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I'm incredibly naive but I don't understand why card networks would ever WANT to raise their percentage rates... Hear me out: - It is perfect rent collecting:

I'm incredibly naive but I don't understand why card networks would ever WANT to raise their percentage rates... Hear me out: - It is perfect rent collecting: minimal costs, benefits hugely from scale, high barrier for competitor entry. You're an "invisible" profit center, if done right. - It is percentage of transaction: So increases naturally with inflation and your client's success. Loses little on your client's failures. But instead of just sitting on their hands and raking in their 6% basically forever, they're inflating the percentage which is causing disgruntled clients to look elsewhere and to give a gap where competition can enter. This is one industry where "boring is king." But it seems like greed may result in legislative or competitive market correction if they keep engaging in these practices.

thomascgalvin 7y ago
> - It is perfect rent collecting: minimal costs, benefits hugely from scale, high barrier for competitor entry. This basically describes the Planet Fitness model. They sign up thousands of people around New Year's, none of them ever show up, and a handful of them can't be bothered to go into their location and cancel, so they just end up paying $10 / month forever.
tedunangst 7y ago
Taking in 6% and returning 7% rewards doesn't seem profitable, even in volume.
- ceejayoz 7y ago
  If it attracts enough people who'll carry an interest-bearing balance, the math works out fine. Many of the higher-end rewards cards have annual fees, too - Chase's Sapphire Reserve card is $450/year. Amex's Platinum is $550.
porknubbins 7y ago
Sound reasoning but then you’re thinking in the long term interest of the company. Visa went public so the individuals who jacked up the prices will probably make a big bonus on their quarter numbers and be gone, rich, or promoted before the backlash hits them.

thomascgalvin 7y ago

> - It is perfect rent collecting: minimal costs, benefits hugely from scale, high barrier for competitor entry. This basically describes the Planet Fitness model. They sign up thousands of people around New Year's, none of them ever show up, and a handful of them can't be bothered to go into their location and cancel, so they just end up paying $10 / month forever.

tedunangst 7y ago

Taking in 6% and returning 7% rewards doesn't seem profitable, even in volume.

ceejayoz 7y ago
If it attracts enough people who'll carry an interest-bearing balance, the math works out fine. Many of the higher-end rewards cards have annual fees, too - Chase's Sapphire Reserve card is $450/year. Amex's Platinum is $550.

porknubbins 7y ago

Sound reasoning but then you’re thinking in the long term interest of the company. Visa went public so the individuals who jacked up the prices will probably make a big bonus on their quarter numbers and be gone, rich, or promoted before the backlash hits them.