3 ms·

EU asks why credit cards are so expensive

10 points by FluidDjango 15y ago

AndrewDucker 15y ago
The problem here is lack of transparency. If shopkeepers always passed on the cost of debit cards (or, at least, separated out whatever amount they were passing on) then consumers could make a choice about which cards to use and providers would have to compete on price as well as service.
bunderbunder 15y ago
Don't know about Europe, but I can sure rant about the situation in the USA. The entire credit card industry is one giant market failure. The people who pay the price for a credit card are, by and large, not the people who choose which card to use. And those costs are deliberately hidden from the people who do make such decisions. It creates a perverse situation where credit card issuers aren't really competing on price at all. They're competing on service. So they issue rewards packages. Those rewards cards do cost more. But the higher price comes in the form of a higher processing fee, which retailers are contractually bound to hide from consumers. So consumers are completely unable to decide whether a particular rewards package is worth the price. Worse yet, since everyone pays the same price at the till regardless of what the transaction fee for their particular credit card is, even if I did know I would have no reason to worry about a more expensive card. We all pay the same price, so if my card's more expensive than average that just means that the extra cost is being paid by someone with a card that bears a lower transaction fee.
- tzs 15y ago
  > But the higher price comes in the form of a higher processing fee, which retailers are contractually bound to hide from consumers That's no longer correct. As part of an antitrust settlement with the Justice Department in late 2010, the card associations agreed to drop that. Retailers can now charge different depending on whether or not the card is a rewards card or not.

3 ms·

EU asks why credit cards are so expensive

10 points by FluidDjango 15y ago

AndrewDucker 15y ago
The problem here is lack of transparency. If shopkeepers always passed on the cost of debit cards (or, at least, separated out whatever amount they were passing on) then consumers could make a choice about which cards to use and providers would have to compete on price as well as service.
bunderbunder 15y ago
Don't know about Europe, but I can sure rant about the situation in the USA. The entire credit card industry is one giant market failure. The people who pay the price for a credit card are, by and large, not the people who choose which card to use. And those costs are deliberately hidden from the people who do make such decisions. It creates a perverse situation where credit card issuers aren't really competing on price at all. They're competing on service. So they issue rewards packages. Those rewards cards do cost more. But the higher price comes in the form of a higher processing fee, which retailers are contractually bound to hide from consumers. So consumers are completely unable to decide whether a particular rewards package is worth the price. Worse yet, since everyone pays the same price at the till regardless of what the transaction fee for their particular credit card is, even if I did know I would have no reason to worry about a more expensive card. We all pay the same price, so if my card's more expensive than average that just means that the extra cost is being paid by someone with a card that bears a lower transaction fee.
- tzs 15y ago
  > But the higher price comes in the form of a higher processing fee, which retailers are contractually bound to hide from consumers That's no longer correct. As part of an antitrust settlement with the Justice Department in late 2010, the card associations agreed to drop that. Retailers can now charge different depending on whether or not the card is a rewards card or not.