. [music]

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Papra there, financial analyst and

YouTuber. Meet Kevin. Always great to

get your take.