5 ms·

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.)
- vidarh 1y ago
  A rational merchant would know that they are also incurring costs for handling cash, and depending on the size of the business that cost can in fact be higher than the cost of handling cards. In fact, the low end of cash handling costs for a business will almost always be higher than the card fees alone, but of course there are other costs in managing card payments too, so it's not quite that clear cut.
eszed 1y ago
Cash handling isn't free! You have to pay someone's time to count + reconcile + deposit it, or If you're dealing at any volume, you'll pay an armored car service to collect it. There's inevitably "shrinkage", or else business processes (more time and more overhead) to avoid it. Cash is king for hiding transactions and avoiding taxes. If that's the situation then I won't say you don't deserve a cut, but for rules-following merchants taking cash isn't any cheaper than paying the credit card fees.
- jader201 1y ago
  > but for rules-following merchants taking cash isn't any cheaper than paying the credit card fees. That’s not true at all, particularly for large purchases. If I go to an electronics and check out with $5000 in electronics, there’s no way that handling cash incurs the same expense to the store as the 3% fee ($150). Maybe for nickel and dime purchases, but that’s rarely the case. Even a $50 dinner doesn’t cost the restaurant $1.50 (plus the $0.30 transaction fee) just to handle cash.
  - ceejayoz 1y ago
    You're not factoring in "I won't go somewhere that doesn't take a credit card". A store that sells $5k electronics is gonna lose a lot of sales if they attempt to save that $150 by only taking cash.
    - AnthonyMouse 1y ago
      Which is why you take both but make the credit card customer eat the fees. Then many customers will save you (i.e. themselves) the money by paying cash and the ones that insist on using a credit card are free to pay what it actually costs.
      - amanaplanacanal 1y ago
        Why do I almost never see a cash discount like this in practice? An I shopping in the wrong places? Or does something else prevent it?

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.)
vidarh 1y ago
A rational merchant would know that they are also incurring costs for handling cash, and depending on the size of the business that cost can in fact be higher than the cost of handling cards. In fact, the low end of cash handling costs for a business will almost always be higher than the card fees alone, but of course there are other costs in managing card payments too, so it's not quite that clear cut.

eszed 1y ago

Cash handling isn't free! You have to pay someone's time to count + reconcile + deposit it, or If you're dealing at any volume, you'll pay an armored car service to collect it. There's inevitably "shrinkage", or else business processes (more time and more overhead) to avoid it. Cash is king for hiding transactions and avoiding taxes. If that's the situation then I won't say you don't deserve a cut, but for rules-following merchants taking cash isn't any cheaper than paying the credit card fees.

jader201 1y ago
> but for rules-following merchants taking cash isn't any cheaper than paying the credit card fees. That’s not true at all, particularly for large purchases. If I go to an electronics and check out with $5000 in electronics, there’s no way that handling cash incurs the same expense to the store as the 3% fee ($150). Maybe for nickel and dime purchases, but that’s rarely the case. Even a $50 dinner doesn’t cost the restaurant $1.50 (plus the $0.30 transaction fee) just to handle cash.
- ceejayoz 1y ago
  You're not factoring in "I won't go somewhere that doesn't take a credit card". A store that sells $5k electronics is gonna lose a lot of sales if they attempt to save that $150 by only taking cash.
  - AnthonyMouse 1y ago
    Which is why you take both but make the credit card customer eat the fees. Then many customers will save you (i.e. themselves) the money by paying cash and the ones that insist on using a credit card are free to pay what it actually costs.
    - amanaplanacanal 1y ago
      Why do I almost never see a cash discount like this in practice? An I shopping in the wrong places? Or does something else prevent it?