3 ms·

Without some other changes to the system, like direct consumer banking and fraud protection through the fed, making points illegal would just be a big windfall

Without some other changes to the system, like direct consumer banking and fraud protection through the fed, making points illegal would just be a big windfall for credit card companies, as they would remain the most convenient way to pay for things, while being able to keep like 2% more of what they charge merchants.

callalex 3y ago
This is already a completely solved problem in most of the world. They simply cap the fees card companies can collect from merchants by law.
- sanderjd 3y ago
  That sounds unlikely to me to be "solved" rather than "a different local maximum". I'm very skeptical that any governments know the single perfect solution to the formula of the precise level of merchant fees that is the best possible solution.
  - CuriouslyC 3y ago
    If you cap fees, all that will happen is high risk businesses won't be able to accept cards and the processors will find ways to nickel and dime (+pos fee, paper billing fee, customer service fee, etc). It's still a better world though.
    - sanderjd 3y ago
      Maybe? For some people? I dunno, that sounds like it would mostly be worse for me, to have fewer points and fewer places that take cards. But even if it's better, it definitely doesn't seem "solved" to me... I think "solved" would be more like, fraud protection without credit, competition among card processing network driving merchant costs to access a network very low, people almost entirely using convenient fraud-protected debit cards like cash.
nfriedly 3y ago
Yeah, you might be right. But I'd be less inclined to use a CC if I wasn't getting cash back, so they'd face more competition from debit cards, cash, etc. And, if they refused to lower their fees, I think some (more) merchants would just stop accepting credit cards.
- sanderjd 3y ago
  I think essentially everyone would keep using their credit cards just as much, because debit cards are significantly riskier (to the consumer) from a fraud standpoint, and cash is significantly less convenient. Merchants can already stop accepting credit cards due to the fees. Why don't they? Because it would make their customers mad. Few businesses have customers who are more loyal to them than they are to their own (even minor) convenience. I do have a local restaurant I go to that doesn't accept credit cards and is packed nonetheless, but it's a rare feat. The points have a little bit to do with this, but not nearly as much as the convenience. What would change is that credit card companies would have more trouble luring people to switch away from their existing card to a new one. But they'd have a huge amount of extra money to spend on advertising to make up for that.

callalex 3y ago

This is already a completely solved problem in most of the world. They simply cap the fees card companies can collect from merchants by law.

sanderjd 3y ago
That sounds unlikely to me to be "solved" rather than "a different local maximum". I'm very skeptical that any governments know the single perfect solution to the formula of the precise level of merchant fees that is the best possible solution.
- CuriouslyC 3y ago
  If you cap fees, all that will happen is high risk businesses won't be able to accept cards and the processors will find ways to nickel and dime (+pos fee, paper billing fee, customer service fee, etc). It's still a better world though.
  - sanderjd 3y ago
    Maybe? For some people? I dunno, that sounds like it would mostly be worse for me, to have fewer points and fewer places that take cards. But even if it's better, it definitely doesn't seem "solved" to me... I think "solved" would be more like, fraud protection without credit, competition among card processing network driving merchant costs to access a network very low, people almost entirely using convenient fraud-protected debit cards like cash.

nfriedly 3y ago

Yeah, you might be right. But I'd be less inclined to use a CC if I wasn't getting cash back, so they'd face more competition from debit cards, cash, etc. And, if they refused to lower their fees, I think some (more) merchants would just stop accepting credit cards.

sanderjd 3y ago
I think essentially everyone would keep using their credit cards just as much, because debit cards are significantly riskier (to the consumer) from a fraud standpoint, and cash is significantly less convenient. Merchants can already stop accepting credit cards due to the fees. Why don't they? Because it would make their customers mad. Few businesses have customers who are more loyal to them than they are to their own (even minor) convenience. I do have a local restaurant I go to that doesn't accept credit cards and is packed nonetheless, but it's a rare feat. The points have a little bit to do with this, but not nearly as much as the convenience. What would change is that credit card companies would have more trouble luring people to switch away from their existing card to a new one. But they'd have a huge amount of extra money to spend on advertising to make up for that.