Cash is (still) King
January 29, 2013 7:16 AM Subscribe
This week, retailers in 40 states will be allowed to charge fees for the use of Visa or Mastercard credit cards. Know Your Card. While large chains may avoid the new surcharge, it could be up to 4%. This is part of a settlement reached last summer in an anti-trust lawsuit against Visa, Mastercard, JP Morgan Chase and Bank of America, among others. There are 10 states where surcharging is illegal, but in many of them merchants may offer a discount for using cash.
Huh, I recently (last month) noticed the return of the two-tiered cash/credit price structure at gas stations in NJ (I am compelled to travel to NJ periodically for business). Is this part of the arrangement discussed here?
posted by Mister_A at 7:21 AM on January 29, 2013
posted by Mister_A at 7:21 AM on January 29, 2013
Um... Isn't anti-trust stuff supposed to help consumers?
posted by Sys Rq at 7:22 AM on January 29, 2013 [5 favorites]
posted by Sys Rq at 7:22 AM on January 29, 2013 [5 favorites]
I have no problem if it's disclosed clearly, but the opportunity to sneak it onto transactions through poor (but legal) signage concerns me. As elizardbits says, I'm willing to pay this to support local businesses; Amazon and their ilk less so.
posted by arcticseal at 7:22 AM on January 29, 2013
posted by arcticseal at 7:22 AM on January 29, 2013
Oh, supposedly not allowed in NY, so irrelevant.
posted by elizardbits at 7:23 AM on January 29, 2013
posted by elizardbits at 7:23 AM on January 29, 2013
Well, it's prohibited in New York. Which really only means every other restaurant in Brooklyn is free to continue not accepting credit cards at all (rarely advertised) and I will have to carry tons of cash on me at all times or be forced to use their "house" ATM (with a 3 dollar surcharge + bank surcharge). I love having to pay to use my own money!
posted by SmileyChewtrain at 7:25 AM on January 29, 2013 [2 favorites]
posted by SmileyChewtrain at 7:25 AM on January 29, 2013 [2 favorites]
The problem is Visa and MC abusing their oligopoly position to institute those stupid points programs on the backs of their merchants.
We desparately need an open source platform that allows anyone to operate a CC clearinghouse so those two fossils can be sent to the tar pits.
posted by ocschwar at 7:27 AM on January 29, 2013 [18 favorites]
We desparately need an open source platform that allows anyone to operate a CC clearinghouse so those two fossils can be sent to the tar pits.
posted by ocschwar at 7:27 AM on January 29, 2013 [18 favorites]
where surcharging is illegal, but in many of them merchants may offer a discount for using cash.
And then how much of that cash shows up on the books? Use your cards, friends, consider the overhead going to Visa and the other banksters as the cost of making sure that these businesses report their sales and pay their taxes.
posted by three blind mice at 7:27 AM on January 29, 2013 [1 favorite]
And then how much of that cash shows up on the books? Use your cards, friends, consider the overhead going to Visa and the other banksters as the cost of making sure that these businesses report their sales and pay their taxes.
posted by three blind mice at 7:27 AM on January 29, 2013 [1 favorite]
Um... Isn't anti-trust stuff supposed to help consumers?
In this instance, the "consumers" are the retail stores ... they consume the credit card processing services offered by Visa and MasterCard, and they are getting a big refund and temporary reduction in those costs. From their perspective, this was a big win for their (consumer) rights against the Evil Big Banking Consortium.
posted by JimInLoganSquare at 7:28 AM on January 29, 2013 [11 favorites]
In this instance, the "consumers" are the retail stores ... they consume the credit card processing services offered by Visa and MasterCard, and they are getting a big refund and temporary reduction in those costs. From their perspective, this was a big win for their (consumer) rights against the Evil Big Banking Consortium.
posted by JimInLoganSquare at 7:28 AM on January 29, 2013 [11 favorites]
Umm... if I read things correctly, the settlement hasn't been given final approval. Can someone explain why they could start charging fee now? Or is the post misleading?
posted by hoyland at 7:29 AM on January 29, 2013 [1 favorite]
posted by hoyland at 7:29 AM on January 29, 2013 [1 favorite]
I have no problem if it's disclosed clearly...
I have a problem with it even then. A lot of people at the edge (or even below) poverty use credit cards as a buffer to even out their expenses. Pay all the bills with credit and then as the money comes in over the next 4 weeks pay it off just in time. Whereas rich people can just not use those cards or will qualify for some fancy-shmancy card that won't do that.
posted by DU at 7:30 AM on January 29, 2013 [3 favorites]
I have a problem with it even then. A lot of people at the edge (or even below) poverty use credit cards as a buffer to even out their expenses. Pay all the bills with credit and then as the money comes in over the next 4 weeks pay it off just in time. Whereas rich people can just not use those cards or will qualify for some fancy-shmancy card that won't do that.
posted by DU at 7:30 AM on January 29, 2013 [3 favorites]
Sys Rq, previous to this law, it's not like businesses didn't charge these fees to the customer, they just passed it on as an average to everyone. Now a fair business will reduce prices so it doesn't factor in the processing fees, and just charge it to customers that are costing them more money (card users). In theory, if you pay cash, your grocery bill will drop a bit and when paying with card it'll increase a bit (because those cash payers aren't picking up your slack).
The question is, how many businesses are actually going to drop their retails, and how many will just see it as an extra bonus cherry on top, my guess: very few.
Any idea how Amex escaped this?
posted by Static Vagabond at 7:31 AM on January 29, 2013 [1 favorite]
The question is, how many businesses are actually going to drop their retails, and how many will just see it as an extra bonus cherry on top, my guess: very few.
Any idea how Amex escaped this?
posted by Static Vagabond at 7:31 AM on January 29, 2013 [1 favorite]
I stopped using credit cards a couple of years ago. Yes you have to carry wads of money, but it stops the banksters skimming off every transaction and helps the local businesses.
posted by bhnyc at 7:31 AM on January 29, 2013 [2 favorites]
posted by bhnyc at 7:31 AM on January 29, 2013 [2 favorites]
I will give the stinkeye to Sbux if they do it, though.
I could totally see a place like Starbucks doing it, since they have their own debit card thingy (glorified gift card) that they'd really prefer you use instead. Presumably because it's a stored-balance rather than a true debit system, so you're constantly floating them a little interest-free loan; must do wonders for their cashflow.
But more broadly, I could see this driving a return to store-specific charge cards, which was the norm before credit cards became consolidated under Visa/MC/Disc/Amex. And that might not be a bad thing; the market desperately needs some new blood and new ideas.
Although I don't especially like the idea of having to either carry around cash (which is filthy and takes up a lot of wallet space) or pay an extra 4%, the credit card companies are frankly rapacious, and they have gone on for far too long extracting an outsize economic rent from businesses of all sizes, completely disconnected from the services they perform. If this is what's necessary to break their stranglehold on the market and get some new electronic-payment methods started, then I'm all for it.
posted by Kadin2048 at 7:32 AM on January 29, 2013 [6 favorites]
I could totally see a place like Starbucks doing it, since they have their own debit card thingy (glorified gift card) that they'd really prefer you use instead. Presumably because it's a stored-balance rather than a true debit system, so you're constantly floating them a little interest-free loan; must do wonders for their cashflow.
But more broadly, I could see this driving a return to store-specific charge cards, which was the norm before credit cards became consolidated under Visa/MC/Disc/Amex. And that might not be a bad thing; the market desperately needs some new blood and new ideas.
Although I don't especially like the idea of having to either carry around cash (which is filthy and takes up a lot of wallet space) or pay an extra 4%, the credit card companies are frankly rapacious, and they have gone on for far too long extracting an outsize economic rent from businesses of all sizes, completely disconnected from the services they perform. If this is what's necessary to break their stranglehold on the market and get some new electronic-payment methods started, then I'm all for it.
posted by Kadin2048 at 7:32 AM on January 29, 2013 [6 favorites]
Um... Isn't anti-trust stuff supposed to help consumers?
The surcharges charged by credit-card companies eat into the profits of businesses, including small businesses. In many cases, the businesses respond by raising their prices overall, which means that cash-paying customers are subsidizing credit-card holders, and by extension, the credit card companies themselves. Insofar as credit-card holders are likely to be wealthier than non-holders, this situation ends up being somewhat regressive. We all pay, card-holders and non-holders, for the convenience that card-holders alone enjoy.
Speaking as a consumer, I welcome this change.
posted by gauche at 7:33 AM on January 29, 2013 [15 favorites]
The surcharges charged by credit-card companies eat into the profits of businesses, including small businesses. In many cases, the businesses respond by raising their prices overall, which means that cash-paying customers are subsidizing credit-card holders, and by extension, the credit card companies themselves. Insofar as credit-card holders are likely to be wealthier than non-holders, this situation ends up being somewhat regressive. We all pay, card-holders and non-holders, for the convenience that card-holders alone enjoy.
Speaking as a consumer, I welcome this change.
posted by gauche at 7:33 AM on January 29, 2013 [15 favorites]
Now a fair business will reduce prices so it doesn't factor in the processing fees,Is that really going to happen, though? Doubtful.
posted by Gordafarin at 7:34 AM on January 29, 2013 [3 favorites]
The question is, how many businesses are actually going to drop their retails, and how many will just see it as an extra bonus cherry on top, my guess, very few.
Most retail businesses have margins so thin that they won't be able to do this for very long. They might not actually drop prices, but it might mean they can go longer without a price increase (something that they'd like, because it creates an advantage for them vs the competition), and the consumer gets it back that way eventually.
Retail isn't especially profitable so I'm pretty confident that things will shake out there. Moving the revenue from the credit card processors down to the retail level is probably a pretty good way to ensure that it eventually benefits the consumer, in fact. (And it's completely the opposite direction of the past few decades, which has mostly involved CC processors and banks squeezing retail, pulling the profits upstream where they disappear into an un-competitive, high-margin environment.)
posted by Kadin2048 at 7:36 AM on January 29, 2013 [1 favorite]
Most retail businesses have margins so thin that they won't be able to do this for very long. They might not actually drop prices, but it might mean they can go longer without a price increase (something that they'd like, because it creates an advantage for them vs the competition), and the consumer gets it back that way eventually.
Retail isn't especially profitable so I'm pretty confident that things will shake out there. Moving the revenue from the credit card processors down to the retail level is probably a pretty good way to ensure that it eventually benefits the consumer, in fact. (And it's completely the opposite direction of the past few decades, which has mostly involved CC processors and banks squeezing retail, pulling the profits upstream where they disappear into an un-competitive, high-margin environment.)
posted by Kadin2048 at 7:36 AM on January 29, 2013 [1 favorite]
CNN Money: Using a credit card? Watch out for the 'checkout fee'
Looks like major retailers are appealing the decision, saying:
Looks like major retailers are appealing the decision, saying:
In November, the National Retail Federation and more than a dozen retailers asked a judge to reject the proposed settlement. In a brief submitted to a U.S. District Court judge in Brooklyn, N.Y., the trade organization wrote that the new fees threaten a merchant's ability to keep prices low for customers.posted by the man of twists and turns at 7:37 AM on January 29, 2013 [1 favorite]
Wal-Mart, Macy's, JCPenney, Limited Brands, Gap Inc, and The Neiman Marcus Group were among those who joined the NRF in claiming that "raising consumer prices by adding an 'interchange tax' is no remedy for Visa's and MasterCard's continuing monopoly abuse."
We desparately need an open source platform that allows anyone to operate a CC clearinghouse
Okay, maybe making it easier to create a credit operation, sure, I think that's a fine goal. But there's so much more than just 'a platform' involved in CC (or any financial) transactions.
merchant agreements, bank account information exchange, hardware support, encryption key management, emergency backups, failover for connectivity or server problems, etc, etc...
posted by timfinnie at 7:42 AM on January 29, 2013 [2 favorites]
Okay, maybe making it easier to create a credit operation, sure, I think that's a fine goal. But there's so much more than just 'a platform' involved in CC (or any financial) transactions.
merchant agreements, bank account information exchange, hardware support, encryption key management, emergency backups, failover for connectivity or server problems, etc, etc...
posted by timfinnie at 7:42 AM on January 29, 2013 [2 favorites]
I love having to pay to use my own money!
But your money is in the othercastle building, and you are paying for the opportunity to not carry cash, similar to how lending institutions and credit cards will have minimum balance requirements, ensuring they have money to lend (and a way for them to profit).
Your money is only free of charge if you keep it in a physical form. Otherwise, someone is involved with making sure your money is safe and available to you, and that someone isn't doing that task because they like to help, but because it is their job.
posted by filthy light thief at 7:43 AM on January 29, 2013 [3 favorites]
But your money is in the other
Your money is only free of charge if you keep it in a physical form. Otherwise, someone is involved with making sure your money is safe and available to you, and that someone isn't doing that task because they like to help, but because it is their job.
posted by filthy light thief at 7:43 AM on January 29, 2013 [3 favorites]
Interesting that the ten states that disallow include the extreme spectrum of red and blue.
Blue and bluish:
Massachusetts
California
Colorado
Connecticut
New York
Middlish:
Florida
Maine
Red and reddish:
Kansas
Oklahoma
Texas
posted by dances_with_sneetches at 7:44 AM on January 29, 2013 [2 favorites]
Blue and bluish:
Massachusetts
California
Colorado
Connecticut
New York
Middlish:
Florida
Maine
Red and reddish:
Kansas
Oklahoma
Texas
posted by dances_with_sneetches at 7:44 AM on January 29, 2013 [2 favorites]
I could totally see a place like Starbucks doing it, since they have their own debit card thingy
Yes, which could be an opportunity to push their smart phone app to use as payment instead.
posted by FJT at 7:44 AM on January 29, 2013
Yes, which could be an opportunity to push their smart phone app to use as payment instead.
posted by FJT at 7:44 AM on January 29, 2013
This is the natural result of a duopoly. Prices get raised beyond merchants' tolerance, but they know their customers would revolt if they charged people with cards more than the people paying cash. If there was real competition between interchange providers, merchants would have to pay less. The idea that Visa needs up to 4% of your purchase price in order to maintain its payment system is laughable.
People should be more comfortable with paying cash for things, but more importantly they should wonder why two private companies are almost completely in control of one of money's most important functions--providing a means for the exchange of goods.
posted by anewnadir at 7:51 AM on January 29, 2013 [7 favorites]
People should be more comfortable with paying cash for things, but more importantly they should wonder why two private companies are almost completely in control of one of money's most important functions--providing a means for the exchange of goods.
posted by anewnadir at 7:51 AM on January 29, 2013 [7 favorites]
And then how much of that cash shows up on the books?
Here in Texas, "Cash discount" also usually applies to debit cards. So, all of it?
posted by muddgirl at 7:52 AM on January 29, 2013
Here in Texas, "Cash discount" also usually applies to debit cards. So, all of it?
posted by muddgirl at 7:52 AM on January 29, 2013
Looks like major retailers are appealing the decision, saying...
Oh, yah, they will hate this. Their ability to negotiate lower rates has long been one of their advantages over the little fella. If the little fella can now advertise/mark a cash price, it closes the gap a little.
The big retailers and CC companies love hiding the extra costs. This looks good for the consumer to me.
posted by Bovine Love at 7:52 AM on January 29, 2013 [3 favorites]
Oh, yah, they will hate this. Their ability to negotiate lower rates has long been one of their advantages over the little fella. If the little fella can now advertise/mark a cash price, it closes the gap a little.
The big retailers and CC companies love hiding the extra costs. This looks good for the consumer to me.
posted by Bovine Love at 7:52 AM on January 29, 2013 [3 favorites]
Even in Texas, there are already places offering a cash discount. I buy deli foods and booze at Spec's and they've had a cash discount as long as I can remember (and I'm in my mid 40s, so I can remember back a ways.)
