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Consumers, especially those paying in cash. Merchants jack prices up to account for credit card fees. The fees pay for things like cashback and flights. Typical

Consumers, especially those paying in cash. Merchants jack prices up to account for credit card fees. The fees pay for things like cashback and flights. Typically CC companies don't allow for merchants to have discounts for stuff like paying in cash (although some businesses may anyways...) so customers paying in cash essentially pay extra.

eldaisfish 3y ago
If I pay cash and pay a price that rose because of credit card fees, how does that cash go back to the credit card companies? Wouldn’t it stay with the seller?
- pkulak 3y ago
  Money is fungible. Your physical dollar bill can be collected and deposited and make it possible for _another_ dollar to do something else.
- sdwr 3y ago
  If the credit card companies take a dollar from every transaction, then the store raises prices by 80 cents to keep margins the same (because some people pay by cash). Your 80 cents in cash goes to the store, and subsidizes 4 other customers purchases (who would otherwise be paying the full extra dollar). Note that this complaining over fees is a privileged position, we are trying to slash visas margin, but if it didn't exist we would be BEGGING someone to come and run it this smoothly.
  - dheera 3y ago
    > but if it didn't exist we would be BEGGING someone to come and run it this smoothly I disagree, if they didn't exist and the need existed it would be fairly easy to get a company going to facilitate payments. China for one has settled on mobile app payments via QR codes for almost everything these days, credit cards are almost nonexistent.
    - bombcar 3y ago
      The US credit card system is build around manually copying down credit information and mailing it in once a month to a processing center. Other countries have strongly leveraged the ability for instant communication to do many more things.
  - noqc 3y ago
    Businesses don't raise prices to "keep margins the same", they raise prices to maximize profit, adding a transaction fee generally has unpredictable effects on price, including possibly lowering your optimum price. I bet this rarely happens in practice, but the theoretical situation is not particularly simple.
    - tomnipotent 3y ago
      > Businesses don't raise prices to "keep margins the same" It's absolutely common practice. A few luxury businesses can get away with outsized margins, but everyone else in the physical goods business is working at 60-70% gross margins (so MSRP is usually ~3x cost). Grocery stores are outliers with absolutely razor thin margins. In twenty years in e-commerce, I've never not seen prices updated to keep margins in a narrow band.
      - bombcar 3y ago
        The only thing that will happen is if you have multiple competing companies, they affect each other's prices in ways that may make the band wider. You also have the various x.99 prices that companies want to hit (so a grocery store will sell something for $4.99 and not raise the price to $5.17 to keep their margins, but will hold out until they feel they can jump to $5.49 or $5.99 - this right here is the biggest reason for "shrinkflation" - the price wants to move to something that is not a .99 and so they resize it to make it hit one.) But no company will long run at a loss.
DaveExeter 3y ago
>Merchants jack prices up to account for credit card fees. This is simply wrong. If it was true, then merchants would not care about credit card fees!
- bryanlarsen 3y ago
  Merchants hate jacking up prices unless that jack-up puts money in their pockets. Jacking up prices drives away customers.
  - missedthecue 3y ago
    Not if everyone has the same credit card fees.
    - epylar 3y ago
      Even overall demand can go down if prices rise
    - bmicraft 3y ago
      But they don't, large vendors often negotiate their own contracts
      - missedthecue 3y ago
        They do this to increase their margins because otherwise... they eat the cost of interchange.
- Supermancho 3y ago
  It's inconsistent. Some do, some do not. Tipping by card comes straight out of the recipient's hands, regardless.
  - deleted 3y ago
    [deleted]
FalconSensei 3y ago
if there's no difference in price, I'm paying card, simple as that
- gordon_freeman 3y ago
  yes. i pay all my CC bills on time and don't incur any fees. So it's no-brainer to pay using card as I get cash-back plus perks like dispute/warranty protections etc if something goes wrong.
  - kylehotchkiss 3y ago
    The dispute protection is no joke. Once 10 years ago, I bought something from Kroger with a debit card. A few hours later, the merchant charged a whole bunch of random amounts to the card until the total climbed above $1000 and I blocked the card. It took the bank quite some time to get the money back. Thankfully I wasn't living on the edge and didn't have rent due around that time period or else that would have been a much more devastating event. Never have to worry about that nonsense with credit cards.
    - reaperman 3y ago
      About 10 years ago I had a similar situation for $500-1500 with my debit card which was pickpocketed in Chicago. I was lucky, Chase put the money back in my account within a couple hours of me calling. Legally I think they could have waited much longer, but they made me whole the same day. I was a college student, traveling, and generally carried low balances. I was very thankful that Chase handled it the way they did. They’ve also likely made far more than that in overdraft and monthly fees from my chronically low-balance accounts which often didn't have direct deposit going into them so I’d have monthly fees for the sin of simply “having less than $5,000 and no direct deposits that month”.
