4 ms·

“ known as an ‘interchange fee,’ from the merchant, roughly 1.5-3.5% of every transaction” This jumps out because it is such a wide margin. In reality the aver

“ known as an ‘interchange fee,’ from the merchant, roughly 1.5-3.5% of every transaction” This jumps out because it is such a wide margin. In reality the average interchange fee is 1.8%. Amex at their _highest_ rate, which is the highest of all the networks is 3.5. So “roughly” is doing a lot of heavy lifting in that sentence which gets further amplified later in the article when they use it to multiply by the total credit volume. I don’t know that it fully discredits the argument but it is certainly a weak rhetorical tactic. In the payments space margins are measured in basis points, 2% seems small to laymen. 200 bips seems crazy big to anyone in the industry.

twothamendment 3y ago
"All your bips are belong to us!"
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AdamN 3y ago
A large portion of those 200 bips goes back to the customer via points/cash refunds so it's not actually an amount that the interchange captures.
jjav 3y ago
> In reality the average interchange fee is 1.8%. Is this really so? (I don't know, asking.) Many credit cards give 2% cash back, so they'd be operating at a loss. I'm quite sure credit card companies will never operate at a loss, so that can't be.
- AnthonyMouse 3y ago
  It's both. The 2% cash back cards have higher interchange fees, but most people don't actually have 2% cash back cards.
- ceejayoz 3y ago
  That 2% attracts plenty of balance-carrying people paying 29%.
  - jjav 3y ago
    > That 2% attracts plenty of balance-carrying people paying 29%. Do you have data on that to share? It feels like that should not be the case, because the higher cash-back cards usually require a higher credit score. And people with a higher credit score are unlikely to fall into the trap of carrying a balance.
    - ceejayoz 3y ago
      The 2% cards aren’t that hard to get, and with something like half of Americans carrying balances some of them are gonna be 2% cardholders who ran up more than they realized on a 0% APR intro rate. You only need a few of those to make up the difference.
stefan_ 3y ago
These are all insanely high. Elsewhere: > The Regulation on Interchange Fees for Card-based payment transactions entered into force in June 2015. > Therefore, the Regulation caps interchange fees for consumer debit cards to 0.2 % and consumer credit cards to 0.3 % of the value of the transaction.
tiffanyh 3y ago
> "The network operator takes a swipe fee, known as an ‘interchange fee,’ from the merchant" For open-loop networks (Visa/Mastercard), this statement is not accurate.

twothamendment 3y ago

"All your bips are belong to us!"

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AdamN 3y ago

A large portion of those 200 bips goes back to the customer via points/cash refunds so it's not actually an amount that the interchange captures.

jjav 3y ago

> In reality the average interchange fee is 1.8%. Is this really so? (I don't know, asking.) Many credit cards give 2% cash back, so they'd be operating at a loss. I'm quite sure credit card companies will never operate at a loss, so that can't be.

AnthonyMouse 3y ago
It's both. The 2% cash back cards have higher interchange fees, but most people don't actually have 2% cash back cards.
ceejayoz 3y ago
That 2% attracts plenty of balance-carrying people paying 29%.
- jjav 3y ago
  > That 2% attracts plenty of balance-carrying people paying 29%. Do you have data on that to share? It feels like that should not be the case, because the higher cash-back cards usually require a higher credit score. And people with a higher credit score are unlikely to fall into the trap of carrying a balance.
  - ceejayoz 3y ago
    The 2% cards aren’t that hard to get, and with something like half of Americans carrying balances some of them are gonna be 2% cardholders who ran up more than they realized on a 0% APR intro rate. You only need a few of those to make up the difference.

stefan_ 3y ago

These are all insanely high. Elsewhere: > The Regulation on Interchange Fees for Card-based payment transactions entered into force in June 2015. > Therefore, the Regulation caps interchange fees for consumer debit cards to 0.2 % and consumer credit cards to 0.3 % of the value of the transaction.

tiffanyh 3y ago

> "The network operator takes a swipe fee, known as an ‘interchange fee,’ from the merchant" For open-loop networks (Visa/Mastercard), this statement is not accurate.