Also, I can't imagine using a debit card for daily purchases if it's linked to a well-stocked savings account. I once accidentally got charged $14K for a dinner of hot wings and yes we got the down payment for our house back before closing, but it was a bit of a mess, and reminded me that there's a reason you pay extra for credit protection: there's actual protection. I'd rather start carrying cash again.
posted by immlass at 7:52 AM on January 29, 2013 [5 favorites]
Also, I can't imagine using a debit card for daily purchases if it's linked to a well-stocked savings account. I once accidentally got charged $14K for a dinner of hot wings and yes we got the down payment for our house back before closing, but it was a bit of a mess, and reminded me that there's a reason you pay extra for credit protection: there's actual protection. I'd rather start carrying cash again.
posted by immlass at 7:52 AM on January 29, 2013 [5 favorites]
In this age of automated everything, I find fees like this highly dubious. If some beancounter really applied themselves to this, I'm pretty sure they'd find that any real operating cost associated with CC transactions is vanishingly small.
posted by Thorzdad at 7:54 AM on January 29, 2013
posted by Thorzdad at 7:54 AM on January 29, 2013
Any idea how Amex escaped this?
"The plaintiffs charged that Visa and MasterCard colluded directly and indirectly through the issuing banks to keep merchants from finding ways to mitigate credit-card costs."
I don't think American Express issues cards through banks (e.g. you can get a Visa card from Chase but not an Amex), so I guess it wasn't party to the same collusion.
American Express (via American Express Co. and American Express Travel Related Services Company, Inc.) was a party to the litigation, though, but in complex ways. There were two cases against Amex Travel directly; I'm not sure what those were about. American Express was also an intervenor and objector in the case, probably so that it could file briefs in support of Visa and MasterCard.
Looking only at the first amended consolidated class action complaint (i.e. the first complaint that tied together most of the cases), Amex was not one of the defendants.
In related news, figuring that out cost me $9 (thanks, PACER). I hope the Aaron Swartz memorial grants are successful in producing Chrome and Internet Explorer extensions for RECAP.
posted by jedicus at 7:58 AM on January 29, 2013 [4 favorites]
"The plaintiffs charged that Visa and MasterCard colluded directly and indirectly through the issuing banks to keep merchants from finding ways to mitigate credit-card costs."
I don't think American Express issues cards through banks (e.g. you can get a Visa card from Chase but not an Amex), so I guess it wasn't party to the same collusion.
American Express (via American Express Co. and American Express Travel Related Services Company, Inc.) was a party to the litigation, though, but in complex ways. There were two cases against Amex Travel directly; I'm not sure what those were about. American Express was also an intervenor and objector in the case, probably so that it could file briefs in support of Visa and MasterCard.
Looking only at the first amended consolidated class action complaint (i.e. the first complaint that tied together most of the cases), Amex was not one of the defendants.
In related news, figuring that out cost me $9 (thanks, PACER). I hope the Aaron Swartz memorial grants are successful in producing Chrome and Internet Explorer extensions for RECAP.
posted by jedicus at 7:58 AM on January 29, 2013 [4 favorites]
I don't think American Express issues cards through banks
They may not do so now, but they certainly used to. I have an Bank of America Rewards card right now which was issued by Amex - 1% cash back.
posted by muddgirl at 8:02 AM on January 29, 2013 [1 favorite]
They may not do so now, but they certainly used to. I have an Bank of America Rewards card right now which was issued by Amex - 1% cash back.
posted by muddgirl at 8:02 AM on January 29, 2013 [1 favorite]
Yeah, Citibank and ML both currently have Amex cards available.
posted by elizardbits at 8:06 AM on January 29, 2013
posted by elizardbits at 8:06 AM on January 29, 2013
I guess I just feel that a real anti-trust ruling would say that credit card companies can't gouge merchants, not that merchants are free to pass the gouging on down.
posted by Sys Rq at 8:12 AM on January 29, 2013 [8 favorites]
posted by Sys Rq at 8:12 AM on January 29, 2013 [8 favorites]
I've always found it odd how merchants fixate on credit card costs as something that needs to be passed on to the customer, while all the other choices in their business they take ownership on. Presumably the decision to accept cards is netting them more than the fees, otherwise they wouldn't take cards, right?
posted by smackfu at 8:17 AM on January 29, 2013 [4 favorites]
posted by smackfu at 8:17 AM on January 29, 2013 [4 favorites]
I guess I just feel that a real anti-trust ruling would say that credit card companies can't gouge merchants, not that merchants are free to pass the gouging on down.The monopoly was gouging, and using their monopoly position to force merchants to hide the fact. This allowed them to essentially suck somewhere between 1-3% of all non-cash transactions out of our pockets without our knowledge or consent.
We are now free (in most states) do become aware of how we're getting gouged, which is an improvement.
I prefer hard money, but since 1933 that's not a real option, here in the USA. Debt notes are still subject to confiscation (and debasement by inflation), but in the short run, and in small amounts, they are the best option.
posted by MikeWarot at 8:19 AM on January 29, 2013
Otherwise, someone is involved with making sure your money is safe and available to you, and that someone isn't doing that task because they like to help, but because it is their job.
Except holding onto someone's money for them is actually an opportunity. Banks should be splitting that benefit with you honestly instead of pretending to do that while, apparently, actually being in the business of nickel-and-dime-ing you to death in sneaky ways.
Prices get raised beyond merchants' tolerance, but they know their customers would revolt if they charged people with cards more than the people paying cash.
It's more a matter of them not even having the choice to charge more, right? At least in the past. Visa forbade you to charge their customers more. In traditional MeFi terms, the people using the credit cards (for free, from their POV) were the product being sold.
posted by fleacircus at 8:19 AM on January 29, 2013
Except holding onto someone's money for them is actually an opportunity. Banks should be splitting that benefit with you honestly instead of pretending to do that while, apparently, actually being in the business of nickel-and-dime-ing you to death in sneaky ways.
Prices get raised beyond merchants' tolerance, but they know their customers would revolt if they charged people with cards more than the people paying cash.
It's more a matter of them not even having the choice to charge more, right? At least in the past. Visa forbade you to charge their customers more. In traditional MeFi terms, the people using the credit cards (for free, from their POV) were the product being sold.
posted by fleacircus at 8:19 AM on January 29, 2013
If the surcharging catches on, I could see it leading to more people using checks in stores. Specifically, the people right in front of me in the checkout lines.
posted by still_wears_a_hat at 8:19 AM on January 29, 2013 [5 favorites]
posted by still_wears_a_hat at 8:19 AM on January 29, 2013 [5 favorites]
I have an Bank of America Rewards card right now which was issued by Amex ... Citibank and ML both currently have Amex cards available.
I stand corrected, then. It must be something specific to how Amex conducted business compared to Visa/MC. If someone else wants to rack up a prodigious PACER bill wading through eight years of filings to figure it out...
posted by jedicus at 8:22 AM on January 29, 2013 [1 favorite]
I stand corrected, then. It must be something specific to how Amex conducted business compared to Visa/MC. If someone else wants to rack up a prodigious PACER bill wading through eight years of filings to figure it out...
posted by jedicus at 8:22 AM on January 29, 2013 [1 favorite]
I thought it was somehow related to the thing where Amex doesn't let you have a revolving balance, but I think that's no longer true either. Everything about this is confusing, basically.
posted by elizardbits at 8:26 AM on January 29, 2013
posted by elizardbits at 8:26 AM on January 29, 2013
It's still true that fewer places accept Amex, and the places that don't tend to be smaller businesses. I could see that being a factor in whether or not it's worth it to pursue litigation against them?
posted by muddgirl at 8:29 AM on January 29, 2013
posted by muddgirl at 8:29 AM on January 29, 2013
If some beancounter really applied themselves to this, I'm pretty sure they'd find that any real operating cost associated with CC transactions is vanishingly small.
Well, if you look just at Visa (NYSE:V, for those following along at home), which is easier than MasterCard because of the latter's weird structure, and ignore the huge one-time writedown they took in 2012Q2, they've consistently made just about $2.4-2.6B in revenue per quarter on just under a billion in expenses.
So that's to say, their profit margin alone could be doubling the cost of credit card transactions, assuming that most of their revenue comes from them (which is a reasonable assumption as it's their core business; everything else is ancillary to that in one way or another).
Short of a casino, I've never seen anything that looks as much like a license to print money. They spend a billion bucks per quarter running the transaction network, and rake in more than twice that as a result. Crazy.
posted by Kadin2048 at 8:30 AM on January 29, 2013 [2 favorites]
Well, if you look just at Visa (NYSE:V, for those following along at home), which is easier than MasterCard because of the latter's weird structure, and ignore the huge one-time writedown they took in 2012Q2, they've consistently made just about $2.4-2.6B in revenue per quarter on just under a billion in expenses.
So that's to say, their profit margin alone could be doubling the cost of credit card transactions, assuming that most of their revenue comes from them (which is a reasonable assumption as it's their core business; everything else is ancillary to that in one way or another).
Short of a casino, I've never seen anything that looks as much like a license to print money. They spend a billion bucks per quarter running the transaction network, and rake in more than twice that as a result. Crazy.
posted by Kadin2048 at 8:30 AM on January 29, 2013 [2 favorites]
Sys Rq, the anti-trust element is that if I wanted to pay in cash, the merchant is effectively forced to charge me a 3-5% fee, same as if I paid with a card.
To me it's very similar to the so-called "Windows tax", in which it wasn't possible to buy a computer from a manufacturer without windows pre-installed because of contract stipulations between manufacturers and Microsoft. Either the manufacturer bundled windows with each computer, or none at all.
Similarly either the merchant collects a credit card transaction fee from all customers, or he accepts no credit cards at all. As a consumer, do I really care if its the merchant or the bank that gets the fee? No, I do not.
Is it the bank protecting my ability to pay with a credit card and avoid extra fees? Absolutely not. In reality it's the opposite. You pay an extra 3-5% to every merchant who accepts credit cards.
posted by cotterpin at 8:30 AM on January 29, 2013 [1 favorite]
To me it's very similar to the so-called "Windows tax", in which it wasn't possible to buy a computer from a manufacturer without windows pre-installed because of contract stipulations between manufacturers and Microsoft. Either the manufacturer bundled windows with each computer, or none at all.
Similarly either the merchant collects a credit card transaction fee from all customers, or he accepts no credit cards at all. As a consumer, do I really care if its the merchant or the bank that gets the fee? No, I do not.
Is it the bank protecting my ability to pay with a credit card and avoid extra fees? Absolutely not. In reality it's the opposite. You pay an extra 3-5% to every merchant who accepts credit cards.
posted by cotterpin at 8:30 AM on January 29, 2013 [1 favorite]
I thought it was somehow related to the thing where Amex doesn't let you have a revolving balance, but I think that's no longer true either.
I thought the same thing, but apparently they are moving away from revolving credit? This is confusing.
posted by psoas at 8:33 AM on January 29, 2013
I thought the same thing, but apparently they are moving away from revolving credit? This is confusing.
posted by psoas at 8:33 AM on January 29, 2013
Charging 2+% to process a transaction is offensively expensive. The reason it costs so much in the US is in large part because of fraud. And credit card fraud in the US is so rampant is because US banks refuse to implement simple, effective security measures that the civilized world uses. So basically we, US consumers, are paying the cost of the credit cards implementing bad systems.
posted by Nelson at 8:34 AM on January 29, 2013 [7 favorites]
posted by Nelson at 8:34 AM on January 29, 2013 [7 favorites]
Also, according to this infographic, there are 20B credit card transactions processed per year in the US, of which Visa has a 38.5% share. That's 7.7 billion. Divide it by 4 since we're talking quarters, and you get 1.925B per quarter. If you divide that by their total operating expenses -- which, I'm sure, involves a lot more than just the transaction-processing network itself, so we're getting a really high maximum estimate here -- then the total amount that a credit card ever ought to cost is about 50 cents per transaction.
And even that just shows you how bloated Visa is: Dwolla charges 25c/txn, and should thus be eating Visa's goddamn lunch. In what other industry can you charge 2x as much as a competitor and still survive, for doing basically the exact same thing? That's ridiculous.
posted by Kadin2048 at 8:43 AM on January 29, 2013 [1 favorite]
And even that just shows you how bloated Visa is: Dwolla charges 25c/txn, and should thus be eating Visa's goddamn lunch. In what other industry can you charge 2x as much as a competitor and still survive, for doing basically the exact same thing? That's ridiculous.
posted by Kadin2048 at 8:43 AM on January 29, 2013 [1 favorite]
Although I don't especially like the idea of having to either carry around cash (which is filthy and takes up a lot of wallet space) or pay an extra 4%
There are no debit cards in the US, where you pay directly from your account to the store without those onerous fees one way or another?
posted by MartinWisse at 8:45 AM on January 29, 2013
There are no debit cards in the US, where you pay directly from your account to the store without those onerous fees one way or another?
posted by MartinWisse at 8:45 AM on January 29, 2013
There is a bitcoin wallet program for Android that still looks quite buggy but converts currency amounts automatically, which sounds promising. I believe bitcoin transaction costs at least 0.0005 BTC currently as well as any conversion fees for extracting real currency.
posted by jeffburdges at 8:46 AM on January 29, 2013
posted by jeffburdges at 8:46 AM on January 29, 2013
People should be more comfortable with paying cash for things,
I'm perfectly comfortable paying cash for things but it is, quite frankly, a pain in the ass.
My barber is my one regular expense that doesn't take cards, and it's always a last minute 'crap, forgot to get cash. Gotta go to the bank, damnit, the nearest atm is on the other end of downtown, mumble, mumble, rage'
I completely understand the cost of transactions, but if I start noticing businesses dinging me for 4% because cash is inconvenient, I'm just going to go elsewhere.
posted by madajb at 8:49 AM on January 29, 2013
I'm perfectly comfortable paying cash for things but it is, quite frankly, a pain in the ass.
My barber is my one regular expense that doesn't take cards, and it's always a last minute 'crap, forgot to get cash. Gotta go to the bank, damnit, the nearest atm is on the other end of downtown, mumble, mumble, rage'
I completely understand the cost of transactions, but if I start noticing businesses dinging me for 4% because cash is inconvenient, I'm just going to go elsewhere.
posted by madajb at 8:49 AM on January 29, 2013
immlass: " I'd rather start carrying cash again."
Interesting to realize that there is more risk to participating in the digital network marketplace than there is to carrying cash. If you lose cash, you lose just the cash. If you lose your identity, you can lose much more than that, and affect your credit for a long time.
Things have come full circle, and it didn't take very long. Cash is the new security.
There is another option. Though some banks offer one time use CC numbers for online transactions, you can always maintain a separate account for debit purchases (do not link this with your primary account). This is only feasible if you want to shoulder the additional 8 dollar a month account fee. Which galls me to no end - if you maintain an average balance of $1000 in that account, you wind up paying 96$ a year in fees, or almost ten percent.
You are literally better off financially hiding your money under your mattress. Either thieves will get your money, or the banks will, but I repeat myself.
posted by Xoebe at 8:50 AM on January 29, 2013 [1 favorite]
Interesting to realize that there is more risk to participating in the digital network marketplace than there is to carrying cash. If you lose cash, you lose just the cash. If you lose your identity, you can lose much more than that, and affect your credit for a long time.
Things have come full circle, and it didn't take very long. Cash is the new security.
There is another option. Though some banks offer one time use CC numbers for online transactions, you can always maintain a separate account for debit purchases (do not link this with your primary account). This is only feasible if you want to shoulder the additional 8 dollar a month account fee. Which galls me to no end - if you maintain an average balance of $1000 in that account, you wind up paying 96$ a year in fees, or almost ten percent.
