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> But how far does this go in explaining why merchants "choose" to participate in this program. The obvious answer would seem to be that they get no benefit fro

> But how far does this go in explaining why merchants "choose" to participate in this program. The obvious answer would seem to be that they get no benefit from the system as it exists but have no real choice, but maybe there is a better answer? The simple reason why issuers don’t make every card a signature rewards card is that merchants would revolt. The interchange fee schedule[1] is fascinating. Dozens of categories of merchants with different rates. There is no technical reason for this. Fraud costs are borne by merchants and to some extent processors, but not the issuer banks that receive the interchange fee. The fee schedule reflects a kind of battle for customers. It’s worth repeating that most of interchange for these higher end cards is passed back to the customer in the form of rewards. Essentially, merchants are willing to pay higher fees to support the cards that higher spending customers prefer. But there is a limit. We can observe that not all merchants accept AmEx, which has some of the highest interchange rates. If every visa/MC card were a signature card, more merchants would push back. [1] https://usa.visa.com/content/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf https://usa.visa.com/content/dam/VCOM/download/merchants/vis...

hot_gril 3y ago
Maybe it's not just that the merchants prefer high-spending customers, but that they're ok paying a little more for customers who have a lower chance of fraud, since they've passed through whatever hoops to have those special credit cards.
sofixa 3y ago
> There is no technical reason for this Point in case, there's an interchange fee cap of 0.3% for credit and 0.2% for debit cards in the EU. And there are entire countries moving to cashless, so obviously everyone is happy with it.
- ponector 3y ago
  As the result, most of the reward programs in EU are meaningless: too much friction with almost zero benefits. Credit card in EU is only for rental cars.
- yunohn 3y ago
  Almost everything (electronics, subscriptions, goods) are expensive in the EU. People travel to the USA to save money on these items, often getting additional discounts and sales that far surpass those in the EU. The lack of a high interchange in the EU has not made any positive impact on prices.
  - sofixa 3y ago
    > Almost everything (electronics, subscriptions, goods) are expensive in the EU. I live in Paris, France, one of the most expensive cities in the EU, and was recently on a roadtrip through the American Southwest and I disagree. Subscriptions? Want to compare how much internet or phone bills cost in the US vs France (I pay 20€ (really 10 because it's the same provider) for unlimited phone calls, messages, internet and 30GB Internet in most of the world; and 50€ for 5Gbps down/1 up fiber which also includes a Netflix subscription and something like a hundred TV channels)? Even Netflix is more expensive in the US. Goods? What goods? Food in restaurants is more expensive in bumfuck nowhere restaurants with Maga hat wearing clientele than mid end restaurants in Paris FFS! Clothing is way too variable to be a useful comparison (there's cheap shit and expensive luxury items in both countries). Electronics... maybe? I compared Apple Mac Mini and Studio prices and it was pretty much the same. Do you have anything concrete in mind or are you just imagining things? There is one thing that is definitely less expensive in the US - fuel. But that's by policy in the EU, not due to credit card interchange fees.
- dboreham 3y ago
  I went to Stockholm last week for a couple of days, worried that I didn't have any local currency. It turned out that nobody takes cash, so everything worked out fine.
  - astrange 3y ago
    Don't the public restrooms take coins there?
    - _Tev 3y ago
      Public restrooms in Czechia often can take cards now. I imagine it works similarly in Sweden.
    - chrisfinazzo 3y ago
      As an American, this concept still makes no sense to me. It's public infrastructure of a sort, don't real estate taxes in the surrounding area pay for upkeep and repairs? See also, subway stations in Japan, which IIRC operate under a similar model.
      - astrange 3y ago
        Transit is so good it replaces cars. That means users can afford to pay for it. Free transit is a terrible idea because e.g. it means tourists don't contribute and anyone who passes a tax cut will have defunded it without the actual users being able to help.
        chrisfinazzo 2y ago
