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> Secondly it costs the consumer nothing. The cost goes to the merchant. If anything the customer gets rewards. Sellers increase the price by the fee amount, s

by vasco 1y ago

> Secondly it costs the consumer nothing. The cost goes to the merchant. If anything the customer gets rewards. Sellers increase the price by the fee amount, savvy consumers with rewards cards can get back around 80% of that price increase, and regular non-credit-card-with-rewards holding consumers just subsidize the whole thing by paying the extra. It's a tax on people without rewards cards.

memco 1y ago
Not sure how prevalent this is now, but a few years back I was seeing a lot of "cash price" advertised for stuff that was lower by whatever the merchant didn't have to pay in fees so sometimes cash may not be subsidizing the credit industry.
- ameliaquining 1y ago
  In a lot of cases there are regulatory or contractual barriers to doing that.
  - kylebenzle 1y ago
    [dead]
  - conductr 1y ago
    The card issuers used to prohibit it, not been the case in a while though. They used to prohibit having a minimum transaction amount or charging transaction fees to your customer too. It never stopped small merchants though
  - lotsofpulp 1y ago
    In the US, not since 2011 since the Dodd Frank act required payment card networks to allow merchants to offer cash and debit card discounts. https://www.ftc.gov/business-guidance/resources/new-rules-electronic-payments-lower-costs-retailers https://www.ftc.gov/business-guidance/resources/new-rules-el...
    - ameliaquining 1y ago
      There's no longer a blanket ban, but there are still obstacles: * Mastercard and Visa don't allow debit card surcharges, even if the transaction is run as "credit". * American Express only allows surcharges if they also apply to all other forms of card payment. This includes debit cards, which interacts problematically with the previous rule; if you want to do a card surcharge while accepting all three card brands and remaining compliant with all their rules, you have to apply it only to Mastercard and Visa and not American Express, even though American Express is the most expensive. * Several states still don't allow card surcharges, and others don't allow merchants to profit from surcharging (which makes it hard to advertise a uniform surcharge) or have regulations about how prices have to be listed if a surcharge is going to apply. Rules like these don't make it impossible to do surcharges while remaining compliant, but they make it significantly harder than it'd otherwise be. I think this is the primary reason why most merchants still don't do them. (Well, that and that their competitors don't, but that could explain either equilibrium.)
      - lotsofpulp 1y ago
        A cash and debit card discount is the same as a credit card surcharge, I fail to see how this qualifies as “significantly harder”. Target, one of the largest retailers, offers a 5% discount for debit. Comcast, Tmobile, Verizon, ATT, Lumen, utilities, governments, and insurance companies also routinely charge extra for credit cards (or discounts for debit/cash). Daycares charge more for credit card, as do doctors’ offices. At least half the gas stations I see have long had higher credit cards prices. Not to mention contractors for physical labor. The change since 15 years ago is stark. If I wasn’t getting a minimum of 3.5% cash back on my purchases, I would use credit cards a lot less.
        ameliaquining 1y ago
        Huh, I didn't know that about Target (perhaps because I've lived for years in a state that doesn't allow this, so I can't get the discount where I live). I did know that recurring utility-type payments, and payments of more than a couple thousand dollars, tend not to accept credit cards or to charge a lot extra for them, presumably because it's not as costly for them to make their users eat the inconvenience of setting up ACH payments. Most merchants can't get away with that. I've also seen it for gasoline but chalked this up to gasoline being an unusually fungible and high-demand commodity. Do you know how they're handling the American Express problem? I don't think I've noticed a big contraction in how many merchants accept it.
- vidarh 1y ago
  Handling cash costs money too. Sometimes more than handling cards. But a proportion of customers who like cash are very strongly convinced they are "subsidising" card payments, and might be attracted by pricing like that, so maybe it still ends up being a net gain.
  - ta12653421 1y ago
    From a percentage perspectice, handling huge amounts of cash should be far more expensive; I know one of the operators over here in my country: If you are a supermarket chain and have three locations in one large street, they charge you for every stop a minimum fee + additional handling costs.
    - vidarh 1y ago
      When I suggested pricing like that might work, my point was not that it'd be cheaper. I 100% agree it'd be more expensive. But if it attracts a sufficient amount of additional business from people who want to pay cash it could still be a net gain (assuming those customers are still profitable).
didibus 1y ago
Are you saying that even when I pay for something in cash or using debit, because of the possibility I'd use my credit-card the merchant had +3% their price?
- vasco 1y ago
