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Shoppers Love Rewards Credit Cards. Retailers Hate Them.:
Large merchants including Amazon.com Inc., Target Corp. and Home Depot Inc. are pushing for the right to reject some rewards credit cards, which typically carry higher fees for merchants. They are likely to opt out of a roughly $6.2 billion settlement Visa Inc., Mastercard Inc. and several large banks recently reached with merchants and continue to make their case in court, according to people familiar with the matter.
The retailers are trying to end the card networks' "honor all cards" rule, which requires merchants that accept Visa- or Mastercard-branded credit cards to take all of them. If merchants could pick and choose among Visa or Mastercard credit cards, those with the highest merchant fees -- and most generous rewards -- likely would be on the chopping block.
The stakes are high all around. Rewards credit cards such as JPMorgan Chase & Co.'s Sapphire Reserve, Capital One Financial Corp.'s Venture and Citigroup Inc.'s Double Cash are wildly popular among consumers for their perks like cash back, airfare and hotel stays. Some 92% of all U.S. credit-card purchase volume is currently charged on rewards credit cards, up from 86% in 2013 and 67% in 2008, according to estimates from Mercator Advisory Group Inc., a payments research and consulting firm.
Yet merchants say the most generous rewards credit cards with the highest fees are cutting into their profits. When shoppers pay with Visa or Mastercard credit cards, merchants are charged interchange fees that are set by the card networks and funneled to the banks that issued those cards. These "swipe" fees vary widely, but are higher on rewards credit cards -- sometimes around 3% of the cardholder's purchase price.
Card networks say preventing merchants from picking and choosing among credit cards creates a frictionless experience for consumers. They argue their rule also creates an even playing field by making sure credit cards issued by banks large and small are accepted.
"If a merchant agrees to accept Mastercard, there cannot be any discrimination between different issuers' cards or between different types of cards issued by one financial institution," a Mastercard spokesman said.
"Visa believes consumers should always have a choice in how they pay, including being allowed to use their Visa credit card regardless of the card type or issuer. When consumer choice is limited, nobody wins," said a Visa spokeswoman.
[...] Visa and Mastercard premium credit cards charge some of the highest interchange fees, often north of 2.1% of the purchase amount, compared with roughly 1.2% to 1.7% on nonpremium credit cards.
[...] For some merchants with lower margins, like grocers, the fees can have a big impact. Kroger Co. unit Foods Co Supermarkets stopped accepting Visa credit cards in August after the two companies failed to reach an agreement on swipe fees.
Kroger Chief Information Officer Chris Hjelm said in an interview at the time that the growing use of rewards credit cards factored into the decision.
(Score: 3, Insightful) by bziman on Saturday September 29 2018, @02:48PM (18 children)
I have a credit card. I go to use it. A retailer doesn't accept it. Do they imagine I will get a different credit card? No, I'll find a different retailer. Hell, Amazon has its own Chase rewards credit card. Will they not accept their own card?
Imagine you get to the check out in the grocery store and discover than your particular Visa card is no good at that store... Are you carrying another card? Or enough cash? Or do you leave a hundred bucks worth of stuff there by the register and walk out? With a promise to never return.
I guarantee consumers will blame the store, not the card. If you want to accept cards, you need to build that transaction fee into your prices and quit complaining.
On the other hand, maybe it would be good for America if the consumer credit industry died... If the retailers win, that'd be the outcome... but I don't see the retailers winning.
(Score: 0) by Anonymous Coward on Saturday September 29 2018, @03:12PM (12 children)
That's the thing, if the logo no longer tells you that you can use a card at a given establishment, then it's going to become extremely annoying to figure out whether or not you can pay and I'm guessing that people will either drop the card or drop the store depending upon the situation. I know I wouldn't keep a card that wasn't accepted at most stores.
I think this is a ton of talk to try and squeeze the credit card networks and card issuers to lower their fees. Because there's just so many problems and so few ways of properly addressing them.
The proper way of dealing with this would be to raise prices, but they can't raise prices because so many businesses are run by cheap, greedy bastards that refuse to pay what the work costs to provide, so there's an ever shrinking amount of household earnings with which to buy most of these products.
(Score: 4, Interesting) by IndigoFreak on Saturday September 29 2018, @03:26PM (10 children)
Another issue for me at least.
If all retailers and consumers stop using credit cards(by some magic wand), you wouldn't see product prices drop. The retailers will no longer be paying the fees but they will just pocket that money and give out bonuses to their execs or just pocket the money for a rainy day.
There is 0 incentive for me not to use a credit card that gives bonuses. It's the only way I can claw back some money for myself.
Very rarely do I run into a business(usually in small towns) that charge you for using a credit card on purchases under certain amounts. If more stores did this upfront, for all credit card transactions, you might see a change in consumer behavior. And at least that is fair to customers paying cash or check.
