10 ms·

How Credit Cards Tax America

28 points by nols 11y ago

sschueller 11y ago
All these fees yet the merchant gets almost no protection from the Credit Card companies when their product is forged and used. Charge backs can happen up to 6 months later and the last time I had a merchant account the permitted response time for a merchant was just 1 day or the full amount plus penalty was taken.
- kintamanimatt 11y ago
  IIRC that's not true for in-person transactions in locations where EMV chips have been rolled out and merchants actually use the chip.
johnchristopher 11y ago
I don't understand. Isn't there something in the US like `Bancontact' ? In Belgium (and, I believe, Germany, The Netherlands, France, etc.) your bank issues you a `debit' card that could act as a credit card but it's not its first use or purpose. When you pay with it you slide it into a terminal, enter your pin and validates the transaction. The money is then transferred from your bank account to the merchant's one. There's only one intermediate between banks and it's the service provider (whose name escapes me at the moment) and there are 0 fees applied. It's on the merchant and it's not percentage based but transaction based (much less than 5ç I believe but the merchant has to rent the terminal). There are basic insurance for card stealing that covers `some' things and you can buy larger ones if needed. Why is the credit card the default in the US ?
- mschuster91 11y ago
  > Why is the credit card the default in the US ? The article states the reason: interests, over-due payback fees. Banks in the US don't have any incentive to provide their customers with debit cards other than to generate a shitty small fee. Banks make real money by borrowing the customer (e.g.) 1000$ and collecting it either in full or in partials, and they hope that the customer pays in partials because they can earn interest for long(er) time. A debit card, on the other side, allows for maximum 3-4 days (due to interbank settlement weirdness) and thus the profit from interest falls away.
  - lotsofpulp 11y ago
    Benefits of credit cards : you can get ~2% back on all purchases, you get a free minimum 20 day loan so your cash is not affected immediately, and if there is fraud, you don't lose any cash. Also, has insurance and foreign exchange fee benefits. Debit cards: if it gets compromised, you start losing cash out of your account I don't see why it is in anyone's benefit to use a debit card, unless they lack self control.
    - mschuster91 11y ago
      > you can get ~2% back on all purchases Who pays for these 2% cashback? Most definitely not the card networks, and not the merchants. It's the CONSUMERS who pay for their own cashback. > Also, has insurance and foreign exchange fee benefits That "insurance" stuff is highly questionable imho, and most people don't ever need the forex benefits. > Debit cards: if it gets compromised, you start losing cash out of your account Chip and PIN. It's not hacker proof either, I admit, but way better than CCs.
      - massysett 11y ago
        Yes we pay, but consumers without cards pay the exact same price. Merchants seem loath to charging a credit card fee. I've seen a few gas stations offer a modest cash discount, and a few places like Costco won't take most credit cards. As long as consumers don't see the price directly, they have no cause to care. If merchants charged 5 cents for debit but 2 percent for credit, that would wipe out my benefit for "rewards" and my use of credit would be eliminated immediately.
      - lotsofpulp 11y ago
        Since the prices are the same for mostly everything, then it's even more imperative to make sure you get your 2% back, otherwise you're just subsidizing other people's credit card rewards!
      - tracker1 11y ago
        But the price isn't lower for using cash, or other payment methods... as I mentioned in another post, I'm surprised Walmart and/or Amazon don't have their own charge account system, given their sheer size, they could offer a 2-3% discount for members, and still come out ahead.
- deleted 11y ago
  [deleted]
- MichaelBurge 11y ago
  It's been years since I've used any debit card. I'm scared to use my debit card, preferring a credit card in almost every case. The one exception is when I need to get cash from an account(and I tend to just visit the bank in-person for that, rather than risk an ATM or grocery store machine being rigged). I understand that my credit card has very strong protections by law, since the bank has loaned me money and people do not have to pay back debts that are not theirs, the bank is at risk of losing money in the event of fraud. Debit cards claim similar protections, but since my actual money was transferred I am the one at risk of losing money in the event of fraud. The bank isn't as motivated to investigate my case, since they're not at risk as much. For a similar reason, I'm scared of checks. If you write someone a check, that's enough information for them to drain the associated account. It's free to query the bank to see "Does this account have $X?", so a binary search will let you know the balance of any account on a check. Then they can withdraw it at any time. It's especially bad for checks written against business checking accounts, since they're not protected by consumer protection laws that allow for 60 days to find fraud but rather by the Uniform Commercial Code that only allows a single day to catch fraud. Do I really want to check on my bank account every single day? For now, I just live with that terror and only write checks to people big enough to sue. No SaaS app will ever get a check from me without me doing some restructuring on my bank accounts.
