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The entire idea behind credit cards is to force processing fees upon store owners. As a store owner you are required to pay up to 3.5% of your revenue to the pr

• cheonic729 6y ago
  > The entire idea behind credit cards is to force processing fees upon store owners. No. As a consumer, I enjoy immense value by carrying around zero cash. In fact, I don't even carry around physical cards (thank you Apple/Google Pay).
  • throwaway_pdp09 6y ago
    What is this 'immense value'?
    • remus 6y ago
      Not carting a pocketful of loose change round your entire life. Not an issue for some people, but I really like carrying less stuff.
      • thaumasiotes 6y ago
        Loose change is both heavy and worthless. You can carry cash around without bothering with loose change.
        • yourapostasy 6y ago
          A very privileged perspective. Most of the world still counts their pennies, and the surcharges on non-cash monetary transactions make a sizeable, noticeable dent if pointed out to them. It's a tough balance they have to navigate. Though I'm extremely privileged now myself, I'm not so far removed that I have forgotten those days when down-to-the-penny accounting mattered. In the US at least, if you had the right education (which sadly many lack), you can live amazingly inexpensively by forgoing many societal conventions and expectations.
    • the_jeremy 6y ago
      less hassle, enhanced security. I can spend hundreds of dollars without having to carry that much cash on me, or having to go to an ATM ever. It's more convenient and more secure, which is almost never true today.
      • throwaway_pdp09 6y ago
        Is cash that hard?
        • renewiltord 6y ago
          Yeah, I carry around a grand on me usually (for drugs and stuff) and it's really bulky. Then you've got the denomination issues.
          • throwaway_pdp09 6y ago
            If you take the speed you've just bought everything will be less tiring.
            • deleted 6y ago
              [deleted]
            • renewiltord 6y ago
              This is true, but the deleterious effects are fairly significant.
      • graham_paul 6y ago
        I would not necessarily call it enhanced security if you are using Android and your phone is not one of the latest models. Plus of course someone can just steal your phone, force you unlock it and steal more than they could ever steal from you if you only had cash. Your enhanced security is a box containing more money than you can carry. This box can (most of the times) only be opened with a key but this key is always with you. So whoever steals your force will just force you to open the box
  • graham_paul 6y ago
    You are paying a price for that. The second someone steals your phone, you lose it, drop in into water or your battery runs off, you are temporarily poor and if you might find yourself in trouble if you can't get somewhere where you can charge your phone
    • asutekku 6y ago
      The second someone steals my cash i don’t have it anymore. If someone steals my phone, it is locked and the money attributed to it are safe. Sure, i may have lost my phone but my money is safe.
      • throwaway_pdp09 6y ago
        Of interest, and I really don't know as I've never had a smartphone, if your phone is stolen, what stops it being used to pay for something? The point of the convenience was - I thought - that you just swipe. Couldn't a thief? Also how do you do anything if your phone is gone - travel, call, let the bank know, buy a new phone, let your partner know you're in trouble, anything? Also how much is you phone worth? A quick look suggests ~£1000 for an iphone 11, although I guess that's needlessly high, but you're carrying a large cash equivalent, highly attractive? I've never had £500 or the equivalent in my pocket, ever (max ~£350 for 1/2 hour IIRC). And cash doesn't break if you sit on it. I'm not entirely convinced of your case quite yet.
        • detaro 6y ago
          You need to unlock the phone to pay with it.
          • graham_paul 6y ago
            You will just unlock it at the thief's request
      • graham_paul 6y ago
        If someone steals your cash (as much cash as you can carry): you don't have it anymore. If someone steals your phone (you will lose at least the value you paid for the phone) and once they force you to unlock the phone and to hand over the passwords, you will lose: - as much cash as they can take out before you can access a device that will allow you to freeze the card you will also be a more attractive target for hacking (especially if you are using Android and your phone is like the vast majority of targets that receives security updates very late or it simply does not receive them) Seen it happen more than once. Yes, you are smart but so are thiefs
  • mgkimsal 6y ago
    that does not contradict or invalidate that the idea behind them was/is to force processing fees on merchants. whatever benefits you may or may not enjoy are unrelated to the purpose behind cards being offered.
