I play the credit card "game" because I hate feeling like I'm leaving money on the table, but I really wish I didn't have to. Some degrees of fees make sense, to run the network, and handle fraud, but it's ridiculous that people have this sense that shopping should somehow fund your vacation.
Where I am it's increasingly common to see credit card fees when checking out. I get it, because merchants are being charged 3-5% of their total revenue. I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.
ianhawes 11 hours ago [-]
There is, it's called debit cards, but Stripe et al. "simplified" pricing by charging a percentage regardless of card type instead of the traditional interchange-plus pricing. Merchant banks "used to" make money by tacking on fixed fees, i.e. a set-up fee, terminal fee, monthly fee, etc, but then Stripe came along and provided (1) a better dev experience, (2) better onboarding, and (3) simplified pricing.
karlosvomacka 9 hours ago [-]
For US readers - in my country in europe I'd say that 95% of people have only debit card, not credit card. it's very not common to have a credit card here. Card payments are extremely common, but everyone uses debit card.
danvayn 1 hours ago [-]
Yes, it’s because Americans have to build credit or otherwise optimize their credit score to finance large purchases. In most other countries there either isn’t a credit score concept or your credit score does not have to be built up over a long period to be effective like it does here. It doesn’t help that a third of Americans dont really have savings either; credit helps them to work around this
smelendez 25 minutes ago [-]
I use credit for the purchase protection (I believe many debit cards have this as well but it’s easier when you haven’t yet paid the charge, and seems better enshrined in law for credit), for the rewards (which including signup bonuses can be huge), for the float period, and for security — if somebody fraudulently uses a credit card versus a debit card, there’s no actual money missing while the situation gets resolved.
avianlyric 8 hours ago [-]
The EU caps all card interchange fees at 0.3% for credit cards and 0.2% for debit, which is an order of magnitude lower than some of the fees in the US.
That’s why you don’t see the same kinds of credit card deals in the EU compared to the US.
adrian_b 7 hours ago [-]
I think that there was a recent HN thread that linked to an article which argued that the credit card system of USA has the purpose of taking money from the poor and giving them to the rich, and the estimated amount of the money transferred in this way was huge.
The EU limits for card fees prevent this in Europe, which is very good.
skybrian 4 hours ago [-]
Assuming they pay their credit card bill themselves, it's effectively a volume discount for big spenders (though that "volume" goes to multiple vendors). The argument that the money "comes from" other customers is sort of like claiming that when you "save money" by buying things on sale, the money comes from other customers who paid full price. Actually you aren't "saving money" at all; you're spending money.
Similarly, the "whales" in a casino get lots of "free" benefits, but only because they're losing a lot of money gambling. They paid for them.
Contrast with frequent-flier miles where businesses pay for plane tickets but the points go to individuals. That's pretty clearly siphoning off business expenses.
8note 57 minutes ago [-]
ok, but what about for equivalent spenders?
one cash, one credit?
the credit payer is clearly paying less, with the difference paid by increased prices overall. That is the cash purchaser paying the credit one
> has the purpose of taking money from the poor and giving them to the rich
Are you saying it is intentional? Is it not more simply explained as simple greed by two companies colluding to keep competitors out of their market?
mayli 5 hours ago [-]
Yep, pretty much the credit card tax. One of the most ugly things.
shimman 5 hours ago [-]
Do you have a link? Highly interested in that thread. Do you know if people discussed how state solutions faired? I'm assuming something like Pix from the Brazilian Central Bank does an even better job at prevention while providing a public service.
Wouldn’t it be simpler for European countries to simply raise the VAT and redistribute the proceeds to poor people, rather than regulate the interchange fees if the concern is inequality
klrefg 22 minutes ago [-]
So.. you’d have both higher taxes and higher interchange fees? What’s the appeal of that?
post-it 5 hours ago [-]
Your solution sounds significantly more complicated actually.
derektank 3 hours ago [-]
In what way? There are many sources of inequality. Trying to play whack a mole with each one seems much more laborious than simply deciding how much inequality you want in society, and then setting it with the tax code
opinion-is-bad 2 hours ago [-]
Inequality isn’t as simple as pulling one tax lever, and not all levers are equally effective at all points of the pull. Dead-weight loss is an important concept when designing tax policies, otherwise why not simply eliminate ALL taxes in place of an expanded VAT or income tax or corporate tax or whatever.
klrefg 24 minutes ago [-]
How do any of they rent cars when they travel? I think that still requires a credit pretty much anywhere in Europe.
I’s bet the proportion is way higher than 5% even if the overwhelming majority use their credit cards the same was as debit.
franga2000 14 minutes ago [-]
The only time I "needed" a credit card is when I tried to sign up for some US company's service. It rejected my debit card because it wanted credit, so I just took my business elsewhere.
Other than that, I've rented cars, rented other things with a "X will be charged to your card if you return it late", unattended gas stations... all the usual places you'd think need a credit card. It's fine.
We do have a "negative limit" that banks often give you, which means you can go into the red and pay it back later, but that has nothing to do with the card, it works even for normal bank transactions.
numpad0 7 hours ago [-]
Debit cards still go through the same credit card infrastructure. The practical difference at this point is whether the card company backend defer payment until collection date for the benefit of customers, or don't wait and just call APIs on the spot. There's a whole "internet" of credit card infra that lets you pay using those numbers on the card like they are phone numbers.