  - kintamanimatt 11y ago
    Aren't checks an anachronism in the US yet? I'd have thought bank transfers would have been more widely adopted in the US by now. I tend to use my debit cards more than credit cards. I've occasionally had to make chargebacks for fraudulent use and there's been no perceptible difference between a credit card chargeback and a debit card chargeback. The bank does the job equally well no matter the type of account. It's all fairly seamless and has always been done quickly by phone. The biggest risk I foresee is losing my wallet, not a fraudulent transaction. That's why I have two wallets with two set of cards, so I can easily failover to that wallet while replacement cards are being generated. The only interesting event that the bank couldn't/wouldn't fix was the time when Best Buy somehow auth'd my card dozens of times in a row for a reasonably expensive laptop. They managed to reduce my available balance far, far into the negative. Obviously they were just authorizations, not final sales, so the money never actually came out of my account, but it was interesting how my bank was happy to let me go many thousands overdrawn and their fraud systems didn't kick in at all. That card was useless until the authorizations dropped off the account.
- danmaz74 11y ago
  Debit cards are prevalent in Italy too, where they're called "PagoBancomat". But AFAIK the cost is commission based (now limited by European law to 0.2%, as opposed to 0.3% for credit card transactions).
- mseebach 11y ago
  Pretty much every European country has their own incompatible, cheap debit card system. The problem is that they are incompatible, and often difficult to access for outsiders (non-permanent residents). As a contractor, I've be in large company cafeterias where the only payment option was such a card (getting by by handing cash to one of the employees I'm working with, high friction and not very professional). In the US, when I was an exchange student in the late 90s, I could pay with my local banks ATM card (so, a debit card) in the local supermarket. I can't remember how far that network extended, but it certainly existed. The reason credit cards are a thing is because processing payments between a global set of debitors and a global set of creditors, instantly and securely (and yes, despite various problems and shortcomings, on the margin, it's very safe), is a pretty hard problem, much more so 20-30 years ago when the current systems came of age. The credit part is necessary because until recently, the technology simply didn't allow for online processing of payments, all the way from the debitors bank account. The payment would clear against your credit, the expectation that you're good for it, not actual cash in your account. Running such a network is complicated, thus the fees. In the past 5 or so years, both Visa and MasterCard have introduced proper debit cards, that is, card where payments are instantly processed against your bank account balance. This is still complicated, but essentially a new, much simpler and more modern network, and thus fees are much lower. Despite the security of the legacy network, this is safer yet, which is good for both merchants and bank (and, indirectly, consumers, though arguments can be made over whether the lower fees outweigh the cost of taking on a higher liability). I expect expensive credit cards to largely go away, if not by regulation, then competition, and be replaced by debit cards and decoupled credit products and travel-benefits/insurance products. On the margin, the vast majority of users will (and economically should) prefer to save ~2% on their spending to earning airline miles.
  - jacquesm 11y ago
    The situation has dramatically improved in the last couple of years. I've been on a fairly extensive trip of Europe recently and I had to use my credit card only on the French toll routes, everywhere else my regular debit card worked. As opposed to previous trips where far more than half the expenses ended up on the CC.
  - 11y ago
blcknight 11y ago
Eh, the bitching over credit cards is tiresome. Cash is expensive for businesses too - they have to pay to transport it securely, keep it safe, deal with cashiers' errors, etc. And at the end of the day, cash consumers spend less than payments by electronic means. Now, what should a very efficient electronic system cost? Very little, a few tenths of a percent. But it doesn't, merchants charge the fees that businesses will pay for that convenience, even begrudgingly, because access to the millions of consumers with credit cards is worth it. If Silicon Valley wants to disrupt the business, do it. It is possible to come in and take on an established industry. But so far I'm less than impressed with the payment start-ups that are out there, and imho all they're doing is introducing yet more fragmentation. Sorry, I have no interest in paying with my phone - especially not with Snapchat. My Chase Sapphire card doesn't run out of batteries, and I get lots of cool perks with it.
- RivieraKid 11y ago
  It's a natural monopoly market, making a better product is not enough.
  - dpweb 11y ago
    3% is not price gouging. First, they spent decades building up their networks. You are paying for indemnity. People forget about the power of purchase protection. I can pay with a card and feel safe I will not get screwed by a merchant. Merchants are scared of chargebacks, so they rarely screw the customer. Card payment is vastly superior to cash payment the fees are not out of line.