• toomuchtodo 6y ago
  If the US regulated interchange fees like Europe did (In the EU, interchange fees are capped to 0.3% of the transaction for credit cards and to 0.2% for debit cards, no cap for corporate cards), everyone would still get the benefit of cashless transactions without the processing rake credit card processors and related entities take.
  • lollolintercha 6y ago
    Ha. Other fees nearly always take this above 1%, often closer to 5% and as far as 20% only sub dollar transactions. Other fees are your scheme fees of which there are many, avs fees, and your acquirer fee (the people who take the chargeback risk - e.g. adyen 0.65%)
    • AnssiH 6y ago
      That may be true for ecommerce. But for physical card-present EMV transactions the rates are typically under 1% in Finland, see comparison: http://www.maksupaatevertailu.fi/ http://www.maksupaatevertailu.fi/ (in Finnish) Nets is the most common physical merchant services provider here, I believe, which has 0.41% for Visa/MC debit and 0.91% for Visa/MC credit (though there are surcharges for foreign cards etc.).
      • lollolintercha 6y ago
        Valid point, I refer to card not present tranx, but are you sure the 0.41% is when via the mc/visa network though (even if we accept an interchange of 0.2x), many of these cards in europe have an alternative national pay network for local cards - you will actually see the choice on some POS screens too. And asia too - TPN dual branded with err can't remember that name of the Chinese pay network that has failed to infect se Asia now, ah unionpay
        • AnssiH 6y ago
          Yes, AFAIK there is no local payment network in Finland (unless it is completely hidden from users and merchants somehow), and Finnish cards are definitely not co-branded. The Nets rate for non-Finnish in-EU debit cards is 0.51% and for non-EU debit cards it is 1.71%, and +0.80% for corporate cards (all 2017 rates and for Visa/MC only).
• dylan604 6y ago
  And here I thought the entire idea behind credit cards was to make up to 22% interest from the user. The 3.5% per transaction from the retailers just seems like bonus. If not even considered a double dipping since most retailers will take the 3.5% into consideration of their pricing.
  • est31 6y ago
    There is a difference between "credit credit cards" and "debit credit cards". Debit credit cards are a bad idea for consumers because of those 22% as well as liabilities when being victim of a crime. But yes, many people treat the limit of those debit credit cards as a way of having money. It isn't though.
    • dahfizz 6y ago
      Can you explain this a bit more? I have no idea what you mean by "credit credit card" vs "debit credit card".
      • est31 6y ago
        Here is an FBI employee explaining the difference between the two when a breach happens: https://youtu.be/vsMydMDi3rI?t=2737 https://youtu.be/vsMydMDi3rI?t=2737 A more general article: https://www.investopedia.com/articles/personal-finance/050214/credit-vs-debit-cards-which-better.asp https://www.investopedia.com/articles/personal-finance/05021...
        • fomine3 6y ago
          OP said "debit credit cards" (not debit cards) and 22%. What's it?
    • tomnipotent 6y ago
      At least in the U.S., there is no such thing as a "debit credit card", and debit cards do not have interest rates as they're (usually) coming straight out of a checking/savings account.
• deegles 6y ago
  You have to sort cash, count it, deal with counterfeit bills, run it to the bank, etc. There must be a break-even point if a business values its time.
  • conjecTech 6y ago
    It's nowhere near 3.5%. It's probably an order of magnitude less. My mother spent a decade as the controller of a luggage store chain. She told me the amount they spent on credit card fees was at times in excess of their stores' payroll. It is rent seeking at nearly unfathomable levels. Even the shady check cashing operations for the unbanked are able to operate profitably on a 1% cut.