Stripe don't do handle their own payment, they just wrap someone else's API, and pay them in percentages and dollars per API calls(idk about the ones behind Stripe, but I think I saw somewhere that those middlemen often charge both? Egregious, but they're literally old boys money men and they have lots of leverages against you).
What are truly different to credit/debit card systems are things like PayPal, Apple/Google and such gift cards with scratch areas, and Chinese QR payment apps. Those are the ones that don't (always) go through the CC ecosystem.
losvedir 8 hours ago [-]
Debit cards aren't that, in practice, because as you say they typically get the same 3% fee whenever I've asked. Toast and other point of sale networks just charge it based on the network and not the card type.
But even so, I still prefer the credit card instrument, used as a "charge card". For those that don't know, a "charge card" is common with businesses and is expected to be paid off every month. But it helps with managing your cashflow - e.g. you can keep your money in a savings account all month and make one transaction at the end - and it keeps your actual money from being at risk of fraud.
Most Europeans seem confused with how Americans use credit cards for everything, but about half of us use them as charge cards, paying them off every month.
That is a benefit, so I can see paying a small percentage for it, but I don't think that benefit alone justifies the 3-5% of a transaction that credit cards charge now.
LeBit 8 hours ago [-]
As a Canadian , I thought that was the expected de facto way of using credit cards: you pay everything with it so you get rewards (ie money) at the end of the year as a function of how much you used the card during the year. At the end of the month, you pay whatever the outstanding balance is, otherwise you pay high interests.
rootusrootus 3 hours ago [-]
Many of us use it exactly that way, though the rewards (in my personal experience) are immediate as soon as a transaction clears and not yearly. Carrying a revolving balance is a quick way to spiral into bankruptcy because the rates are so high (and the minimum payment is typically 1% of the balance).
zaphirplane 7 hours ago [-]
There are fees thou and i cant imagine they are losing out as a business
eastbayjake 8 hours ago [-]
Debit cards are not subject to surcharging, and any merchant doing so is violating Visa/Mastercard regulations. (And possibly state law in several places -- Colorado where I live caps surcharge at the lesser of 2% or the cost of payment processing.)
ecommerceguy 7 hours ago [-]
Correct, Toast specifically will not allow it under any circumstance.
Debit cards issued by smaller community banks or credit unions are exempt from the cap and carry higher interchange rates (often 1.0%–1.65% + $0.10).
All merchants should either do Surcharging or Cash Discount.
losvedir 6 hours ago [-]
You say "Correct", but Toast works the opposite of the person you're responding to. They charge the same fee regardless if it's a debit or credit card. They charge based on the network, and most debit cards in my experience use the Visa or Mastercard network. Yes, this is contrary to the Visa/MC terms, but I've never seen it enforced.
It’s not just community banks or credit unions. The cap is $10 billion in assets.
There’s a whole industry of mid-sized banks just below that which are offering their services as sponsor banks to fintechs that want to earn the orders of magnitudes higher interchange rates while still getting debit acceptance/less surcharges and being allowed to offer a debit product.
cmurf 7 hours ago [-]
It’s 2% or actual cost for credit cards.
Under subparagraph f)A seller or lessor shall not impose a surcharge if a customer elects to pay for goods or services by Check, cash, debit card, processing as a debit payment, or gift card.
What even is an “eCheck”? I keep hearing that word but haven’t found a sane definition. Is it just a weird term for an ACH debit transfer?
projektfu 4 hours ago [-]
Sometimes it is a synonym for ACH, but it could be processed more literally as a check, with a check image and everything, and something like "Pre-Authorized Payment" written on the signature line. Usually they also let you specify the check number, if you wanted to have it follow your own sequence. Amazon Business was doing this with invoice payments up until January of this year.
4lx87 8 hours ago [-]
Prices reflect the credit card merchant fees, even if there's no separate surcharge. People pay higher prices and anyone who doesn't use a credit card to recoup some in "rewards" is effectively getting taxed.
rootusrootus 3 hours ago [-]
There is some nuance there. Cash is hardly free to process, and I have seen arguments that it is not far from the same overhead as credit card fees. So people who pay in cash are not subsidizing credit card users. Maybe it could be argued that debit card users are, though.
4lx87 8 hours ago [-]
You get charged higher prices and then have to use a credit card to recoup the loss, so that rent-seeking monopolists can make money. And Americans are also seemingly baffled by the idea of regulating this away, as if other countries doing this don't exist. Credit cards are the USA epitomized.
lotsofpulp 7 hours ago [-]
It was regulated away in the Durbin Amendment of the 2010 Dodd-Frank law:
American sellers have had the option to collect however much extra they want from people paying with credit cards, and many do. The government, utilities, mobile network providers, insurance, schools, healthcare, gas stations, home contractors, etc all usually collect at least 2% to 3% more if a buyer wants to pay with a credit card.
I am down to only using my credit cards for retail purchases, restaurants, and travel. Otherwise, the extra cost of paying with credit cards don't make sense and I pay with debit card or electronic money transfer (ACH/Zelle).
