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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.


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  • (Score: 2) by quietus on Sunday September 30 2018, @09:50AM (2 children)

    by quietus (6328) on Sunday September 30 2018, @09:50AM (#742038) Journal

    Card issuing banks use reward schemes to incentivise consumers to pay with the cards providing the highest fees to the bank. Maybe they do the same with retailers?

    There is a huge difference between the US and the EU here: in the European Union, debit card fee per transaction is something around 0.06%. For credit card transactions, the fee is capped [europa.eu] between 0.3 and 0.4%.

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  • (Score: 2) by TheRaven on Sunday September 30 2018, @11:26AM

    by TheRaven (270) on Sunday September 30 2018, @11:26AM (#742049) Journal
    The cap on transactions is very recent and it killed off a lot of reward cards when it came in. I was getting 1% cash back before the rule change without any shopping around for a good deal. Now no one offers more than 0.5% except for some very short-term deals (e.g. 5% for 3 months in the hope that they can get people to run up a big balance that they'll carry forward for a long time).
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  • (Score: 0) by Anonymous Coward on Monday October 01 2018, @07:06PM

    by Anonymous Coward on Monday October 01 2018, @07:06PM (#742418)

    For credit card transactions, the fee is capped [europa.eu] between 0.3 and 0.4%.

    Note the linked factsheet refers to a cap only on interchange fees, which is just one of the fees relevant to processing credit card transactions.

    The interchange fee is the fee, set by the credit card network, which is paid by the acquirer (typically a bank) to the issuer (also typically a bank). It's usually not directly paid by the merchant. Most businesses just sign up with a processor and that processor charges a single rate per transaction. Sometimes there are a couple different rate buckets depending on the details of the transaction, but often the exact interchange fee is hidden.

    Obviously retailers like Amazon have a lot of clout and can negotiate very favourable agreements with a processor. That very well may include directly paying the interchange fee on each transaction. Most retailers won't have that kind of influence.