4 ms·

The baseline price for payment processing is well below 2-3%. In the EU, credit card processing fees are capped at 0.3%, and these companies are still able to m

The baseline price for payment processing is well below 2-3%. In the EU, credit card processing fees are capped at 0.3%, and these companies are still able to make a decent profit despite. What those high fees really come from is the need to cover the cost of all those rewards programs that are so ubiquitous in some countries such as the USA. Those would probably disappear pretty quickly in the presence of a law allowing merchants to add any processing fees (perhaps above some nominal baseline cost) on to the bill. 1% cash back doesn't seem like nearly so great a deal when you have to reckon with the fact that what's really going on is that you pay 2% more, and then the issuing bank gives half of it back to you, along with a generous dose of smoke up the ass, and then pockets the other half.

zorga 8y ago
Solid point, thanks for the additional context.
quadrangle 8y ago
> a law allowing merchants to add any processing fees (perhaps above some nominal baseline cost) on to the bill This!! So much. The status quo amounts to price manipulation that harms the market and is utter B.S. Item 8 from http://donellameadows.org/archives/leverage-points-places-to-intervene-in-a-system http://donellameadows.org/archives/leverage-points-places-to...
- joecool1029 8y ago
  Actually most states do permit credit card surcharges by the merchant. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas are the ones that ban it. Some of those states have pending litigation against those laws. Some of them also allow discounts for paying cash (as if it's any different than a surcharge for processing) There was a time from 2013 to 2017 that merchants were permitted by processing agreement to do it, but Visa and Mastercard convinced an appeals court to throw it out. A few places in my state still do surcharges, but it's pretty rare.
  - quadrangle 8y ago
    Thanks for the insight. I would like to see surcharges mandated for credit cards (but not for debit cards).
pravda 8y ago
>What those high fees really come from is the need to cover the cost of all those rewards programs You've swapped cause and effect here. It's the other way around. High fees lead to rewards programs.
- mamon 8y ago
  No, it is the way GP described it. Both transaction fees and reward programs are governed by the same entity: payment processing company. Reward programs were a trick to make people accept high transaction fees, because people fall for the illusion of "getting something in return". In practice, transaction fee is paid by everyone, but many people do not bother to claim their rewards, so it is a net win for payment processors. Also, even people who do claim their rewards usually do not do excesive calculaitons and do not realize that for 3% payment fee they get 0.5-1.5% worth of reward.
  - bunderbunder 8y ago
    Last time I worked at a place that could swipe credit cards, we would get charged one fee for regular cards, and another, much higher fee if it was a rewards card. (This was back when non-rewards cards were the regular variety, so I'm assuming things have changed since then.)
village-idiot 8y ago
The actual problem here is that rewards programs and universally applied CC fees represent a transfer of wealth from those who use cash to those who use credit.
GeneralTspoon 8y ago
In practice, I don’t know of anyone offering 0.3% card processing fees. Most POS systems and online payment processors are more like ~2% e.g. Stripe is 1.4% + ~€0.30 to take online payments from within the EU. And chargebacks are passed on to the merchant with an additional fee tacked on. Can you point me to any cheaper solutions? I like the idea of having the processing fees displayed prominently on the receipt though (like VAT). If people had to actually pay more to use Amex (rather than the merchant absorbing the blow, or distributing the costs across their other customers), then they might quickly go out of business (and rightly so).
- thesimon 8y ago
  >In practice, I don’t know of anyone offering 0.3% card processing fees Obviously. They need to pay 0.2%-0.3% to the issuer (ie. the bank that gives you your card), but VISA/MasterCard and the processor want their cut as well. > Can you point me to any cheaper solutions? At least in Germany there are quite some cheap POS solutions: 0.69% for Visa/MasterCard: https://translate.google.de/translate?hl=de&sl=de&tl=en&u=https%3A%2F%2Fwww.simplepay.de%2Fec-cash-terminal-ingenico-ict-220 https://translate.google.de/translate?hl=de&sl=de&tl=en&u=ht... 0.98% for Visa/MasterCard: https://translate.google.de/translate?hl=de&sl=de&tl=en&u=https%3A%2F%2Fwww.cashforless.de%2F https://translate.google.de/translate?hl=de&sl=de&tl=en&u=ht...

zorga 8y ago

Solid point, thanks for the additional context.

quadrangle 8y ago

> a law allowing merchants to add any processing fees (perhaps above some nominal baseline cost) on to the bill This!! So much. The status quo amounts to price manipulation that harms the market and is utter B.S. Item 8 from http://donellameadows.org/archives/leverage-points-places-to-intervene-in-a-system http://donellameadows.org/archives/leverage-points-places-to...

joecool1029 8y ago
Actually most states do permit credit card surcharges by the merchant. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas are the ones that ban it. Some of those states have pending litigation against those laws. Some of them also allow discounts for paying cash (as if it's any different than a surcharge for processing) There was a time from 2013 to 2017 that merchants were permitted by processing agreement to do it, but Visa and Mastercard convinced an appeals court to throw it out. A few places in my state still do surcharges, but it's pretty rare.
- quadrangle 8y ago
  Thanks for the insight. I would like to see surcharges mandated for credit cards (but not for debit cards).

pravda 8y ago

>What those high fees really come from is the need to cover the cost of all those rewards programs You've swapped cause and effect here. It's the other way around. High fees lead to rewards programs.

mamon 8y ago
No, it is the way GP described it. Both transaction fees and reward programs are governed by the same entity: payment processing company. Reward programs were a trick to make people accept high transaction fees, because people fall for the illusion of "getting something in return". In practice, transaction fee is paid by everyone, but many people do not bother to claim their rewards, so it is a net win for payment processors. Also, even people who do claim their rewards usually do not do excesive calculaitons and do not realize that for 3% payment fee they get 0.5-1.5% worth of reward.
- bunderbunder 8y ago
  Last time I worked at a place that could swipe credit cards, we would get charged one fee for regular cards, and another, much higher fee if it was a rewards card. (This was back when non-rewards cards were the regular variety, so I'm assuming things have changed since then.)

village-idiot 8y ago

The actual problem here is that rewards programs and universally applied CC fees represent a transfer of wealth from those who use cash to those who use credit.

GeneralTspoon 8y ago

In practice, I don’t know of anyone offering 0.3% card processing fees. Most POS systems and online payment processors are more like ~2% e.g. Stripe is 1.4% + ~€0.30 to take online payments from within the EU. And chargebacks are passed on to the merchant with an additional fee tacked on. Can you point me to any cheaper solutions? I like the idea of having the processing fees displayed prominently on the receipt though (like VAT). If people had to actually pay more to use Amex (rather than the merchant absorbing the blow, or distributing the costs across their other customers), then they might quickly go out of business (and rightly so).

thesimon 8y ago
>In practice, I don’t know of anyone offering 0.3% card processing fees Obviously. They need to pay 0.2%-0.3% to the issuer (ie. the bank that gives you your card), but VISA/MasterCard and the processor want their cut as well. > Can you point me to any cheaper solutions? At least in Germany there are quite some cheap POS solutions: 0.69% for Visa/MasterCard: https://translate.google.de/translate?hl=de&sl=de&tl=en&u=https%3A%2F%2Fwww.simplepay.de%2Fec-cash-terminal-ingenico-ict-220 https://translate.google.de/translate?hl=de&sl=de&tl=en&u=ht... 0.98% for Visa/MasterCard: https://translate.google.de/translate?hl=de&sl=de&tl=en&u=https%3A%2F%2Fwww.cashforless.de%2F https://translate.google.de/translate?hl=de&sl=de&tl=en&u=ht...