  Almost but not exactly, any rational merchant would estimate how much they pay monthly in credit card fees and find a way to add that back to their revenue. For most practical cases, the business is started already after the existence of credit cards, so when modeling revenue in your business plan this should already be baked in and the prices you come up with already cover it. So it doesn't mean they increase the price of every product by 3%. One guy might charge more just for coffee, another do some other thing. But any extra cost you put on a seller of anything, the rational seller will make that back in sales somehow.
  - mightypirate 1y ago
    the seller just charges whatever it get can get away with. 3% only has an impact when margins are closer to that percentage
    - conductr 1y ago
      Savvy/corporate sellers are typically concerned with margins so fees do play a role
  - AnthonyMouse 1y ago
    In particular, that is what happens when costs are imposed industry wide, as with credit card fees. If the cost is only being paid by one vendor then that vendor can't raise prices or else customers would patronize one that had lower costs and passed on the savings. But if every vendor has to pay 3% then prices are going up 3%, because then the competition has no cost advantage they can pass on and people only stay in business if they're making enough to justify not doing something else. (3% is more than the entire net margin in many industries.)
  - 1y ago
frontfor 1y ago
Still, most consumers don’t care or notice it (we are not most consumers), so this doesn’t refute the original argument.
- vasco 1y ago
  If I take your money without you noticing it won't affect your immediate behavior, but later on you'll buy less stuff, specially if I keep doing it. If nothing else because you don't have it anymore.
conductr 1y ago
It’s worse on business cards. I negotiated a bank contract for our corporate card program earlier this year and we get 3.5% cash back from purchases. It incentivizes us to pay every vendor invoice by card too as ACH / check actually cost us money.
- guru4consulting 1y ago
  if merchants pay anywhere between 2% to 3%, how is the bank able to pay 3.5% for purchases to your corp card customers? Simple math says the bank would lose money on this which of course won't be true. What am I missing?
  - conductr 1y ago
    Merchants pay what they’re charged on a transaction by transaction basis. That is unless they have some agreement with Stripe or similar that provides a fixed percentage. If you get a full merchant account as a business, with IC+ billing or similar, your statement will itemize IC charges on every transaction and it’s based on the type of card the customer used. If it’s Amex / Discover it might be 5% or more. This is why a lot of merchants are Visa and Mastercard only. If your customer has a cash back card, it will maybe be 4%. If your customer uses a no frills visa bank card, it might be 1.5%. Across a large population of transactions it usually averages 2-3%. But if you have a B2B where all your transactions are from companies like mine, you’ll likely find it averages above 3%. Businesses like stripe are betting that 2.9% is above the average they see across a very large population of transactions.
vidarh 1y ago
Handling cash costs more on average at least for smaller businesses than typical card fees. It's typical to estimate the cost of handling cash anywhere from 4% to as high as 15% depending on takings and size of transactions.
- Hunpeter 1y ago
  As someone with little financial knowledge, I'm curious why that is the case and how those estimates are calculated. I've seen stores offering a discount on cash payments, citing card-related fees as the reason.
  - ceejayoz 1y ago
    Cash can be misplaced. Stolen. Needs to be stored securely. Banks often charge fees for depositing large amounts. Security companies charge fees to transport said amounts. Counterfeit bills. Etc.
  - aledue 1y ago
    Here in Italy the answer would be that you cannot evade taxes if payments are tracked. I imagine that applies elsewhere too.
  - stellar678 1y ago
    I kinda wondered about this forever as well. Then one day I was chilling in my local worker-owned cooperative bakery when the Brinks truck came by to do the bakery's cash pickup. Armed driver. Guard waiting next to the truck holding a long gun. Two guys (presumably armed) going into the business to get the cash and take it out to the truck. That's all pretty expensive! Smaller family-owned businesses will just take cash to the bank - but it's super common for somebody to eventually surveil them long enough to rob them one day as they're transporting the cash to the bank. It's pricey to handle cash!
  - pbhjpbhj 1y ago
    Discount on cash IME is because they're not putting transactions through the till (POS) so they can commit [tax] fraud. Ran a micro business in UK for 15 years, cash cost as much to deposit as card did - employee time (counting, reconciling, making deposit) and bank charges for cash deposits. It also slowed down transaction time (which was almost all IRL).
rendaw 1y ago
And some businesses (that consumers want) just don't exist because they can't be made to fit the card pricing structure. Ex: journalism (subscriptions only)

by vasco 1y ago

memco 1y ago

Not sure how prevalent this is now, but a few years back I was seeing a lot of "cash price" advertised for stuff that was lower by whatever the merchant didn't have to pay in fees so sometimes cash may not be subsidizing the credit industry.