Basically, the sellers that continue to collect the same price from credit card users and non credit card users are those who believe that incentivizing credit card usage will result in sufficient people paying sufficiently higher prices such that it offsets the processing costs of the credit card transaction (and the chargeback risk).
rootusrootus 3 hours ago [-]
It is interesting the breadth of experiences in this regard. I pay basically everything on my card, to the tune of 5-6 grand a month, including utilities. The only time I have ever seen a surcharge is for things like contractors doing work at my house. The gas company, electric, the city, all take the card with no extra charge. I rack up a lot of airline miles just from day-to-day use.
vjvjvjvjghv 2 hours ago [-]
None of the utilities for my house take credit card without surcharge.
titanomachy 6 hours ago [-]
Most stripe transactions do use cost-plus pricing. The flat pricing is popular with smaller businesses, but larger companies graduate from it pretty quickly.
jimbob45 10 hours ago [-]
You have to wait for the investigation to complete to receive compensation if you’re hit by fraud on a debit card. Credit cards don’t share that issue. If you’re poor or living paycheck-to-paycheck, debit cards are potentially a risk to your livelihood.
seabre 9 hours ago [-]
As someone who has been hit with fraud on a debit card and a credit card, the process to recover money from fraud on a credit card is so much easier and more hassle-free than a debit card.
The big difference is that with a debit card, it's your money that is hit by fraud. The debit card is basically just a proxy. You have to go file a police report. You have to hope the bank will give you the money back.
When the credit card gets hit, it's the credit card company's money and they will seemingly chase the fraud to the ends of the earth to recover it.
rootusrootus 3 hours ago [-]
This is where you find out which banks suck, and which do not. I will say that while USAA is a long ways from perfect, when someone swiped my wife's debit card and took $5000 from our checking account, they put that money back within a day while the investigation was pending. No police report necessary, either.
avianlyric 8 hours ago [-]
This depends heavily on the country you’re in. In the UK banks are required to refund you within a single business day if they don’t have any evidence that the customer isn’t trying to defraud the bank themselves.
They try to squirm out of that of course. But in general getting your money back isn’t too tricky even with a debit card.
seabre 8 hours ago [-]
Oh yeah. I should definitely caveat: I am in the US. I think banks here are required to cap your loss to $50 USD if you report unauthorized fraud within two business days. But still, the onus is on you. Meanwhile, virtually all credit cards in the US offer $0 liability protection. Which means at most you pay nothing.
arjvik 6 hours ago [-]
2 business days is a lot more strict than credit cards, which at the very least would not blink an eye at 2 weeks.
labcomputer 6 hours ago [-]
Er what?
You don’t even pay for the fraudulent credit card transactions in the first place! There’s no money for them to return!
thechao 7 hours ago [-]
> The big difference is that with a debit card, it's your money that is hit by fraud.
I kind of disagree. I think what's happened is the bank would prefer you to believe that. Imagine I kept my money at the bank, and deposited $10000 with the teller. Immediately afterward a robber follows in and steals that $10000 from the teller. Does the bank say "oh no Mr. TheChao! A robber stole your $10000!". I mean, no? The bank got robbed. Just because the bank's digital security is more tied one-to-one to dollars and its easier for a robber to steal from "my till" doesn't mean it was me who was robbed. It's the bank's job to stop that.
crdrost 5 hours ago [-]
This was also the subject of a brief sketch on That Mitchell and Webb Look:
> Bank official: Sit down Mr. Coleman, I'm, I'm afraid I've got bad news about your account.
> Mr. Coleman: Really?
> Bank official: I'm very sorry to say that someone's stolen your identity.
> Mr. Coleman: Oh God! Do you know who it was?
> Bank official: Well -- they said they were you, but uh--
> Mr. Coleman: Of course. So, um, what happened?
> Bank official: Well it was on the bank website, someone logged in, and committed identity theft electronically.
> Mr. Coleman: I see. Did they take anything else?
> Bank official: Uh, no.
> Mr. Coleman: Oh good, so all the money's still there...
> Bank official: What?
> Mr. Coleman: Well: it's just my identity that's gone -- none of your money?
> Bank official: Well no, they did -- they, they, emptied your account. It's identity theft, they took all the money.
> Mr. Coleman: That sounds more like a bank robbery.
Just as a handy thing to chuckle over and then link others to, if the topic comes up again.
Hardwired8976 7 hours ago [-]
Eh when you deposit money with a teller, it gets added to your account, which is in physical terms probably just a big storage and a database who has how much.
But in the case of debit card, the card ties the money to your account. It is actually that.
It's as if someone would steal from a personal safe at the bank.
lxgr 6 hours ago [-]
Except that you have strong statutory rights and commercial agreements between your bank and the card networks making it very likely that you’ll be made whole.
lxgr 6 hours ago [-]
I don’t thing Regulation E allows banks to require a police report before processing an unauthorized payment, nor can they outright refuse to do so.
Practically, Reg E is essentially as strong as Reg Z.
abdullahkhalids 8 hours ago [-]
The underlying problem is that the whole concept of cards is insane. Basically, you go around telling every shopkeeper the code for your safe, and ask them to take however much cash you owe them out of the safe.
Sane ways to organize payments:
- Merchant gives you a bill-id. You input it into your bank website - where you see the bill amount being charged. You accept, and bank pays merchant.
- You give merchant your card number (that's the only information - no expiry, no ccv, no name). A notification pops up on your bank website asking if you want to pay what the merchant is requesting. You accept.
- You go to your bank website and obtain a random number, either allowing a single transaction or a recurring transaction. You give the merchant the number. After merchant charges it, no other merchant can charge the same number.
KptMarchewa 8 hours ago [-]
> You go to your bank website and obtain a random number, either allowing a single transaction or a recurring transaction. You give the merchant the number. After merchant charges it, no other merchant can charge the same number.