You are literally better off financially hiding your money under your mattress. Either thieves will get your money, or the banks will, but I repeat myself.
posted by Xoebe at 8:50 AM on January 29, 2013 [1 favorite]
And even that just shows you how bloated Visa is: Dwolla charges 25c/txn, and should thus be eating Visa's goddamn lunch. In what other industry can you charge 2x as much as a competitor and still survive, for doing basically the exact same thing? That's ridiculous.
Although I don't doubt Visa is very fat, Dwolla is not equivalent to Visa. In particular, Dwolla almost certainly has much, much lower fraud rates. Visa is selling convenience, and that convenience makes fraud easier as well.
posted by Bovine Love at 8:51 AM on January 29, 2013
Although I don't doubt Visa is very fat, Dwolla is not equivalent to Visa. In particular, Dwolla almost certainly has much, much lower fraud rates. Visa is selling convenience, and that convenience makes fraud easier as well.
posted by Bovine Love at 8:51 AM on January 29, 2013
And credit card fraud in the US is so rampant is because US banks refuse to implement simple, effective security measures that the civilized world uses.
Chip and PIN is many things but it's not secure.
Anyone who thinks dumping all of your banking details plus your PIN onto a compromised reader is "secure" is absolutely fucking high. It's like someone looked at the Run GSM Algorithm part of the SIM card spec and thought "that's an absolutely fucking terrible idea. We'll just dump all of the data onto the reader and let them clone it to a magstripe".
posted by Talez at 8:52 AM on January 29, 2013 [3 favorites]
Chip and PIN is many things but it's not secure.
Anyone who thinks dumping all of your banking details plus your PIN onto a compromised reader is "secure" is absolutely fucking high. It's like someone looked at the Run GSM Algorithm part of the SIM card spec and thought "that's an absolutely fucking terrible idea. We'll just dump all of the data onto the reader and let them clone it to a magstripe".
posted by Talez at 8:52 AM on January 29, 2013 [3 favorites]
There are no debit cards in the US, where you pay directly from your account to the store without those onerous fees one way or another?
I like the idea of having someone be able to skim a simple card number and then hoover out the entire contents of my checking account even less.
The Euro-style chip-and-PIN systems make it more reasonable [well, maybe; on preview it looks like maybe not per Talez's comment], but the US system makes fraud trivial. I have to change my main credit card number every couple of years due to fraudulent transactions; I'm not willing to play the "pretty please give me my money back" game that often.
(Although for a 4% discount I might consider setting up a separate checking account for debit card use, akin to the way businesses protect against check fraud with ZBAs.)
posted by Kadin2048 at 8:55 AM on January 29, 2013 [2 favorites]
I like the idea of having someone be able to skim a simple card number and then hoover out the entire contents of my checking account even less.
The Euro-style chip-and-PIN systems make it more reasonable [well, maybe; on preview it looks like maybe not per Talez's comment], but the US system makes fraud trivial. I have to change my main credit card number every couple of years due to fraudulent transactions; I'm not willing to play the "pretty please give me my money back" game that often.
(Although for a 4% discount I might consider setting up a separate checking account for debit card use, akin to the way businesses protect against check fraud with ZBAs.)
posted by Kadin2048 at 8:55 AM on January 29, 2013 [2 favorites]
I guess no one remembered that the number one disease vector is, you guessed it, cash money.
I love legislation that raises the risk of plague, particularly amongst the poor.
posted by sexyrobot at 8:57 AM on January 29, 2013 [1 favorite]
I love legislation that raises the risk of plague, particularly amongst the poor.
posted by sexyrobot at 8:57 AM on January 29, 2013 [1 favorite]
There are no debit cards in the US, where you pay directly from your account to the store without those onerous fees one way or another?
Part of the preference for credit cards is that it's easier to recoup losses due to fraud. Plus the money hasn't come out of your bank account when someone steals your card (or its number) and buys a load of BART tickets or whatever. Some debit card transactions (notably gas purchases) result in a substantial hold being placed on your account, rendering some of your money inaccessible, even though it's not been spent.
posted by hoyland at 8:59 AM on January 29, 2013
Part of the preference for credit cards is that it's easier to recoup losses due to fraud. Plus the money hasn't come out of your bank account when someone steals your card (or its number) and buys a load of BART tickets or whatever. Some debit card transactions (notably gas purchases) result in a substantial hold being placed on your account, rendering some of your money inaccessible, even though it's not been spent.
posted by hoyland at 8:59 AM on January 29, 2013
We desparately need an open source platform that allows anyone to operate a CC clearinghouse
Okay, maybe making it easier to create a credit operation, sure, I think that's a fine goal. But there's so much more than just 'a platform' involved in CC (or any financial) transactions.
merchant agreements, bank account information exchange, hardware support, encryption key management, emergency backups, failover for connectivity or server problems, etc, etc...
Let's go through that list, shall we?
merchant agreements
So easy to standardize an agreement that will bring the merchants in.
Flat fee per transaction, plus flat subscription fee, no other financial terms.
bank account information exchange,hardware support, encryption key management, emergency backups, failover for connectivity or server problems, etc
So basically the same stuff every dotcom has been working on since 1997.
posted by ocschwar at 9:03 AM on January 29, 2013 [1 favorite]
Okay, maybe making it easier to create a credit operation, sure, I think that's a fine goal. But there's so much more than just 'a platform' involved in CC (or any financial) transactions.
merchant agreements, bank account information exchange, hardware support, encryption key management, emergency backups, failover for connectivity or server problems, etc, etc...
Let's go through that list, shall we?
merchant agreements
So easy to standardize an agreement that will bring the merchants in.
Flat fee per transaction, plus flat subscription fee, no other financial terms.
bank account information exchange,hardware support, encryption key management, emergency backups, failover for connectivity or server problems, etc
So basically the same stuff every dotcom has been working on since 1997.
posted by ocschwar at 9:03 AM on January 29, 2013 [1 favorite]
Money isn't a "disease vector" in the technical sense of that term, and I doubt it's as much of an issue as unwashed hands.
That said, it's still kinda disgusting. If someone sneezes on my Amex (no joke, it's happened) I can at least rinse the thing off; you can't really do that with paper bills.
I suppose we could always go back to significant-denomination coinage, or maybe plastic or metal-foil bills that could be chemically or UV treated as they go through bank counting machines. They'd probably last longer too.
posted by Kadin2048 at 9:09 AM on January 29, 2013
That said, it's still kinda disgusting. If someone sneezes on my Amex (no joke, it's happened) I can at least rinse the thing off; you can't really do that with paper bills.
I suppose we could always go back to significant-denomination coinage, or maybe plastic or metal-foil bills that could be chemically or UV treated as they go through bank counting machines. They'd probably last longer too.
posted by Kadin2048 at 9:09 AM on January 29, 2013
I guess no one remembered that the number one disease vector is, you guessed it, cash money.
Meh. The cocaine residue cancels it out.
posted by Sys Rq at 9:14 AM on January 29, 2013
Meh. The cocaine residue cancels it out.
posted by Sys Rq at 9:14 AM on January 29, 2013
"If the surcharging catches on, I could see it leading to more people using checks in stores. Specifically, the people right in front of me in the checkout lines."
Blergh. Hopefully more merchants will go the way of Target and offer an EFT card like their Redcard. I just hope the 5% EFT discount doesn't disappear....
posted by JoeZydeco at 9:16 AM on January 29, 2013
Blergh. Hopefully more merchants will go the way of Target and offer an EFT card like their Redcard. I just hope the 5% EFT discount doesn't disappear....
posted by JoeZydeco at 9:16 AM on January 29, 2013
And credit card fraud in the US is so rampant is because US banks refuse to implement simple, effective security measures that the civilized world uses.
Chip and PIN is many things but it's not secure.
And credit card processing fees are just as high in Europe and Asia as they are in the US. If you're a big enough company and you have a savvy finance group and a willing payment services provider you can mitigate the cost of those fees down in different ways (BIN routing, 3D Secure programs, currency conversion programs for international business, 3rd-party fraud management, etc) but if you're a small business you are basically just screwed and there's nothing you can do about it. Except stop accepting credit cards.
posted by Doleful Creature at 9:16 AM on January 29, 2013
Chip and PIN is many things but it's not secure.
And credit card processing fees are just as high in Europe and Asia as they are in the US. If you're a big enough company and you have a savvy finance group and a willing payment services provider you can mitigate the cost of those fees down in different ways (BIN routing, 3D Secure programs, currency conversion programs for international business, 3rd-party fraud management, etc) but if you're a small business you are basically just screwed and there's nothing you can do about it. Except stop accepting credit cards.
posted by Doleful Creature at 9:16 AM on January 29, 2013
I've always found it odd how merchants fixate on credit card costs as something that needs to be passed on to the customer, while all the other choices in their business they take ownership on.
They will avoid taking ownership on any expense they can, provided it either doesn't alienate customers or if every one of their competitors identically alienates customers. Look at car rental operations; when I get a car at the airport there's a "facility fee" which in the rest of the sane universe is called RENT and which I don't have to give a shit about at McDs.
Or look at airline bag fees. A few carriers use not having them as a selling point but overall it's an ongoing strategy because it lets them compete semi-dishonestly on price while also having a slight payoff for them by somewhat reducing load & handling labor costs.
Pencil me in as someone who calls this a net win. I despise the nickel and dime fee nonsense but the shell game that happens with credit is maddening. If this brings it up to consumer attention... I'm not sure whether we're past the point of doing anything about this, given the ubiquity of V/MC, but here's hoping. Starbucks' integration of Square into their system was a big shot across the bow of the credit card clearinghouses.
Maybe this can pile on and make it a little more of interest to the consumer. I'm skeptical, given how effectively the industry has gamed the debit card legislation and claimed to consumers they they just HAD to raise certain rates and cut benefits when they could no longer soak everyone inappropriately for cash-backed purchases. But I can always hope.
Those of you who are talking as if consumers haven't always been shouldering this cost: quit being part of the problem.
posted by phearlez at 9:28 AM on January 29, 2013
They will avoid taking ownership on any expense they can, provided it either doesn't alienate customers or if every one of their competitors identically alienates customers. Look at car rental operations; when I get a car at the airport there's a "facility fee" which in the rest of the sane universe is called RENT and which I don't have to give a shit about at McDs.
Or look at airline bag fees. A few carriers use not having them as a selling point but overall it's an ongoing strategy because it lets them compete semi-dishonestly on price while also having a slight payoff for them by somewhat reducing load & handling labor costs.
Pencil me in as someone who calls this a net win. I despise the nickel and dime fee nonsense but the shell game that happens with credit is maddening. If this brings it up to consumer attention... I'm not sure whether we're past the point of doing anything about this, given the ubiquity of V/MC, but here's hoping. Starbucks' integration of Square into their system was a big shot across the bow of the credit card clearinghouses.
Maybe this can pile on and make it a little more of interest to the consumer. I'm skeptical, given how effectively the industry has gamed the debit card legislation and claimed to consumers they they just HAD to raise certain rates and cut benefits when they could no longer soak everyone inappropriately for cash-backed purchases. But I can always hope.
Those of you who are talking as if consumers haven't always been shouldering this cost: quit being part of the problem.
posted by phearlez at 9:28 AM on January 29, 2013
> Now a fair business will reduce prices so it doesn't factor in the processing fees,
> Is that really going to happen, though? Doubtful.
They will if the market makes them. That is to say, if a store in a particular market does lower the cash price rather than just raising the credit price, and the market rewards it or punishes its competitors, ceteris paribus the competitors will come into line.
posted by gauche at 9:28 AM on January 29, 2013
> Is that really going to happen, though? Doubtful.
They will if the market makes them. That is to say, if a store in a particular market does lower the cash price rather than just raising the credit price, and the market rewards it or punishes its competitors, ceteris paribus the competitors will come into line.
posted by gauche at 9:28 AM on January 29, 2013
SO y'all don't use debit cards because "yarg criminals can get my money"? Paying by pin has been around for a long, long time now in the Netherlands (and elsewhere in Europe) and I've been using it for decades now to pay for, well, largely everything I actually buy in a store, from groceries to more Billies to chips at the local chippie. I can't imagine the hassle of having to actually carry and get money to do all that.
posted by MartinWisse at 9:30 AM on January 29, 2013
posted by MartinWisse at 9:30 AM on January 29, 2013
I stopped using credit cards a couple of years ago. Yes you have to carry wads of money, but it stops the banksters skimming off every transaction and helps the local businesses.
That, and you end up with a ton of loose change.
posted by paper chromatographologist at 9:31 AM on January 29, 2013
That, and you end up with a ton of loose change.
posted by paper chromatographologist at 9:31 AM on January 29, 2013
SO y'all don't use debit cards because "yarg criminals can get my money"? Paying by pin has been around for a long, long time now in the Netherlands (and elsewhere in Europe) and I've been using it for decades now to pay for, well, largely everything I actually buy in a store, from groceries to more Billies to chips at the local chippie.
Well, yes, people do that in North America, too. Why would criminals bother exploiting the system if nobody used it?
posted by Sys Rq at 9:33 AM on January 29, 2013
Well, yes, people do that in North America, too. Why would criminals bother exploiting the system if nobody used it?
posted by Sys Rq at 9:33 AM on January 29, 2013
SO y'all don't use debit cards because "yarg criminals can get my money"?
My experience didn't involve a criminal. It was an accident due to a miskey (dinner was $14 and it was miskeyed as $14K), but it was still a massive inconvenience that would never have happened with a credit card. The $14K expenditure would most likely have been declined based on credit limits and/or fraud algorithms, and if it hadn't been, reversing the charge would have been possible without touching my savings account where the down payment on the house was sitting.
The risks of using debit cards may be worthwhile to some folks but there are actual risks that aren't related to crime. There are fewer protections when you use a debit card; that's part of why they're cheaper to use.
posted by immlass at 9:39 AM on January 29, 2013 [1 favorite]
My experience didn't involve a criminal. It was an accident due to a miskey (dinner was $14 and it was miskeyed as $14K), but it was still a massive inconvenience that would never have happened with a credit card. The $14K expenditure would most likely have been declined based on credit limits and/or fraud algorithms, and if it hadn't been, reversing the charge would have been possible without touching my savings account where the down payment on the house was sitting.
The risks of using debit cards may be worthwhile to some folks but there are actual risks that aren't related to crime. There are fewer protections when you use a debit card; that's part of why they're cheaper to use.
posted by immlass at 9:39 AM on January 29, 2013 [1 favorite]
I totally understand retailers wanting to charge, as Visa and Mastercard have been gouging them for years, especially for the premium cards.
posted by jb at 9:40 AM on January 29, 2013
posted by jb at 9:40 AM on January 29, 2013
Chip and PIN has its flaws, but it's more secure than what we do in the US. US card security depends entirely on your 16 digit number combined with your 4 digit expiration date being a secret. Only it's not a secret, since it's shared with everyone who ever makes a transaction for you and it's printed right there on the damn card. Lately the innovation has been to print another 3 "secret" numbers on the card, which are also printed right there on the card for anyone to see and typed into whatever machine is doing the transaction. In theory this CVV isn't supposed to be stored in software but in practice that doesn't seem to work. Black market card purchases routinely include CVV data.
At least in Europe the chip provides the potential for some physical security. I don't know how well that has worked in practice; can anyone knowledgable comment? I read Talez's links but it wasn't clear to me whether that was stealing just the 16 digit numbers (which aren't really secrets anyway) or if the attack also got at the secret PIN stored in the chip. This wikipedia article details various attacks, but then this one says that chip-and-pin has reduced fraud by 80% in France. I imagine the real story is more complex; I'm no expert.
Interestingly, this report claims the value of a US credit card is about $8 on the black market whereas a European card is worth $50. (Another post there puts the prices at $2 and $6 respectively.) They claim "Having a smart card makes it much harder to conduct fraud so getting a usable credit card in Europe would drive value up." I'm not sure I understand that, again I'm no expert.
