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Much of the 2-3% US companies charge is spent in the form of rewards in the US. The fact that US companies offer 1-1.5% back to customers as rewards implies the
by quantumhobbit 10y ago
Much of the 2-3% US companies charge is spent in the form of rewards in the US. The fact that US companies offer 1-1.5% back to customers as rewards implies they can support lower fees to merchants if they get rid of rewards. Do EU cards have cash back programs?
- lostboys67 10y agoThey used to but they are being phased out - the EU piously thinks that the merchants will pass on lower costs to the consumer - which is to borrow a line from Sir Humphrey "A brave choice commissioner"
- rz2k 10y agoHow is that a "pious" belief? Let's say that retailers' financial services costs drop by 1% of revenue, and they choose to raise their prices by 5%, because they're really greedy or mean. Their competitor across the street is also really mean, but only raises their prices by 4%. As a thought experiment, play that scenario through a few more turns. The effect of lowering their costs for financial transactions is to lower retailers' minimum price for selling their products. They're "allowed" to charge as much as they like, though there are legal restrictions that make it illegal to collude with their competitors. And, even if they do collude there are motivations to defect from those illegal agreements that tend to undermine them. A higher level view will appreciate that the higher sticker prices from higher transaction costs largely ended up being refunded to consumers through credit card reward programs, but probably distorted the prices for buyers paying with cash.
- lostboys67 10y agoYou do know what pious means in this context - the shops will just pocket the savings for them selves
- germanier 10y agoThe regulation had a noticeable effect in Germany: As soon as it was in effect every chain started to accept MasterCard and Visa cards. That includes the most frugal stores that have razor thin margins. The food market is extremely competitive and if a store can afford to undercut their competition they will the first second they can.
- wgj 10y agoGood point, yet the remainder is still significantly more than 0.3%. It seems fraud is much worse in the US. That could be a factor too. https://www.google.com/search?q=credit+card+fraud+us+vs+europe https://www.google.com/search?q=credit+card+fraud+us+vs+euro...
- nucleardog 10y agoChip and pin, yo.
- rogerbinns 10y agoChip only helps for cardholder present transactions. It doesn't help for other transactions such as online, over the phone, subscriptions etc.
- radicalbyte 10y agoYou can only pay online with debit cards if you use two factor authentication in Europe (eurozone). It's basically free though (cash is more expensive to handle), unlike credit cards.
- pjc50 10y agoVerified by Visa/3d secure? It's not exactly two factors, it's just more tedious data entry you have to do. And I've got it turned off on my card. Actual 2fa would be great. I was wondering about the enourmous amount of work that would enable websites to support contactless ..
- nikita2206 10y agoNo, the processor will redirect you to the page of your bank where you need to enter a code sent by sms by your bank. This is true 2fa, it works at least with all Russian banks I've used and I'm sure it works in EU the same way (I thought it was like that everywhere in the world?)
- imglorp 10y agoSo, the card gives rewards and charges higher merchant fees. The merchant raises prices to offset the fees, which offset the customers' rewards. Friction. This is exactly like subsidizing farm, ranch, and oil but then raising taxes to pay for the subsidies indirectly.
- pravda 10y ago>The merchant raises prices to offset the fees, which offset the customers' rewards. If this were true, why would merchants care about merchant fees?
- bemmu 10y agoRaising your price leads to less sales.
- gozur88 10y agoThey don't, really, as long as they're not disadvantaged compared to the competition. The people who are getting screwed are people who pay cash or use cards without rewards programs.
- pravda 10y agoOh...I assure you they do! Why? Because these fees come out of profits.
- deleted 10y ago[deleted]
- guelo 10y agoWhat's sad is that the rewards cards are generally only available to people with good credit which correlates strongly with the middle class and up. That makes rewards cards a transfer of wealth from lower classes up. Making us all complicit in the ursury evilness of credit cards.
- matt_wulfeck 10y agoOh please. Here's a better reward: don't buy anything you don't need. Since credit cards are commonly used to purchase luxury goods -- generally associated with middle class and up -- I could make a similarly inane argument that it's a transfer of wealth from spendthrifts to those that are disciplined and save their money.
- nommm-nommm 10y agoBusiness do a lot of credit card spending too. A real lot.
- tracker1 10y agoIf you do business travel, or other per-deim expenses, it's a huge boost to have a rewards card... the original bill is reimbursed and you get the points/miles.
- tracker1 10y ago
- Iv 10y agoI don't want rewards. I want the transaction being done as low as possible.
- tracker1 10y agoBut that won't lower prices... as it stands, even if rewards programs were eliminated today, and fees were capped as in europe, the prices of goods would not go down.
- grahamburger 10y agoI'll bet they would. Especially online. Online retailers (esp small ones) are paying ~2.5-3% in credit card fees, and compete heavily on price. I run a small online store - if my credit card fees suddenly dropped by 2% the first thing I would do is drop all my prices accordingly.
- tracker1 10y agoThe vast majority of pricing I see online is $##.99, not $##.74, etc...
- usrusr 10y agoRounding to stupid numbers (.99) works just like rounding to reasonable numbers: there are some inputs where a sub-granularity change would push the result over the threshold and others where it would not. But your observation gave me an entirely unrelated idea: could a merchant, online or not, use deliberately random "##.74 instead of ##.99" prices to give the impression of really tight margins, even when they are actually wide?
- acveilleux 10y agoDebit cards, which are huge outside the US, never have reward programs (that I've seen anyway.) Visa does not charge different fees for different product types for them.
- nommm-nommm 10y agoI have a Discover Bank Cashback Checking Account. I get 10 cents per debt card transaction. https://www.discover.com/online-banking/checking/ https://www.discover.com/online-banking/checking/ It's not unique, there's a few Cashback checking accounts out there. Other banks require a certain amount of debt card transactions a month to remain fee free.
- acveilleux 10y agoThat's cool but that's a fixed 10 cents, so basically Discover is forwarding to you some of the money they receive for handling the debit in the first place. I have yet to see a debit card do a 1% cash back, which is really common in credit. Here in Canada, the debit charge (handled via the interbank Interac "sort of coop") are really low, 6 cents per transactions is about par. There's nowhere to tack on even a 10 cents cash back.
- youngtaff 10y agoYes, there were plenty of reward schemes - Airline, store points, hotels, cashback etc. in the UK (at least) but the number of them and the rewards are getting smaller since this ruling