5 ms·

Your No annual fee credit card is costing you $700 a year

31 points by cwwc 5y ago

TimPC 5y ago
This market is a natural monopoly and it’s no surprise it has few competitors. Imagine how frustrating credit cards would be if there were 40 competing companies and each merchant accepted a different 25 of them. Merchants benefit greatly from only having to deal with a small handful of credit card companies. Yes there are also costs but it seems a bit disingenuous to ignore all the benefits from the current situation.
- vineyardmike 5y ago
  Interestingly though, as of late I’ve started seeing a lot of different accepted methods of payment in store in major metros. Cash. Visa. Mastercard. Amex. Diners Club. Venmo. Union pay. Square + CashApp QR. Apple Pay/G Pay (could one day be their own processor so listed separately). More I can’t recall.
  - Dracophoenix 5y ago
    Venmo uses Visa uses via Paypal. Diner's Club is a subsidiary of Mastercard. Square and Cash also use Mastercard's network and I think they piggybacks off others. In the US, and likely in most of the world, the only self-sufficient processors are Visa, Mastercard, American Express, and Discover.
    - nybble41 5y ago
      That's correct if you're processing a credit card, but some of these (PayPal, Cash App, perhaps Venmo) have their own separate accounts which bypass the card networks altogether. If you have a balance in Cash App and you send part of it to another Cash App user then they're not paying any fees to Visa, Mastercard, American Express, or Discover. PayPal and Cash App also support direct bank transfers (ACH) in addition to credit cards. Then you have the newcomers like Bitcoin with their own networks and processors (e.g. BitPay or Coinbase), or the option to perform your own processing.
    - vineyardmike 5y ago
      1. Venmo is part of PayPal, and can use visa, but they don't need it. 2. Same with square and Mastercard. 3. No, there's plenty more ways to pay across the world, eg.: https://bam.kalzumeus.com/archive/payments-in-japan/ https://bam.kalzumeus.com/archive/payments-in-japan/ or another comment mentioning Indian UPI. 4. My argument is that there are more, and further that fintech was helping proliferate options, including the possibility that new processors spread. Eg. Apple Pay could be its own processor instead of falling back on just card networks, just as square+cashapp started doing.
- 2Gkashmiri 5y ago
  Look at Indian UPI. It doesn't have to be stuck to visa/MasterCard with their monolith fees incurring infrastructure and eesto go along with it. UPI has been a great hit because the govt implemented a "ecosystem". Banks and apps and users are ALL part of the same network, everyone talks to everyone, everything is compatible. There is no moat except for having a bank account and a mobile number. Coming from 2.5-4% fees for MDR in cards to UPI which is literally free,there is a LOT of savings in general when the daily transactions are in billions. Those 2.5% fees really add up. And there is no stupid argument of " fraud protection" fees and all. Arent banks already paying that insurance and they have an incentive to reduce leakages by improving the tech.
- supertrope 5y ago
  In the US debit networks have cheap fees but merchants don’t want to buy more PIN pads. There’s a lot of inertia behind the waiter/employee physically running the payment - often through highly integrated POS systems that would have to be entirely replaced to upgrade the card reader.
TimPC 5y ago
The solution by the way is for federal legislatures to make illegal the terms about not charging fees for credit card use. If merchants can pass on part or all of credit card fees we get out of this dystopian situation where credit card companies pay users to use the credit cards and merchants are forced to raise prices for everyone regardless of whether they use a credit card.
- ectospheno 5y ago
  Passing on all of the fees will cost the average consumer even more. No one living paycheck to paycheck is getting a flat 2.25% cash back.
  - inbox-demon 5y ago
    While there are people using credit cards to cover expenses when there is no other option, I'm not sure how well it holds as a reason against legislation aimed at increasing competition with alternatives. That problem should be solved via the competing alternatives, especially considering how predatory these cards are for low income people in the first place.
    - TimPC 5y ago
      The problem is credit cards have used manipulative terms of service to force users of all other payment methods to subsidize the cost of credit card use. They’ve then driven up credit card usage by giving consumers rewards for doing so. As they’ve done so fees have gone up and with them the size of the subsidy had as well.
- throw8383833jj 5y ago
  Absolutely! There's no reason why someone paying with cash should be forced to pay 2.5% credit card fee on every transaction (because the merchant isn't allowed to give a discount for cash or increase for credit card use) even though they're not even using a credit card. It just forces everyone to use the credit card in order to get some of the fee back.
carride 5y ago
I agree that the fees charged to the merchants, and the policies they enforce on merchants are a bad thing. Though there continues to be competition who bring innovations. In the US I know Square is not the only option for point of sale transactions, just the quickest example that comes to my mind. MercadoPago POS in Latin America. Then all the many options for internet transactions which started with PayPal over 20 years ago.
- PopAlongKid 5y ago
  Square and Paypal charge merchant fees similar to credit cards. >PayPal, Square, and Stripe cover those swipe fees with their fees. [0] [0]https://www.fool.com/investing/2021/06/24/why-paypal-raised-processing-fees-could-backfire/ https://www.fool.com/investing/2021/06/24/why-paypal-raised-...
laurencerowe 5y ago
Visiting family in Britain for the first time in a few years I was surprised to be presented with a card machine by default even when buying a pint in a pub. Tap and pay in the U.K. is super fast in comparison with the glacially slow implementations in the US. I’ve had no reason to take out cash here whereas in the US I always carry it since it’s preferred in bars and small shops (which often have a $15 minimum.)
- sdflhasjd 5y ago
  "Contactless" as we usually call it is now almost completely ubiquitous, and the last time wasn't given the option was probably pre-pandemic. Interestingly, card surcharges have been banned for perhaps 4 years now. I'm not sure what card fees look like for retailers though.
  - Wowfunhappy 5y ago
    > card surcharges have been banned for perhaps 4 years now. I keep hearing this, but—well, I can’t tell if the law is different in NYC or if everyone just ignores it, but it’s definitely one of the two. Card surcharges (sometimes in the form of a “cash discount”) are very common.
    - sdflhasjd 5y ago
      Sorry, I was referring to the UK in my comment.
- deleted 5y ago
  [deleted]
- xcdzvyn 5y ago
  I'm in Australia where this is also the case. Is it different in America?
buescher 5y ago
You basically get all of that back with a decent rewards or cash-back card, plus you get the protections of buying with a credit card, and some of them are no fee.
nybble41 5y ago
> Your No annual fee credit card is costing you $700 a year The title is inaccurate since it's not "your" card costing you $700/year. If you got rid of your card and switched to paying for everything in cash you'd still pay just as much, as the prices are the same and card fees aren't (usually) passed on to the customer, while losing the benefits you get from the card. And of course going cash-only isn't a panacea, as cash is actually rather expensive for retailers to handle. Cash registers, counting & recounting, "shrinkage", secure storage on-site, transportation to & from a bank… it all adds up. Electronic payments are safer & cheaper to implement; we just need more competition to keep prices down. The surprising thing to me is that the payment processors are blaming the prices increases on fraud control. Weren't the recent changes to chipped cards & contactless payments mostly aimed at making fraud more difficult by design and thus reducing the need for the more expensive anti-fraud measures?