    - needusername 11y ago
      > 3% is not price gouging. First, they spent decades building up their networks. Except the fee goes to the issuer and not the network. > You are paying for indemnity. People forget about the power of purchase protection. I can pay with a card and feel safe I will not get screwed by a merchant. Merchants are scared of chargebacks, so they rarely screw the customer. Then the cardholder should pay for this, certainly not the merchant. > Card payment is vastly superior to cash payment the fees are not out of line. 3% is out of line for incrementing an integer in one mainframe and decrementing it in an other mainframe with virtually not risk.
ersii 11y ago
Recent jurisdiction that came into effect in Europe limits transaction fees in Europe to 0.3% of the transaction. The flip side of this for the customers is that the card rewards/kickbacks are decreased as well.
- danmaz74 11y ago
  Addendum: 0.3% for credit cards issued by Visa and Mastercard. 0.2% for debit cards. Interestingly, there is no law limit for American Express and Discovery (my guess is that Visa and Mastercard were somehow selected for their dominanti position).
  - germanier 11y ago
    No, the limit also applies to other smaller national schemes. The real difference between Visa/Mastercard and Amex/Discovery is the the former only provide the payment network (the interchange is used to give a cut to issuing banks) while the latter issue their own cards.
    - danmaz74 11y ago
      Thanks for the clarification. I was going to ask if this meant that for merchants there would also be additional fees on top of the interchange rate, but already saw your other comment stating this...
- kintamanimatt 11y ago
  Because of this legislation I foresee non-EU companies choosing to set up a European subsidiary to take online payments. It's good for Europe and will likely apply an interesting market force on fees outside of the EU.
- blcknight 11y ago
  That's not the only downside, this basically kills the possibility of innovation. They're basically solidifying the position of MC and Visa in the market forever, and make it hard for someone else to come in. So far the U.S. hasn't been so successful in taking the power away from these payment networks, but at least there's a chance. I could see someone like Square coming in and dominating the market with a consumer product in 5-10 years.
dclowd9901 11y ago
The thing I hate most about this whole thing is it's reached a critical mass such that if you don't play the game you're just paying the cost. I wish stores would simply charge the credit card fee outright as a line item to dis incentivize usage of the credit card (many gas stations do something similar in charging a cash vs credit price).
- hannibalhorn 11y ago
  Charging a different price for credit cards is generally against the terms of the contract a merchant has with their card processor.
  - germanier 11y ago
    In Europe usually it is allowed (as long as the surcharge reflects the real costs) but it doesn't happen. Notable exceptions are only online travel agents and shops in Denmark.
caf 11y ago
A few years ago the regulations in Australia were changed so that the CC companies can't force merchants to cross-subsidise the fees - merchants are allowed to directly pass on the transaction fees as a surcharge if they want. I've certainly chosen to use alternate payment methods to avoid the surcharge when convenient, so this must be putting some competitive pressure on the CC transaction fees.
- Maxious 11y ago
  The next wave of that regulation should come into effect soon - the banks tried some loopholes and merchants like Jetstar claimed they needed to levy huge surcharges so another reform is required: "the Board is proposing to change the Bank's surcharging standard with the aim of ensuring that customers cannot be surcharged any more than the cost of accepting cards." "It is proposed that no credit card interchange fee will be able to exceed 0.80 per cent and no debit interchange fee will be able to exceed 15 cents if levied as a fixed amount or 0.20 per cent if levied as a percentage amount." http://www.rba.gov.au/media-releases/2015/mr-15-24.html http://www.rba.gov.au/media-releases/2015/mr-15-24.html
deleted 11y ago
[deleted]
tracker1 11y ago
I'm genuinely curious why the likes of Walmart and/or Amazon, given their sheer size haven't started their own credit card networks, or even charge accounts for their own stores over using the CC networks...
pps43 11y ago
The author mixes in interest, interchange, and fees. What he calls "fees" are actually interchange, and it's a relatively small line item in bank's P&L. The main source of business income is interest. And interest is so high because it has to offset losses from card members that stopped paying. Remember that credit cards are unsecured products. Banks typically recover only about 20% of the default amount, the rest is gone.
ismail 11y ago
"The founder of Coinbase actually left his job at Airbnb to start a Bitcoin company once he realized that credit card fees ate up nearly half of Airbnb’s profit margins." This is so true, and a weakness in cc wth the rise of marketplaces. I started a side project, a marketplace due to very low margins of suppliers the max we could get in transaction fee including cc processing was 10%. We did not want to add markups on in store price so had to absorb the costs. Take a transaction of $100 , e.g you pay 3% fee/$3. For the merchant it is 3% but for you its actually 30%

