4 ms·

Well, ultimately, you pay for the rewards because merchants set their prices to account for what they expect to pay in payment processing, just like any other m

Well, ultimately, you pay for the rewards because merchants set their prices to account for what they expect to pay in payment processing, just like any other marginal cost. Even loyalty programs like the card with stamps you might get at your local coffee shop got priced in somewhere along the way.

bombcar 3y ago
This is the thing that people never really seem to realize. In the end, all costs are borne by the customer because there's really no other source of revenue. Now since the costs are already in the price, you "give up" something by paying cash, but that's getting less and less common because more and more places are offering cash discounts (now that the feds sat on the processors).
- wredcoll 3y ago
  > In the end, all costs are borne by the customer because there's really no other source of revenue. This would be considerably more relevant if the price paid was related to the costs in any meaningful way. 50+ years of economic study demonstrates rather conclusively that it is not.
  - bombcar 3y ago
    The price paid will not long be below the costs. The best example of this is (was?) gas stations, where the ones taking cash or debit only would be cheaper, because the credit card processing is a significant cost in a low-margin product-interchangeable market. The bigger companies try to make you THINK that there's a difference between their gallon of gas and that other gallon over there that came from the same depot, but there really isn't.
panarky 3y ago
> you pay for the rewards ... No, I don't pay for the rewards on my premium rewards credit card. For the most part, my rewards are paid for by everyone else who doesn't have a premium rewards credit card. Premium rewards cards cost merchants a lot more to accept than regular credit cards and debit cards. Rewards cards: 5% to 10% of total volume with swipe fees of 2.5% to 4.0% Regular credit cards: 30% to 40% of total volume with swipe fees of 1.5% to 2.5% Debit cards: 50% to 60% of total volume with swipe fees of 0.5% Yes, merchants build their payment costs into the prices of their products, but they generally don't charge different prices depending on what card the customer uses. So the majority of the population that doesn't qualify for a premium rewards card is effectively paying more for everything to subsidize the more wealthy people at the top.

bombcar 3y ago

This is the thing that people never really seem to realize. In the end, all costs are borne by the customer because there's really no other source of revenue. Now since the costs are already in the price, you "give up" something by paying cash, but that's getting less and less common because more and more places are offering cash discounts (now that the feds sat on the processors).

wredcoll 3y ago
> In the end, all costs are borne by the customer because there's really no other source of revenue. This would be considerably more relevant if the price paid was related to the costs in any meaningful way. 50+ years of economic study demonstrates rather conclusively that it is not.
- bombcar 3y ago
  The price paid will not long be below the costs. The best example of this is (was?) gas stations, where the ones taking cash or debit only would be cheaper, because the credit card processing is a significant cost in a low-margin product-interchangeable market. The bigger companies try to make you THINK that there's a difference between their gallon of gas and that other gallon over there that came from the same depot, but there really isn't.

panarky 3y ago

> you pay for the rewards ... No, I don't pay for the rewards on my premium rewards credit card. For the most part, my rewards are paid for by everyone else who doesn't have a premium rewards credit card. Premium rewards cards cost merchants a lot more to accept than regular credit cards and debit cards. Rewards cards: 5% to 10% of total volume with swipe fees of 2.5% to 4.0% Regular credit cards: 30% to 40% of total volume with swipe fees of 1.5% to 2.5% Debit cards: 50% to 60% of total volume with swipe fees of 0.5% Yes, merchants build their payment costs into the prices of their products, but they generally don't charge different prices depending on what card the customer uses. So the majority of the population that doesn't qualify for a premium rewards card is effectively paying more for everything to subsidize the more wealthy people at the top.