ameliaquining 1y ago
In a lot of cases there are regulatory or contractual barriers to doing that.
- kylebenzle 1y ago
  [dead]
- conductr 1y ago
  The card issuers used to prohibit it, not been the case in a while though. They used to prohibit having a minimum transaction amount or charging transaction fees to your customer too. It never stopped small merchants though
- lotsofpulp 1y ago
  In the US, not since 2011 since the Dodd Frank act required payment card networks to allow merchants to offer cash and debit card discounts. https://www.ftc.gov/business-guidance/resources/new-rules-electronic-payments-lower-costs-retailers https://www.ftc.gov/business-guidance/resources/new-rules-el...
  - ameliaquining 1y ago
    There's no longer a blanket ban, but there are still obstacles: * Mastercard and Visa don't allow debit card surcharges, even if the transaction is run as "credit". * American Express only allows surcharges if they also apply to all other forms of card payment. This includes debit cards, which interacts problematically with the previous rule; if you want to do a card surcharge while accepting all three card brands and remaining compliant with all their rules, you have to apply it only to Mastercard and Visa and not American Express, even though American Express is the most expensive. * Several states still don't allow card surcharges, and others don't allow merchants to profit from surcharging (which makes it hard to advertise a uniform surcharge) or have regulations about how prices have to be listed if a surcharge is going to apply. Rules like these don't make it impossible to do surcharges while remaining compliant, but they make it significantly harder than it'd otherwise be. I think this is the primary reason why most merchants still don't do them. (Well, that and that their competitors don't, but that could explain either equilibrium.)
    - lotsofpulp 1y ago
      A cash and debit card discount is the same as a credit card surcharge, I fail to see how this qualifies as “significantly harder”. Target, one of the largest retailers, offers a 5% discount for debit. Comcast, Tmobile, Verizon, ATT, Lumen, utilities, governments, and insurance companies also routinely charge extra for credit cards (or discounts for debit/cash). Daycares charge more for credit card, as do doctors’ offices. At least half the gas stations I see have long had higher credit cards prices. Not to mention contractors for physical labor. The change since 15 years ago is stark. If I wasn’t getting a minimum of 3.5% cash back on my purchases, I would use credit cards a lot less.
      - ameliaquining 1y ago
        Huh, I didn't know that about Target (perhaps because I've lived for years in a state that doesn't allow this, so I can't get the discount where I live). I did know that recurring utility-type payments, and payments of more than a couple thousand dollars, tend not to accept credit cards or to charge a lot extra for them, presumably because it's not as costly for them to make their users eat the inconvenience of setting up ACH payments. Most merchants can't get away with that. I've also seen it for gasoline but chalked this up to gasoline being an unusually fungible and high-demand commodity. Do you know how they're handling the American Express problem? I don't think I've noticed a big contraction in how many merchants accept it.
vidarh 1y ago
Handling cash costs money too. Sometimes more than handling cards. But a proportion of customers who like cash are very strongly convinced they are "subsidising" card payments, and might be attracted by pricing like that, so maybe it still ends up being a net gain.
- ta12653421 1y ago
  From a percentage perspectice, handling huge amounts of cash should be far more expensive; I know one of the operators over here in my country: If you are a supermarket chain and have three locations in one large street, they charge you for every stop a minimum fee + additional handling costs.
  - vidarh 1y ago
    When I suggested pricing like that might work, my point was not that it'd be cheaper. I 100% agree it'd be more expensive. But if it attracts a sufficient amount of additional business from people who want to pay cash it could still be a net gain (assuming those customers are still profitable).

didibus 1y ago

Are you saying that even when I pay for something in cash or using debit, because of the possibility I'd use my credit-card the merchant had +3% their price?