28 points by nols 11y ago

All these fees yet the merchant gets almost no protection from the Credit Card companies when their product is forged and used. Charge backs can happen up to 6 months later and the last time I had a merchant account the permitted response time for a merchant was just 1 day or the full amount plus penalty was taken.

kintamanimatt 11y ago
IIRC that's not true for in-person transactions in locations where EMV chips have been rolled out and merchants actually use the chip.

johnchristopher 11y ago

I don't understand. Isn't there something in the US like `Bancontact' ? In Belgium (and, I believe, Germany, The Netherlands, France, etc.) your bank issues you a `debit' card that could act as a credit card but it's not its first use or purpose. When you pay with it you slide it into a terminal, enter your pin and validates the transaction. The money is then transferred from your bank account to the merchant's one. There's only one intermediate between banks and it's the service provider (whose name escapes me at the moment) and there are 0 fees applied. It's on the merchant and it's not percentage based but transaction based (much less than 5ç I believe but the merchant has to rent the terminal). There are basic insurance for card stealing that covers `some' things and you can buy larger ones if needed. Why is the credit card the default in the US ?

mschuster91 11y ago
> Why is the credit card the default in the US ? The article states the reason: interests, over-due payback fees. Banks in the US don't have any incentive to provide their customers with debit cards other than to generate a shitty small fee. Banks make real money by borrowing the customer (e.g.) 1000$ and collecting it either in full or in partials, and they hope that the customer pays in partials because they can earn interest for long(er) time. A debit card, on the other side, allows for maximum 3-4 days (due to interbank settlement weirdness) and thus the profit from interest falls away.
- lotsofpulp 11y ago
  Benefits of credit cards : you can get ~2% back on all purchases, you get a free minimum 20 day loan so your cash is not affected immediately, and if there is fraud, you don't lose any cash. Also, has insurance and foreign exchange fee benefits. Debit cards: if it gets compromised, you start losing cash out of your account I don't see why it is in anyone's benefit to use a debit card, unless they lack self control.
  - mschuster91 11y ago
    > you can get ~2% back on all purchases Who pays for these 2% cashback? Most definitely not the card networks, and not the merchants. It's the CONSUMERS who pay for their own cashback. > Also, has insurance and foreign exchange fee benefits That "insurance" stuff is highly questionable imho, and most people don't ever need the forex benefits. > Debit cards: if it gets compromised, you start losing cash out of your account Chip and PIN. It's not hacker proof either, I admit, but way better than CCs.
    - massysett 11y ago
      Yes we pay, but consumers without cards pay the exact same price. Merchants seem loath to charging a credit card fee. I've seen a few gas stations offer a modest cash discount, and a few places like Costco won't take most credit cards. As long as consumers don't see the price directly, they have no cause to care. If merchants charged 5 cents for debit but 2 percent for credit, that would wipe out my benefit for "rewards" and my use of credit would be eliminated immediately.
    - lotsofpulp 11y ago
      Since the prices are the same for mostly everything, then it's even more imperative to make sure you get your 2% back, otherwise you're just subsidizing other people's credit card rewards!
    - tracker1 11y ago
      But the price isn't lower for using cash, or other payment methods... as I mentioned in another post, I'm surprised Walmart and/or Amazon don't have their own charge account system, given their sheer size, they could offer a 2-3% discount for members, and still come out ahead.
deleted 11y ago
[deleted]
MichaelBurge 11y ago
It's been years since I've used any debit card. I'm scared to use my debit card, preferring a credit card in almost every case. The one exception is when I need to get cash from an account(and I tend to just visit the bank in-person for that, rather than risk an ATM or grocery store machine being rigged). I understand that my credit card has very strong protections by law, since the bank has loaned me money and people do not have to pay back debts that are not theirs, the bank is at risk of losing money in the event of fraud. Debit cards claim similar protections, but since my actual money was transferred I am the one at risk of losing money in the event of fraud. The bank isn't as motivated to investigate my case, since they're not at risk as much. For a similar reason, I'm