Stories
Slash Boxes
Comments

SoylentNews is people

posted by chromas on Saturday September 29 2018, @12:40PM   Printer-friendly
from the BuT-mUh-FrEe-ReWaRdS! dept.

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.


Original Submission

 
This discussion has been archived. No new comments can be posted.
Display Options Threshold/Breakthrough Mark All as Read Mark All as Unread
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
  • (Score: 0) by Anonymous Coward on Saturday September 29 2018, @03:12PM (12 children)

    by Anonymous Coward on Saturday September 29 2018, @03:12PM (#741808)

    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)

    by IndigoFreak (3415) on Saturday September 29 2018, @03:26PM (#741815)

    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)

      by Anonymous Coward on Saturday September 29 2018, @03:39PM (#741819)

      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)

        by Runaway1956 (2926) Subscriber Badge on Saturday September 29 2018, @07:30PM (#741885) Journal

        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

          by Anonymous Coward on Saturday September 29 2018, @07:53PM (#741888)

          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

          by Blymie (4020) on Sunday September 30 2018, @04:44AM (#742006)

          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)

          by Anonymous Coward on Sunday September 30 2018, @12:24PM (#742061)

          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

            by Pino P (4721) on Sunday September 30 2018, @04:57PM (#742113) Journal

            In Australia it is illegal to display a non-GST price.

            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)

      by martyb (76) Subscriber Badge on Saturday September 29 2018, @04:39PM (#741843) Journal

      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 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)

        by Blymie (4020) on Sunday September 30 2018, @04:49AM (#742007)

        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

          by Anonymous Coward on Sunday September 30 2018, @12:19PM (#742058)

          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

      by Blymie (4020) on Sunday September 30 2018, @05:02AM (#742010)

      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

    by khallow (3766) Subscriber Badge on Sunday September 30 2018, @12:30AM (#741956) Journal

    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 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.