Anyway, this is all about fraud. Another thing I'd love to know; are European credit card processing fees really the same as in the US? Casual research finds conflicting reports. So many factors could go into that; competition in the market, relative use by consumers, etc. Fraud may only be a small part of what's driving cost.
posted by Nelson at 9:49 AM on January 29, 2013 [1 favorite]
At least in Europe the chip provides the potential for some physical security. I don't know how well that has worked in practice; can anyone knowledgable comment? I read Talez's links but it wasn't clear to me whether that was stealing just the 16 digit numbers (which aren't really secrets anyway) or if the attack also got at the secret PIN stored in the chip. This wikipedia article details various attacks, but then this one says that chip-and-pin has reduced fraud by 80% in France. I imagine the real story is more complex; I'm no expert.
Interestingly, this report claims the value of a US credit card is about $8 on the black market whereas a European card is worth $50. (Another post there puts the prices at $2 and $6 respectively.) They claim "Having a smart card makes it much harder to conduct fraud so getting a usable credit card in Europe would drive value up." I'm not sure I understand that, again I'm no expert.
Anyway, this is all about fraud. Another thing I'd love to know; are European credit card processing fees really the same as in the US? Casual research finds conflicting reports. So many factors could go into that; competition in the market, relative use by consumers, etc. Fraud may only be a small part of what's driving cost.
posted by Nelson at 9:49 AM on January 29, 2013 [1 favorite]
cash-paying customers are subsidizing credit-card holders
The idea that accepting cash does not cost merchants anything is just plain wrong.
posted by one more dead town's last parade at 9:54 AM on January 29, 2013
The idea that accepting cash does not cost merchants anything is just plain wrong.
posted by one more dead town's last parade at 9:54 AM on January 29, 2013
Cash can get lost, stolen by an employee, stolen by a third party, or stolen on the way to the bank. (Do armored cars work for free?) There's the labor cost that you mention, and the fact that you are on the hook if somebody passes you a counterfeit bill. You have to make sure everyone's drawers add up properly, that you have correct change (oh, look, another trip to the bank), etc.
There's got to be a reason you can't use anything but credit cards to pay for your $7 in-flight sandwich.
posted by one more dead town's last parade at 10:09 AM on January 29, 2013
There's got to be a reason you can't use anything but credit cards to pay for your $7 in-flight sandwich.
posted by one more dead town's last parade at 10:09 AM on January 29, 2013
Credit is no good . . . it's old fashioned
posted by the man of twists and turns at 10:12 AM on January 29, 2013
posted by the man of twists and turns at 10:12 AM on January 29, 2013
SO y'all don't use debit cards because "yarg criminals can get my money"? Paying by pin has been around for a long, long time now in the Netherlands
You can pay by PIN in the US as well, unfortunately you can also pay with the magstripe and signature using the same card, and it is impossible to disable the magstripe+sig (except by physically demagnetizing the card). So if you use a debit card and the number gets lifted, which is trivial to do, someone can clear out your checking account and you're in a rather uncomfortable position. Plus you also get screwed if you use them to buy gas, pay for a hotel room, or rent a car, because significant amounts of your checking account balance become subject to "holds" that appear as temporary debits to your account and can cause you to bounce checks and other fun stuff.
As a result of this, and because credit cards cost basically nothing (if you have reasonably clean credit), many people instead just get and use a credit card and pay off the balance every month. If your CC number gets stolen, you just dispute those charges, pay the rest of the bill, and the worst part is having to update the stored number on your Netflix/Amazon/FooOfTheMonthClub accounts. And many of them come with perks that you don't get on debit cards, so why not?
It's not that debit cards don't exist here, it's that there's really no advantage to using them and some significant potential disadvantages.
The idea that accepting cash does not cost merchants anything is just plain wrong.
Sure, but if you're going to be a merchant you have to accept something in form of payment, and the overhead of accepting cash is pretty low. Cash is subject to "shrinkage" (e.g. stealing out of the till, improper change given back, etc.) more than credit card transactions are, and moving it around in large quantities is a pain, but the only numbers I can find put that at around ~2% at the retail level. (And that presentation is by someone trying to sell cash-handling systems so we can safely assume it's a high estimate.)
Handling cash is a problem that we've worked on for several hundred years and we're damn good at it, overall. At each stage of the process for handling cash payments -- cash registers, mechanical handling equipment, banks, armored car services, and the central bank / issuer / Mint itself -- you have either a very competitive private sector market, or you have a very tightly regulated and unprofitable government monopoly. Not much fat there.
It's entirely possible that if we had a competitive market for electronic payments, that due to the inherent disadvantages and inefficiencies involved in moving small pieces of paper around, the electronic solution would be cheaper and eventually displace cash. There is, contrary to popular belief, no requirement for merchants to accept cash, and some don't today (although it's mostly a stunt). A voluntarily-almost-cashless society is easy to imagine. But we're never going to get there when Visa/MC/Amex are skimming billions of additional dollars a year out of the system above what it actually costs to provide the service.
posted by Kadin2048 at 10:12 AM on January 29, 2013 [3 favorites]
You can pay by PIN in the US as well, unfortunately you can also pay with the magstripe and signature using the same card, and it is impossible to disable the magstripe+sig (except by physically demagnetizing the card). So if you use a debit card and the number gets lifted, which is trivial to do, someone can clear out your checking account and you're in a rather uncomfortable position. Plus you also get screwed if you use them to buy gas, pay for a hotel room, or rent a car, because significant amounts of your checking account balance become subject to "holds" that appear as temporary debits to your account and can cause you to bounce checks and other fun stuff.
As a result of this, and because credit cards cost basically nothing (if you have reasonably clean credit), many people instead just get and use a credit card and pay off the balance every month. If your CC number gets stolen, you just dispute those charges, pay the rest of the bill, and the worst part is having to update the stored number on your Netflix/Amazon/FooOfTheMonthClub accounts. And many of them come with perks that you don't get on debit cards, so why not?
It's not that debit cards don't exist here, it's that there's really no advantage to using them and some significant potential disadvantages.
The idea that accepting cash does not cost merchants anything is just plain wrong.
Sure, but if you're going to be a merchant you have to accept something in form of payment, and the overhead of accepting cash is pretty low. Cash is subject to "shrinkage" (e.g. stealing out of the till, improper change given back, etc.) more than credit card transactions are, and moving it around in large quantities is a pain, but the only numbers I can find put that at around ~2% at the retail level. (And that presentation is by someone trying to sell cash-handling systems so we can safely assume it's a high estimate.)
Handling cash is a problem that we've worked on for several hundred years and we're damn good at it, overall. At each stage of the process for handling cash payments -- cash registers, mechanical handling equipment, banks, armored car services, and the central bank / issuer / Mint itself -- you have either a very competitive private sector market, or you have a very tightly regulated and unprofitable government monopoly. Not much fat there.
It's entirely possible that if we had a competitive market for electronic payments, that due to the inherent disadvantages and inefficiencies involved in moving small pieces of paper around, the electronic solution would be cheaper and eventually displace cash. There is, contrary to popular belief, no requirement for merchants to accept cash, and some don't today (although it's mostly a stunt). A voluntarily-almost-cashless society is easy to imagine. But we're never going to get there when Visa/MC/Amex are skimming billions of additional dollars a year out of the system above what it actually costs to provide the service.
posted by Kadin2048 at 10:12 AM on January 29, 2013 [3 favorites]
There's got to be a reason you can't use anything but credit cards to pay for your $7 in-flight sandwich.
Simple efficiency. It's more convenient to run your card, even on an airplane, than to have the attendants carry wads of cash to make change. Then, there's the secure storage and transfer of the cash on and off the plane, etc.
posted by Thorzdad at 10:15 AM on January 29, 2013
Simple efficiency. It's more convenient to run your card, even on an airplane, than to have the attendants carry wads of cash to make change. Then, there's the secure storage and transfer of the cash on and off the plane, etc.
posted by Thorzdad at 10:15 AM on January 29, 2013
My experience didn't involve a criminal. It was an accident due to a miskey (dinner was $14 and it was miskeyed as $14K), but it was still a massive inconvenience that would never have happened with a credit card.
Every PIN-accepting machine I've seen asks you to confirm the amount before it charges, and using your debit card as a credit card (i.e., signature or number only) is subject to the same limits and fraud detection methods as credit cards (I know, because I've tripped the limits and fraud algorithms several times on my debit card).
So if you use a debit card and the number gets lifted, which is trivial to do, someone can clear out your checking account and you're in a rather uncomfortable position.
Also not true, they definitely have fraud prevention and limits when used as credit cards (if you have a Visa or Mastercard branded debit card). On my Visa-branded debit card at least, the limit for a credit transaction started out at only $1000.
posted by Pyry at 10:19 AM on January 29, 2013
Every PIN-accepting machine I've seen asks you to confirm the amount before it charges, and using your debit card as a credit card (i.e., signature or number only) is subject to the same limits and fraud detection methods as credit cards (I know, because I've tripped the limits and fraud algorithms several times on my debit card).
So if you use a debit card and the number gets lifted, which is trivial to do, someone can clear out your checking account and you're in a rather uncomfortable position.
Also not true, they definitely have fraud prevention and limits when used as credit cards (if you have a Visa or Mastercard branded debit card). On my Visa-branded debit card at least, the limit for a credit transaction started out at only $1000.
posted by Pyry at 10:19 AM on January 29, 2013
My experience didn't involve a criminal. It was an accident due to a miskey (dinner was $14 and it was miskeyed as $14K), but it was still a massive inconvenience that would never have happened with a credit card. The $14K expenditure would most likely have been declined based on credit limits and/or fraud algorithms, and if it hadn't been, reversing the charge would have been possible without touching my savings account where the down payment on the house was sitting.
Not to pick on you, but it bears repeating that, just like in the old days with checks, a debit card should never be linked to a savings or reserve account.
It should have an independent account* that contains only enough money to cover the outstanding charges or at most, a month's worth of expenses.
That, along with signing rather than using a pin, can alleviate most of the fraud issues associated with debit cards.
*Preferably at a separate bank, but that might be too much for some people
posted by madajb at 10:21 AM on January 29, 2013 [1 favorite]
Not to pick on you, but it bears repeating that, just like in the old days with checks, a debit card should never be linked to a savings or reserve account.
It should have an independent account* that contains only enough money to cover the outstanding charges or at most, a month's worth of expenses.
That, along with signing rather than using a pin, can alleviate most of the fraud issues associated with debit cards.
*Preferably at a separate bank, but that might be too much for some people
posted by madajb at 10:21 AM on January 29, 2013 [1 favorite]
using your debit card as a credit card (i.e., signature or number only) is subject to the same limits and fraud detection methods as credit cards (I know, because I've tripped the limits and fraud algorithms several times on my debit card).
But if there's a $14k fraud or mistaken charge on my credit card, it's not a huge deal to wait a month for it to clear.
If there's a $14k fraud or mistaken charge on my debit card, even if it's linked to a separate account that in no way touches my savings, there goes all my liquid assets for the month it takes the bank to clear the charge.
Credit cards limit risks to consumer liquidity. We should indeed be paying for that service.
posted by muddgirl at 10:26 AM on January 29, 2013 [1 favorite]
But if there's a $14k fraud or mistaken charge on my credit card, it's not a huge deal to wait a month for it to clear.
If there's a $14k fraud or mistaken charge on my debit card, even if it's linked to a separate account that in no way touches my savings, there goes all my liquid assets for the month it takes the bank to clear the charge.
Credit cards limit risks to consumer liquidity. We should indeed be paying for that service.
posted by muddgirl at 10:26 AM on January 29, 2013 [1 favorite]
Paying by pin has been around for a long, long time now in the Netherlands (and elsewhere in Europe)
And I'm told it's coming online in Canada, too? Much like the metric system or healthcare, this looks like it's destined to be yet another area where the U.S. is doomed to lag behind the rest of the developed world.
I've been trying to get a 'proper' chip-and-pin card to use when travelling in Europe. It is *not* easy for a U.S. resident. I'd go into it further, but it could turn into a significant derail. (I'm pretty sure it's been talked about on the blue or on AskMe before.)
posted by gimonca at 10:27 AM on January 29, 2013
And I'm told it's coming online in Canada, too? Much like the metric system or healthcare, this looks like it's destined to be yet another area where the U.S. is doomed to lag behind the rest of the developed world.
I've been trying to get a 'proper' chip-and-pin card to use when travelling in Europe. It is *not* easy for a U.S. resident. I'd go into it further, but it could turn into a significant derail. (I'm pretty sure it's been talked about on the blue or on AskMe before.)
posted by gimonca at 10:27 AM on January 29, 2013
Simple efficiency. It's more convenient to run your card, even on an airplane, than to have the attendants carry wads of cash to make change. Then, there's the secure storage and transfer of the cash on and off the plane, etc.
So it's cheaper in this case not to accept cash at all.
There's also the fact that people spend more when using credit cards than when using cash.
posted by one more dead town's last parade at 10:28 AM on January 29, 2013
So it's cheaper in this case not to accept cash at all.
There's also the fact that people spend more when using credit cards than when using cash.
posted by one more dead town's last parade at 10:28 AM on January 29, 2013
And I'm told it's coming online in Canada, too? Much like the metric system or healthcare, this looks like it's destined to be yet another area where the U.S. is doomed to lag behind the rest of the developed world.
It's been pretty much standard in Canada for some time now. But chip-and-PIN is not automatically better. Canadian banks are trying to use the changeover to shift liability for unauthorized transactions to consumers despite the fact that this is against federal law and despite the fact that chip-and-PIN has been shown not to be secure. (If memory serves, British banks are trying to do the same thing.)
posted by one more dead town's last parade at 10:32 AM on January 29, 2013
It's been pretty much standard in Canada for some time now. But chip-and-PIN is not automatically better. Canadian banks are trying to use the changeover to shift liability for unauthorized transactions to consumers despite the fact that this is against federal law and despite the fact that chip-and-PIN has been shown not to be secure. (If memory serves, British banks are trying to do the same thing.)
posted by one more dead town's last parade at 10:32 AM on January 29, 2013
If there's a $14k fraud or mistaken charge on my debit card, even if it's linked to a separate account that in no way touches my savings, there goes all my liquid assets for the month it takes the bank to clear the charge.
Assuming you explicitly raised your limit on your debit card to over $14k so that such a transaction would even go through, Visa at least will extend you provisional credit while the charge is investigated (for a signature-only charge, not a PIN charge).
posted by Pyry at 10:39 AM on January 29, 2013
Assuming you explicitly raised your limit on your debit card to over $14k so that such a transaction would even go through, Visa at least will extend you provisional credit while the charge is investigated (for a signature-only charge, not a PIN charge).
posted by Pyry at 10:39 AM on January 29, 2013
Assuming you explicitly raised your limit on your debit card to over $14k so that such a transaction would even go through
I don't know what you mean by this. How do I explicitely put a limit on my signature-only charges on my debit card? We are presuming at the start that I have money in my checking account to cover it. For example, if I need to write a check or money order to pay for a semester's tuition, it has to come out of my checking account, not a savings account.
Are we now talking about paying for two checking accounts just to duplicate the protection provided by a credit card?
Visa at least will extend you provisional credit while the charge is investigated (for a signature-only charge, not a PIN charge).
within 5 business days of notification of the loss.
posted by muddgirl at 10:47 AM on January 29, 2013
I don't know what you mean by this. How do I explicitely put a limit on my signature-only charges on my debit card? We are presuming at the start that I have money in my checking account to cover it. For example, if I need to write a check or money order to pay for a semester's tuition, it has to come out of my checking account, not a savings account.
Are we now talking about paying for two checking accounts just to duplicate the protection provided by a credit card?
Visa at least will extend you provisional credit while the charge is investigated (for a signature-only charge, not a PIN charge).
within 5 business days of notification of the loss.
posted by muddgirl at 10:47 AM on January 29, 2013
I've been trying to get a 'proper' chip-and-pin card to use when travelling in Europe. It is *not* easy for a U.S. resident.