scared of checks. If you write someone a check, that's enough information for them to drain the associated account. It's free to query the bank to see "Does this account have $X?", so a binary search will let you know the balance of any account on a check. Then they can withdraw it at any time. It's especially bad for checks written against business checking accounts, since they're not protected by consumer protection laws that allow for 60 days to find fraud but rather by the Uniform Commercial Code that only allows a single day to catch fraud. Do I really want to check on my bank account every single day? For now, I just live with that terror and only write checks to people big enough to sue. No SaaS app will ever get a check from me without me doing some restructuring on my bank accounts.
- kintamanimatt 11y ago
  Aren't checks an anachronism in the US yet? I'd have thought bank transfers would have been more widely adopted in the US by now. I tend to use my debit cards more than credit cards. I've occasionally had to make chargebacks for fraudulent use and there's been no perceptible difference between a credit card chargeback and a debit card chargeback. The bank does the job equally well no matter the type of account. It's all fairly seamless and has always been done quickly by phone. The biggest risk I foresee is losing my wallet, not a fraudulent transaction. That's why I have two wallets with two set of cards, so I can easily failover to that wallet while replacement cards are being generated. The only interesting event that the bank couldn't/wouldn't fix was the time when Best Buy somehow auth'd my card dozens of times in a row for a reasonably expensive laptop. They managed to reduce my available balance far, far into the negative. Obviously they were just authorizations, not final sales, so the money never actually came out of my account, but it was interesting how my bank was happy to let me go many thousands overdrawn and their fraud systems didn't kick in at all. That card was useless until the authorizations dropped off the account.
danmaz74 11y ago
Debit cards are prevalent in Italy too, where they're called "PagoBancomat". But AFAIK the cost is commission based (now limited by European law to 0.2%, as opposed to 0.3% for credit card transactions).
mseebach 11y ago
Pretty much every European country has their own incompatible, cheap debit card system. The problem is that they are incompatible, and often difficult to access for outsiders (non-permanent residents). As a contractor, I've be in large company cafeterias where the only payment option was such a card (getting by by handing cash to one of the employees I'm working with, high friction and not very professional). In the US, when I was an exchange student in the late 90s, I could pay with my local banks ATM card (so, a debit card) in the local supermarket. I can't remember how far that network extended, but it certainly existed. The reason credit cards are a thing is because processing payments between a global set of debitors and a global set of creditors, instantly and securely (and yes, despite various problems and shortcomings, on the margin, it's very safe), is a pretty hard problem, much more so 20-30 years ago when the current systems came of age. The credit part is necessary because until recently, the technology simply didn't allow for online processing of payments, all the way from the debitors bank account. The payment would clear against your credit, the expectation that you're good for it, not actual cash in your account. Running such a network is complicated, thus the fees. In the past 5 or so years, both Visa and MasterCard have introduced proper debit cards, that is, card where payments are instantly processed against your bank account balance. This is still complicated, but essentially a new, much simpler and more modern network, and thus fees are much lower. Despite the security of the legacy network, this is safer yet, which is good for both merchants and bank (and, indirectly, consumers, though arguments can be made over whether the lower fees outweigh the cost of taking on a higher liability). I expect expensive credit cards to largely go away, if not by regulation, then competition, and be replaced by debit cards and decoupled credit products and travel-benefits/insurance products. On the margin, the vast majority of users will (and economically should) prefer to save ~2% on their spending to earning airline miles.
- jacquesm 11y ago
  The situation has dramatically improved in the last couple of years. I've been on a fairly extensive trip of Europe recently and I had to use my credit card only on the French toll routes, everywhere else my regular debit card worked. As opposed to previous trips where far more than half the expenses ended up on the CC.
- 11y ago

