"The financial system in the U.S. is horribly inefficient. Retail transactions conducted with credit cards cost 2-3%, which is a ridiculously high cost given t

"The financial system in the U.S. is horribly inefficient. Retail transactions conducted with credit cards cost 2-3%, which is a ridiculously high cost given today's technology." No. The reason banks charge high transaction fees on credit cards has to do with how credit cards are billed. The billing cycle for a card is 30 days, after which you have 30 days to pay. This is effectively a loan for which you are paying zero interest. Somebody must pay, though, because you are risky, unsecured debt and your interest rate is maybe 12 percent. Up to two months of free credit therefore costs the bank two percent, which they charge the merchant. Credit card companies could shorten this billing cycle once the delays of snail mail are no longer commonplace, but that doesn't reduce the transaction cost--it only moves it from the merchant to the consumer, who now begins to accrue interest charges earlier. Consumers could theoretically pay off their debts faster and thus pay less interest, but only to a point, because most consumers live paycheck to paycheck and will carry a balance until their biweekly paycheck isn't eaten up by rent and auto payments--roughly a month. And I would argue that most consumers and banks prefer the grace period and simple interest calculations; it makes the whole billing process easy to understand.