I'm quite happy with Chase's JP Morgan Select card. It's not really chip-and-PIN, it's chip-and-signature, so it's kind of bogus security. But it seemed to work everywhere in France and Norway I used it, typically via the chip readers and not the ancient knuckle buster they have to haul out from the back. Crucially it works fine in automated machines like gas pumps and toll collectors.
Irritatingly, Chase has discontinued this card. Here's a list of EMV-compatible cards for Americans. Why it's so hard to find one baffles me.
posted by Nelson at 10:53 AM on January 29, 2013
I'm quite happy with Chase's JP Morgan Select card. It's not really chip-and-PIN, it's chip-and-signature, so it's kind of bogus security. But it seemed to work everywhere in France and Norway I used it, typically via the chip readers and not the ancient knuckle buster they have to haul out from the back. Crucially it works fine in automated machines like gas pumps and toll collectors.
Irritatingly, Chase has discontinued this card. Here's a list of EMV-compatible cards for Americans. Why it's so hard to find one baffles me.
posted by Nelson at 10:53 AM on January 29, 2013
Also not true, they definitely have fraud prevention and limits when used as credit cards (if you have a Visa or Mastercard branded debit card). On my Visa-branded debit card at least, the limit for a credit transaction started out at only $1000.
Those fraud prevention and limits exist on credit cards as well, and you get the additional layer of defense that it's never your money that's getting stolen. When a fraudulent charge appears, you just refuse to pay it.
The fraud prevention checks aren't that great and the limits are an especially blunt tool. I have totally legitimate transactions that would require that limit to be raised significantly, far above my comfort level for what I'd want to ding my checking account for a few days in the case of fraud.
The current setup just gives most consumers little reason to use a debit card versus either a credit or charge card (the latter being my favorite), unless either you have credit issues or you need the hard limit of a debit card as a control mechanism.
But if there's suddenly a 4% surcharge for using a credit card versus a debit card, then I (and I suspect a lot of other people) might reconsider.
Credit cards limit risks to consumer liquidity. We should indeed be paying for that service.
Both credit and charge cards provide transactional credit, which is a very useful product in itself, apart from the better asset separation and various perks programs that they offer. I think the rolling-balance aspect of credit cards is dangerous, and if I was king of the world they'd have to separate the rolling-balance line of credit from the cards, and sell you credit in chunks just like traditional personal loans. But the day-of-purchase to day-of-payment float is really the grease that makes a lot of little inconveniences disappear. (Off the top of my head: I can easily buy things for someone else, e.g. my employer, for which I expect to be reimbursed or paid upon delivery, without having to be advanced the money to do so. Happens all the time, without even thinking about it much.)
The original conception of charge cards was that the user would pay for this liquidity via the annual fee. E.g. for $50 or $100 a year paid to American Express, you'd be allowed to charge a fairly large amount of stuff as long as you paid it off at the end of the month. The annual fee provided them the capital necessary to borrow the money for this, and also to cover the occasional loss due to someone who couldn't pay their bill and couldn't be collected from. When you get right down to it, it's not a bad system and it doesn't lead to staggeringly large pools of unsecured consumer debt. But it's not really a profitable business, at least compared to running aloan sharking operation rolling-balance credit card, and so it's almost become extinct as the issuers have encouraged consumers to move to the latter type.
posted by Kadin2048 at 11:12 AM on January 29, 2013 [2 favorites]
Those fraud prevention and limits exist on credit cards as well, and you get the additional layer of defense that it's never your money that's getting stolen. When a fraudulent charge appears, you just refuse to pay it.
The fraud prevention checks aren't that great and the limits are an especially blunt tool. I have totally legitimate transactions that would require that limit to be raised significantly, far above my comfort level for what I'd want to ding my checking account for a few days in the case of fraud.
The current setup just gives most consumers little reason to use a debit card versus either a credit or charge card (the latter being my favorite), unless either you have credit issues or you need the hard limit of a debit card as a control mechanism.
But if there's suddenly a 4% surcharge for using a credit card versus a debit card, then I (and I suspect a lot of other people) might reconsider.
Credit cards limit risks to consumer liquidity. We should indeed be paying for that service.
Both credit and charge cards provide transactional credit, which is a very useful product in itself, apart from the better asset separation and various perks programs that they offer. I think the rolling-balance aspect of credit cards is dangerous, and if I was king of the world they'd have to separate the rolling-balance line of credit from the cards, and sell you credit in chunks just like traditional personal loans. But the day-of-purchase to day-of-payment float is really the grease that makes a lot of little inconveniences disappear. (Off the top of my head: I can easily buy things for someone else, e.g. my employer, for which I expect to be reimbursed or paid upon delivery, without having to be advanced the money to do so. Happens all the time, without even thinking about it much.)
The original conception of charge cards was that the user would pay for this liquidity via the annual fee. E.g. for $50 or $100 a year paid to American Express, you'd be allowed to charge a fairly large amount of stuff as long as you paid it off at the end of the month. The annual fee provided them the capital necessary to borrow the money for this, and also to cover the occasional loss due to someone who couldn't pay their bill and couldn't be collected from. When you get right down to it, it's not a bad system and it doesn't lead to staggeringly large pools of unsecured consumer debt. But it's not really a profitable business, at least compared to running a
posted by Kadin2048 at 11:12 AM on January 29, 2013 [2 favorites]
SO y'all don't use debit cards because "yarg criminals can get my money"?
I don't use debit cards because I don't get points/rewards for using debit cards, and I don't get enhanced warranty protection or the ability to dispute a transaction if a vendor fails to honor their own policies or the (admittedly minimal) standards of the CC company.
In the US, it's become common to use a "check card" which uses funds from one's checking account but through the CC network rather than the debit/POS network. In fact, most ATM cards are now both "check cards" (MC or Visa) and "debit cards" (Star, Plus and/or Interlink) and one chooses the modality one prefers at checkout.
posted by snuffleupagus at 11:17 AM on January 29, 2013 [1 favorite]
I don't use debit cards because I don't get points/rewards for using debit cards, and I don't get enhanced warranty protection or the ability to dispute a transaction if a vendor fails to honor their own policies or the (admittedly minimal) standards of the CC company.
In the US, it's become common to use a "check card" which uses funds from one's checking account but through the CC network rather than the debit/POS network. In fact, most ATM cards are now both "check cards" (MC or Visa) and "debit cards" (Star, Plus and/or Interlink) and one chooses the modality one prefers at checkout.
posted by snuffleupagus at 11:17 AM on January 29, 2013 [1 favorite]
My understanding was that American Express was originally able to bootstrap its credit card business via the interest free float it received from purchasers of Traveller's Cheques. Which is pretty clever.
posted by snuffleupagus at 11:18 AM on January 29, 2013
posted by snuffleupagus at 11:18 AM on January 29, 2013
There are 10 states where surcharging is illegal, but in many of them merchants may offer a discount for using cash.
Since the four biggest states are on that list, that's 1/3 of the country.
posted by smackfu at 11:40 AM on January 29, 2013
Since the four biggest states are on that list, that's 1/3 of the country.
posted by smackfu at 11:40 AM on January 29, 2013
chip+pin, along with free domestic bank transfers, works great in the Netherlands as long as you have a Dutch bank account. If you are from anywhere else, the impression the system makes is that your presence as a visitor in Holland isn't worth even thinking about. I saw a Swedish couple unable to pay for train tickets without a surcharge (who carries €18 in coins?) and a Belgian unable to charge her transit pass even with a chip+pin from the next country over. The nice thing about credit cards, now that I've been able to see the Dutch system in action for about a year, is that they Just Work, pretty much wherever you happen to be.
posted by 1adam12 at 12:08 PM on January 29, 2013
posted by 1adam12 at 12:08 PM on January 29, 2013
Please consider this from the merchant's position, too. More and more of our customers are switching to credit cards instead of maintaining an open account and paying by check each month. Purchasing cards are good for users, they separate expenses and they get a detailed report every month showing purchases made by each user. But every time I run a card, it costs me, as a merchant, between 3-4%. That's what I have to pay for the privilege of accepting your Visa, MC, AMEX, whatever.
We generally just mark everything up an additional 5% to cover this cost. There are some times when we have to get super competitive, sure... But for the most part, we're just marking everything up, and making that our base price. Cash, check, card... You're all paying the inflated price made necessary by those who insist on using their card.
So sure, up until now, merchants were prohibited from adding an after-sale markup to cover credit cards, but if you think that very real (and very stupid) cost hasn't been built into the price you're already paying all along, you're fooling yourself.
Rather than allowing merchants to recover the surcharge from customers (which will surely be seen as a penalty by consumers), how about prohibiting Visa, MC, etc. from charging merchants these fees in the first place?
posted by xedrik at 12:10 PM on January 29, 2013 [2 favorites]
We generally just mark everything up an additional 5% to cover this cost. There are some times when we have to get super competitive, sure... But for the most part, we're just marking everything up, and making that our base price. Cash, check, card... You're all paying the inflated price made necessary by those who insist on using their card.
So sure, up until now, merchants were prohibited from adding an after-sale markup to cover credit cards, but if you think that very real (and very stupid) cost hasn't been built into the price you're already paying all along, you're fooling yourself.
Rather than allowing merchants to recover the surcharge from customers (which will surely be seen as a penalty by consumers), how about prohibiting Visa, MC, etc. from charging merchants these fees in the first place?
posted by xedrik at 12:10 PM on January 29, 2013 [2 favorites]
Sounds good. Why don't we prohibit you from making money too, xedrik?
The credit card companies are duplicitous scum, but they obviously need to charge SOME fees. The issue is that the lack of competition and the opacity of the system has left them charging overly high rates and doing so without regard to actual risk. Like the fact that until the recent regulation they charged identical discount rates on cash-backed debit card purchases as they did for revolving charges.
posted by phearlez at 12:40 PM on January 29, 2013 [1 favorite]
The credit card companies are duplicitous scum, but they obviously need to charge SOME fees. The issue is that the lack of competition and the opacity of the system has left them charging overly high rates and doing so without regard to actual risk. Like the fact that until the recent regulation they charged identical discount rates on cash-backed debit card purchases as they did for revolving charges.
posted by phearlez at 12:40 PM on January 29, 2013 [1 favorite]
gauche: "The surcharges charged by credit-card companies eat into the profits of businesses, including small businesses. In many cases, the businesses respond by raising their prices overall, which means that cash-paying customers are subsidizing credit-card holders, and by extension, the credit card companies themselves."
It's not actually that simple, though. There are significant expenses related to handling large amounts of cash. I'm not saying that cash is more expensive to the store in the end, but it's not like cash costs nothing to accept and credit does. You just pay at a different point in the process.
Kadin2048: " Plus you also get screwed if you use them to buy gas, pay for a hotel room, or rent a car, because significant amounts of your checking account balance become subject to "holds" that appear as temporary debits to your account and can cause you to bounce checks and other fun stuff."
Of course if you stop banking with the fucking sharks, none of that will happen. You'll still have holds, but your account comes with a reasonable amount of overdraft protection and you never get charged unless it turns into a settled transaction. And they might even process your deposits before your withdrawals. Yes, my commercial bank with many billions in assets does that.
posted by wierdo at 12:43 PM on January 29, 2013
It's not actually that simple, though. There are significant expenses related to handling large amounts of cash. I'm not saying that cash is more expensive to the store in the end, but it's not like cash costs nothing to accept and credit does. You just pay at a different point in the process.
Kadin2048: " Plus you also get screwed if you use them to buy gas, pay for a hotel room, or rent a car, because significant amounts of your checking account balance become subject to "holds" that appear as temporary debits to your account and can cause you to bounce checks and other fun stuff."
Of course if you stop banking with the fucking sharks, none of that will happen. You'll still have holds, but your account comes with a reasonable amount of overdraft protection and you never get charged unless it turns into a settled transaction. And they might even process your deposits before your withdrawals. Yes, my commercial bank with many billions in assets does that.
posted by wierdo at 12:43 PM on January 29, 2013
The credit card companies are duplicitous scum, but they obviously need to charge SOME fees.
Right, because they have no revenue stream otherwise... Except, you know, the whole usury thing.
To say nothing of the fact that credit cards would have no reason to exist if merchants didn't accept them -- i.e., merchants are providing a service to the CC companies as much as the opposite is true. Maybe the credit card companies should pay the merchants?
posted by Sys Rq at 12:47 PM on January 29, 2013
Right, because they have no revenue stream otherwise... Except, you know, the whole usury thing.
To say nothing of the fact that credit cards would have no reason to exist if merchants didn't accept them -- i.e., merchants are providing a service to the CC companies as much as the opposite is true. Maybe the credit card companies should pay the merchants?
posted by Sys Rq at 12:47 PM on January 29, 2013
Sounds good. Why don't we prohibit you from making money too, xedrik?
The credit card companies are duplicitous scum, but they obviously need to charge SOME fees.
Originally, CC companies offset costs by charging annual fees to the users of their cards, which they gradually abandoned in favor of charging merchants for each transaction instead. No one, including me, is suggesting CC companies not make a profit. It would be nice if CC companies directed those costs towards the actual users of their product (consumers), rather than forcing them to be carried by the merchants who make the use of their product possible in the first place.
Cards, like cell phones, are a convenience. All the perks of a credit card (rewards points, warranties, etc.) have a cost. Despite paying monthly for the service, no one seems to mind the cost of a cell phone for the convenience, yet somehow paying an annual fee for the convenience of a card is absurd. Why don't we just make cell phones free, and charge the receiver every time a call is made? That's how absurd the current credit card structure is, to a merchant.
posted by xedrik at 12:58 PM on January 29, 2013
The credit card companies are duplicitous scum, but they obviously need to charge SOME fees.
Originally, CC companies offset costs by charging annual fees to the users of their cards, which they gradually abandoned in favor of charging merchants for each transaction instead. No one, including me, is suggesting CC companies not make a profit. It would be nice if CC companies directed those costs towards the actual users of their product (consumers), rather than forcing them to be carried by the merchants who make the use of their product possible in the first place.
Cards, like cell phones, are a convenience. All the perks of a credit card (rewards points, warranties, etc.) have a cost. Despite paying monthly for the service, no one seems to mind the cost of a cell phone for the convenience, yet somehow paying an annual fee for the convenience of a card is absurd. Why don't we just make cell phones free, and charge the receiver every time a call is made? That's how absurd the current credit card structure is, to a merchant.
posted by xedrik at 12:58 PM on January 29, 2013
Except, you know, the whole usury thing.
Please explain how this applies to Visa and MasterCard.
posted by one more dead town's last parade at 12:58 PM on January 29, 2013
Please explain how this applies to Visa and MasterCard.
posted by one more dead town's last parade at 12:58 PM on January 29, 2013
Please explain how this applies to Visa and MasterCard.
I'm guessing, by offering cards to people who really shouldn't have a credit card in the first place, at ridiculous interest rates, and setting the payment structure so that by making only the minimum payments, it will take approximately forever to pay off the card, assuming no new charges are made (which, the card companies know, there almost certainly will be.)
posted by xedrik at 1:07 PM on January 29, 2013
I'm guessing, by offering cards to people who really shouldn't have a credit card in the first place, at ridiculous interest rates, and setting the payment structure so that by making only the minimum payments, it will take approximately forever to pay off the card, assuming no new charges are made (which, the card companies know, there almost certainly will be.)
posted by xedrik at 1:07 PM on January 29, 2013
xedrik: "Originally, CC companies offset costs by charging annual fees to the users of their cards, which they gradually abandoned in favor of charging merchants for each transaction instead."
This is not an instead thing. Interchange/acceptance fees have existed from day one when Diner's or Amex or whoever the hell it was started doing charge cards. And Amex's fees have always been sky high, which is why until recently it wasn't usable as widely as Visa/MC.