That's basically how Blik works in Poland. With the exception being that the number is random 6 digits randomly generated when you open the app, that is active for ~2 minutes. So you don't deal with the issue of very long and error prone numbers to copy.
Cards have supported strong, positive cardholder authentication at the POS (chip and PIN) and online (3DS) since the 90s.
It’s entirely the US credit card industry and its regulating bodies’ fault that it has made neither mandatory in the way that e.g. the EU did, and is in fact fighting any attempt to do so tooth and nail (please think of the conversion rate!!)
dizhn 19 minutes ago [-]
Can you guys still write a check at the supermarket checkout? No pin credit cards are small potatoes next to personal checks in terms of weirdness. But I wish we had that trust culture everywhere.
kevin_thibedeau 9 hours ago [-]
I've always had fraudulent debit charges automatically reverted. Typically the bank's fraud detection disables the card and you clear up the matter on the phone. Or they call you to verify if a suspicious charge outside your profile was actually yours. The banks aren't required to do this but they can choose to provide this level of service.
bijowo1676 8 hours ago [-]
the cc fraud (and fraud protection) is THE main selling point of Visa/MC credit cards.
it is that different treatment of debit/cc fraud that pushes people towards high fee cc.
it is cc fraud protection that justifies high cc processing fees.
without cc fraud there is no need in visa/mc duopoly.
pyreko 4 hours ago [-]
Eh... I guess YMMV, at least for a low amount it took me literally an afternoon, I just froze my card, walked to the bank, explained the issue, and they refunded me on the spot (also switched out the card for a new one). They said technically it could be clawed back after investigation but they never did.
ryall 8 hours ago [-]
Weird take, credit card debt is much more of a risk to that demographic than debit cards ever will be
milesskorpen 10 hours ago [-]
Also debit cards run by smaller credit unions charge credit-card like fees (and then are used by fintechs to earn fees while making it harder to pass those fees on to end users).
ianhawes 7 hours ago [-]
Hah! Good to know, makes total sense.
spauldo 52 minutes ago [-]
In my case, it's literally free money. I travel a lot for work. I pay for everything with my card, and I'm reimbursed by the company. I rack up points, and whenever I travel for pleasure or as an independent contractor, hotels are free. I'd get free airfare like my coworkers do if I didn't avoid flying and drive everywhere.
The system is broken. No one with the power to fix it has any incentive to do so. Might as well get what you can.
asdfasvea 9 hours ago [-]
It boggles my mind that the government has privatized currency to these people.
Crazy-person-but-actually-really practical-idea:
Nationalize one if these networks. Maybe Discover.
The US government should provide us digital currency. The simplest way is to force the current systems to do that. All that rent they collect in terms of transactions fees shouldn't be profit for a private business but fees of the government.
Each of those networks carry a lot, a lot of ancient stuff. Gov is better off building a brand new network from scratch and promote it as a standard for banks to join.
There are plenty of great examples from this century all over the world.
Even Iran has a better payment infra than the US.
rootusrootus 3 hours ago [-]
> Even Iran has a better payment infra than the US.
That is a big claim. What would prevent someone from setting up something equally as good in the US, aside from the network effect and users unwilling to try something new for uncertain gain?
Aspos 2 hours ago [-]
End-users don't have much agency here, network needs banks.
In Iran, they simply don't have much choice, so banks use the only network available to them. It just happens to have been built in this century, so it's not as archaic as Visa.
Here in the US, I guess only regulators could realistically create a new network and have enough power to convince banks to adopt it.
Nothing, of course, stops anyone from creating a new network. But the network effect is THE driving force here, it's not a minor factor.
CGMthrowaway 9 hours ago [-]
>It boggles my mind that the government has privatized currency to these people.
That's the banks (lenders), not the payment networks.
>Crazy-person-but-actually-really practical-idea: Nationalize one if these networks. Maybe Discover.
The central planners want to. It's called FedNow.
ZeWaka 7 hours ago [-]
FedNow is the backend behind the "instant" transfers you see between some banks these days.
nsvd2 9 hours ago [-]
Yes, let's bring the experience of waiting at the DMV or dealing with the IRS to payment systems. Great idea
drdeca 6 hours ago [-]
My experiences with the DMV have actually been pretty decent. I think a lot of their negative reputation is from how it used to be, but that they have improved substantially since then?
spauldo 3 hours ago [-]
DMV is a state level agency and varies a lot depending on where you are. It's partially privatized here in Oklahoma and mostly painless (you only need the actual DMV for driver's tests, CDL background checks, etc.) but when I lived on the Illinois side of St. Louis I routinely heard of people spending hours in line.
Normally I'm not a huge fan of privatization but the way it's done here works great. The fees are set by the state and the agency gets a percentage, so if an area is underserved someone just opens another one.
derektank 6 hours ago [-]
Naturally, it varies by state. But yes, the Department of Licensing in WA state is also one of the least onerous bureaucracies I interact with
throwup238 6 hours ago [-]
I’ve never had a problem with the IRS or DMV, because unlike Visa or Mastercard they are government agencies with accountability to the people.
Visa and Mastercard are a cancer.
