9 ms·

If a law were passed that gets rid of credit card rewards, I very much doubt that prices would go down accordingly; the merchant would still pay that fee, and t

If a law were passed that gets rid of credit card rewards, I very much doubt that prices would go down accordingly; the merchant would still pay that fee, and the credit card company would keep all of it. I'd be happy to stop having rewards if all prices went down 2% accordingly. But that doesn't seem likely to happen.

matz1 7y ago
why not ? the market competition still apply right ?
- JoshTriplett 7y ago
  Just as a few of the billion examples: are stores going to go through and change their $3.99 prices to $3.91, and their "3 for $10" prices to $3.27? Are SaaS services going to change their nice round $19/month to $18.62/month? Or are they just going to say "awesome, lower processing fees", and keep their prices the same? Perhaps over the course of decades, new businesses and new products would take the change into account, so it would probably be a net win long-term, but in the short-term, consumers would just lose that 2%. Now, on the other hand, I'd be quite happy to see a prohibition on the credit-card-company practice of preventing merchants from charging a surcharge for credit card use. If merchants were free to charge the consumer whatever the credit card processor charged them, then if you used a credit card with lower processing fees, you'd immediately reap the benefits.
  - matz1 7y ago
    Depending the kind of product and their business strategy, yes they will changes their price. The market competition still apply. If I see one product priced as 3.99 and same quality product priced as 3.98. I will choose the 3.98 like many other people will.
mfcl 7y ago
I think we would get some value back, potentially even more. Probably hard to quantify anyway. CC rewards are a strategy to limit competition. It makes it harder for new players because merchants don't need them, they need Visa and the other big ones. So the negotiation power is small. You seek for more customers, but you can't convince anyone because you don't have rewards. When competition and choice is limited, you, as a customer, are on the loosing side of the deal. Always.
dlubarov 7y ago
If businesses are free to add surcharges and/or discounts based on the payment instrument used, that should nudge consumers to lower-fee payment instruments like cash, debit cards, cryptocurrency, or at least a credit network with lower fees. For better or for worse, there are some legal obstacles to surcharges for certain payment instruments, but discounts are always an option. I.e. merchants could pad sticker prices with the max fee they might pay, then discount depending on the instrument used.
kbenson 7y ago
There are already different fees charged based on card types, which is why you see some merchants accept Ames/Discover and some not. They have different per-transaction fees and different transaction percentages (at least the last time I saw, long ago). If a card offers a smaller fee, I imagine some processors and then merchants will jump on it ASAP. What's half a percent off the processing fee to Amazon/Walmart/Target? Hundreds of millions to billions of dollars, given it has a disproportionate affect on profit since it applies to total charged. I'm sure this is also why Target tried to get you to sign up for their own card, and offers you a percent off all purchases at target with it.
- JoshTriplett 7y ago
  > There are already different fees charged based on card types, which is why you see some merchants accept Ames/Discover and some not. But those merchants are not allowed to accept both but pass through their fees. Rather than seeing a prohibition on rewards, I'd rather see a prohibition on the anti-competitive terms that prevent merchants from passing through credit card processing fees. Then a card that charges less to the merchant would be just as good as a rewards card.

matz1 7y ago

why not ? the market competition still apply right ?

JoshTriplett 7y ago
Just as a few of the billion examples: are stores going to go through and change their $3.99 prices to $3.91, and their "3 for $10" prices to $3.27? Are SaaS services going to change their nice round $19/month to $18.62/month? Or are they just going to say "awesome, lower processing fees", and keep their prices the same? Perhaps over the course of decades, new businesses and new products would take the change into account, so it would probably be a net win long-term, but in the short-term, consumers would just lose that 2%. Now, on the other hand, I'd be quite happy to see a prohibition on the credit-card-company practice of preventing merchants from charging a surcharge for credit card use. If merchants were free to charge the consumer whatever the credit card processor charged them, then if you used a credit card with lower processing fees, you'd immediately reap the benefits.
- matz1 7y ago
  Depending the kind of product and their business strategy, yes they will changes their price. The market competition still apply. If I see one product priced as 3.99 and same quality product priced as 3.98. I will choose the 3.98 like many other people will.

mfcl 7y ago

I think we would get some value back, potentially even more. Probably hard to quantify anyway. CC rewards are a strategy to limit competition. It makes it harder for new players because merchants don't need them, they need Visa and the other big ones. So the negotiation power is small. You seek for more customers, but you can't convince anyone because you don't have rewards. When competition and choice is limited, you, as a customer, are on the loosing side of the deal. Always.

dlubarov 7y ago

If businesses are free to add surcharges and/or discounts based on the payment instrument used, that should nudge consumers to lower-fee payment instruments like cash, debit cards, cryptocurrency, or at least a credit network with lower fees. For better or for worse, there are some legal obstacles to surcharges for certain payment instruments, but discounts are always an option. I.e. merchants could pad sticker prices with the max fee they might pay, then discount depending on the instrument used.

kbenson 7y ago

There are already different fees charged based on card types, which is why you see some merchants accept Ames/Discover and some not. They have different per-transaction fees and different transaction percentages (at least the last time I saw, long ago). If a card offers a smaller fee, I imagine some processors and then merchants will jump on it ASAP. What's half a percent off the processing fee to Amazon/Walmart/Target? Hundreds of millions to billions of dollars, given it has a disproportionate affect on profit since it applies to total charged. I'm sure this is also why Target tried to get you to sign up for their own card, and offers you a percent off all purchases at target with it.

JoshTriplett 7y ago
> There are already different fees charged based on card types, which is why you see some merchants accept Ames/Discover and some not. But those merchants are not allowed to accept both but pass through their fees. Rather than seeing a prohibition on rewards, I'd rather see a prohibition on the anti-competitive terms that prevent merchants from passing through credit card processing fees. Then a card that charges less to the merchant would be just as good as a rewards card.