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I am not an expert but I understand merchants here in the US pay about 2.5-3% in fees. Of these, they are split between the merchant's bank (called the acquirer

I am not an expert but I understand merchants here in the US pay about 2.5-3% in fees. Of these, they are split between the merchant's bank (called the acquirer), the merchant's service provider (if any, like Square or Whatever), the network (Mastercard, etc.), and the cardholders bank (called the issuer). Note that sometimes the issuer and network are the same (e.g., for AmEx and Discover). I am curious how 3% is "absolutely insane"? I pay almost 9% in sales tax. Apple store takes 15-30% cut of apps. Parking tax in NYC is almost 19%. I tip 20+% regularly at restaurants and usually much more for home delivery people. Some Banks charge $25+ For a wire transfer, sometimes even to receive one. I do not "feel" like 3% is a lot. Could it be less? Sure - give up your rewards cards though because your issuer may not be able to afford it. Now that some merchants charge a few percent for using cards, the cost is not even borne by them.

horsawlarway 5y ago
If most purchases are from cards (not saying they are, but we are slowly trending that way) that's essentially a 3% drain on the entire economy for shuffling around some rows in a database. If I were a government overseeing an economy that has a total expected yearly GDP growth of less than 3% (like the US/EU/UK) then I would exceedingly interested in removing that drain on the system. --- If anything, I'd say rewards cards are the perfect example of a product resulting from a system that has too much revenue compared to costs. They make so much money from having you use your card that they're willing to share some of it with you (admittedly - often through convoluted systems that are hard to place a real dollar value on).
zamadatix 5y ago
None of the things you listed are really comparable. What does the cost of running schools and police and fire and so on tell you about whether the cost for a transaction is reasonable. That being said my understanding is the cost sources from risk involved in credit risks and other guarantees on credit cards not the actual transaction of the money. E.g. debit cards have far lower merchant fees but don't assume any of those risks. From that perspective the premium makes more sense, not because you give tips on a meal that are larger.

horsawlarway 5y ago

If most purchases are from cards (not saying they are, but we are slowly trending that way) that's essentially a 3% drain on the entire economy for shuffling around some rows in a database. If I were a government overseeing an economy that has a total expected yearly GDP growth of less than 3% (like the US/EU/UK) then I would exceedingly interested in removing that drain on the system. --- If anything, I'd say rewards cards are the perfect example of a product resulting from a system that has too much revenue compared to costs. They make so much money from having you use your card that they're willing to share some of it with you (admittedly - often through convoluted systems that are hard to place a real dollar value on).

zamadatix 5y ago

None of the things you listed are really comparable. What does the cost of running schools and police and fire and so on tell you about whether the cost for a transaction is reasonable. That being said my understanding is the cost sources from risk involved in credit risks and other guarantees on credit cards not the actual transaction of the money. E.g. debit cards have far lower merchant fees but don't assume any of those risks. From that perspective the premium makes more sense, not because you give tips on a meal that are larger.