The card companies are as much providing a service to the merchant as the merchant is to them. Assuming they follow the rules laid out in their merchant agreement, the merchant knows that they will get paid if they take a credit card. They know the same for cash, but not for checks. You may remember that checks were a huge fucking thing before credit cards became widespread. People do not like carrying large amounts of cash.
So yeah, I'd say that eliminating the risk of a bad check is a pretty valuable service. So is largely eliminating cash handling expense and its attendant..shrinkage. Is it worth what has been charged? Probably not that much, but it's definitely worth something to the merchant just as much as I find some value in the arrangement.
Visa and MasterCard do not issue credit cards. Complain about Amex and Discover if you like. They offer their own cards. (as well as now offering interchange for other banks)
posted by wierdo at 1:10 PM on January 29, 2013 [1 favorite]
This is not an instead thing. Interchange/acceptance fees have existed from day one when Diner's or Amex or whoever the hell it was started doing charge cards. And Amex's fees have always been sky high, which is why until recently it wasn't usable as widely as Visa/MC.
The card companies are as much providing a service to the merchant as the merchant is to them. Assuming they follow the rules laid out in their merchant agreement, the merchant knows that they will get paid if they take a credit card. They know the same for cash, but not for checks. You may remember that checks were a huge fucking thing before credit cards became widespread. People do not like carrying large amounts of cash.
So yeah, I'd say that eliminating the risk of a bad check is a pretty valuable service. So is largely eliminating cash handling expense and its attendant..shrinkage. Is it worth what has been charged? Probably not that much, but it's definitely worth something to the merchant just as much as I find some value in the arrangement.
Visa and MasterCard do not issue credit cards. Complain about Amex and Discover if you like. They offer their own cards. (as well as now offering interchange for other banks)
posted by wierdo at 1:10 PM on January 29, 2013 [1 favorite]
I'm guessing, by offering cards to people who really shouldn't have a credit card in the first place, at ridiculous interest rates, and setting the payment structure so that by making only the minimum payments, it will take approximately forever to pay off the card, assuming no new charges are made (which, the card companies know, there almost certainly will be.)
Visa and MasterCard do precisely none of those things.
posted by one more dead town's last parade at 1:13 PM on January 29, 2013
Visa and MasterCard do precisely none of those things.
posted by one more dead town's last parade at 1:13 PM on January 29, 2013
US card security depends entirely on your 16 digit number combined with your 4 digit expiration date being a secret.
Having worked a temp job for the past several months as a credit/debit card dispute processor, I can tell you that it's actually a little more complicated than that, at least for online transactions. For in-person transactions, your purchase should be authenticated by you keying in your PIN or signing the receipt. Assuming the cashier actually looks at the back of the card to verify the sameness of the signatures, and assuming you have actually signed your card. That really doesn't matter, though -- in the event that your card is stolen and used to make in-person purchases that require a signature, Visa won't let us pursue a refund if the merchant can provide a copy of a receipt that shows the required authorization data and a signature. Doesn't matter if it's not your signature. Doesn't matter if your name is Christopher Isherwood and the receipt is signed ROY in sad little chicken scratch letters. As far as Visa is concerned (probably Mastercard as well, I haven't been fully trained on that mess yet), anything in the signature field of a receipt counts as a signed receipt. Smiley faces count as a signature. YOU GOT TOOK counts as a signature. Yesterday I had to reject 17 separate claims because the receipts I got back were signed with JC and that little fish symbol. (Jesus probably wouldn't commit credit card fraud, yo.) Your bank or credit union will probably issue you provisional credit in the event you're a victim of fraud, but a lot of the time they get screwed over by Visa's regulations.
(Oh, and if your card was skimmed and counterfeited and then used to buy gas from an automated fuel pump, you're totally out of luck. Just claim the card was lost or stolen -- it's a hassle for you to get a new card, believe me, I know. But your bank can't recoup the loss from those charges unless the card is blocked due to loss or theft.)
This job has basically driven me to use cash for all in-person purchases now.
posted by palomar at 1:39 PM on January 29, 2013 [4 favorites]
Having worked a temp job for the past several months as a credit/debit card dispute processor, I can tell you that it's actually a little more complicated than that, at least for online transactions. For in-person transactions, your purchase should be authenticated by you keying in your PIN or signing the receipt. Assuming the cashier actually looks at the back of the card to verify the sameness of the signatures, and assuming you have actually signed your card. That really doesn't matter, though -- in the event that your card is stolen and used to make in-person purchases that require a signature, Visa won't let us pursue a refund if the merchant can provide a copy of a receipt that shows the required authorization data and a signature. Doesn't matter if it's not your signature. Doesn't matter if your name is Christopher Isherwood and the receipt is signed ROY in sad little chicken scratch letters. As far as Visa is concerned (probably Mastercard as well, I haven't been fully trained on that mess yet), anything in the signature field of a receipt counts as a signed receipt. Smiley faces count as a signature. YOU GOT TOOK counts as a signature. Yesterday I had to reject 17 separate claims because the receipts I got back were signed with JC and that little fish symbol. (Jesus probably wouldn't commit credit card fraud, yo.) Your bank or credit union will probably issue you provisional credit in the event you're a victim of fraud, but a lot of the time they get screwed over by Visa's regulations.
(Oh, and if your card was skimmed and counterfeited and then used to buy gas from an automated fuel pump, you're totally out of luck. Just claim the card was lost or stolen -- it's a hassle for you to get a new card, believe me, I know. But your bank can't recoup the loss from those charges unless the card is blocked due to loss or theft.)
This job has basically driven me to use cash for all in-person purchases now.
posted by palomar at 1:39 PM on January 29, 2013 [4 favorites]
Visa and MasterCard do precisely none of those things.
Okay. Financial institutions who issue cards bearing the Visa and Mastercard logo offer cards to people who really shouldn't have a credit card in the first place, at ridiculous interest rates, and set the payment structure so that by making only the minimum payments, it will take approximately forever to pay off the card, assuming no new charges are made (which, the financial institutions who are issuing cards bearing the Visa and Mastercard logo know, there almost certainly will be.) Meanwhile, Visa and Mastercard, while not issuing these cards themselves, aren't exactly going to great lengths to stop the practice.
posted by xedrik at 2:06 PM on January 29, 2013
Okay. Financial institutions who issue cards bearing the Visa and Mastercard logo offer cards to people who really shouldn't have a credit card in the first place, at ridiculous interest rates, and set the payment structure so that by making only the minimum payments, it will take approximately forever to pay off the card, assuming no new charges are made (which, the financial institutions who are issuing cards bearing the Visa and Mastercard logo know, there almost certainly will be.) Meanwhile, Visa and Mastercard, while not issuing these cards themselves, aren't exactly going to great lengths to stop the practice.
posted by xedrik at 2:06 PM on January 29, 2013
But every time I run a card, it costs me, as a merchant, between 3-4%. That's what I have to pay for the privilege of accepting your Visa, MC, AMEX, whatever. ... We generally just mark everything up an additional 5% to cover this cost
That doesn't seem quite fair either.
posted by smackfu at 2:24 PM on January 29, 2013
That doesn't seem quite fair either.
posted by smackfu at 2:24 PM on January 29, 2013
That doesn't seem quite fair either.
Why not? There are costs associated with accepting credit cards beyond the surcharges. Generally, merchants have to buy the machines, and they're not cheap. We need an extra, dedicated phone line for our CC machines to use. Then there's receipt paper just for the credit card machine, the cost to repair the terminal when it goes down...
posted by xedrik at 2:28 PM on January 29, 2013
Why not? There are costs associated with accepting credit cards beyond the surcharges. Generally, merchants have to buy the machines, and they're not cheap. We need an extra, dedicated phone line for our CC machines to use. Then there's receipt paper just for the credit card machine, the cost to repair the terminal when it goes down...
posted by xedrik at 2:28 PM on January 29, 2013
It would be nice if CC companies directed those costs towards the actual users of their product (consumers), rather than forcing them to be carried by the merchants who make the use of their product possible in the first place.
Cards, like cell phones, are a convenience. All the perks of a credit card (rewards points, warranties, etc.) have a cost. Despite paying monthly for the service, no one seems to mind the cost of a cell phone for the convenience, yet somehow paying an annual fee for the convenience of a card is absurd. Why don't we just make cell phones free, and charge the receiver every time a call is made? That's how absurd the current credit card structure is, to a merchant.
Piffle. Everyone involved in the commerce is an "actual user" of the service. If that was not true then you would simply elect not to take credit cards. You choose to do so because there's a perceived good to you - people who wouldn't make a purchase otherwise, removing the need to handle cash, reduced risk vs taking a check (to the extent that anyone has a checkbook with them) etc.
That's not to say the current system isn't shit. The discount rate is unreasonably high, given the risks, and it reflects the industry's decision to deliberately accept a certain amount of fraud (which they fight tooth and nail against anything more than minimal efforts to curtail) and then pass it on to the consumer via the merchant. It's complete fucking nonsense that the card issuers can opt to offer these various rewards cards and fund them by forcing merchants to accept the additional percentage point when customers use them. But this is largely enabled by the completely hidden nature of the cost and the lack of competition in the marketplace for credit card clearing.
But acting as if you're just a purely disinterested party here is similarly nonsense.
[marking up 5% to account for 3-4% discount rates] doesn't seem quite fair either.
Why not?
$1 minus a 4% discount rate yields $0.96.
$1.05 minus a 4% discount rate yields $1.008
So when you apply that logic to a $100 item you've made it $105 and kept $100.80
As far as card-specific costs, where do you draw that line? Do people on hot days pay more because your A/C costs were higher? Are you discounting by a penny when they don't need a bag? Charging a nickel surcharge for large items that require larger and more expensive plastic bags?
posted by phearlez at 2:33 PM on January 29, 2013
Cards, like cell phones, are a convenience. All the perks of a credit card (rewards points, warranties, etc.) have a cost. Despite paying monthly for the service, no one seems to mind the cost of a cell phone for the convenience, yet somehow paying an annual fee for the convenience of a card is absurd. Why don't we just make cell phones free, and charge the receiver every time a call is made? That's how absurd the current credit card structure is, to a merchant.
Piffle. Everyone involved in the commerce is an "actual user" of the service. If that was not true then you would simply elect not to take credit cards. You choose to do so because there's a perceived good to you - people who wouldn't make a purchase otherwise, removing the need to handle cash, reduced risk vs taking a check (to the extent that anyone has a checkbook with them) etc.
That's not to say the current system isn't shit. The discount rate is unreasonably high, given the risks, and it reflects the industry's decision to deliberately accept a certain amount of fraud (which they fight tooth and nail against anything more than minimal efforts to curtail) and then pass it on to the consumer via the merchant. It's complete fucking nonsense that the card issuers can opt to offer these various rewards cards and fund them by forcing merchants to accept the additional percentage point when customers use them. But this is largely enabled by the completely hidden nature of the cost and the lack of competition in the marketplace for credit card clearing.
But acting as if you're just a purely disinterested party here is similarly nonsense.
[marking up 5% to account for 3-4% discount rates] doesn't seem quite fair either.
Why not?
$1 minus a 4% discount rate yields $0.96.
$1.05 minus a 4% discount rate yields $1.008
So when you apply that logic to a $100 item you've made it $105 and kept $100.80
As far as card-specific costs, where do you draw that line? Do people on hot days pay more because your A/C costs were higher? Are you discounting by a penny when they don't need a bag? Charging a nickel surcharge for large items that require larger and more expensive plastic bags?
posted by phearlez at 2:33 PM on January 29, 2013
Yes, we absolutely do all of those things. Doesn't everyone? Also, when it rains, wiping your feet on the entry mat costs a quarter.
We apply it as a flat mark-up because there's really no better way to do it. Until now, you couldn't add a surcharge to make up card fees. We're certainly going to be looking at that as an option now. It's a guesstimation, to cover all the hard and soft costs of taking credit cards.
Sure, accepting cards does give you some assurance (though, certainly not 100%) that the funds are yours, moreso than checks. But 90% of our business is delivery, out the back door to our clients. 10% is walk-in traffic. Of our account customers, nearly all of them pay promptly anyway. Only now (over the last 5-ish years, or so) that more and more of them are switching to purchasing cards, they're still paying promptly, only now it's costing me 3-4%. Which, hooray math, really starts to add up when they're doing $100k per month. Should I just eat that 4%, thankful that hey, now I'm getting paid on time, just like I was before, only... on-timier? Or should I recoup that cost, because I rather like staying in business?
So when you apply that logic to a $100 item you've made it $105 and kept $100.80
And that 80 cents juuuuust about accounts for the surcharges, the cost of the machine, the supplies, the upkeep, and its phone line. Magic!
Even now, we cannot impose a minimum purchase requirement for debit cards, which, with our card processor, cost us a flat 35 cents per transaction. If someone wants to be a douche and buy a 29-cent stick pen with their debit card, we'd be better off if they just stole it.
But acting as if you're just a purely disinterested party here is similarly nonsense.
I'm sorry if you took my saying "as a merchant" or "at my store" to indicate I was saying these things as a purely disinterested party. My bad.
posted by xedrik at 2:50 PM on January 29, 2013 [1 favorite]
We apply it as a flat mark-up because there's really no better way to do it. Until now, you couldn't add a surcharge to make up card fees. We're certainly going to be looking at that as an option now. It's a guesstimation, to cover all the hard and soft costs of taking credit cards.
Sure, accepting cards does give you some assurance (though, certainly not 100%) that the funds are yours, moreso than checks. But 90% of our business is delivery, out the back door to our clients. 10% is walk-in traffic. Of our account customers, nearly all of them pay promptly anyway. Only now (over the last 5-ish years, or so) that more and more of them are switching to purchasing cards, they're still paying promptly, only now it's costing me 3-4%. Which, hooray math, really starts to add up when they're doing $100k per month. Should I just eat that 4%, thankful that hey, now I'm getting paid on time, just like I was before, only... on-timier? Or should I recoup that cost, because I rather like staying in business?
So when you apply that logic to a $100 item you've made it $105 and kept $100.80
And that 80 cents juuuuust about accounts for the surcharges, the cost of the machine, the supplies, the upkeep, and its phone line. Magic!
Even now, we cannot impose a minimum purchase requirement for debit cards, which, with our card processor, cost us a flat 35 cents per transaction. If someone wants to be a douche and buy a 29-cent stick pen with their debit card, we'd be better off if they just stole it.
But acting as if you're just a purely disinterested party here is similarly nonsense.
I'm sorry if you took my saying "as a merchant" or "at my store" to indicate I was saying these things as a purely disinterested party. My bad.
posted by xedrik at 2:50 PM on January 29, 2013 [1 favorite]
Sorry. I'm getting all fighty, and I don't want to be fighty.
Seriously though, ask any merchant about their credit card fees, and I'll bet you lunch that not a single one thinks the fees justify the benefits, or doesn't think their fees are too high. It's really quite expensive to take cards, and we're at the point now where cards are so ingrained in American (at least, probably wider) culture, that you pretty much have to. And it really doesn't have to be that way.
posted by xedrik at 3:09 PM on January 29, 2013
Seriously though, ask any merchant about their credit card fees, and I'll bet you lunch that not a single one thinks the fees justify the benefits, or doesn't think their fees are too high. It's really quite expensive to take cards, and we're at the point now where cards are so ingrained in American (at least, probably wider) culture, that you pretty much have to. And it really doesn't have to be that way.
posted by xedrik at 3:09 PM on January 29, 2013
Visa and Mastercard, while not issuing these cards themselves, aren't exactly going to great lengths to stop the practice.
So they should be barred from any sort of revenue generation because of the actions of a third party?
all the hard and soft costs of taking credit cards
If taking credit cards didn't make you money, you wouldn't do it. Demanding the ability to turn a profit on absolutely every transaction, as though it were some sort of right, puts you on the same side as the telcos over yonder.