Navarr 9 hours ago [-]
Discover was JUST purchased by Capital One, so I think they'd hate for it to be nationalized
pampas 2 hours ago [-]
It's not about US consumers but international trade. The US likes taxing the world's B2C activity.
braiamp 10 hours ago [-]
That's what systems like Pix fixes. It's managed by the state, it's low cost and it's universal... which is why the US is against it so hard.
qurren 10 hours ago [-]
I used to think "I should be nice to merchants" and pay everything in cash.
That was 15 years ago. Now, living costs have gone up, I'm getting taxed to death by not just governments but increasingly more by businesses themselves ("benefits fees", "installation fee", "convenience fee", guilt-tip screens, sneaky price increases, etc.) so now I feel no guilt in playing the system to get at least some of my money back. Now I just churn 1-2 credit cards a year to pay my taxes and get some of it back in the massive sign up bonuses, which more than cover the transaction costs, fees, and then get me another few thousand back.
If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
Deal? No? Okay, you continue paying your merchant fees and I'll continue reaping the credit card bonuses to the maximum possible.
johannes1234321 9 hours ago [-]
> I used to think "I should be nice to merchants" and pay everything in cash.
That is only "nicer" as it allows to evade taxes. (Which some may consider nice)
But cost for cash is comparable to card payment if looked at seriously
* You need working time to count it
* You need working time to bring to bank (or request pickup, which costs)
* The bank will charge the deposit
* The bank will charge for the change you need
* In the shop the cash has to be protected (safe? Protection against robbery)
* This requires procedures for shift change etc (thus training time and prolonging working time)
* There is a risk of fraud (counterfeit, swap tricks etc.)
* Employees might have sticky fingers
senbrow 8 hours ago [-]
I own a business that does about $10-$15k mo USD in cash and card transactions and most of what you've said here doesn't ring true to me.
Unless you're handling huge amounts of cash, cards are WAY more expensive to deal with IME, especially because the fees scale as a percentage of revenue, so you can't just increase sales and lower your margins.
I bought a cheap cash and coin counter for about $400 on Amazon, which means it takes me about 2m to count whenever I need to balance the register.
For reference, with my POS I pay about $400 per MONTH in card fees (square).
It does take time to bring it to the bank, maybe 5-10m a week for me.
My bank does not charge for deposits or change; this would be insane and I've never encountered this in the US.
Counterfeits aren't generally an issue for small bills in practice; for $20+ we use a 50c testing pen that takes about 2s per transaction.
Sticky fingers are easily caught by balancing the register after each shift which is again about a 2m operation with cash and coin counters.
Overall I would be taking home about $500 more a month if all my customers paid cash, which is a big deal for a low margin business.
jamesfinlayson 4 hours ago [-]
> My bank does not charge for deposits or change; this would be insane and I've never encountered this in the US.
Some smaller banks in Australia do but the big ones all have cash and coin ATMs which are free for account holders.
brocklobsta 7 hours ago [-]
Many businesses, including restaurants, in California are going cashless and it makes my weekly budgeting harder (cash in wallet is my budget).
senbrow 7 hours ago [-]
I know, it sucks. I didn't intend to do cash before I started my business because it seemed like a pain but now that I've figured it out I'm really glad I did.
I love being able to transact without the payment processors knowing anything about my customers, and they appreciate it, too. My cash payers are usually very grateful.
kazinator 10 hours ago [-]
> If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
Where are you not getting this? You mean taxes on top of the retail price? You would pay cash, if the merchants colluded with you in evading taxes?
avianlyric 8 hours ago [-]
You could just do what all of Europe does and just include the tax in the listed retail price, rather than only tacking it on at the end.
9 hours ago [-]
8 hours ago [-]
zahlman 10 hours ago [-]
> If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
This seems to still be pretty reliable for most things in brick-and-mortar stores, FWIW.
tombert 3 hours ago [-]
Agreed.
I will admit that sometimes I do have fun playing the game (certainly a lot more when I was younger), but not often anymore. I feel like I "have" to do it, because there's no such thing as a free lunch, and as such stores price in the fees and so I might as well get it back in the form of traveling, but it is very weird that we just expect credit cards to do that.
asdff 10 hours ago [-]
Another thing to consider is your credit card rewards cash back etc are really trading your privacy for a little rounding error worth of discount in comparison to using cash.
You may also save far more money going cash only. E.g. some local restaurants near me give you like 5% off paying in cash. Gas is generally cheaper cash price vs card price or debit fee. You have a big job with a contractor, tell them you might be interested in paying cash and they might offer you a substantial discount.
lxgr 6 hours ago [-]
Many more restaurants and grocery stores don’t, and then it’s 2-5% of cashback vs. 0% cash discount. Doesn’t sound like a rounding error to me.
There are a lot of good reasons to dislike the market structure and game theory of card payments in the US, but please don’t accuse consumers of being short-sighted or irrational.
The only way to break the cycle of self-reinforcing incentives would be swift regulatory action. Absent that, playing the game is the rational move at the individual level for both merchants and consumers.
moduspol 10 hours ago [-]
Contractors, but also cosmetic health work. Invisalign, veneers, plastic surgery, etc. Probably most big-ticket items or services that you're not buying from a megacorp.
Sometimes they'll give even more than 5% because they can keep it off their books completely, but in those cases, they want physical cash--not just a check to avoid credit card fees.
toast0 10 hours ago [-]
> Another thing to consider is your credit card rewards cash back etc are really trading your privacy for a little rounding error worth of discount in comparison to using cash.
