After 20 years of fighting, Visa and Mastercard have agreed to lower their swipe fees. Check it out:
In the deal, the credit-card networks and banks will lower the fees that merchants pay to accept credit cards. There is a range of these fees, typically referred to as swipe fees or interchange fees, with an average of around 2%. The pact would lower the rates by 0.04 percentage point and keep them there for five years.
So fees will go down from 2% to 1.96%. Booyah! In Europe swipe fees are capped at 0.3% and credit card companies have remained thriving and profitable. Draw your own conclusions.
But if swipe fees in the U.S. were based on actual costs, the credit card companies couldn't offer reward perks - 2% always, or 5% on select categories, or whatever. This, it turns out, benefits the rich and hurts the poor - https://www.brookings.edu/articles/how-credit-card-companies-reward-the-rich-and-punish-the-rest-of-us/ . Anyone want to bet that the lawyers negotiating the settlement also held credit cards with good perks?
Also, following the money: managers in big businesses, and small business owners, have corporate credit cards. The company pays the card swipe fee (in essence), and the kickback ("rewards") goes to the manager or owner, in the form of reward points. The IRS should, of course, force companies to report this as additional compensation, but it does not. So, untaxed income.
And finally, businesses that affiliate with a credit card can make a lot of money - https://sherwoodmedia.com/snacks/newsletters/GptbTfH3TGCsKNYjP48YR/articles/3K22y9MNvS9PoubwUv0uz5/ - Delta, for 2018, got 35% of its profits from its branded credit card.
Exactly right.
Credit cards impose a 2% (sorry, 1.94%) tax on non-users.
They're a lot like cars that way. Even though I don't own one, I still have to breath your exhaust.
Regardless of how a merchant collects payment, there's a cost. Cash is a headache for a business. It's easily stolen, you pretty much have to manually count it, and it has to be physically transported to the bank every day. For a lot of businesses, it's worth 2% to not have to handle cash, so people who pay cash are not subsidizing credit card payments. By far the best deal from a retailer's perspective is payment by debit card. It has all the advantages of credit card payments, but service fees are considerably lower.
I'm not talking about the merchant at all, you're confusing two of the three parties in the transaction. Merchant costs are an entirely different conversation.
I'm talking about the cash-back I get from my credit card company. That's them splitting the rake me with me.
Where do you think it comes from?
Just another insidious way the system of big finance makes it harder for new businesses to break in, even small local ones in areas with no competition. The CC payment handling fees are huge.
It's rather sad that this country is so money hungry-greedy!