(Score: 0) by Anonymous Coward on Saturday September 29 2018, @03:39PM (5 children)
Back in the day when I was first getting involved with computers, early '90s, you'd see in a lot of the ads for computer hardware an indication that they provided a discount for cash payments rather than credit cards. It wasn't very big, IIRC it was usually about 3%.
God, I miss those old computer hardware magazines that they used to give out for free that were mostly just a huge listing of various local computer stores and deals. Those were amazing to read through and just generally slobber all over while thinking about that $4k rig that I could never afford. The one with that Pentium 133mhz chip rather than the crappy 75mhz chip I had.
That's not something you typically see any more for various reasons and I'm not even sure if the networks allow you to do that. I suspect that between fewer people using cash and checks, wanting to have a less complicated pricing structure and various other factors that you're not going to see it come back, even if they're allowed to.
(Score: 3, Interesting) by Runaway1956 on Saturday September 29 2018, @07:30PM (4 children)
I am almost certain that by 1990, it was universally illegal throughout the US to advertise a "cash price". It was common in the '60's and '70's. It was growing far less common in the '80's. At some point, it became illegal, and I'm pretty sure that point was before 1990.
(Score: 0) by Anonymous Coward on Saturday September 29 2018, @07:53PM
The advertised price was the credit card price and there was a stated discount for cash or credit. This was well into the '90s.
Legally speaking, this is a matter of the merchant agreement and I don't think that change happened until later.
(Score: 1) by Blymie on Sunday September 30 2018, @04:44AM
It never has been illegal to state a cash price.
You're confusing civil (typically common law in most US states) with criminal law.
What happens, is that the credit card company forces the merchant to *sign an agreement* to not charge a different price for card, versus cash. And further, to not advertise the rate. So when you see companies in "court" for doing so, they are in civil, not criminal court.
If a merchant breaks that contract and charges different rates, that's not breaking the law, and the merchant did nothing illegal. It's breach of contract.
(Score: 0) by Anonymous Coward on Sunday September 30 2018, @12:24PM (1 child)
In Australia it is illegal to display a non-GST price. The price displayed must be inclusive of GST. If you have ever shopped in America or the EU with VAT etc you'd understand why.
(Score: 2) by Pino P on Sunday September 30 2018, @04:57PM
In the Canadian province of British Columbia, it's the other way around: it is illegal to advertise a price including tax. I learned this from the FAQ of the Tarsnap online backup service.
(Score: 2) by martyb on Saturday September 29 2018, @04:39PM (2 children)
There is an unstated assumption here that cash transactions are free to the merchants and that is far from being the case.
See this comment [soylentnews.org], above.
Wit is intellect, dancing.
(Score: 1) by Blymie on Sunday September 30 2018, @04:49AM (1 child)
There's a vast difference between a small deposit charge for depositing cash from a *thousand* consumers, and paying 3% on every dollar earned to credit card companies.
All of your additional "costs" to the merchant, such as getting the money to the bank certainly do exist, but they are trivial in comparison. If they weren't, why would stores care about the 3%? Why would they want to charge more for credit cards? If cash was JUST as expensive, or if cash HURT, they'd want to charge LESS for credit card transactions, yes?
No... that 3% is VERY VERY *VERY* expensive.
(Score: 0) by Anonymous Coward on Sunday September 30 2018, @12:19PM
In many cases that 3% is the profit the business makes.
For a lot of cases the business is making 5% to 10% profit on a transaction so 3% is a lot.
(Score: 1) by Blymie on Sunday September 30 2018, @05:02AM
Prices won't drop overnight, you're right there.
An example? In the 90s, Canada changed how it taxed various goods. Prior to the "GST", the "goods and services" tax, there was an "MST", the "merchant sales tax".
The difference?
The MST was applied not at the retailer level, but at the manufacturer/import level. It was a hidden tax, and was not applied at the cash register -- merchants had in fact already paid it, when buying clothes (for example) from distributors. The problem with the MST was that it hurt exports, because this tax was applied at the point of manufacture. The new GST was applied at point of sale, at the cash register.. and therefore did not effect export pricing.
So over a period of a few months, retailers paid + to the manufacturer/distributor, which disappeared, to paying . In other words, the price of product merchants bought dropped 13.5% over a few months.
And not one penny was returned to the consumer. Investigative news reports were done on this very fact, that prices did not drop after this change.
But what really happened is that the market reacted slowly, PLUS inflation took care of the rest. Over a period of a few years, pricing did even out... as stores sought to compete with each other.
Of course with credit card pricing, it's a little bit different too. If credit cards are, for example, no longer "part of the price", but instead charged an additional 3%? That means that the "hidden" fee disappears. The difference though is that this fee was not a cost to the store for all customers. Some stores may be "mostly cash", so that only 10% of customers might use cards. Others might be "mostly credit", where the inverse is true. But in either case, the 'real cost" to the price you pay for goods, would be dependent upon averaging this cost in all prices.
