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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: 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