7 ms·

Huh. And all this time, as a person who uses credit cards heavily, but never paid a penny on interest for years, but used all my card benefits, I thought I was

Huh. And all this time, as a person who uses credit cards heavily, but never paid a penny on interest for years, but used all my card benefits, I thought I was cheating the banks. This is the first time I learned that they make money on each transaction regardless of interest or late payment fees. That’s a revelation.

yash1th 7y ago
They do. some places in United states and India you have to do a minimum amount of purchase for them to accept any kind of card
- derefr 7y ago
  IIRC Visa (at least) has a rule stating that a business can’t charge more for Visa card transactions than cash transactions, nor can they have a minimum purchase for Visa card transactions (unless they also have the same minimum purchase for cash transactions.) If they find out a business is doing these things, they’ll stop allowing the business to accept Visa (even through intermediaries like payment processors).
  - kyllo 7y ago
    It may be against Visa's ToS, but it's still a very common practice, especially among small businesses, probably because of enforcement challenges.
    - exclusiv 7y ago
      I've reported a few businesses and it was an easy process. I don't think it's an enforcement issue; more of consumers not being informed that the merchants shouldn't be forcing them to increase their basket size to a min amount and not knowing that it's easy to report.
  - intelekshual 7y ago
    This is no longer true as of ~2013. See rules on surcharging: https://usa.visa.com/dam/VCOM/global/support-legal/documents/merchant-surcharging-qa-for-web.pdf https://usa.visa.com/dam/VCOM/global/support-legal/documents... And minimum transaction amounts (minimum can't exceed $10): https://usa.visa.com/dam/VCOM/download/merchants/minimum-transactions-credit-card.pdf https://usa.visa.com/dam/VCOM/download/merchants/minimum-tra...
southphillyman 7y ago
The reason why some places don't accept AMEX is because their transaction fees are higher. I haven't paid a cent in interest in probably over a decade but AMEX incentivizes me to use my card for everything with rewards and make money off the fees.
- wastedhours 7y ago
  It's also the reason why credit card benefits are worse in Europe, as I believe there are restrictions on what the card companies can charge for transaction fees.
  - tialaramex 7y ago
    Here's a typical case: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_2311 https://ec.europa.eu/commission/presscorner/detail/en/IP_19_... In this example the fees capped were for outsiders who are buying things in the EEA. e.g. an American buying something from an Italian vineyard or an Australian buying some authentic British tableware (for now). The EU also forbids hidden fees for most types of transaction. It wants the advertised price to match the price paid by consumers‡. If I have 25 EUR in my pocket and you advertise a product for 25 EUR I should be able to get that product. Whereas in the US if you see a product advertised for $25 you know they'll want maybe $30 or more as they add fees, taxes and charges on top of the supposed price. As a consequence this means the fee for a card ends up built in to most online prices in Europe, even if you actually transact in some other way that reduces or eliminates the fee for the seller. So ensuring the fee is low makes good sense here too. ‡ British supermarkets (used to?) use a trick to reduce taxes here - they charge you a fee for their backend card processing, but they subtract that fee from your checkout price. The cost to you doesn't change, and you'd never notice unless you read the small print, but they've successfully argued that this service fee should be taxed differently than your purchases, saving them money. Since it doesn't affect the headline price versus price paid the EU doesn't care.
    - rahimnathwani 7y ago
      How would the supermarket save money by charging a separate service fee? Many of the items sold in supermarkets (e.g. bread and milk) aren't subject to VAT, whereas (almost) all services attract VAT at 20%
basch 7y ago
That 3% is also baked into the price of goods at this point, so youre paying it even when using cash. However, some people think the credit card companies are inflating the price of goods with rewards, without taking into account how expensive cash is to deal with. To count, to detect counterfeiting, to lock up, to trust employees, to move. Processing cash isnt cheap, and can involve considerable risk, including increased IRS scrutiny. Handling money is a cost, like rent and electricity, built into everything we do. Credit card networks are much more efficient than existing alternatives.
- nordsieck 7y ago
  > That 3% is also baked into the price of goods at this point, so youre paying it even when using cash. Every once in a while, I'll run into places that do a cash discount, usually smaller businesses. It's super common at gas stations - even big chains.
  - basch 7y ago
    I have to feel its misguided in some cases. Credit card transaction fees hit the hardest on small purchases, as they take a larger percent. A business thats lots of tiny transactions might come out slightly ahead with cash, but now youre losing customers, and maybe not book keeping accurately enough to be legally compliant. I have noticed gas stations are more prone to this (along with very small business), although it happens on occasion at restaurants as well. I figure, with 3% restaurant rewards, I break even at 3% restaurant charge and or using cash.
    - nordsieck 7y ago
      > A business thats lots of tiny transactions might come out slightly ahead with cash, but now youre losing customers Why would businesses that offers a cash discount (which means they also accept credit/debit) lose customers?
      - ac29 7y ago
        I think they meant a business that only takes cash.
kevindong 7y ago
Different cards have different business models. For example, high end premium credit cards (think Amex Platinum, Chase Sapphire Reserve, Citi Prestige, etc.) tend to make most of their money from betting that cardholders won't make back more than they pay annually in annual fees (which is possible considering the annual fees on high end premium cards can easily exceed $500).

