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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, Interesting) by theluggage on Saturday September 29 2018, @03:13PM (5 children)
Credit card terminal: $500/year
Swipe fees: 3% per transaction
Customers walking into your store with an added incentive to spend money they haven't got without even feeling the thickness of the wad of virtual cash they're handing over: priceless.
Or perhaps the big retailers really mean they'd rather sell customers their own store cards and credit schemes (with rates and penalty charges that make even Nasty McBankerface look like Robin Hood) because the old naive business model of buying goods from wholesalers and promoting and selling them to the public at a mark-up is long dead...?
It pains me to sound sympathetic towards banks, but in this specific case...
(Score: 0) by Anonymous Coward on Saturday September 29 2018, @03:42PM
Credit cards tend to increase spending. Which is the main reason why stores offer them even when it's a face to face interaction.
Not only does it make it less painful to pay at the time, but it also provides some protection if for some reason there's an issue with the purchase. I know the credit cards I have all have extended warranties included, so if I buy something and it dies just after the warranty period, I'm not out of luck.
You also have people like me that don't generally pay cash if we can help it as losing a wallet that's full of credit cards may not result in any money being stolen, but losing an entire wallet could lead to all of that cash being stolen. Even if there are cases where a wallet with thousands of dollars gets turned in without any of it being stolen.
(Score: 0) by Anonymous Coward on Saturday September 29 2018, @04:42PM
What is amusing is those SAME cards are run by the same bank companies. BoA, Citi and Chase. There is not exactly a lot of different companies running their own VISA systems. They buy the system and skin it.
(Score: 1) by khallow on Sunday September 30 2018, @12:33AM
That's far from priceless. Customers aren't making your store infinite profit as a result of the fees. And if the fees mean the difference between profit and loss, well it's very distant from priceless.
(Score: 1) by Blymie on Sunday September 30 2018, @05:06AM (1 child)
My accountant, a very stoic and reserved man, once became VERY very animated and started gesticulating wildly whilst describing income taxes payments on each pay period.
He claimed that it was the "biggest victory" for all governments, everywhere, when income tax payments were made on each pay stub, for the average citizen did not truly feel the true cost of his government, nor the taxes he paid. That if instead, the government handed a bill for -- say, $12000 at the end of the year.. instead of $500 per biweekly paycheck, citizens would go bananas.
He's probably right. Same as with spending money you don't have.
(Score: 0) by Anonymous Coward on Sunday September 30 2018, @12:22PM
PAYG has saved the Australian government billions. When you are paid a percentage is taken out as tax and paid to the ATO.
These days people would be mostly unable to pay $20,000 to $30,000 at the end of the financial year.