    - AlgoRitmo 3y ago
      It wasn’t the merchant someone placed a skimmer on that machine. It happened to me, but only for $100…my bank caught it instantly. I used a debit card at Home Depot, and an hour later my bank contacted me knowing that I did not purchase sneakers at a Steve Madden store an hour away (I was actually impressed with whatever fraud-detection software they were using) After that I was very wary about using debit cards, but felt better once most had chips on them.
arcticbull 3y ago
> Typically CC companies don't allow for merchants to have discounts for stuff like paying in cash (although some businesses may anyways...) so customers paying in cash essentially pay extra. Cash discounts have always been permitted in merchant agreements. What was forbidden until a couple of years ago was credit surcharges however that restriction was removed in 2013. Unless forbidden by state law they're allowed everywhere in the US.
hnburnsy 3y ago
Not a fan of these credit card fees, especially where certain cards have higher merchant fees, but cash handling has its own fees such as bank per-deposit fees, leakage, and additional labor costs. According to Gemini, accepting credit cards has lower total\hidden fees and other benefits... >Compared to cash, credit card transactions generally come with lower hidden fees for businesses. Here's a breakdown: >Credit Card Processing Fees: There are fees associated with credit card transactions, typically a percentage of the sale amount paid by the business to the credit card processor. However, these fees are often lower than the cumulative hidden costs of handling cash. >Faster Transactions: Credit card transactions are quicker than cash transactions, reducing checkout lines and improving customer experience. This translates to lower labor costs for the business. >Reduced Risk: The risk of theft and loss is significantly lower with credit cards. Chargebacks (when a customer disputes a credit card transaction) can be an issue, but these are typically manageable compared to stolen cash. >Improved Sales Tracking: Credit card transactions provide a clear digital record of sales, simplifying bookkeeping and reconciliation for the business. >Potential for Increased Sales: Offering credit cards allows customers to make larger purchases they might not have enough cash for, potentially increasing sales for the business.
- jddj 3y ago
  It's fair to say that anyone looking for what an LLM might output on this topic could just ask an LLM, no?
  - NLPaep 3y ago
    At some point, we’re here for human interaction
  - hnburnsy 3y ago
    Gemini just summarized what I had discovered in the past on this topic, I had read somewhere that cash handling can add up to 17% in total fees but I believe it was an unbiased source. Of course what is not accounted for is tax avoidance which cash can make easier for a merchant.
dawnerd 3y ago
I'd argue it's actually the people paying interest covering all those rewards. Credit Card companies know they have a high percent of people that don't pay off every month - especially travel focused cards.
- bombcar 3y ago
  What's fun, is if you run the math (let's assume $1k card) - the credit card companies make more money if you charge and pay off your $1k each month than if you charge $1k and then pay interest on it. Let's assume 3% merchant fee, they get 3% of each charge, so $30 a month, for $360 in a year. Most cards max at 30% interest, which would be $300 a year (technically less because you're paying it off each time). Even with the 3% once, that's $330. The banks aren't dumb. The interest they make is gravy.
- kelnos 3y ago
  Not sure about that. Consider that in Europe, credit cards are not as popular, perhaps in part because there's not much in the way of rewards programs. An oft-suggested reason for that is because card fees are legally capped pretty low in Europe.
  - machomaster 3y ago
    You try to explain why you don't necessarily agree and in doing that you confirm everything the parent said. Very confusing.
    - deleted 3y ago
      [deleted]
    - bmicraft 3y ago
      They probably weren't talking about high interest but vendor fees instead
- throwitaway222 3y ago
  Yeah it is actually pretty insane, the middle class with a barely handle-able debt load are paying for the upper middle/upper class to have free flights, etc...
lotsofpulp 3y ago
>Typically CC companies don't allow for merchants to have discounts for stuff like paying in cash (although some businesses may anyways...) It has been legal in the USA since Oct 2011 for all merchants to offer discounts for cash and debit card use. https://www.ftc.gov/business-guidance/resources/new-rules-electronic-payments-lower-costs-retailers https://www.ftc.gov/business-guidance/resources/new-rules-el... https://en.wikipedia.org/wiki/Durbin_amendment https://en.wikipedia.org/wiki/Durbin_amendment
darth_avocado 3y ago
Not just cash, also debit cards and credit cards with lower rewards. Basically merchants raise prices to average out these fees, so a person with a cash credit card would pay for someone who uses Amex platinum.
decafninja 3y ago
Many merchants in the US give a cash discount. A generous interpretation is that this is rewarding the customer for not making the merchant pay credit card fees. A less generous interpretation is that this is to facilitate tax evasion. The truth is probably a mix of both. I have friends with small businesses that basically admitted to the latter.
rrrrrrrrrrrryan 3y ago
They can give legally discounts for other payment methods, but not for specific cards. Credit is credit. Meaning if you have a card that charges the merchant high fees and gives their customers lots of rewards, the business has to either eat that cost or not take that card. They can't charge you more for AmEx.

