4 ms·

Wouldn't the risk of fraud make a $1 million transaction much more expensive to handle?

onlyrealcuzzo 8y ago
Yes. This is roughly half of the transaction fee. The other half is to self-fund the rewards illusion that gets customers to use the card.
- matwood 8y ago
  > rewards illusion Maybe if you don't pay your balance every month, but the rewards are very real for me.
  - ceejayoz 8y ago
    The rewards may be real, but so are the cost increases the merchants gradually put in place to offset them.
    - jl6 8y ago
      We can’t pay merchants less by paying cash, so we may as well try to grab a slice of the fee via the reward. 2% sounds pretty good.
      - r00fus 8y ago
        Some local merchants offer bonuses for cash usage. Of course, those only take Debit cards if not cash.
    - tfehring 8y ago
      For those of us who use credit cards with rewards, the rewards significantly exceed the price increases, because most of the price increases are paid by people using other payment methods.
      - kevin_thibedeau 8y ago
        They're mostly paid by people who carry a balance and incur interest payments. They fuel the rewards programs.
        tfehring 8y ago
        I'm sure interest revenue plays a role in determining the rewards that are offered, but the data suggest that merchant fees, which are largely paid for by non-credit-card-using households in the form of higher prices, are a bigger contributor. The average credit-card-using household receives a net transfer of over $1,000/year from non-credit-card-using households [0] (2010). [0] 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...
    - r00fus 8y ago
      It's like a vig the retailers pay to participate, where part of that is split with the consumers.
    - gommm 8y ago
      The way I see it, every customers who do not pay their card in full or who don't use credit cards subsidize my travels. It's honestly an extremely good deal for me and even if I pay 2.2% of every transactions, it's more than worth it for me. I never would be able to pay for as many long haul first class flights if I saved 2.2% of the transactions and used that to buy tickets
  - onlyrealcuzzo 8y ago
    The rewards are real -- believe me, I take advantage of them too -- but we're paying for them by the inflation caused on consumer goods by everyone using credit cards. It's true that you pay the inflation regardless of whether you use a card or not, though. And you only get the reward if you do use a card.
ceejayoz 8y ago
Isn't the bank responsible for the fraud (and fraud detection)? Not Visa/MC?

Yes. This is roughly half of the transaction fee. The other half is to self-fund the rewards illusion that gets customers to use the card.

matwood 8y ago
> rewards illusion Maybe if you don't pay your balance every month, but the rewards are very real for me.
- ceejayoz 8y ago
  The rewards may be real, but so are the cost increases the merchants gradually put in place to offset them.
  - jl6 8y ago
    We can’t pay merchants less by paying cash, so we may as well try to grab a slice of the fee via the reward. 2% sounds pretty good.
    - r00fus 8y ago
      Some local merchants offer bonuses for cash usage. Of course, those only take Debit cards if not cash.
  - tfehring 8y ago
    For those of us who use credit cards with rewards, the rewards significantly exceed the price increases, because most of the price increases are paid by people using other payment methods.
    - kevin_thibedeau 8y ago
      They're mostly paid by people who carry a balance and incur interest payments. They fuel the rewards programs.
      - tfehring 8y ago
        I'm sure interest revenue plays a role in determining the rewards that are offered, but the data suggest that merchant fees, which are largely paid for by non-credit-card-using households in the form of higher prices, are a bigger contributor. The average credit-card-using household receives a net transfer of over $1,000/year from non-credit-card-using households [0] (2010). [0] 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...
  - r00fus 8y ago
    It's like a vig the retailers pay to participate, where part of that is split with the consumers.
  - gommm 8y ago
    The way I see it, every customers who do not pay their card in full or who don't use credit cards subsidize my travels. It's honestly an extremely good deal for me and even if I pay 2.2% of every transactions, it's more than worth it for me. I never would be able to pay for as many long haul first class flights if I saved 2.2% of the transactions and used that to buy tickets
- onlyrealcuzzo 8y ago
  The rewards are real -- believe me, I take advantage of them too -- but we're paying for them by the inflation caused on consumer goods by everyone using credit cards. It's true that you pay the inflation regardless of whether you use a card or not, though. And you only get the reward if you do use a card.

ceejayoz 8y ago

Isn't the bank responsible for the fraud (and fraud detection)? Not Visa/MC?