3 ms·
Chargebacks essentially are escrow. The merchant can't stop them from happening because the money is taken from the merchant account reserve, i.e. a minimum bal
by wcoenen 8y ago
Chargebacks essentially are escrow. The merchant can't stop them from happening because the money is taken from the merchant account reserve, i.e. a minimum balance that the merchant can't withdraw. Sounds similar to money held by an escrow agent doesn't it?
And credit card transactions are also expensive, between 1.5% and 3% and even higher[1]. It's just that the cost is hidden from the consumer by accounting for it in a higher product price. (Some merchants like gas stations may offer a cash discount, which can be used as a rough estimate of that hidden cost.)
On top of this, merchants get charged a hefty fee (on the order of $50) for each chargeback that they receive.
[1] https://www.creditdonkey.com/credit-card-processing-fees.html https://www.creditdonkey.com/credit-card-processing-fees.htm...
- adrianN 8y agoThe EU proposed limiting transaction fees to 0.2%. I don't know whether that is law already or not.
- thesimon 8y ago0.2% for debit cards, 0.3% for credit cards. Only applies to consumer cards and only the interchange (ie. the part that the bank of your card gets). MasterCard and Visa fees are still quite substantial. A regular merchant would now pay < 1%, so quite a bit cheaper than before.
- dalore 8y agoLooks like it was 0.3% https://www.europeanpaymentscouncil.eu/news-insights/insight/18-months-impact-interchange-fee-regulation-european-union-cards-market https://www.europeanpaymentscouncil.eu/news-insights/insight... The outcome was that they cut back on lots of loyalty programs, and not many businesses passed on the cost savings to the consumers. So sounds like limiting the fees had an adverse effect on the consumer.