How much privacy really? If I get mostly $20s from the ATM, and the merchant does daily deposits of most of the $20s they get, why wouldn't banks start scanning and tracking serial numbers (if they don't already), if my purchasing habits are actually valuable?
puzzledobserver 10 hours ago [-]
In a theoretical sense, you are right.
The life of most currency notes is bank to customer to merchant to bank, and the bank could just track serial numbers to figure out your spending habits.
Practically, it would make little sense. The actual life of most currency notes is bank1 to customer to merchant to bank2, and there is a large probability that bank1 and bank2 are different entities. And then, so many more people use the credit card system, and it is so much easier to track people there, that the ROI on tracking people using cash would be low.
I would be very surprised if any bank tried to scan currency note serial numbers.
c22 6 hours ago [-]
Serial number scanning is a common feature of electronic cash counters (also networking!) I'm pretty sure all incoming serial numbers are scanned and checked against a database to find stolen banknotes. I don't know if any banks are tracking outgoing serial numbers, but it would be pretty trivial to implement. I've noticed when I go in and withdraw cash from a human teller that the cash no longer comes from a drawer, but rather is dispensed by an automatic cash handling machine and then handed to me.
bix6 8 hours ago [-]
Is the probability that large for bank1 vs bank2? There’s only a few major banks left. Chase has so many ATMs it’s hard to compete with the access.
asdff 10 hours ago [-]
Make change with your local under the table taco stand
> The site was officially launched on December 23, 1998.
sillysaurusx 11 hours ago [-]
Agreed. The pool hall nearby has a game of pool for $2. But if you use a credit card the minimum purchase is $6 (three games) due to fees. It works, but I thought it was a gimmick to trap people into playing more pool until I saw your comment here and realized it was from fees.
bigbuppo 10 hours ago [-]
What's really fun is when you're reselling something like Microsoft 365 and both the credit card companies and the state (through sales tax) make more than you do on each sale.
riazrizvi 10 hours ago [-]
I don't get this. Use cash like me and a bunch of us if you don't want to play the game. Or a debit card. Otherwise it's just an extra game. Extra games are choice. Choice is good.
kazinator 10 hours ago [-]
I would only use cash in situations where I'm able to obtain a discount compared to using a credit card.
Even then, you have to think twice. If you get scammed of cash, it's gone. If you get scammed in a credit card transaction, there is a fighting chance you can dispute the charge and have it reversed in their face.
You know that credit card feature of providing some insurance coverage on things like vehicle rentals? It may look like small print, but I actually used that. By some amazing fluke, I damaged the bumper of a rental car; the credit card coverage took care of it. I filled out minor paperwork and never heard about the issue.
Speaking of rentals, in many rental situations (even simple power tools at your Home Depot or whatever) you get charged a deposit on the card which comes back when you return the thing. It's just a number in database. With cash, you'd have to fork that up over the counter; very unappealing.
quickthrowman 8 hours ago [-]
> but it's ridiculous that people have this sense that shopping should somehow fund your vacation.
Some people are dumb and think tax refunds are free money when in reality they’re an interest-free loan to the IRS.
Money is fungible and instantly redeeming rewards for a statement credit is almost always the optimal way to use credit card rewards.
A person who wants to fund a vacation with rewards can simply redeem the rewards for a statement credit while simultaneously transferring that amount of cash to a HYSA or similar.
JamesSwift 4 hours ago [-]
> Money is fungible and instantly redeeming rewards for a statement credit is almost always the optimal way to use credit card rewards.
Uhh I have no credit cards where redeeming for credit is the optimal play. Every single one has 'offers' that give a further multiplier on the dollar amount of the points. Eg redeem $80 of points for a $100 home depot gift card.
JimsonYang 11 hours ago [-]
Why do you play the points game?
I felt like if I didnt spend $1 on something that was the equivalent of me spending $50 to get those same credit card points
toast0 10 hours ago [-]
I don't play the points game, I use a cashback card.
I use a cashback card, because most merchants will charge me the same regardless of payment method, and getting a 4% discount (+ time value of money) is the lowest cost to me. If I use some other payment method, the merchant may keep more of the transaction amount, and that's great for them, but it doesn't improve my customer experience. If interchange fees are strictly capped and cashback cards disappear, I wouldn't be upset; but while they're here, I'm incentivized to use them... following economic incentives while doing economic transactions seems like the right thing to do?
mrguyorama 10 hours ago [-]
>I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.
This is called "Regulate the max fees" like Europe did, where they still have functioning credit card networks, including good fraud coverage, but you aren't expected to dance for the credit card company for peanuts of kickback.
maelito 10 hours ago [-]
Well I don't really know what they do, but what I know is that Visa transactions costs are 0,22 € out of a payment of 1 €, Mastercard's is 0,23 €, and the French CB network is 0,17 €.
All of them do the same : ensure I get the money from the customer. Of course it's a larger project to run this in the whole world, but shouldn't it scale to less along with the number of billions of customers instead of the other way round ?
This is an insane amount of money. They killed micro-transactions, they killed the business model of the Web in favor of ads, the only popular way to do microtransactions right now.
thomasahle 10 hours ago [-]
They charge you 23%?
I thought in the EU the maximum interchange fee for consumer credit cards is capped at 0.3% of the transaction value.
maelito 10 hours ago [-]
Plus fixed fees.
I don't want to put responsability on anyone, I don't know who takes what in the chain, but I see the fees in practice.