        How does this account for people who live paycheck to paycheck and don't have cars? This is literally how they get around - asking those who can pay the fare to subsidize them doesn't seem like that much to ask.
  - ghaff 3y ago
    Europe varies a lot from largely cashless to you will probably need cash if you want to have a beer.
- lupire 3y ago
  "point in case" is a funny term. Are you a mathematician or programmer, using "case" in the sense of "branch of a proof", not "matter to be settled"?
  - iacvlvs 3y ago
    I assume it’s a simple accidental transposition of “case in point”, an instance or example that supports, or is relevant or pertinent to, what is being discussed. https://www.merriam-webster.com/wordplay/usage-of-case-in-point https://www.merriam-webster.com/wordplay/usage-of-case-in-po...
    - sofixa 3y ago
      Indeed, thanks, I've been using it wrong for months if not years... never realised I swapped it at some point in my mind.
    - notpushkin 3y ago
      That's interesting: I've only seen "point in case" being used, never "case in point" (although it does make a lot more sense, now that I think of it).
      - whimsicalism 3y ago
        you must not be a native speaker, i have never heard 'point in case' before this conversation. but fwiw, neither really make much sense to me
        1letterunixname 3y ago
        Pedantic language shaming is uncool and other people's experiences are different from your own. Get over it.
        maxcoder4 3y ago
        As a non-native speaker I appreciate comments like GP, because they let me improve my English and speak better. It's not pedantic if the "shamer" is obviously right (I've consulted internet and it looks like he is). I think correcting other people speech is valuable because it lets us all understand each other better.
- abalone 3y ago
  I wouldn’t assume everyone is happy with it. Consumers are going to prefer rewards programs over no rewards programs. And before you say it results in higher prices, that’s not necessarily true. Australia regulated away interchange and it didn’t result in lowering prices. Merchants kept the profit. A lot of times these regulations are pitched as helping consumers, but it’s really merchants pushing for them. You could make a similar observation about the EU regulatory fight with Apple et al right now. It’s actually Spotify fighting for it, and they have different interests than consumers.
  - ddfs123 3y ago
    >Australia regulated away interchange and it didn’t result in lowering prices. Prices has already been raised, I don't think they'll ever drop back, so that doesn't seems like a reasonable data point to dispute the price raising claim.
    - Ekaros 3y ago
      Better measurement might be did they go up less after this or did they go up later? As there should be more leeway in delaying increasing prices.
  - andruby 3y ago
    > I wouldn’t assume everyone is happy with it. Consumers are going to prefer rewards programs over no rewards programs. Personally, I would disagree. I prefer no rewards and a simple landscape where I don't have to compare credit cards. I lived in both EU and US, and didn't like the work needed to compare (and keep comparing) all the credit card offerings. In the EU, you just the credit card from your bank and don't feel like you're missing out.
    - deleted 3y ago
      [deleted]
    - balderdash 3y ago
      Why would you prefer a world where where you can’t get a 1-5% discount on everything you buy vs the alternative (spending on a debit card or using cash)? Obviously some people try to over optimize, but 30min of research every few years is definitely with the thousands of dollars of benefits in my mind
- ajkjk 3y ago
  It only means that they haven't managed to improve it yet.
fallingknife 3y ago
There is a government to government payment fee category in there. Why on earth would two government agencies ever need to use a CC to pay each other and lose over 1% in fees?
- paulmd 3y ago
  Unfortunately, as Lord Governor Supreme of a proud and prosperous micronation, I am disappointed to report that SWIFT does not recognize my sovereignty and regulatory authority.
granzymes 3y ago
> Fraud costs are borne by merchants and to some extent processors, but not the issuer banks that receive the interchange fee. Merchant fraud and merchant credit risk is borne by acquirers (although, if they went under the issuing baking is ultimately on the hook). But fraud by the cardholder and cardholder credit risk is borne by the issuer.
- abalone 3y ago
  Yes, merchant fraud is what I was referring to with “to some extent.” And you’re correct that card-present fraud is more likely to be borne by the bank these days (this was not always the case). But typical e-commerce fraud is usually eaten by the merchant.