blcknight 11y ago

Eh, the bitching over credit cards is tiresome. Cash is expensive for businesses too - they have to pay to transport it securely, keep it safe, deal with cashiers' errors, etc. And at the end of the day, cash consumers spend less than payments by electronic means. Now, what should a very efficient electronic system cost? Very little, a few tenths of a percent. But it doesn't, merchants charge the fees that businesses will pay for that convenience, even begrudgingly, because access to the millions of consumers with credit cards is worth it. If Silicon Valley wants to disrupt the business, do it. It is possible to come in and take on an established industry. But so far I'm less than impressed with the payment start-ups that are out there, and imho all they're doing is introducing yet more fragmentation. Sorry, I have no interest in paying with my phone - especially not with Snapchat. My Chase Sapphire card doesn't run out of batteries, and I get lots of cool perks with it.

RivieraKid 11y ago
It's a natural monopoly market, making a better product is not enough.
- dpweb 11y ago
  3% is not price gouging. First, they spent decades building up their networks. You are paying for indemnity. People forget about the power of purchase protection. I can pay with a card and feel safe I will not get screwed by a merchant. Merchants are scared of chargebacks, so they rarely screw the customer. Card payment is vastly superior to cash payment the fees are not out of line.
  - needusername 11y ago
    > 3% is not price gouging. First, they spent decades building up their networks. Except the fee goes to the issuer and not the network. > You are paying for indemnity. People forget about the power of purchase protection. I can pay with a card and feel safe I will not get screwed by a merchant. Merchants are scared of chargebacks, so they rarely screw the customer. Then the cardholder should pay for this, certainly not the merchant. > Card payment is vastly superior to cash payment the fees are not out of line. 3% is out of line for incrementing an integer in one mainframe and decrementing it in an other mainframe with virtually not risk.

ersii 11y ago

Recent jurisdiction that came into effect in Europe limits transaction fees in Europe to 0.3% of the transaction. The flip side of this for the customers is that the card rewards/kickbacks are decreased as well.

