Payment Types

/Payment Types

Chart: How Do Credit Card Companies Make Money?

Students need to understand the business models behind credit card companies as well as other financial service companies. Why? It provides a roadmap for consumers as to how they should use the financial product to AVOID becoming a profitable part of that business model. NerdWallet has a report out about credit card trends, which included this chart showing how credit card companies make money:

Charts: What Are The Most Common Non-Cash Forms of Payment?

You might ask your students to rank order the following non-cash payment types from most common to least common and see how they do:

  • Credit cards
  • Checks
  • Prepaid debit cards (often called prepaid cards)
  • Debit cards (what comes with your checking account)
  • ACH (automated clearinghouse payments – see definition below)


The Federal Reserve is out with their triennial report on non-cash payment trends and there are some fascinating charts within it (look for more over the coming week). Today, we focus on the big picture…what are the trends in how people are paying for stuff in a non-cash way? 

Question: How Much Are The “Big 5” Credit Card Companies Spending on Rewards Programs?

From Financial Times (sub. required):


Answer: A LOT! Almost $23 BILLION in 2016 based on estimates from Instinet

These reward programs provide cash back or points (that can be exchanged for goods or services) to cardholders based on their spending habits. The FT article answers a few questions that students might have:

Question: How Much Do Banks Earn From Overdraft Charges?

Answer: Billions!

Happy New Year! Welcome back to school. I know that banking tends to be a unit that many of you teach early in the semester so this data should prove particularly timely. I have posted on this topic several times but have some new data to report about the three largest U.S. banks and their fees from overdraft charges (from Financial Times, subscription required):


This quarterly data on the three largest banks shows how fees tend to grow over the course of the year as evidenced by the quarterly data from 2015. So, back to the question about how much they are charging for overdrafts…Let’s make the math easy and say $400mm per quarter or $1.6 billion a year for each of the three banks totaling $4.8 billion for the three of them combined. Some other nuggets from the FT article:

Question: What Percentage of Millennials Write Checks?

This one surprised me. Maybe we should continue to teach check-writing after all!

Answer (from Qualtrics survey): 42%

What’s Changed in Personal Finance Since 2001?

I received an email from a personal finance curriculum in my inbox this morning (nothing unusual here, I get a lot of them:). The provider was encouraging their educators to update their curriculum since they had heard some were still using their 2001 edition (Remember Friends? That was the top TV show in 2001). Yikes! Quick digression, ok, let’s call it a commercial: Since NGPF makes all of its content available online, we make real-time updates when circumstances change, such as when the FAFSA becomes available three months earlier.

I thought it would be interesting to think about how the financial services industry has changed since 2001. In other words, what are students missing if they are being taught from a 2001 edition?

Question: How Long Does It Take a Hacker To Steal Your Credit Card Information Online?

Answer (from Newcastle University research): About 6 seconds (yikes!) [This should grab your students attention!]

From Thrillist:

According to new a paper authored by Newcastle University researchers, hackers can mine your financial information using simple guesswork, spread out across multiple websites. When the process, known as a Distributed Guessing Attack, is coupled with a specifically designed toolkit, it isn’t very hard to exploit the security systems of major e-commerce sites…

Here’s a 31 second video explaining the technique:

Future of Retail: The Supermarket May Never Be the Same Again!


This image on the right may become a thing of the past if Amazon has their way! But first, I must digress…

For those who have listened to my podcast or read my blog, you probably know about the first stock I purchased in the fall of 1989. I took a few hundred dollars from my first paycheck and walked on down to the Quick and Reilly brokerage office in Boston and set up an account (the concept of online trading still about five years away). Thirty minutes later, I had my 100 shares of a company called CheckRobot in my account (and the riches were going to flow). Their innovation: automated checkout lines. Customers would skip the checkout line and be able to scan their own items and take their groceries and their receipt and pay at a centralized pay station. Customers would love it, companies would love the labor-saving aspect of it (one clerk for 5 checkout lines) and orders would flow in…well that’s not how it happened. Adoption was slow to non-existent, the company ran low on funds and was forced into a merger where shareholders got very little:( I got a valuable lesson in risk.