If you're advertising a $100 product and then charging me an extra $5 once you find out how I'm paying for it, then I'll gladly take my business down the street to a competitor who doesn't do those things.
posted by one more dead town's last parade at 3:46 PM on January 29, 2013
So they should be barred from any sort of revenue generation because of the actions of a third party?
all the hard and soft costs of taking credit cards
If taking credit cards didn't make you money, you wouldn't do it. Demanding the ability to turn a profit on absolutely every transaction, as though it were some sort of right, puts you on the same side as the telcos over yonder.
If you're advertising a $100 product and then charging me an extra $5 once you find out how I'm paying for it, then I'll gladly take my business down the street to a competitor who doesn't do those things.
posted by one more dead town's last parade at 3:46 PM on January 29, 2013
I'm still amazed that $14k on a debit purchase went through. I've been using my debit card for the majority of my purchases for years now (Canada, not the US) but I've always had a built-in limit. I forget exactly what it is, but it's something like max. $1000 for a single purchase, and $1500 per day.
Even then, the bank seems to have some built-in checks in place. A few months ago I used my card to pay a $400-ish vet bill and instead of going through, it came up with a message for me to call a number and speak to someone at the bank. I'm sure there's some crusty people out there who would bitch them out for wasting their valuable time, but I was glad to see that kind of secondary protection. Even last month when I was across the country visiting Montreal and using my card for small purchases at restaurants and record stores, I got a call from someone to check that was really me.
posted by mannequito at 3:54 PM on January 29, 2013
Even then, the bank seems to have some built-in checks in place. A few months ago I used my card to pay a $400-ish vet bill and instead of going through, it came up with a message for me to call a number and speak to someone at the bank. I'm sure there's some crusty people out there who would bitch them out for wasting their valuable time, but I was glad to see that kind of secondary protection. Even last month when I was across the country visiting Montreal and using my card for small purchases at restaurants and record stores, I got a call from someone to check that was really me.
posted by mannequito at 3:54 PM on January 29, 2013
xedrik: "...and set the payment structure so that by making only the minimum payments, it will take approximately forever to pay off the card"
This is fundamental to the nature of revolving accounts - the minimum payment is almost always a percentage of the outstanding balance, with some small minimum. 2% / $10 is fairly typical, but regardless of the actual percent, reducing the balance by a fixed percentage every month will *never* pay the balance completely.
For example, let's say you have a balance of $1,000, and you have a 0% interest rate. If you pay off exactly half of the outstanding balance every month, how long will it take you to pay the amount off completely?
For those who don't feel like mathing, the answer is literally forever, though after just 18 months, your balance drops to well under a penny, paying half of which might be challenging. If your card has a minimum payment of $10, then it only takes eight months.
The same effect holds true for paying off 2% of the balance every month.
I've thought about this a bit and have a couple of ideas, such as a minimum payment based on the highest balance over the past five years, but in the end, revolving accounts are not self-amortizing.
posted by Hatashran at 4:05 PM on January 29, 2013
This is fundamental to the nature of revolving accounts - the minimum payment is almost always a percentage of the outstanding balance, with some small minimum. 2% / $10 is fairly typical, but regardless of the actual percent, reducing the balance by a fixed percentage every month will *never* pay the balance completely.
For example, let's say you have a balance of $1,000, and you have a 0% interest rate. If you pay off exactly half of the outstanding balance every month, how long will it take you to pay the amount off completely?
For those who don't feel like mathing, the answer is literally forever, though after just 18 months, your balance drops to well under a penny, paying half of which might be challenging. If your card has a minimum payment of $10, then it only takes eight months.
The same effect holds true for paying off 2% of the balance every month.
I've thought about this a bit and have a couple of ideas, such as a minimum payment based on the highest balance over the past five years, but in the end, revolving accounts are not self-amortizing.
posted by Hatashran at 4:05 PM on January 29, 2013
I'm still amazed that $14k on a debit purchase went through. I've been using my debit card for the majority of my purchases for years now (Canada, not the US) but I've always had a built-in limit. I forget exactly what it is, but it's something like max. $1000 for a single purchase, and $1500 per day.
This was in 1999. Protections may be better now. I rather hope they are! Also we were with a small credit union, which might not have had the money/facilities to do all the checking that's now automated, particularly at large banks.
posted by immlass at 5:14 PM on January 29, 2013
This was in 1999. Protections may be better now. I rather hope they are! Also we were with a small credit union, which might not have had the money/facilities to do all the checking that's now automated, particularly at large banks.
posted by immlass at 5:14 PM on January 29, 2013
Do merchants get charged different rates depending on the reward program that their customer is using? If not, who's paying for it?
posted by Joe in Australia at 7:03 PM on January 29, 2013
posted by Joe in Australia at 7:03 PM on January 29, 2013
Do merchants get charged different rates depending on the reward program that their customer is using? If not, who's paying for it?
No. The card issuer's bank pays for the reward program or what have you to attract customers. Keep in mind on a 2% cut, Visa's transaction fee is only .11% and MC's is 0.09%. The bank that issued the customer's card usually takes 1.8% and the merchant's bank gets the rest.
posted by Talez at 11:05 PM on January 29, 2013
No. The card issuer's bank pays for the reward program or what have you to attract customers. Keep in mind on a 2% cut, Visa's transaction fee is only .11% and MC's is 0.09%. The bank that issued the customer's card usually takes 1.8% and the merchant's bank gets the rest.
posted by Talez at 11:05 PM on January 29, 2013
If taking credit cards didn't make you money, you wouldn't do it. Demanding the ability to turn a profit on absolutely every transaction, as though it were some sort of right, puts you on the same side as the telcos over yonder.
Just because it's more profitable to play ball with the credit card companies than doesn't mean that merchants are getting a fair shake. If visa and mastercard are leveraging their market share in ways that run afoul of anti-trust laws, it doesn't matter which way merchants are better off.
posted by cotterpin at 1:22 AM on January 30, 2013
Just because it's more profitable to play ball with the credit card companies than doesn't mean that merchants are getting a fair shake. If visa and mastercard are leveraging their market share in ways that run afoul of anti-trust laws, it doesn't matter which way merchants are better off.
posted by cotterpin at 1:22 AM on January 30, 2013
Just because it's more profitable to play ball with the credit card companies than doesn't mean that merchants are getting a fair shake.
I'm not saying that the credit-card companies aren't screwing the merchants; it certainly looks like there's conscious parallelism going on at the very least. That doesn't give the merchants the right to screw their customers.
That also doesn't let merchants claim that accepting credit cards, overall, is a money-loser for them. It's clearly not, or they'd stop.
posted by one more dead town's last parade at 5:36 AM on January 30, 2013
I'm not saying that the credit-card companies aren't screwing the merchants; it certainly looks like there's conscious parallelism going on at the very least. That doesn't give the merchants the right to screw their customers.
That also doesn't let merchants claim that accepting credit cards, overall, is a money-loser for them. It's clearly not, or they'd stop.
posted by one more dead town's last parade at 5:36 AM on January 30, 2013
That also doesn't let merchants claim that accepting credit cards, overall, is a money-loser for them. It's clearly not, or they'd stop.
Depends on what you mean by "overall"; clearly, you have a concept in mind, but not everyone may agree. If, for example, a merchant made less money on visa transactions then cash transactions, they can claim it is a money loser, since they would have made more money if those transactions had been cash. However, their fear is that they would not have had the transactions at all. Very very few businesses actually know this, however, since they buy into the conventional wisdom that CC creates more transactions and are not willing to run the trial to find out differently, as it could have long-term damage to their business if it turned out to be true.
posted by Bovine Love at 7:21 AM on January 30, 2013
Depends on what you mean by "overall"; clearly, you have a concept in mind, but not everyone may agree. If, for example, a merchant made less money on visa transactions then cash transactions, they can claim it is a money loser, since they would have made more money if those transactions had been cash. However, their fear is that they would not have had the transactions at all. Very very few businesses actually know this, however, since they buy into the conventional wisdom that CC creates more transactions and are not willing to run the trial to find out differently, as it could have long-term damage to their business if it turned out to be true.
posted by Bovine Love at 7:21 AM on January 30, 2013
Do merchants get charged different rates depending on the reward program that their customer is using? If not, who's paying for it?
The issuing bank is paying for it, because they want big spenders and big spenders want reward cards. If they don't offer rewards cards, the big spenders will go to another bank that does. Making 1/2% fee after rewards is better than making 0%, after all. And if they run a balance, so much the better.
posted by smackfu at 8:25 AM on January 30, 2013
The issuing bank is paying for it, because they want big spenders and big spenders want reward cards. If they don't offer rewards cards, the big spenders will go to another bank that does. Making 1/2% fee after rewards is better than making 0%, after all. And if they run a balance, so much the better.
posted by smackfu at 8:25 AM on January 30, 2013
If you're advertising a $100 product and then charging me an extra $5 once you find out how I'm paying for it, then I'll gladly take my business down the street to a competitor who doesn't do those things.
Except that you're likely to find the same item for sale for $105 down at the other store. They're subject to the same costs, and are either going to build it into the price or charge it explicitly at the time of purchase.
Assuming the two stores were next to each other (so that people with cash would just go to the one that offers the cash discount / credit card surcharge), there's not going to be any cash customers who can be forced to subsidize those who want to use cards. Thus the prices at the two stores will be exactly the same if you use a card.
posted by Kadin2048 at 8:58 AM on January 30, 2013
Except that you're likely to find the same item for sale for $105 down at the other store. They're subject to the same costs, and are either going to build it into the price or charge it explicitly at the time of purchase.
Assuming the two stores were next to each other (so that people with cash would just go to the one that offers the cash discount / credit card surcharge), there's not going to be any cash customers who can be forced to subsidize those who want to use cards. Thus the prices at the two stores will be exactly the same if you use a card.
posted by Kadin2048 at 8:58 AM on January 30, 2013
the prices at the two stores will be exactly the same if you use a card
Perhaps, but going to the other store is partly intended to punish the one that falsely advertises a lower price to get you in the door.
posted by one more dead town's last parade at 10:06 AM on January 30, 2013
Perhaps, but going to the other store is partly intended to punish the one that falsely advertises a lower price to get you in the door.
posted by one more dead town's last parade at 10:06 AM on January 30, 2013
It isn't false if you pay cash; they do offer the product at the advertised price, and not in some twisted subtle way, either, you just have to pay cash. If you buy a car, and take the financing, you will pay more then the advertised price. If you pay cash (typically in the form of certified cheque), you pay the advertised price. Well, with a bunch of BS, but still cheaper then the financed option.
Claiming the vendor is being dishonest here is unreasonable. They are offering the product, honestly, at a price. You can take options (extended warranty, financing, pay via CC, etc) which add to the price. This is hardly dishonest.
posted by Bovine Love at 10:23 AM on January 30, 2013
Claiming the vendor is being dishonest here is unreasonable. They are offering the product, honestly, at a price. You can take options (extended warranty, financing, pay via CC, etc) which add to the price. This is hardly dishonest.
posted by Bovine Love at 10:23 AM on January 30, 2013
It isn't false if you pay cash
Advertising it as $105 and then offering a discount for paying a certain way is not false advertising. Advertising it as $100 and then tacking on a previously unmentioned fee when you go to check out is.
posted by one more dead town's last parade at 10:39 AM on January 30, 2013
Advertising it as $105 and then offering a discount for paying a certain way is not false advertising. Advertising it as $100 and then tacking on a previously unmentioned fee when you go to check out is.
posted by one more dead town's last parade at 10:39 AM on January 30, 2013
Advertising it as $105 and then offering a discount for paying a certain way is not false advertising. Advertising it as $100 and then tacking on a previously unmentioned fee when you go to check out is.
You must live in one of the five states that doesn't have a sales tax.
posted by Talez at 10:43 AM on January 30, 2013
You must live in one of the five states that doesn't have a sales tax.
posted by Talez at 10:43 AM on January 30, 2013
You must live in one of the five states that doesn't have a sales tax.
That doesn't follow.
posted by one more dead town's last parade at 10:47 AM on January 30, 2013
That doesn't follow.
posted by one more dead town's last parade at 10:47 AM on January 30, 2013
Credit unions are the answer.
I've told this before, but I think it's worth sharing again here: Once my wife's credit card was accidentally charged $5000 by a vendor (boring story, but it was genuinely an innocent mistake). We had no idea until the auto-payment hit our credit union account, which had a balance much less than that.
At most banks, that would be a disaster, the beginning of who knows how many overdraft fees and other crap. In our case, I got a call from someone at the credit union saying, Mr. Straight, we have a situation here, is this a mistake? And then they gave me the chance to call the credit card company and get it straightened out. Our account was never charged or fined or anything.
posted by straight at 10:59 AM on January 30, 2013
I've told this before, but I think it's worth sharing again here: Once my wife's credit card was accidentally charged $5000 by a vendor (boring story, but it was genuinely an innocent mistake). We had no idea until the auto-payment hit our credit union account, which had a balance much less than that.
At most banks, that would be a disaster, the beginning of who knows how many overdraft fees and other crap. In our case, I got a call from someone at the credit union saying, Mr. Straight, we have a situation here, is this a mistake? And then they gave me the chance to call the credit card company and get it straightened out. Our account was never charged or fined or anything.
posted by straight at 10:59 AM on January 30, 2013
That doesn't follow.
Well I come up the the counter with $1.70 in change for a $1.69 Slurpee and get told it's actually $1.84. Then I curse once again that this meshugana country does all of its advertised pricing pre-tax.
posted by Talez at 12:41 PM on January 30, 2013 [1 favorite]
Well I come up the the counter with $1.70 in change for a $1.69 Slurpee and get told it's actually $1.84. Then I curse once again that this meshugana country does all of its advertised pricing pre-tax.
posted by Talez at 12:41 PM on January 30, 2013 [1 favorite]
Except that you're likely to find the same item for sale for $105 down at the other store. They're subject to the same costs, and are either going to build it into the price or charge it explicitly at the time of purchase.
Not quite. Assume each store has half credit and half cash sales volume, and the credit has a 5% fee.
Store 1 charges a credit surcharge, so cash people pay $100 and credit people pay $105.
Store 2 average the costs over everyone, so everyone pays $102.5.
As a credit user, I have a clear incentive to go to store 2. As a cash user, I have a clear incentive to go to store 1. Over time, yes, store 2 won't be as much of a benefit for a credit user as more volume goes to them. But it will still always be better than store 1.
posted by smackfu at 12:59 PM on January 30, 2013
Not quite. Assume each store has half credit and half cash sales volume, and the credit has a 5% fee.
Store 1 charges a credit surcharge, so cash people pay $100 and credit people pay $105.
Store 2 average the costs over everyone, so everyone pays $102.5.
As a credit user, I have a clear incentive to go to store 2. As a cash user, I have a clear incentive to go to store 1. Over time, yes, store 2 won't be as much of a benefit for a credit user as more volume goes to them. But it will still always be better than store 1.
posted by smackfu at 12:59 PM on January 30, 2013
Well I come up the the counter with $1.70 in change for a $1.69 Slurpee and get told it's actually $1.84. Then I curse once again that this meshugana country does all of its advertised pricing pre-tax.
The idea that prices not including tax is automatically bad is just silly.
posted by one more dead town's last parade at 1:20 PM on January 30, 2013
The idea that prices not including tax is automatically bad is just silly.
posted by one more dead town's last parade at 1:20 PM on January 30, 2013
Do merchants get charged different rates depending on the reward program that their customer is using? If not, who's paying for it?
No. The card issuer's bank pays for the reward program or what have you to attract customers.
Yes, sometimes, sort-of, unclearly. It's been ten years since I signed a merchant agreement but I have a distinct memory of there being variability in there for these sorts of programs; I had a base rate for Mastercard, for example, but there were potential add-ons. Some of that was my choice - was I accepting a card I wasn't physically holding - but other aspects weren't under my control, like fleet cards.
