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> I wonder what high credit card fees you are talking about. As a consumer, I pay none of them. That's not how economics works. You are still paying.

by darawk 8y ago

bdcravens 8y ago
Yet no one is making that a surcharge. So if I pay with crypto, I'm paying twice, as the credit card cost are presumably baked in for all.
- darawk 8y ago
  That's because up until recently credit card companies required merchants to charge the same prices. They had the power to do this because they are basically a cartel. But yes, you're right. You would be paying twice, just like you're still paying once even if you pay with cash. This is a real problem, but it's not an inherent flaw in cryptocurrencies, IMO. Just a practical consequence of our existing financial system. That doesn't make it any less real, but it's "not Bitcoin's fault" so to speak.
- UncleEntity 8y ago
  And if I pay in cash I'm also paying the baked in credit card cost. Rationally one would think that if some cryptocoin did see large scale adoption then it would have the same effect as credit cards where the consumer doesn't actually see the transaction costs.
wlesieutre 8y ago
Do you though? Except for gas, everything I buy costs the same whether I pay cash or credit. If a store started accepting bitcoins, I doubt they're going to recalculate the price to be lower than the cash price because you don't have a credit card transaction fee.
- darawk 8y ago
  We collectively pay, as a society. Credit card fees are a tax on commerce.
  - pbreit 8y ago
    Except that the bulk of the fees to the merchant are paid back out to cardholders in the form of rewards and cashback. So it's closer to a wash.
    - darawk 8y ago
      Visa still managed to make $15 billion in gross profit last year. Seems pretty significant to me.
      - pbreit 8y ago
        On $7.4 trillion in volume. So about 0.2%.
        darawk 8y ago
        I'd call that a lot.
    - magnetic 8y ago
      Someone seems to have computed the cash vs CC money flow: https://www.bostonfed.org/publications/public-policy-discussion-paper/2010/who-gains-and-who-loses-from-credit-card-payments-theory-and-calibrations.aspx https://www.bostonfed.org/publications/public-policy-discuss... "On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year."
  - nradov 8y ago
    Cash transactions aren't free either. The merchant has to pay for security, transport, and typically suffers some "leakage". Depending on the type of business and location those can end up being even more expensive than payment card fees.
- gray_-_wolf 8y ago
  You do. The store just gets higher margin on cash-paying customers.
  - magnetic 8y ago
    He is the consumer, so he doesn't, because as you pointed out, it's the store that is on the hook for CC "transaction fees", not the consumer.
    - PretzelPirate 8y ago
      Many small businesses raise their prices to offset credit card processing fees. Because of that, the consumer is paying the fee regardless of whether they pay in cash or with a card.
      - magnetic 8y ago
        Apparently not: https://www.bostonfed.org/publications/public-policy-discussion-paper/2010/who-gains-and-who-loses-from-credit-card-payments-theory-and-calibrations.aspx https://www.bostonfed.org/publications/public-policy-discuss... "Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or "cash" ) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year."
        PretzelPirate 8y ago
        This is interesting. I was going off of the information I've received from small business owners in the Seattle area who I've formed personal relationships with, and who have told me how they increased their prices specifically to offset the cost of credit card fees.
magnetic 8y ago
That's a mysterious response. Can you elaborate on how I'm paying?
- zxcmx 8y ago
  The TL;DR is that the point where some kind of tax or fee is collected (in this case it is charged to businesses) does not have that much influence on who ends up really "paying" for it. That's going to depend on market dynamics between buyers and sellers. The long version is, read: https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence and replace "government" and "tax" with "VISA" and "transaction fees". To be honest I don't know who "really" pays but I'm certain that "I don't see any fees on my bill and I paid the cash price" is not the right way to read the situation.
  - magnetic 8y ago
    Well, as a business owner, I do have some idea of who "really pays" as you put it. When I charge my customers with Credit Card, I get charged a CC fee (around 2.9%). It's not that there is a free lunch anywhere: the merchants pay for it, as well as some consumers who pay interest on their balances, and some consumers who want special features from their CC. But as a consumer myself, leaving debt part of the equation aside (since it is irrelevant to the transaction itself), I pay zero transaction fees with my CC, whereas I'd have to pay a significant fee with a cryptocurrency. More annoying is that the cryptocurrency fee would be charged every time I make a payment. Looking at my CC statement, I can see I & wife made about 50 CC transactions last month, which would result in a significant "monthly fee" if we had used Bitcoin for example (to pick the most "widely adopted" cryptocurrency). Like I mentioned above, cryptocurrency has very specific key positive aspects, but low transaction fees aren't one of them.
    - zxcmx 8y ago
      Sorry, my response was just addressing credit card payments, I hadn't really thought about the crypto aspects of this before. Totally agree that on a practical basis it would be crazy to try and justify the utility of crypto to the average person based on "lower fees" since they are exorbitant for all but very large transactions. My point with CC fees was, merchants "pay" but the open question is: are prices in a given market perhaps a bit (even just 1 or 2%) higher than they would be if card transactions were free? If so, exactly how much? Does this differ across different markets / product categories and how much? This is the kind of thing one would need to figure out to know who is "really" eating the fees. My intuition is that whether the charges can be passed through to the consumer via higher prices is going to depend on the market (say supermarkets vs luxury goods) but I'm not aware of any research on this.

