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> That 2.5% goes straight to the credit card companies, even if you pay cash! You're going to have to explain how this makes any sense at all

by omni 9y ago

Pxtl 9y ago
CC company charges 2.5% of overhead on all CC-based purchases. Vendor agreement prohibits passing that markup over to customers, so instead the vendor must pass that cost onto everybody. The net effect is that cash payers are subsidizing the credit card companies. To encourage this arrangement, the CC companies offer a kickback to the people who use the card, like 1% in cash back or "points" or whatever. This creates a game-theory problem where the customer is encouraged to always pay with their card, because otherwise they're wasting a percent or two. In countries where vendor agreements prohibiting passing the fee onto consumers is illegal, stores are able to ensure that cash payers are not subsidizing card payers... But consumers may rebel at the extra fee for paying with card and choose to take their business somewhere else altogether.
- briandear 9y ago
  Actually in France where I have a tiny hotel, our fee is 1.5%. High volume merchants can negotiate even lower rates. There is also a savings for us by encouraging credit cards. Cash is a pain in the ass in France because you have to go to a bank to deposit it and we are 30 minutes from the nearest bank. Then there is security. If our guests paid us all in cash, I now have the very real problem of having thousands of euros in cash unless I want to waste an hour of my time going to a bank all the time. Then also in France, there is a law preventing cash purchases over €1000. There is also a guest security issue – why would you want guests to be carrying hundreds of euros in cash when they travel? For businesses, cash handling costs money too. There is a time cost, there is a security cost as well. Rarely does an employee skim money from the credit cards, but in shops it happens all the time.

> That 2.5% goes straight to the credit card companies, even if you pay cash! You're going to have to explain how this makes any sense at all

by omni 9y ago

> That 2.5% goes straight to the credit card companies, even if you pay cash! You're going to have to explain how this makes any sense at all

Pxtl 9y ago

CC company charges 2.5% of overhead on all CC-based purchases. Vendor agreement prohibits passing that markup over to customers, so instead the vendor must pass that cost onto everybody. The net effect is that cash payers are subsidizing the credit card companies. To encourage this arrangement, the CC companies offer a kickback to the people who use the card, like 1% in cash back or "points" or whatever. This creates a game-theory problem where the customer is encouraged to always pay with their card, because otherwise they're wasting a percent or two. In countries where vendor agreements prohibiting passing the fee onto consumers is illegal, stores are able to ensure that cash payers are not subsidizing card payers... But consumers may rebel at the extra fee for paying with card and choose to take their business somewhere else altogether.

briandear 9y ago
Actually in France where I have a tiny hotel, our fee is 1.5%. High volume merchants can negotiate even lower rates. There is also a savings for us by encouraging credit cards. Cash is a pain in the ass in France because you have to go to a bank to deposit it and we are 30 minutes from the nearest bank. Then there is security. If our guests paid us all in cash, I now have the very real problem of having thousands of euros in cash unless I want to waste an hour of my time going to a bank all the time. Then also in France, there is a law preventing cash purchases over €1000. There is also a guest security issue – why would you want guests to be carrying hundreds of euros in cash when they travel? For businesses, cash handling costs money too. There is a time cost, there is a security cost as well. Rarely does an employee skim money from the credit cards, but in shops it happens all the time.