So if it's 10% credit card users, that means that .3% is being charged extra on every gallon of milk. 50%, means 1.5% and so on. That "hidden fee" would disappear over months in a grocery store, as they compete with each other and as "churn" is much faster in a grocery store than say... a clothing store. They have lots of perishable goods.
Perhaps I should sue credit card companies for making me type this all at 1am. :P
(Score: 1) by khallow on Sunday September 30 2018, @12:30AM
So what labor are we speaking of with respect to credit cards? And you're arguing circularly. The cost of the work is already what the work costs to provide. And if you're speaking of the costs to the workers, well, it's less, else they wouldn't work.
(Score: 2, Insightful) by ShadowSystems on Saturday September 29 2018, @04:13PM (3 children)
I'd just leave the potential sale sitting at the register & walk out.
"The sign says you accept Visa. I'm using a Visa. You refuse my Visa. I refuse to do business with you. Chiao!"
Voting with the wallet (my Visa debit card) is the best way to pound the lesson home.
Leaving $100+ in groceries at the till & leaving forces the merchant to examine all that lost profit while they clean up the mess.
Have fun with that half melted ice cream, thawing frozen vegetables, & warming hamburger - I'm sure it'll still sell fine to the next Visa customer that tries to buy it too.
(Score: 0) by Anonymous Coward on Saturday September 29 2018, @04:40PM
This is what will happen.
Also not because 'my feelings'. It will be because THAT is all I have to use to pay for this. I do not carry 150 bucks in cash around because well because I do not have to 'swing by the bank' anymore. I spend about 3k per month on my card. I sure as HELL am not walking around with 3k or making extra trips to the bank. I am not going to duck out and grab some money or use that sketchy ATM you conveniently have in your store. I just will move on and not come back. This is not the 1960s anymore. Oh you do not take less than 10 dollars on a card? Well here is your stuff back have fun with that. I will consider you a place to avoid in the future too.
I did not use costco for the longest time. Why? Because I did not want to deal with cash and they only accepted 1 type of credit card that I did not have. Same with Sams. The stores did just fine without me. But even now that they do accept everything else I still do not shop there. Probably never will.
(Score: 3, Insightful) by tibman on Saturday September 29 2018, @10:04PM (1 child)
And whoever was with you would be embarrassed. Then you'd have to re-cart all that stuff again at another store. Then when your card was rejected again you'd do what?
Retailers should be able to decide what card fee they are willing to pay. Or they should be permitted to tack the fee onto your purchase. It's their business and there is a happy medium somewhere. Visa is bullying everyone because credit cards are a must have.
SN won't survive on lurkers alone. Write comments.
(Score: 0) by Anonymous Coward on Sunday September 30 2018, @03:25PM
Not embarrassed at all. I would just leave again. Do you maybe see a pattern? I am not embarrassed at all. My family would do the same thing. Sure the store would get exactly the kind of customer it wants. Ones with the 'special cards' and 'cash'. The rest of us would just skip ever going back.
(Score: 3, Insightful) by DannyB on Sunday September 30 2018, @08:32PM
There is a fee that can be charged called a Convenience Fee.
What will happen is that your grocer will charge you a convenience fee instead of not accepting your card. So you'll pay a buck extra, or two.
Suddenly those valuable rewards don't seem so valuable any more.
I've expected this for quite some time. I've explained on SN before that my spouse and I have several major cards. We get offers in the mail all the time and trash them. The ones we have are the ones we want rewards for.
Here is the game I play:
* Use credit cards to buy EVERYTHING.
* Never EVER use cash unless you must
* Never EVER borrow money on a credit card
* Never spend money on the card unless you are prepared to spend cash or write a check right now!
* Pay the cards off promptly -- like once a week. Don't wait until the end of the month. We don't want that money sitting in our checking looking like it has not been spent.
We have tens of thousands of dollars worth of credit on those cards, but we keep the balances at zero. (Possibly some small unpaid balance that is part of our ordinary spending at any given moment.)
When I say buy everything on the card, I mean utilities, groceries, fuel, anything you buy on Amazon, etc. Use your Target card at Target. Your Amazon card at Amazon. The Disney and Southwest cards on everything else. Each year when we go to Disney World, we have several hundred dollars in rewards. (Yes, really) And somewhere between 1/2 to 1 flight free.
So you can see how this game is worth it.
Another trick: Buy a couple thousand dollars worth of Disney gift cards at Target, using your Target card getting 5% off at the register. At Disney those cards are worth face value. But you got 5% off. On a couple thousand or more dollars, that is a bit of real money you just saved. There are other Disney tricks.
Now, you can probably see why retailers don't like this. Where am I getting all that free money from? Oh, it's just a magical pile of money in the sky! (I'm getting it from people who pay cash that's who. Oh, and people who are irresponsible with credit cards and pay enormous amounts of interest.)
Just sayin'. It's how the game works. So play it by the rules.
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