31 points by cwwc 5y ago

This market is a natural monopoly and it’s no surprise it has few competitors. Imagine how frustrating credit cards would be if there were 40 competing companies and each merchant accepted a different 25 of them. Merchants benefit greatly from only having to deal with a small handful of credit card companies. Yes there are also costs but it seems a bit disingenuous to ignore all the benefits from the current situation.

vineyardmike 5y ago
Interestingly though, as of late I’ve started seeing a lot of different accepted methods of payment in store in major metros. Cash. Visa. Mastercard. Amex. Diners Club. Venmo. Union pay. Square + CashApp QR. Apple Pay/G Pay (could one day be their own processor so listed separately). More I can’t recall.
- Dracophoenix 5y ago
  Venmo uses Visa uses via Paypal. Diner's Club is a subsidiary of Mastercard. Square and Cash also use Mastercard's network and I think they piggybacks off others. In the US, and likely in most of the world, the only self-sufficient processors are Visa, Mastercard, American Express, and Discover.
  - nybble41 5y ago
    That's correct if you're processing a credit card, but some of these (PayPal, Cash App, perhaps Venmo) have their own separate accounts which bypass the card networks altogether. If you have a balance in Cash App and you send part of it to another Cash App user then they're not paying any fees to Visa, Mastercard, American Express, or Discover. PayPal and Cash App also support direct bank transfers (ACH) in addition to credit cards. Then you have the newcomers like Bitcoin with their own networks and processors (e.g. BitPay or Coinbase), or the option to perform your own processing.
  - vineyardmike 5y ago
    1. Venmo is part of PayPal, and can use visa, but they don't need it. 2. Same with square and Mastercard. 3. No, there's plenty more ways to pay across the world, eg.: https://bam.kalzumeus.com/archive/payments-in-japan/ https://bam.kalzumeus.com/archive/payments-in-japan/ or another comment mentioning Indian UPI. 4. My argument is that there are more, and further that fintech was helping proliferate options, including the possibility that new processors spread. Eg. Apple Pay could be its own processor instead of falling back on just card networks, just as square+cashapp started doing.
2Gkashmiri 5y ago
Look at Indian UPI. It doesn't have to be stuck to visa/MasterCard with their monolith fees incurring infrastructure and eesto go along with it. UPI has been a great hit because the govt implemented a "ecosystem". Banks and apps and users are ALL part of the same network, everyone talks to everyone, everything is compatible. There is no moat except for having a bank account and a mobile number. Coming from 2.5-4% fees for MDR in cards to UPI which is literally free,there is a LOT of savings in general when the daily transactions are in billions. Those 2.5% fees really add up. And there is no stupid argument of " fraud protection" fees and all. Arent banks already paying that insurance and they have an incentive to reduce leakages by improving the tech.
supertrope 5y ago
In the US debit networks have cheap fees but merchants don’t want to buy more PIN pads. There’s a lot of inertia behind the waiter/employee physically running the payment - often through highly integrated POS systems that would have to be entirely replaced to upgrade the card reader.