I took the cheapest PSP I could find in Europe... Stripe is way more expensive, taking 25 cents of fixed fee !
Faaak 7 hours ago [-]
Which PSP did you choose finally?
idoubtit 9 hours ago [-]
> Visa transactions costs are 0,22 € out of a payment of 1 €, Mastercard's is 0,23 €, and the French CB network is 0,17 €.
Are you sure of these values? Because that's different from what I was told, which was that CB was cheaper for transactions of more than 10 €, because their fees were fixed, not rates like Visa and Mastercard.
From what I've just read (not counting the possible extra tax by the bank of the seller):
CB: 0.20% + 0.00117 € ⇒ 0.00317 € for 1 €, 0.20117 for 100 €
Visa: 0.20% + (0.01% to 0.014%) ⇒ up to 0.00214 € for 1 €, 0.214 € for 100 €
Mastercard: 0.20% + (0.15 to 0.17%)
The 0.20% is for the "interchange" described in the article. So it applies only when the seller and the buyer do not have the same bank. The maximal rate is fixed by the UE, and AFAIK everyone use the max value.
maelito 9 hours ago [-]
> Are you sure of these values?
Yes perfectly sure, just checked. I'm not saying these are visa fees vs CB fees. Lots of actors in the chain. But that's what I'm paying for each card type.
8 hours ago [-]
4 hours ago [-]
techdmn 12 hours ago [-]
I remember reading a comment here a while back about merchants being offered a discount on the processing fee if they also transmitted detailed data about the purchase (essentially the data that would be on the receipt). That data could then be resold on to advertisers. Does anyone remember this or have links to more data? (Not having much luck with search, maybe I'm hallucinating the whole thing.)
It's only available in the US, many countries have lower interchange fees and prohibit sending this data.
iancarroll 9 hours ago [-]
Importantly, there is only an incentive for L2/L3 data on business/corporate cards, which have an inflated interchange rate above personal cards anyway.
This is not a scheme to get enhanced targeting data for personal transactions.
Ive heard of casinos trying to pay out winnings using some kind of prepaid card, where theyd also get info about how people spent their casino winnings. Lots of ways to leverage that data.
soared 8 hours ago [-]
Also available in Canada now!
mikeweiss 11 hours ago [-]
I would love if it was transmitted to the bank for my own use so I can easily remember what I purchased or run budgeting software against it! Obviously wouldn't be excited about it being resold tho.
ctkhn 11 hours ago [-]
It's crazy it is resold but we don't even get it for our own use. Budgeting with credit card statements would instantly become so much more useful with less effort.
dylan604 11 hours ago [-]
Just provide Plaid your login credentials to your card account /s
mikeweiss 11 hours ago [-]
How does that help if the bank doesn't have the data?
kccqzy 8 hours ago [-]
It does, at least in some cases. When I book flights directly from an airline, the bank knows the name of the passenger, the date of the flight, the origin and destination airports, as well as the cabin class. For one bank (Chase), the information is printed on the statements; for another they have a web lookup tool.
c0_0p_ 8 hours ago [-]
Flights are one of the very few cases where this happens automatically though the card providers systems. It's called L2 data, and it's sent a little while after the transaction goes through.
11 hours ago [-]
massagedpelican 9 hours ago [-]
the main purpose of that data is for fraud detection, anything downstream (i.e. selling it to advertisers) is just the cherry on top. Merchants are always financially incentivized both implicitly and explicitly to do anything that would reduce fraud and increase the rate of successful authorizations.
RobRivera 11 hours ago [-]
This would explain why so many damn coffee shops dont deal with cash now - the double as a coffee shop and data reseller
smelendez 11 hours ago [-]
Well, they still pay a fee, it’s just reduced.
They primarily don’t deal with cash because cash is a pain. It needs to be physically taken to a bank and protected from theft by both staff and random robbers with guns, it needs to be counted all the time, and you need to maintain the right denominations to make change.
I have reservations about businesses getting rid of cash, especially if they’re turning away people who don’t have alternative ways to pay, but I certainly understand why they do it.
It’s also always awkward when a coffee shop is like 95% credit, and you try to hand them cash and they look at you like you’re Rip Van Winkle.
wahern 8 hours ago [-]
Also anyone handling cash is supposed to wash their hands before handling food, unless perhaps they're using tongs or something. Ideally an establishment dedicates one person to the register, but with the cost of labor that can be expensive without enough sales volume.
Peanuts99 11 hours ago [-]
Merchants aren't going cash only to sell your data, they're doing it because it's expensive to handle cash and makes their taxes a whole lot more troublesome too.
umeshunni 11 hours ago [-]
Not to mention the crime risk of cash
foobarian 10 hours ago [-]
Huh, I thought accepting legal tender was a federal rule, I guess not. Looks like a salad variety of regulations that vary by state and city.
Terr_ 10 hours ago [-]
> Huh, I thought accepting legal tender was a federal rule, I guess not.
I think the key word is debt when bills state "for all debts, public and private." (And a couple more categories under the law. [0])
At the moment you're asking for the drink, you are not in debt to the coffee shop, they're setting a precondition on an exchange. [1] Now, you might have a case if they let you run up a tab...
[1] Yes, there are a positive number of milliseconds where somebody owes somebody something, but pedantic software intuitions don't always apply to law, and overall that's a good thing.
vulcan01 10 hours ago [-]
Note the wording on dollar bills:
> This note is legal tender for all debts, public and private.