    • fredophile 6y ago
      I'm not convinced the margins are as big as you might think. My understanding is that the margins are thin but they make it up in massive volume. Stripe charges 2.9% plus $0.30 per transaction. If you have an average transaction size of $100 you're paying $3.20 in fees (3.2%). There are several no annual fee credit cards that give the consumer 2% cash back. That leaves 1.2%. This 1.2% isn't pure profit. Things like fraud protection will cut into this. There are also several groups that need to split whatever is left of that 1.2%. Stripe needs to make money, Visa/MC need to make money, the bank offering the card needs to make money.
      • conjecTech 6y ago
        Visa and Mastercard are both publicly traded. You can go look at their financials. I believe Visa still holds the crown for the highest gross margin and price-to-sales ratio of any stock in the S&P 500. Mastercard isn't far behind. These are not marginally profitable businesses. They are money printers that rely on tightfisted control over merchants and the payment clearing infrastructure.
        • fredophile 6y ago
          I took your advice and looked at some financials. The total revenue/cost of revenue for Visa in their most recent info was 5.5. That does seem like a more than healthy profit margin. For context, here is the same ratio for the FAANG companies and a few telecoms. I would've included some banks as well but they report their income differently so I didn't see an easy way to calculate the same ratio. Facebook 5.5 Amazon 1.3 Apple 1.6 Netflix 1.6 Google 2.2 AT&T 2.2 Verizon 2.4 Comcast 3.2 Out of all these companies the only one with a better ratio was Facebook. However, if you look at total revenue Visa was by far the smallest of the companies I've listed. Based on this info I can agree that Visa could reduce their fees and still have healthy profit margins. If you want to use this as evidence they charge too much and need some form of government intervention you might want to look at Facebook first and keep an eye on the cable companies.
• snarf21 6y ago
  Cash businesses are also some of the ones the most prone to employee theft, especially bars. Also, the 3.5% is just passed on to the consumer is happy to pay for the convenience it brings.
  • mgkimsal 6y ago
    > the consumer is happy to pay Happy to pay? Or ignorant of the cost? Or ... not offered any discount for cash? I'm not particularly "happy" to pay these fees, but there's not much way around them. They get baked in to prices, and I'm not offered a way to opt out.
• qwerty1234599 6y ago
  I'd wager the average card purchase is way larger than 3.5% compared to cash, as the money being spent feels less real.
• throwaheyy 6y ago
  No. The entire idea behind credit cards is to reduce friction in commerce resulting from handling cash. This attracts more customers to businesses through increased convenience. Taking cards is voluntary, there's no "forcing processing fees" involved. Plenty of businesses opt not to take credit cards. In fact, interchange fees (which in the US now top out around 2.7%, not 3.5%) are at an all-time low because of technology improvements. The first credit cards had a processing fee of 7% (https://www.businessinsider.com.au/history-of-credit-cards-2015-2 https://www.businessinsider.com.au/history-of-credit-cards-2...).
  • jjoonathan 6y ago
    > Taking cards is voluntary, there's no "forcing processing fees" involved. Lol, sure. That's why they make stores promise to never, ever, under any circumstances make interchange fees visible to customers. Hiding in the shadows is not the sign of voluntary mutual-benefit value creation, it's the sign of a good hustle that someone is hoping to milk just a little bit more before the Sauron's Eye of public attention turns their way.
    • setr 6y ago
      I usually see it, but inverted: "we offer a 4% discount for cash payments" signs But usually only in small individual shops
      • jjoonathan 6y ago
        If that's allowed under the credit card processing merchant agreements it's a new development. If I had to guess, it's still forbidden, but small shops don't know/care until the CC company actually asks them to stop. If people could get a 5% discount everywhere with their debit card, the gig would be up, and the CC companies know it.
    • throwaheyy 6y ago
      I’ll draw an analogy. Most tech firms will make you sign an NDA as a condition of employment. That doesn’t mean that you are forced to work there.