> I wonder what high credit card fees you are talking about. As a consumer, I pay none of them. That's not how economics works. You are still paying.

by darawk 8y ago

> I wonder what high credit card fees you are talking about. As a consumer, I pay none of them. That's not how economics works. You are still paying.

bdcravens 8y ago

Yet no one is making that a surcharge. So if I pay with crypto, I'm paying twice, as the credit card cost are presumably baked in for all.

darawk 8y ago
That's because up until recently credit card companies required merchants to charge the same prices. They had the power to do this because they are basically a cartel. But yes, you're right. You would be paying twice, just like you're still paying once even if you pay with cash. This is a real problem, but it's not an inherent flaw in cryptocurrencies, IMO. Just a practical consequence of our existing financial system. That doesn't make it any less real, but it's "not Bitcoin's fault" so to speak.
UncleEntity 8y ago
And if I pay in cash I'm also paying the baked in credit card cost. Rationally one would think that if some cryptocoin did see large scale adoption then it would have the same effect as credit cards where the consumer doesn't actually see the transaction costs.

wlesieutre 8y ago

Do you though? Except for gas, everything I buy costs the same whether I pay cash or credit. If a store started accepting bitcoins, I doubt they're going to recalculate the price to be lower than the cash price because you don't have a credit card transaction fee.

darawk 8y ago
We collectively pay, as a society. Credit card fees are a tax on commerce.
- pbreit 8y ago
  Except that the bulk of the fees to the merchant are paid back out to cardholders in the form of rewards and cashback. So it's closer to a wash.
  - darawk 8y ago
    Visa still managed to make $15 billion in gross profit last year. Seems pretty significant to me.
    - pbreit 8y ago
      On $7.4 trillion in volume. So about 0.2%.
      - darawk 8y ago
        I'd call that a lot.
  - magnetic 8y ago
    Someone seems to have computed the cash vs CC money flow: https://www.bostonfed.org/publications/public-policy-discussion-paper/2010/who-gains-and-who-loses-from-credit-card-payments-theory-and-calibrations.aspx https://www.bostonfed.org/publications/public-policy-discuss... "On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year."
- nradov 8y ago
  Cash transactions aren't free either. The merchant has to pay for security, transport, and typically suffers some "leakage". Depending on the type of business and location those can end up being even more expensive than payment card fees.
gray_-_wolf 8y ago
You do. The store just gets higher margin on cash-paying customers.
- magnetic 8y ago
  He is the consumer, so he doesn't, because as you pointed out, it's the store that is on the hook for CC "transaction fees", not the consumer.
  - PretzelPirate 8y ago
    Many small businesses raise their prices to offset credit card processing fees. Because of that, the consumer is paying the fee regardless of whether they pay in cash or with a card.
    - magnetic 8y ago
      Apparently not: https://www.bostonfed.org/publications/public-policy-discussion-paper/2010/who-gains-and-who-loses-from-credit-card-payments-theory-and-calibrations.aspx https://www.bostonfed.org/publications/public-policy-discuss... "Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or "cash" ) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year."
      - PretzelPirate 8y ago
        This is interesting. I was going off of the information I've received from small business owners in the Seattle area who I've formed personal relationships with, and who have told me how they increased their prices specifically to offset the cost of credit card fees.

magnetic 8y ago

That's a mysterious response. Can you elaborate on how I'm paying?

zxcmx 8y ago
The TL;DR is that the point where some kind of tax or fee is collected (in this case it is charged to businesses) does not have that much influence on who ends up really "paying" for it. That's going to depend on market dynamics between buyers and sellers. The long version is, read: https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence and replace "government" and "tax" with "VISA" and "transaction fees". To be honest I don't know who "really" pays but I'm certain that "I don't see any fees on my bill and I paid the cash price" is not the right way to read the situation.
- magnetic 8y ago
  Well, as a business owner, I do have some idea of who "really pays" as you put it. When I charge my customers with Credit Card, I get charged a CC fee (around 2.9%). It's not that there is a free lunch anywhere: the merchants pay for it, as well as some consumers who pay interest on their balances, and some consumers who want special features from their CC. But as a consumer myself, leaving debt part of the equation aside (since it is irrelevant to the transaction itself), I pay zero transaction fees with my CC, whereas I'd have to pay a significant fee with a cryptocurrency. More annoying is that the cryptocurrency fee would be charged every time I make a payment. Looking at my CC statement, I can see I & wife made about 50 CC transactions last month, which would result in a significant "monthly fee" if we had used Bitcoin for example (to pick the most "widely adopted" cryptocurrency). Like I mentioned above, cryptocurrency has very specific key positive aspects, but low transaction fees aren't one of them.
  - zxcmx 8y ago
    Sorry, my response was just addressing credit card payments, I hadn't really thought about the crypto aspects of this before. Totally agree that on a practical basis it would be crazy to try and justify the utility of crypto to the average person based on "lower fees" since they are exorbitant for all but very large transactions. My point with CC fees was, merchants "pay" but the open question is: are prices in a given market perhaps a bit (even just 1 or 2%) higher than they would be if card transactions were free? If so, exactly how much? Does this differ across different markets / product categories and how much? This is the kind of thing one would need to figure out to know who is "really" eating the fees. My intuition is that whether the charges can be passed through to the consumer via higher prices is going to depend on the market (say supermarkets vs luxury goods) but I'm not aware of any research on this.