I'm sure that depending on your power to negotiate (am I Walmart?) that might not be the case and the card issuer might eat it. But unless I killed those specific brain cells with alcohol I'm sure this was the case. That failed business' records are sealed up in a box in my basement but this report from the Kansas fed seems to back it up.
posted by phearlez at 1:22 PM on January 30, 2013
No. The card issuer's bank pays for the reward program or what have you to attract customers.
Yes, sometimes, sort-of, unclearly. It's been ten years since I signed a merchant agreement but I have a distinct memory of there being variability in there for these sorts of programs; I had a base rate for Mastercard, for example, but there were potential add-ons. Some of that was my choice - was I accepting a card I wasn't physically holding - but other aspects weren't under my control, like fleet cards.
I'm sure that depending on your power to negotiate (am I Walmart?) that might not be the case and the card issuer might eat it. But unless I killed those specific brain cells with alcohol I'm sure this was the case. That failed business' records are sealed up in a box in my basement but this report from the Kansas fed seems to back it up.
The actual levels of fees vary by transaction. Merchant fees significantly vary by scheme and card type. The fees for credit card transactions are the highest, followed by the fees for signature-debit card transactions. The fees for PIN-debit card transactions are the lowest. Among merchant fees for credit cards, American Express has the highest and Discover has the lowest (Chart 1).(emphasis mine)
...
While rewards and merchant fees are related, it is not clear how closely. Over the past several years in the United States, we have observed increasingly more generous rewards as well as rising interchange and merchant fees. But this does not necessarily imply that rewards have caused merchant fees to rise. Merchant fees depend not only on rewards but also on the costs of handling a card transaction by the card issuer or the acquirer, as well as their profit margins. Rewards can be financed by different sources, including reducing the card issuer’s profit margin. Therefore, higher merchant fees do not necessarily imply more generous rewards, and vice versa.
Still, in some cases a close positive relationship between rewards and interchange fees (and merchant fees) is evident. In 2005, MasterCard and Visa introduced new credit card categories that charge higher interchange fees to merchants and provide more generous rewards to card users. Both MasterCard and Visa now offer four credit card categories. MasterCard’s Core Value and Visa’s Traditional cards provide the least generous rewards (or no rewards), while MasterCard’s World Elite and Visa’s Signature Preferred cards provide the most generous rewards. Chart 3 shows the 2007 interchange fee rates for MasterCard and Visa at retail stores. Tier I includes the rates for retail stores that generate the highest number or value of transactions, while Base includes the rates for retail stores that generate the least. Regardless of their transaction volume, merchants consistently pay higher interchange fees for cards with more generous rewards.
posted by phearlez at 1:22 PM on January 30, 2013
Another example of the USA refusing to acknowledge overseas direct experience (cf. healthcare, gun control, drug laws, the list goes on). Seriously, the US could save a hella lot of heartache when it came up with an idea if it asked, has it been tried somewhere else?
This change occurred several years ago in Australia.
Prior to the change, merchants had to absorb card fees, making purchases more expensive for non-cardholders.
Merchants can now choose whether to apply the card fee.
Most huge stores do not, partly because it pisses people off, but mainly because the costs of them handling cash in terms of security, change management, staff pilfering etc. are higher than the fees they have negotiated with the card issuers (MC & V approx 0.6%, Amex 1.2%, Diners 1.6% based on figures I have seen).
Small merchants often waive the fee on MC & V, but charge 1 or 2% for Amex and DC, but they also typically pay double the merchant fees to begin with.
Monopolies/near monopolies (utilities, airlines, taxis fleets) tend to see it as a profit center. QANTAS, for example, routinely charges $7.70 per domestic ticket for card payment and $30(!!) for international flights.
One result here has been card reward programs have become substantially less generous. I used to earn a FF point per dollar spent on my card with a $50 annual fee. To get the same deal now I need to pay $250 annual fee, and it is restricted to Amex merchants.
The net result is most people complain, those with little money tend to pay with debit cards, but cash is still becoming less and less prevalent.
posted by bystander at 12:00 AM on January 31, 2013
This change occurred several years ago in Australia.
Prior to the change, merchants had to absorb card fees, making purchases more expensive for non-cardholders.
Merchants can now choose whether to apply the card fee.
Most huge stores do not, partly because it pisses people off, but mainly because the costs of them handling cash in terms of security, change management, staff pilfering etc. are higher than the fees they have negotiated with the card issuers (MC & V approx 0.6%, Amex 1.2%, Diners 1.6% based on figures I have seen).
Small merchants often waive the fee on MC & V, but charge 1 or 2% for Amex and DC, but they also typically pay double the merchant fees to begin with.
Monopolies/near monopolies (utilities, airlines, taxis fleets) tend to see it as a profit center. QANTAS, for example, routinely charges $7.70 per domestic ticket for card payment and $30(!!) for international flights.
One result here has been card reward programs have become substantially less generous. I used to earn a FF point per dollar spent on my card with a $50 annual fee. To get the same deal now I need to pay $250 annual fee, and it is restricted to Amex merchants.
The net result is most people complain, those with little money tend to pay with debit cards, but cash is still becoming less and less prevalent.
posted by bystander at 12:00 AM on January 31, 2013
Seriously, the US could save a hella lot of heartache when it came up with an idea if it asked, has it been tried somewhere else?
Not sure if you are arguing credit card surcharges are good or bad here.
posted by smackfu at 6:19 AM on January 31, 2013
Not sure if you are arguing credit card surcharges are good or bad here.
posted by smackfu at 6:19 AM on January 31, 2013
Not quite. Assume each store has half credit and half cash sales volume, and the credit has a 5% fee.
I don't think that's a good assumption, and I explicitly ruled it out later on in that post. Assuming that the goods are the same and that customers are shopping predominantly on price (else why are we even that concerned over 5% here and there), even if the stores start off with the same cash/credit balance it's not going to stay that way. The cash customers would be stupid not to move to the store that gives them the lower price. Credit customers might be agnostic.
So if we were to begin with an equal mix as a starting condition with two stores, the expected steady state will have the same net price at both stores for credit card customers, because the cash customers will switch. If credit card customers are agnostic rather than trying to "punish" the CC-fee store, then they'll stay split between the two stores and the one with the built-in fee will actually suffer in terms of marketshare.
If the two stores aren't next to each other or otherwise can't easily be substituted, then sure the whole thing falls apart, but then they're really not in the same market in some way.
Anyway, a good example of this is with gas stations. (Since gasoline is, for all practical purposes, a perfectly fungible good.) There are a few gas stations around in my area that offer a not-insignificant cash discount, generally 3% or so. As a result, if you're paying with cash -- and it's worth pointing out that in my community there are a significant number of people who only use cash, for cultural reasons -- you go to those gas stations. They do a pretty good business. If you're paying with credit their price is basically the same as the "same price cash / credit" station across the street, so there's no advantage. However, the 3% disc is apparently not enough to actually shift many people from credit to cash for gas purchases, since the same-price stations remain open.
I don't know if it's due to a change in the law or merchant agreements or what, but I've increasingly noticed that a lot of low-margin stores have signs up now that say "All prices reflect 3% cash discount" or similar language. Which is a de facto credit card surcharge, just spelled out in a backwards way.
Advertising it as $100 and then tacking on a previously unmentioned fee when you go to check out is.
Stores have no obligation to accept any form of payment you want to use, or to accept all forms of payment at the same rate if it costs them something on the back end. Forcing them to advertise the cash price, and not some hypothetical payment method that's actually preferable to cash but not available to everyone (which is plausible if the CC companies weren't so greedy, cf. the discussion of cash-handling costs upthread), seems reasonable. But they should have the option of taking other forms of payment, and if you don't like the terms then you can pay cash.
I don't think this is controversial except for the fact that credit cards have crept into ubiquity in the past few decades. If you consider other forms of payment, it's not. Consider, for instance, gold: I know several stores (all gun stores, but whatever) that will accept gold bullion and specie as payment. They don't really want gold, they're not in the business of selling gold, but they'll take it ... at a significant discount off the market price, or even what you'd get by going to a legitimate gold dealer and selling bullion to them. I don't know how many people take them up on this not-especially-generous offer, but it's available. Credit cards are no different; if you don't like the terms that a merchant offers for that method of payment, you're free to get cash and get the advertised price that way, and thereby absorb some of the transaction costs yourself.
Provided that we ensure that advertised prices are comparable -- that nobody can advertise a price that's lower than what you'd get by paying straight cash-on-the-barrel-head, and that the surcharges for various methods of payment are applied in a nondiscriminatory manner -- it doesn't look like a problem to me.
posted by Kadin2048 at 8:14 AM on January 31, 2013
I don't think that's a good assumption, and I explicitly ruled it out later on in that post. Assuming that the goods are the same and that customers are shopping predominantly on price (else why are we even that concerned over 5% here and there), even if the stores start off with the same cash/credit balance it's not going to stay that way. The cash customers would be stupid not to move to the store that gives them the lower price. Credit customers might be agnostic.
So if we were to begin with an equal mix as a starting condition with two stores, the expected steady state will have the same net price at both stores for credit card customers, because the cash customers will switch. If credit card customers are agnostic rather than trying to "punish" the CC-fee store, then they'll stay split between the two stores and the one with the built-in fee will actually suffer in terms of marketshare.
If the two stores aren't next to each other or otherwise can't easily be substituted, then sure the whole thing falls apart, but then they're really not in the same market in some way.
Anyway, a good example of this is with gas stations. (Since gasoline is, for all practical purposes, a perfectly fungible good.) There are a few gas stations around in my area that offer a not-insignificant cash discount, generally 3% or so. As a result, if you're paying with cash -- and it's worth pointing out that in my community there are a significant number of people who only use cash, for cultural reasons -- you go to those gas stations. They do a pretty good business. If you're paying with credit their price is basically the same as the "same price cash / credit" station across the street, so there's no advantage. However, the 3% disc is apparently not enough to actually shift many people from credit to cash for gas purchases, since the same-price stations remain open.
I don't know if it's due to a change in the law or merchant agreements or what, but I've increasingly noticed that a lot of low-margin stores have signs up now that say "All prices reflect 3% cash discount" or similar language. Which is a de facto credit card surcharge, just spelled out in a backwards way.
Advertising it as $100 and then tacking on a previously unmentioned fee when you go to check out is.
Stores have no obligation to accept any form of payment you want to use, or to accept all forms of payment at the same rate if it costs them something on the back end. Forcing them to advertise the cash price, and not some hypothetical payment method that's actually preferable to cash but not available to everyone (which is plausible if the CC companies weren't so greedy, cf. the discussion of cash-handling costs upthread), seems reasonable. But they should have the option of taking other forms of payment, and if you don't like the terms then you can pay cash.
I don't think this is controversial except for the fact that credit cards have crept into ubiquity in the past few decades. If you consider other forms of payment, it's not. Consider, for instance, gold: I know several stores (all gun stores, but whatever) that will accept gold bullion and specie as payment. They don't really want gold, they're not in the business of selling gold, but they'll take it ... at a significant discount off the market price, or even what you'd get by going to a legitimate gold dealer and selling bullion to them. I don't know how many people take them up on this not-especially-generous offer, but it's available. Credit cards are no different; if you don't like the terms that a merchant offers for that method of payment, you're free to get cash and get the advertised price that way, and thereby absorb some of the transaction costs yourself.
Provided that we ensure that advertised prices are comparable -- that nobody can advertise a price that's lower than what you'd get by paying straight cash-on-the-barrel-head, and that the surcharges for various methods of payment are applied in a nondiscriminatory manner -- it doesn't look like a problem to me.
posted by Kadin2048 at 8:14 AM on January 31, 2013
Credit cards are no different; if you don't like the terms that a merchant offers for that method of payment, you're free to get cash and get the advertised price that way, and thereby absorb some of the transaction costs yourself.
That's fine, as long as the advertised price includes a statement that it's higher for credit cards, or they don't advertise that they take credit cards.
If they advertise that they take credit cards, and advertise a widget for $100, refusing to sell it to you for less than $105 once you're at the checkout is a classic bait-and-switch, nothing more.
posted by one more dead town's last parade at 10:23 AM on January 31, 2013
That's fine, as long as the advertised price includes a statement that it's higher for credit cards, or they don't advertise that they take credit cards.
If they advertise that they take credit cards, and advertise a widget for $100, refusing to sell it to you for less than $105 once you're at the checkout is a classic bait-and-switch, nothing more.
posted by one more dead town's last parade at 10:23 AM on January 31, 2013
I've seen lots of places around here that are cash-only, and then have an ATM in the store with an inflated transaction fee. Is that bait-and-switch? It isn't always obvious that they are cash only unless you look hard.
posted by Bovine Love at 10:57 AM on January 31, 2013
posted by Bovine Love at 10:57 AM on January 31, 2013
I've seen lots of places around here that are cash-only, and then have an ATM in the store with an inflated transaction fee. Is that bait-and-switch?
Nope. Cash-only is the default. It's what you should expect if they don't have a Visa sticker on the window.
posted by Sys Rq at 11:14 AM on January 31, 2013
Nope. Cash-only is the default. It's what you should expect if they don't have a Visa sticker on the window.
posted by Sys Rq at 11:14 AM on January 31, 2013
That's fine, as long as the advertised price includes a statement that it's higher for credit cards, or they don't advertise that they take credit cards.
I guess I could live with that as a practical matter. However, I suppose I just have a difference of opinion as to whether advertising that you "accept" a credit card implies that you accept it at a 0% discount with respect to cash. I don't think that's necessarily implied, since we all know (or should know) that credit card companies charge obnoxious fees for handling the transaction and these fees are in excess of what it costs to handle cash.
Similarly, the gun store that advertises accepting payment in gold bullion doesn't necessarily imply that they'll give you the London fix for it; they're just saying they'll take it from you for convenience's sake, as opposed to having you go down the street, turn it into cash, and then come back in, which is the equivalent of saying you have to go down to an ATM and come back with cash.
Of course, if we really wanted an elegant-yet-unlikely solution to this whole problem, we'd just have the credit card companies taken out and (proverbially, but I'd consider literally) shot, and replaced by having either the Treasury or the FRB issue everyone in the country a charge card. (Oblig. resulting MeFi discussion) I doubt I'll live to see it, and I think the technology is still way too immature, but I suspect at some point in the future that cash will give way to a system like that, and it'll end up being run as a public utility in the way that the Mint is now, since a low-friction medium for settling transactions is just too important to leave anywhere else.
posted by Kadin2048 at 11:22 AM on January 31, 2013
I guess I could live with that as a practical matter. However, I suppose I just have a difference of opinion as to whether advertising that you "accept" a credit card implies that you accept it at a 0% discount with respect to cash. I don't think that's necessarily implied, since we all know (or should know) that credit card companies charge obnoxious fees for handling the transaction and these fees are in excess of what it costs to handle cash.
Similarly, the gun store that advertises accepting payment in gold bullion doesn't necessarily imply that they'll give you the London fix for it; they're just saying they'll take it from you for convenience's sake, as opposed to having you go down the street, turn it into cash, and then come back in, which is the equivalent of saying you have to go down to an ATM and come back with cash.
Of course, if we really wanted an elegant-yet-unlikely solution to this whole problem, we'd just have the credit card companies taken out and (proverbially, but I'd consider literally) shot, and replaced by having either the Treasury or the FRB issue everyone in the country a charge card. (Oblig. resulting MeFi discussion) I doubt I'll live to see it, and I think the technology is still way too immature, but I suspect at some point in the future that cash will give way to a system like that, and it'll end up being run as a public utility in the way that the Mint is now, since a low-friction medium for settling transactions is just too important to leave anywhere else.
posted by Kadin2048 at 11:22 AM on January 31, 2013
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