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> the transaction fee, for many, is perceived as a rip off Only if you're a merchant. Most of the 2-3% fee is transferred to consumers via reward programs. It'
by abalone 9y ago
> the transaction fee, for many, is perceived as a rip off
Only if you're a merchant. Most of the 2-3% fee is transferred to consumers via reward programs. It's important to understand that merchants and consumers face different incentives and that US card networks have aligned themselves with consumers.
- michaelmrose 9y agoThe merchant is charging more to cover the fees. THEN the user often gets 1% or less back in rewards that are both less flexible and less useful than more cash in your pocket.
- muninn_ 9y ago1% or more is a better phrase. Add to that, if the merchant is charging higher fees then you would have to get everybody to collectively stop using credit cards at the same time, or otherwise every time you use cash you're paying extra on your purchase.
- abalone 9y ago> The merchant is charging more to cover the fees. This is what everyone assumes, but it turns out it's false. We are fortunate to have some experimental evidence on this. In 2003 Australia slashed interchange fees through regulation. Prices did not decline. "...retailers saved more than $400 million (Australian) annually in fee revenue after interchange rates there were cut, but there was no evidence that they passed any of the savings on to consumers. Instead, consumers saw higher card fees, a reduction in loyalty benefits, and the introduction of surcharges of up to 3% on credit card transactions, the report found."[1] [1] http://www.digitaltransactions.net/news/story/Report_-Australian-Merchants-Don_t-Pass-on-Interchange-Savings http://www.digitaltransactions.net/news/story/Report_-Austra...