vasco 1y ago
Almost but not exactly, any rational merchant would estimate how much they pay monthly in credit card fees and find a way to add that back to their revenue. For most practical cases, the business is started already after the existence of credit cards, so when modeling revenue in your business plan this should already be baked in and the prices you come up with already cover it. So it doesn't mean they increase the price of every product by 3%. One guy might charge more just for coffee, another do some other thing. But any extra cost you put on a seller of anything, the rational seller will make that back in sales somehow.
- mightypirate 1y ago
  the seller just charges whatever it get can get away with. 3% only has an impact when margins are closer to that percentage
  - conductr 1y ago
    Savvy/corporate sellers are typically concerned with margins so fees do play a role
- AnthonyMouse 1y ago
  In particular, that is what happens when costs are imposed industry wide, as with credit card fees. If the cost is only being paid by one vendor then that vendor can't raise prices or else customers would patronize one that had lower costs and passed on the savings. But if every vendor has to pay 3% then prices are going up 3%, because then the competition has no cost advantage they can pass on and people only stay in business if they're making enough to justify not doing something else. (3% is more than the entire net margin in many industries.)
- 1y ago

frontfor 1y ago

Still, most consumers don’t care or notice it (we are not most consumers), so this doesn’t refute the original argument.

vasco 1y ago
If I take your money without you noticing it won't affect your immediate behavior, but later on you'll buy less stuff, specially if I keep doing it. If nothing else because you don't have it anymore.

conductr 1y ago

It’s worse on business cards. I negotiated a bank contract for our corporate card program earlier this year and we get 3.5% cash back from purchases. It incentivizes us to pay every vendor invoice by card too as ACH / check actually cost us money.

guru4consulting 1y ago
if merchants pay anywhere between 2% to 3%, how is the bank able to pay 3.5% for purchases to your corp card customers? Simple math says the bank would lose money on this which of course won't be true. What am I missing?
- conductr 1y ago
  Merchants pay what they’re charged on a transaction by transaction basis. That is unless they have some agreement with Stripe or similar that provides a fixed percentage. If you get a full merchant account as a business, with IC+ billing or similar, your statement will itemize IC charges on every transaction and it’s based on the type of card the customer used. If it’s Amex / Discover it might be 5% or more. This is why a lot of merchants are Visa and Mastercard only. If your customer has a cash back card, it will maybe be 4%. If your customer uses a no frills visa bank card, it might be 1.5%. Across a large population of transactions it usually averages 2-3%. But if you have a B2B where all your transactions are from companies like mine, you’ll likely find it averages above 3%. Businesses like stripe are betting that 2.9% is above the average they see across a very large population of transactions.

vidarh 1y ago

Handling cash costs more on average at least for smaller businesses than typical card fees. It's typical to estimate the cost of handling cash anywhere from 4% to as high as 15% depending on takings and size of transactions.

Hunpeter 1y ago
As someone with little financial knowledge, I'm curious why that is the case and how those estimates are calculated. I've seen stores offering a discount on cash payments, citing card-related fees as the reason.
- ceejayoz 1y ago
  Cash can be misplaced. Stolen. Needs to be stored securely. Banks often charge fees for depositing large amounts. Security companies charge fees to transport said amounts. Counterfeit bills. Etc.
- aledue 1y ago
  Here in Italy the answer would be that you cannot evade taxes if payments are tracked. I imagine that applies elsewhere too.
- stellar678 1y ago
  I kinda wondered about this forever as well. Then one day I was chilling in my local worker-owned cooperative bakery when the Brinks truck came by to do the bakery's cash pickup. Armed driver. Guard waiting next to the truck holding a long gun. Two guys (presumably armed) going into the business to get the cash and take it out to the truck. That's all pretty expensive! Smaller family-owned businesses will just take cash to the bank - but it's super common for somebody to eventually surveil them long enough to rob them one day as they're transporting the cash to the bank. It's pricey to handle cash!
- pbhjpbhj 1y ago
  Discount on cash IME is because they're not putting transactions through the till (POS) so they can commit [tax] fraud. Ran a micro business in UK for 15 years, cash cost as much to deposit as card did - employee time (counting, reconciling, making deposit) and bank charges for cash deposits. It also slowed down transaction time (which was almost all IRL).

rendaw 1y ago

And some businesses (that consumers want) just don't exist because they can't be made to fit the card pricing structure. Ex: journalism (subscriptions only)