danmaz74 11y ago
Addendum: 0.3% for credit cards issued by Visa and Mastercard. 0.2% for debit cards. Interestingly, there is no law limit for American Express and Discovery (my guess is that Visa and Mastercard were somehow selected for their dominanti position).
- germanier 11y ago
  No, the limit also applies to other smaller national schemes. The real difference between Visa/Mastercard and Amex/Discovery is the the former only provide the payment network (the interchange is used to give a cut to issuing banks) while the latter issue their own cards.
  - danmaz74 11y ago
    Thanks for the clarification. I was going to ask if this meant that for merchants there would also be additional fees on top of the interchange rate, but already saw your other comment stating this...
kintamanimatt 11y ago
Because of this legislation I foresee non-EU companies choosing to set up a European subsidiary to take online payments. It's good for Europe and will likely apply an interesting market force on fees outside of the EU.
blcknight 11y ago
That's not the only downside, this basically kills the possibility of innovation. They're basically solidifying the position of MC and Visa in the market forever, and make it hard for someone else to come in. So far the U.S. hasn't been so successful in taking the power away from these payment networks, but at least there's a chance. I could see someone like Square coming in and dominating the market with a consumer product in 5-10 years.

dclowd9901 11y ago

The thing I hate most about this whole thing is it's reached a critical mass such that if you don't play the game you're just paying the cost. I wish stores would simply charge the credit card fee outright as a line item to dis incentivize usage of the credit card (many gas stations do something similar in charging a cash vs credit price).

hannibalhorn 11y ago
Charging a different price for credit cards is generally against the terms of the contract a merchant has with their card processor.
- germanier 11y ago
  In Europe usually it is allowed (as long as the surcharge reflects the real costs) but it doesn't happen. Notable exceptions are only online travel agents and shops in Denmark.

caf 11y ago

A few years ago the regulations in Australia were changed so that the CC companies can't force merchants to cross-subsidise the fees - merchants are allowed to directly pass on the transaction fees as a surcharge if they want. I've certainly chosen to use alternate payment methods to avoid the surcharge when convenient, so this must be putting some competitive pressure on the CC transaction fees.

Maxious 11y ago
The next wave of that regulation should come into effect soon - the banks tried some loopholes and merchants like Jetstar claimed they needed to levy huge surcharges so another reform is required: "the Board is proposing to change the Bank's surcharging standard with the aim of ensuring that customers cannot be surcharged any more than the cost of accepting cards." "It is proposed that no credit card interchange fee will be able to exceed 0.80 per cent and no debit interchange fee will be able to exceed 15 cents if levied as a fixed amount or 0.20 per cent if levied as a percentage amount." http://www.rba.gov.au/media-releases/2015/mr-15-24.html http://www.rba.gov.au/media-releases/2015/mr-15-24.html

deleted 11y ago

[deleted]

tracker1 11y ago

I'm genuinely curious why the likes of Walmart and/or Amazon, given their sheer size haven't started their own credit card networks, or even charge accounts for their own stores over using the CC networks...

pps43 11y ago

The author mixes in interest, interchange, and fees. What he calls "fees" are actually interchange, and it's a relatively small line item in bank's P&L. The main source of business income is interest. And interest is so high because it has to offset losses from card members that stopped paying. Remember that credit cards are unsecured products. Banks typically recover only about 20% of the default amount, the rest is gone.

ismail 11y ago

"The founder of Coinbase actually left his job at Airbnb to start a Bitcoin company once he realized that credit card fees ate up nearly half of Airbnb’s profit margins." This is so true, and a weakness in cc wth the rise of marketplaces. I started a side project, a marketplace due to very low margins of suppliers the max we could get in transaction fee including cc processing was 10%. We did not want to add markups on in store price so had to absorb the costs. Take a transaction of $100 , e.g you pay 3% fee/$3. For the merchant it is 3% but for you its actually 30%