eldaisfish 3y ago

If I pay cash and pay a price that rose because of credit card fees, how does that cash go back to the credit card companies? Wouldn’t it stay with the seller?

pkulak 3y ago
Money is fungible. Your physical dollar bill can be collected and deposited and make it possible for _another_ dollar to do something else.
sdwr 3y ago
If the credit card companies take a dollar from every transaction, then the store raises prices by 80 cents to keep margins the same (because some people pay by cash). Your 80 cents in cash goes to the store, and subsidizes 4 other customers purchases (who would otherwise be paying the full extra dollar). Note that this complaining over fees is a privileged position, we are trying to slash visas margin, but if it didn't exist we would be BEGGING someone to come and run it this smoothly.
- dheera 3y ago
  > but if it didn't exist we would be BEGGING someone to come and run it this smoothly I disagree, if they didn't exist and the need existed it would be fairly easy to get a company going to facilitate payments. China for one has settled on mobile app payments via QR codes for almost everything these days, credit cards are almost nonexistent.
  - bombcar 3y ago
    The US credit card system is build around manually copying down credit information and mailing it in once a month to a processing center. Other countries have strongly leveraged the ability for instant communication to do many more things.
- noqc 3y ago
  Businesses don't raise prices to "keep margins the same", they raise prices to maximize profit, adding a transaction fee generally has unpredictable effects on price, including possibly lowering your optimum price. I bet this rarely happens in practice, but the theoretical situation is not particularly simple.
  - tomnipotent 3y ago
    > Businesses don't raise prices to "keep margins the same" It's absolutely common practice. A few luxury businesses can get away with outsized margins, but everyone else in the physical goods business is working at 60-70% gross margins (so MSRP is usually ~3x cost). Grocery stores are outliers with absolutely razor thin margins. In twenty years in e-commerce, I've never not seen prices updated to keep margins in a narrow band.
    - bombcar 3y ago
      The only thing that will happen is if you have multiple competing companies, they affect each other's prices in ways that may make the band wider. You also have the various x.99 prices that companies want to hit (so a grocery store will sell something for $4.99 and not raise the price to $5.17 to keep their margins, but will hold out until they feel they can jump to $5.49 or $5.99 - this right here is the biggest reason for "shrinkflation" - the price wants to move to something that is not a .99 and so they resize it to make it hit one.) But no company will long run at a loss.

DaveExeter 3y ago

>Merchants jack prices up to account for credit card fees. This is simply wrong. If it was true, then merchants would not care about credit card fees!

bryanlarsen 3y ago
Merchants hate jacking up prices unless that jack-up puts money in their pockets. Jacking up prices drives away customers.
- missedthecue 3y ago
  Not if everyone has the same credit card fees.
  - epylar 3y ago
    Even overall demand can go down if prices rise
  - bmicraft 3y ago
    But they don't, large vendors often negotiate their own contracts
    - missedthecue 3y ago
      They do this to increase their margins because otherwise... they eat the cost of interchange.
Supermancho 3y ago
It's inconsistent. Some do, some do not. Tipping by card comes straight out of the recipient's hands, regardless.
- deleted 3y ago
  [deleted]

FalconSensei 3y ago

if there's no difference in price, I'm paying card, simple as that

gordon_freeman 3y ago
yes. i pay all my CC bills on time and don't incur any fees. So it's no-brainer to pay using card as I get cash-back plus perks like dispute/warranty protections etc if something goes wrong.
- kylehotchkiss 3y ago
  The dispute protection is no joke. Once 10 years ago, I bought something from Kroger with a debit card. A few hours later, the merchant charged a whole bunch of random amounts to the card until the total climbed above $1000 and I blocked the card. It took the bank quite some time to get the money back. Thankfully I wasn't living on the edge and didn't have rent due around that time period or else that would have been a much more devastating event. Never have to worry about that nonsense with credit cards.
  - reaperman 3y ago
    About 10 years ago I had a similar situation for $500-1500 with my debit card which was pickpocketed in Chicago. I was lucky, Chase put the money back in my account within a couple hours of me calling. Legally I think they could have waited much longer, but they made me whole the same day. I was a college student, traveling, and generally carried low balances. I was very thankful that Chase handled it the way they did. They’ve also likely made far more than that in overdraft and monthly fees from my chronically low-balance accounts which often didn't have direct deposit going into them so I’d have monthly fees for the sin of simply “having less than $5,000 and no direct deposits that month”.
  - AlgoRitmo 3y ago
    It wasn’t the merchant someone placed a skimmer on that machine. It happened to me, but only for $100…my bank caught it instantly. I used a debit card at Home Depot, and an hour later my bank contacted me knowing that I did not purchase sneakers at a Steve Madden store an hour away (I was actually impressed with whatever fraud-detection software they were using) After that I was very wary about using debit cards, but felt better once most had chips on them.

