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Richard Field on Technology and Commerce (22 Jun 2005)
At first, credit cards actually seemed to be a brilliant solution, very minimal, very cheap. In credit cards, you have got sellers who are willing to give up their goods and ship their goods, knowing that they've got a credit card payment even though the credit card payment can be reversed, but there is a cost to the customer to reversing, with the credit card company paternalistically standing over their people. And if they start getting too clever they're going to cut out their credit and sellers know that. So sellers rely on the credit coming in. Buyers equally are saying, we don't know that the seller is ever going to send us the stuff, but we're willing to send the credit card payment because we can get it back if something bad goes on. And it's an extremely cheap way of doing it for those who can, and in addition it replaces online arbitration in some ways. The credit card system, almost by accident, has set up a way to handle transactions for pennies by giving each party just enough assurance that for a small chunk of transaction fees they're willing to release their end of it without full assurance that they're going to get anything. And for consumers, the law overrides contracts to provide additional protection. Which is why in the U.S. credit cards have really been the way to go.
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