yash1th 7y ago

They do. some places in United states and India you have to do a minimum amount of purchase for them to accept any kind of card

derefr 7y ago
IIRC Visa (at least) has a rule stating that a business can’t charge more for Visa card transactions than cash transactions, nor can they have a minimum purchase for Visa card transactions (unless they also have the same minimum purchase for cash transactions.) If they find out a business is doing these things, they’ll stop allowing the business to accept Visa (even through intermediaries like payment processors).
- kyllo 7y ago
  It may be against Visa's ToS, but it's still a very common practice, especially among small businesses, probably because of enforcement challenges.
  - exclusiv 7y ago
    I've reported a few businesses and it was an easy process. I don't think it's an enforcement issue; more of consumers not being informed that the merchants shouldn't be forcing them to increase their basket size to a min amount and not knowing that it's easy to report.
- intelekshual 7y ago
  This is no longer true as of ~2013. See rules on surcharging: https://usa.visa.com/dam/VCOM/global/support-legal/documents/merchant-surcharging-qa-for-web.pdf https://usa.visa.com/dam/VCOM/global/support-legal/documents... And minimum transaction amounts (minimum can't exceed $10): https://usa.visa.com/dam/VCOM/download/merchants/minimum-transactions-credit-card.pdf https://usa.visa.com/dam/VCOM/download/merchants/minimum-tra...

southphillyman 7y ago

The reason why some places don't accept AMEX is because their transaction fees are higher. I haven't paid a cent in interest in probably over a decade but AMEX incentivizes me to use my card for everything with rewards and make money off the fees.

wastedhours 7y ago
It's also the reason why credit card benefits are worse in Europe, as I believe there are restrictions on what the card companies can charge for transaction fees.
- tialaramex 7y ago
  Here's a typical case: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_2311 https://ec.europa.eu/commission/presscorner/detail/en/IP_19_... In this example the fees capped were for outsiders who are buying things in the EEA. e.g. an American buying something from an Italian vineyard or an Australian buying some authentic British tableware (for now). The EU also forbids hidden fees for most types of transaction. It wants the advertised price to match the price paid by consumers‡. If I have 25 EUR in my pocket and you advertise a product for 25 EUR I should be able to get that product. Whereas in the US if you see a product advertised for $25 you know they'll want maybe $30 or more as they add fees, taxes and charges on top of the supposed price. As a consequence this means the fee for a card ends up built in to most online prices in Europe, even if you actually transact in some other way that reduces or eliminates the fee for the seller. So ensuring the fee is low makes good sense here too. ‡ British supermarkets (used to?) use a trick to reduce taxes here - they charge you a fee for their backend card processing, but they subtract that fee from your checkout price. The cost to you doesn't change, and you'd never notice unless you read the small print, but they've successfully argued that this service fee should be taxed differently than your purchases, saving them money. Since it doesn't affect the headline price versus price paid the EU doesn't care.
  - rahimnathwani 7y ago
    How would the supermarket save money by charging a separate service fee? Many of the items sold in supermarkets (e.g. bread and milk) aren't subject to VAT, whereas (almost) all services attract VAT at 20%

basch 7y ago

That 3% is also baked into the price of goods at this point, so youre paying it even when using cash. However, some people think the credit card companies are inflating the price of goods with rewards, without taking into account how expensive cash is to deal with. To count, to detect counterfeiting, to lock up, to trust employees, to move. Processing cash isnt cheap, and can involve considerable risk, including increased IRS scrutiny. Handling money is a cost, like rent and electricity, built into everything we do. Credit card networks are much more efficient than existing alternatives.

nordsieck 7y ago
> That 3% is also baked into the price of goods at this point, so youre paying it even when using cash. Every once in a while, I'll run into places that do a cash discount, usually smaller businesses. It's super common at gas stations - even big chains.
- basch 7y ago
  I have to feel its misguided in some cases. Credit card transaction fees hit the hardest on small purchases, as they take a larger percent. A business thats lots of tiny transactions might come out slightly ahead with cash, but now youre losing customers, and maybe not book keeping accurately enough to be legally compliant. I have noticed gas stations are more prone to this (along with very small business), although it happens on occasion at restaurants as well. I figure, with 3% restaurant rewards, I break even at 3% restaurant charge and or using cash.
  - nordsieck 7y ago
    > A business thats lots of tiny transactions might come out slightly ahead with cash, but now youre losing customers Why would businesses that offers a cash discount (which means they also accept credit/debit) lose customers?
    - ac29 7y ago
      I think they meant a business that only takes cash.

kevindong 7y ago

Different cards have different business models. For example, high end premium credit cards (think Amex Platinum, Chase Sapphire Reserve, Citi Prestige, etc.) tend to make most of their money from betting that cardholders won't make back more than they pay annually in annual fees (which is possible considering the annual fees on high end premium cards can easily exceed $500).