TimPC 5y ago

The solution by the way is for federal legislatures to make illegal the terms about not charging fees for credit card use. If merchants can pass on part or all of credit card fees we get out of this dystopian situation where credit card companies pay users to use the credit cards and merchants are forced to raise prices for everyone regardless of whether they use a credit card.

ectospheno 5y ago
Passing on all of the fees will cost the average consumer even more. No one living paycheck to paycheck is getting a flat 2.25% cash back.
- inbox-demon 5y ago
  While there are people using credit cards to cover expenses when there is no other option, I'm not sure how well it holds as a reason against legislation aimed at increasing competition with alternatives. That problem should be solved via the competing alternatives, especially considering how predatory these cards are for low income people in the first place.
  - TimPC 5y ago
    The problem is credit cards have used manipulative terms of service to force users of all other payment methods to subsidize the cost of credit card use. They’ve then driven up credit card usage by giving consumers rewards for doing so. As they’ve done so fees have gone up and with them the size of the subsidy had as well.
throw8383833jj 5y ago
Absolutely! There's no reason why someone paying with cash should be forced to pay 2.5% credit card fee on every transaction (because the merchant isn't allowed to give a discount for cash or increase for credit card use) even though they're not even using a credit card. It just forces everyone to use the credit card in order to get some of the fee back.

carride 5y ago

I agree that the fees charged to the merchants, and the policies they enforce on merchants are a bad thing. Though there continues to be competition who bring innovations. In the US I know Square is not the only option for point of sale transactions, just the quickest example that comes to my mind. MercadoPago POS in Latin America. Then all the many options for internet transactions which started with PayPal over 20 years ago.

PopAlongKid 5y ago
Square and Paypal charge merchant fees similar to credit cards. >PayPal, Square, and Stripe cover those swipe fees with their fees. [0] [0]https://www.fool.com/investing/2021/06/24/why-paypal-raised-processing-fees-could-backfire/ https://www.fool.com/investing/2021/06/24/why-paypal-raised-...

laurencerowe 5y ago

Visiting family in Britain for the first time in a few years I was surprised to be presented with a card machine by default even when buying a pint in a pub. Tap and pay in the U.K. is super fast in comparison with the glacially slow implementations in the US. I’ve had no reason to take out cash here whereas in the US I always carry it since it’s preferred in bars and small shops (which often have a $15 minimum.)

sdflhasjd 5y ago
"Contactless" as we usually call it is now almost completely ubiquitous, and the last time wasn't given the option was probably pre-pandemic. Interestingly, card surcharges have been banned for perhaps 4 years now. I'm not sure what card fees look like for retailers though.
- Wowfunhappy 5y ago
  > card surcharges have been banned for perhaps 4 years now. I keep hearing this, but—well, I can’t tell if the law is different in NYC or if everyone just ignores it, but it’s definitely one of the two. Card surcharges (sometimes in the form of a “cash discount”) are very common.
  - sdflhasjd 5y ago
    Sorry, I was referring to the UK in my comment.
deleted 5y ago
[deleted]
xcdzvyn 5y ago
I'm in Australia where this is also the case. Is it different in America?

buescher 5y ago

You basically get all of that back with a decent rewards or cash-back card, plus you get the protections of buying with a credit card, and some of them are no fee.

nybble41 5y ago

> Your No annual fee credit card is costing you $700 a year The title is inaccurate since it's not "your" card costing you $700/year. If you got rid of your card and switched to paying for everything in cash you'd still pay just as much, as the prices are the same and card fees aren't (usually) passed on to the customer, while losing the benefits you get from the card. And of course going cash-only isn't a panacea, as cash is actually rather expensive for retailers to handle. Cash registers, counting & recounting, "shrinkage", secure storage on-site, transportation to & from a bank… it all adds up. Electronic payments are safer & cheaper to implement; we just need more competition to keep prices down. The surprising thing to me is that the payment processors are blaming the prices increases on fraud control. Weren't the recent changes to chipped cards & contactless payments mostly aimed at making fraud more difficult by design and thus reducing the need for the more expensive anti-fraud measures?