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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: 3, Insightful) by DannyB on Sunday September 30 2018, @08:32PM

    by DannyB (5839) Subscriber Badge on Sunday September 30 2018, @08:32PM (#742152) Journal

    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.

    --
    People today are educated enough to repeat what they are taught but not to question what they are taught.
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