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So, the card gives rewards and charges higher merchant fees. The merchant raises prices to offset the fees, which offset the customers' rewards. Friction. Th
by imglorp 10y ago
So, 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.
- gozur88 10y agoMerchants will charge more when profits drop. None of this is coming out of profits. They only time it comes out of profits is when competitors have some advantage that prevents the merchant from passing increases on to the customer.
- zardo 10y agoThe rewards establish a system where everyone would be better off if no one uses reward cards, but the best strategy for each individual is to use them. A clever application of game theory to leach wealth from the populous.
- joering2 10y agoI don't get it why merchants should be responsible for covering it? So the banks fight with each other offering more points/rewards/etc - meanwhile you pick up the tab. I wish usgov would look deep into this criminal scheme.
- imglorp 10y agoAt this point, the banks are kind of the usgov. Their interests are cojoined while not aligned with yours.
- rhino369 10y agoThere are benefits for the merchant too. Those rewards programs get people to spend more money because they get more points.
- nommm-nommm 10y agohttps://www.nerdwallet.com/blog/credit-cards/credit-cards-make-you-spend-more/ https://www.nerdwallet.com/blog/credit-cards/credit-cards-ma... >One of the most often cited studies is one conducted by Dun & Bradstreet, where the company found that people spend 12-18% more when using credit cards instead of cash. McDonald’s reports its average ticket is $7 when people use credit cards versus $4.50 for cash. >Those who were told they would have to pay by credit card were willing to pay more than twice as much on average as those who were told that they would have to pay by cash.
- zardo 10y agoThat doesn't tell us about the effect of reward cards specifically though.
- oh_sigh 10y agoOr like throwing your change in a bucket every day for a year, and then pretending like the money came out of nowhere when you cash it in once a year and blow it on something you wouldn't normally buy.