arcticbull 3y ago

> Typically CC companies don't allow for merchants to have discounts for stuff like paying in cash (although some businesses may anyways...) so customers paying in cash essentially pay extra. Cash discounts have always been permitted in merchant agreements. What was forbidden until a couple of years ago was credit surcharges however that restriction was removed in 2013. Unless forbidden by state law they're allowed everywhere in the US.

hnburnsy 3y ago

Not a fan of these credit card fees, especially where certain cards have higher merchant fees, but cash handling has its own fees such as bank per-deposit fees, leakage, and additional labor costs. According to Gemini, accepting credit cards has lower total\hidden fees and other benefits... >Compared to cash, credit card transactions generally come with lower hidden fees for businesses. Here's a breakdown: >Credit Card Processing Fees: There are fees associated with credit card transactions, typically a percentage of the sale amount paid by the business to the credit card processor. However, these fees are often lower than the cumulative hidden costs of handling cash. >Faster Transactions: Credit card transactions are quicker than cash transactions, reducing checkout lines and improving customer experience. This translates to lower labor costs for the business. >Reduced Risk: The risk of theft and loss is significantly lower with credit cards. Chargebacks (when a customer disputes a credit card transaction) can be an issue, but these are typically manageable compared to stolen cash. >Improved Sales Tracking: Credit card transactions provide a clear digital record of sales, simplifying bookkeeping and reconciliation for the business. >Potential for Increased Sales: Offering credit cards allows customers to make larger purchases they might not have enough cash for, potentially increasing sales for the business.

jddj 3y ago
It's fair to say that anyone looking for what an LLM might output on this topic could just ask an LLM, no?
- NLPaep 3y ago
  At some point, we’re here for human interaction
- hnburnsy 3y ago
  Gemini just summarized what I had discovered in the past on this topic, I had read somewhere that cash handling can add up to 17% in total fees but I believe it was an unbiased source. Of course what is not accounted for is tax avoidance which cash can make easier for a merchant.

dawnerd 3y ago

I'd argue it's actually the people paying interest covering all those rewards. Credit Card companies know they have a high percent of people that don't pay off every month - especially travel focused cards.

bombcar 3y ago
What's fun, is if you run the math (let's assume $1k card) - the credit card companies make more money if you charge and pay off your $1k each month than if you charge $1k and then pay interest on it. Let's assume 3% merchant fee, they get 3% of each charge, so $30 a month, for $360 in a year. Most cards max at 30% interest, which would be $300 a year (technically less because you're paying it off each time). Even with the 3% once, that's $330. The banks aren't dumb. The interest they make is gravy.
kelnos 3y ago
Not sure about that. Consider that in Europe, credit cards are not as popular, perhaps in part because there's not much in the way of rewards programs. An oft-suggested reason for that is because card fees are legally capped pretty low in Europe.
- machomaster 3y ago
  You try to explain why you don't necessarily agree and in doing that you confirm everything the parent said. Very confusing.
  - deleted 3y ago
    [deleted]
  - bmicraft 3y ago
    They probably weren't talking about high interest but vendor fees instead
throwitaway222 3y ago
Yeah it is actually pretty insane, the middle class with a barely handle-able debt load are paying for the upper middle/upper class to have free flights, etc...

lotsofpulp 3y ago

>Typically CC companies don't allow for merchants to have discounts for stuff like paying in cash (although some businesses may anyways...) It has been legal in the USA since Oct 2011 for all merchants to offer discounts for cash and debit card use. https://www.ftc.gov/business-guidance/resources/new-rules-electronic-payments-lower-costs-retailers https://www.ftc.gov/business-guidance/resources/new-rules-el... https://en.wikipedia.org/wiki/Durbin_amendment https://en.wikipedia.org/wiki/Durbin_amendment

darth_avocado 3y ago

Not just cash, also debit cards and credit cards with lower rewards. Basically merchants raise prices to average out these fees, so a person with a cash credit card would pay for someone who uses Amex platinum.

decafninja 3y ago

Many merchants in the US give a cash discount. A generous interpretation is that this is rewarding the customer for not making the merchant pay credit card fees. A less generous interpretation is that this is to facilitate tax evasion. The truth is probably a mix of both. I have friends with small businesses that basically admitted to the latter.

rrrrrrrrrrrryan 3y ago

They can give legally discounts for other payment methods, but not for specific cards. Credit is credit. Meaning if you have a card that charges the merchant high fees and gives their customers lots of rewards, the business has to either eat that cost or not take that card. They can't charge you more for AmEx.