hot_gril 3y ago

Maybe it's not just that the merchants prefer high-spending customers, but that they're ok paying a little more for customers who have a lower chance of fraud, since they've passed through whatever hoops to have those special credit cards.

sofixa 3y ago

> There is no technical reason for this Point in case, there's an interchange fee cap of 0.3% for credit and 0.2% for debit cards in the EU. And there are entire countries moving to cashless, so obviously everyone is happy with it.

ponector 3y ago
As the result, most of the reward programs in EU are meaningless: too much friction with almost zero benefits. Credit card in EU is only for rental cars.
yunohn 3y ago
Almost everything (electronics, subscriptions, goods) are expensive in the EU. People travel to the USA to save money on these items, often getting additional discounts and sales that far surpass those in the EU. The lack of a high interchange in the EU has not made any positive impact on prices.
- sofixa 3y ago
  > Almost everything (electronics, subscriptions, goods) are expensive in the EU. I live in Paris, France, one of the most expensive cities in the EU, and was recently on a roadtrip through the American Southwest and I disagree. Subscriptions? Want to compare how much internet or phone bills cost in the US vs France (I pay 20€ (really 10 because it's the same provider) for unlimited phone calls, messages, internet and 30GB Internet in most of the world; and 50€ for 5Gbps down/1 up fiber which also includes a Netflix subscription and something like a hundred TV channels)? Even Netflix is more expensive in the US. Goods? What goods? Food in restaurants is more expensive in bumfuck nowhere restaurants with Maga hat wearing clientele than mid end restaurants in Paris FFS! Clothing is way too variable to be a useful comparison (there's cheap shit and expensive luxury items in both countries). Electronics... maybe? I compared Apple Mac Mini and Studio prices and it was pretty much the same. Do you have anything concrete in mind or are you just imagining things? There is one thing that is definitely less expensive in the US - fuel. But that's by policy in the EU, not due to credit card interchange fees.
dboreham 3y ago
I went to Stockholm last week for a couple of days, worried that I didn't have any local currency. It turned out that nobody takes cash, so everything worked out fine.
- astrange 3y ago
  Don't the public restrooms take coins there?
  - _Tev 3y ago
    Public restrooms in Czechia often can take cards now. I imagine it works similarly in Sweden.
  - chrisfinazzo 3y ago
    As an American, this concept still makes no sense to me. It's public infrastructure of a sort, don't real estate taxes in the surrounding area pay for upkeep and repairs? See also, subway stations in Japan, which IIRC operate under a similar model.
    - astrange 3y ago
      Transit is so good it replaces cars. That means users can afford to pay for it. Free transit is a terrible idea because e.g. it means tourists don't contribute and anyone who passes a tax cut will have defunded it without the actual users being able to help.
      - chrisfinazzo 2y ago
        How does this account for people who live paycheck to paycheck and don't have cars? This is literally how they get around - asking those who can pay the fare to subsidize them doesn't seem like that much to ask.
- ghaff 3y ago
  Europe varies a lot from largely cashless to you will probably need cash if you want to have a beer.
lupire 3y ago
"point in case" is a funny term. Are you a mathematician or programmer, using "case" in the sense of "branch of a proof", not "matter to be settled"?
- iacvlvs 3y ago
  I assume it’s a simple accidental transposition of “case in point”, an instance or example that supports, or is relevant or pertinent to, what is being discussed. https://www.merriam-webster.com/wordplay/usage-of-case-in-point https://www.merriam-webster.com/wordplay/usage-of-case-in-po...
  - sofixa 3y ago
    Indeed, thanks, I've been using it wrong for months if not years... never realised I swapped it at some point in my mind.
  - notpushkin 3y ago
    That's interesting: I've only seen "point in case" being used, never "case in point" (although it does make a lot more sense, now that I think of it).
    - whimsicalism 3y ago
      you must not be a native speaker, i have never heard 'point in case' before this conversation. but fwiw, neither really make much sense to me
      - 1letterunixname 3y ago
        Pedantic language shaming is uncool and other people's experiences are different from your own. Get over it.
        maxcoder4 3y ago
        As a non-native speaker I appreciate comments like GP, because they let me improve my English and speak better. It's not pedantic if the "shamer" is obviously right (I've consulted internet and it looks like he is). I think correcting other people speech is valuable because it lets us all understand each other better.
abalone 3y ago
I wouldn’t assume everyone is happy with it. Consumers are going to prefer rewards programs over no rewards programs. And before you say it results in higher prices, that’s not necessarily true. Australia regulated away interchange and it didn’t result in lowering prices. Merchants kept the profit. A lot of times these regulations are pitched as helping consumers, but it’s really merchants pushing for them. You could make a similar observation about the EU regulatory fight with Apple et al right now. It’s actually Spotify fighting for it, and they have different interests than consumers.
- ddfs123 3y ago
  >Australia regulated away interchange and it didn’t result in lowering prices. Prices has already been raised, I don't think they'll ever drop back, so that doesn't seems like a reasonable data point to dispute the price raising claim.
  - Ekaros 3y ago
    Better measurement might be did they go up less after this or did they go up later? As there should be more leeway in delaying increasing prices.
- andruby 3y ago
  > I wouldn’t assume everyone is happy with it. Consumers are going to prefer rewards programs over no rewards programs. Personally, I would disagree. I prefer no rewards and a simple landscape where I don't have to compare credit cards. I lived in both EU and US, and didn't like the work needed to compare (and keep comparing) all the credit card offerings. In the EU, you just the credit card from your bank and don't feel like you're missing out.
  - deleted 3y ago
    [deleted]
  - balderdash 3y ago
    Why would you prefer a world where where you can’t get a 1-5% discount on everything you buy vs the alternative (spending on a debit card or using cash)? Obviously some people try to over optimize, but 30min of research every few years is definitely with the thousands of dollars of benefits in my mind
ajkjk 3y ago
It only means that they haven't managed to improve it yet.

fallingknife 3y ago

There is a government to government payment fee category in there. Why on earth would two government agencies ever need to use a CC to pay each other and lose over 1% in fees?

paulmd 3y ago
Unfortunately, as Lord Governor Supreme of a proud and prosperous micronation, I am disappointed to report that SWIFT does not recognize my sovereignty and regulatory authority.

granzymes 3y ago

> Fraud costs are borne by merchants and to some extent processors, but not the issuer banks that receive the interchange fee. Merchant fraud and merchant credit risk is borne by acquirers (although, if they went under the issuing baking is ultimately on the hook). But fraud by the cardholder and cardholder credit risk is borne by the issuer.

abalone 3y ago
Yes, merchant fraud is what I was referring to with “to some extent.” And you’re correct that card-present fraud is more likely to be borne by the bank these days (this was not always the case). But typical e-commerce fraud is usually eaten by the merchant.