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Every time I pay for something in cash at a store, I’m paying for those 2-5% rewards, even though I won’t partake in them. This happens because the credit card

Every time I pay for something in cash at a store, I’m paying for those 2-5% rewards, even though I won’t partake in them. This happens because the credit card companies, by dint of their crushing market power over small retailers, can force stores to charge identical cash and credit prices. I suppose a well-functioning competitive market would fix this problem, but weirdly enough Amex and Discover don’t seem interested on competing to offer a better deal to retailers. Credit card fees and rebates are such an amazing example of how systems can fool human beings. The entire system clearly could not exist in a frictionless, well-functioning marketplace —- but people seem hard pressed to actually figure out how the whole thing works. It’s kind of brilliant.

akira2501 6y ago
> I’m paying for those 2-5% rewards Well.. you're paying a 2-5% higher price, but the merchant gets to keep all of that; it's not as if they have to also pay that fraction into their transaction processor. > I suppose a well-functioning competitive market You ever see retailers that offer a discount card? Like, spend $50 here get $10 off in the future? Typically they'll only offer those for cash transactions. This is why.
- jhloa2 6y ago
  Anecdotally, I have never once seen those discounts limited to cash transactions in the United States
- matthewdgreen 6y ago
  In a properly competitive market the merchant doesn’t really get to keep it. Presumably they set their prices to a value that is X% higher than where they would normally set their prices without the need to pay transaction fees. If exactly half their business is paid in cash/debit and half in credit, then X might be set to something like half of the excess CC transaction fee. Then the credit card customers get to split up all of those rewards amongst themselves, and the cash/debit customers get nothing.
  - briandear 6y ago
    So get a rewards card. Some percentage of the sales taxes go to support programs I don’t agree with or use. And I can’t escape that. However, one could start a cash-only store if one wanted. You are also ignoring the cost of cash. Theft and cash handling isn’t a zero cost. Why should I, as a credit card user, be forced to subsidize losses due to cash handling? We could also talk shoplifting as well; policies that don’t punish shoplifters means I get to subsidize that as well. We could go on and on and ultimately it gets absurd. If you don’t like the price, go somewhere else and the market can sort it out.
    - stale2002 6y ago
      > Why should I, as a credit card user, be forced to subsidize losses due to cash handling How about the store gets to decide what to charge? Most stores seem to believe that credit cards are more expensive, which is why they try to offer discounts for cash. So the facts do not back you up.
    - matthewdgreen 6y ago
      You shouldn't be forced to subsidize anything. That's the whole point. At a minimum: the government should recognize the market power imbalance between card processors and small businesses, and ensure that the stores can set their own prices appropriately. If cash or debit is genuinely more expensive, let stores reflect that fact in their prices offered to consumers -- rather than prohibiting it via a contract they can't say "no" to.
      - wolf550e 6y ago
        The government can make a law that says credit card merchant agreements cannot prevent a shop from making cash prices lower than credit card prices. Then shops will have two prices cash price and credit card price. Then people will use cash more, and the government will lose some of the information they get from reading everyone's credit card transactions. Do you think this affects the government's decision? Or are politicians simply bribed by visa/mastercard?

akira2501 6y ago

> I’m paying for those 2-5% rewards Well.. you're paying a 2-5% higher price, but the merchant gets to keep all of that; it's not as if they have to also pay that fraction into their transaction processor. > I suppose a well-functioning competitive market You ever see retailers that offer a discount card? Like, spend $50 here get $10 off in the future? Typically they'll only offer those for cash transactions. This is why.

jhloa2 6y ago
Anecdotally, I have never once seen those discounts limited to cash transactions in the United States
matthewdgreen 6y ago
In a properly competitive market the merchant doesn’t really get to keep it. Presumably they set their prices to a value that is X% higher than where they would normally set their prices without the need to pay transaction fees. If exactly half their business is paid in cash/debit and half in credit, then X might be set to something like half of the excess CC transaction fee. Then the credit card customers get to split up all of those rewards amongst themselves, and the cash/debit customers get nothing.
- briandear 6y ago
  So get a rewards card. Some percentage of the sales taxes go to support programs I don’t agree with or use. And I can’t escape that. However, one could start a cash-only store if one wanted. You are also ignoring the cost of cash. Theft and cash handling isn’t a zero cost. Why should I, as a credit card user, be forced to subsidize losses due to cash handling? We could also talk shoplifting as well; policies that don’t punish shoplifters means I get to subsidize that as well. We could go on and on and ultimately it gets absurd. If you don’t like the price, go somewhere else and the market can sort it out.
  - stale2002 6y ago
    > Why should I, as a credit card user, be forced to subsidize losses due to cash handling How about the store gets to decide what to charge? Most stores seem to believe that credit cards are more expensive, which is why they try to offer discounts for cash. So the facts do not back you up.
  - matthewdgreen 6y ago
    You shouldn't be forced to subsidize anything. That's the whole point. At a minimum: the government should recognize the market power imbalance between card processors and small businesses, and ensure that the stores can set their own prices appropriately. If cash or debit is genuinely more expensive, let stores reflect that fact in their prices offered to consumers -- rather than prohibiting it via a contract they can't say "no" to.
    - wolf550e 6y ago
      The government can make a law that says credit card merchant agreements cannot prevent a shop from making cash prices lower than credit card prices. Then shops will have two prices cash price and credit card price. Then people will use cash more, and the government will lose some of the information they get from reading everyone's credit card transactions. Do you think this affects the government's decision? Or are politicians simply bribed by visa/mastercard?