See also USC §5103:
> United States coins and currency [...] are legal tender for all debts, public charges, taxes, and dues.
Thus a private person is only obligated to accept cash as repayment for a debt, not for purchases.
RobRivera 10 hours ago [-]
Well technically, all debts denominated in cash must be able to be settled with cash.
Companies simply get ahead of that law by refusing to provide the service or good.
Works in retail bc at the till they can just say 'no cash no business deal'
Doesn't work in other ventures so easily.
It is along the lines of 'we reserve the right to refuse business to anyone'
c0_0p_ 8 hours ago [-]
I don't think this is the reason, cash will always have no fees. In some senses it can have negative fees if you're not very diligent with your tax reporting *wink wink*.
Not accepting cash is probably more to do with not wanting to deal with it, not needing to trust employees with it, keeping poor people out, and preventing robbery.
Credit card companies and banks know basically squat about your purchase except in certain circumstances (buying gas or flights causes more data to follow, called L2 or L3 data), or if they work with a data enrichment provider. There is a lot of action in this space right now, but the banks are hardly equipped to handle more data even if it became available.
soared 8 hours ago [-]
Coffee shops don’t qualify for l2/l3
mikepurvis 11 hours ago [-]
I mean, cash is also expensive in its own way. It has to be handled and insured, coins may need to be rolled before being taken to the bank, a register is a mechanical device to power and maintain, petty theft by employees is a concern.
It's not really that hard to see why a business charging $5-20 per transaction from people who all have phones and credit cards anyway might choose not to accept cash.
why-el 11 hours ago [-]
> a register is a mechanical device to power and maintain,
surely a million times less expensive than a subscription to a POS....this is not a strong argument.
nemomarx 10 hours ago [-]
if you cut out all the other details they mentioned I guess. how much do you think taking the cash to the bank weekly costs?
carlosjobim 9 hours ago [-]
Nothing, because the owner is rejoicing every step of the way.
I'd say employee theft is the only reason a coffee shop would be "no-cash", and fear of robbery in a few places.
warkdarrior 8 hours ago [-]
You think the owner is taking the cash to the bank?? Unless they are an one-person operation, they likely have an employee do it (among their other duties).
supertrope 11 hours ago [-]
Level 3 data.
TheGoodBarn 10 hours ago [-]
If anyone is interested in this topic from a historical standpoint, the Acquired episode on Visa is phenomenal: https://www.acquired.fm/episodes/visa
1970-01-01 11 hours ago [-]
>The merchant pays 2.5%
The best way to pay for poor services already rendered and move on with life is to simply pay via card. Didn't like that haircut? Terrible food at the restaurant? Hold onto your cash and slip them the card.
dietr1ch 8 hours ago [-]
Some businesses pass you the credit card fees if they offer other payment methods. You'll even hear about a discount around VAT/2 if you pay with cash sometimes.
I think that hiding the CC fees into the price that you pay with all payment methods should be illegal.
tonymet 11 hours ago [-]
Jokes on you. Merchants prefer credit cards because there is less loss than cash. 2.5% is nothing compared to 5-10% loss at the register. Plus easier and more accurate accounting.
1970-01-01 11 hours ago [-]
If you're expecting 10% loss at the register and have terrible service, that's a 1-2 punch for bankruptcy.
seri4l 11 hours ago [-]
>5-10% loss at the register
Where did you get this number from?
foobarian 10 hours ago [-]
Clankers found me one study [1] that suggests total handling costs may actually be this bad, but are highly business dependent e.g. restaurants are worse than grocery stores
I'm just seeing what looks like an attempt to sell me a PDF.
What actually is the source of such costs? The cashier still has to be paid even if the customer is using a card. Presumably there isn't anywhere near that much theft from registers, or people messing up giving change?
supertrope 9 hours ago [-]
Employee theft. Store manager theft. Robberies. Counterfeits. The extra time spent at each cash transaction and re-counting at the end of the day. Going to the bank, or paying an armored car service. Banks charge merchants a percentage of each cash deposit. Buying safes and pointing cameras down at each register.
tonymet 7 hours ago [-]
Great examples all around !
consumer451 9 hours ago [-]
Clank deeper, please. You gave us content marketing from the electronic payment industry:
"Does IHL Group have any connections to merchant providers?"
> IHL Group sells market intelligence, vendor directories, and lead generation data to the electronic payment industry.
supertrope 9 hours ago [-]
Definitely a conflict of interest.
Cash handling costs is a real issue though. Not counting under-reporting income, credit cards cost the most at US intercharge levels of 1-3%. Then the all-in cost of cash handling. The lowest cost method is debit.
consumer451 9 hours ago [-]
The lowest cost is in the EU in this regard. Anti-rent-seeking regulations ain't so bad for everyone, save the rent-seekers.
BTW, I used to handle around $7M/year in credit card transaction in the USA, and if you got actual hand-written partial numbers on a signed contract, then we could avoid nearly 100% of charge backs, as we always delivered on our end. I think in 14 years, we had around 10 charge back attempts, and our merchant provider loved us. The only time I ever magically lost a charge back was to a Visa executive for ~$10k, and our merchant provider just shrugged. Whatayagonnado?
aand16 11 hours ago [-]
90% of cash I give to restaurants goes in the pocket, not the register.
Bad service = card always.
nonethewiser 11 hours ago [-]
Are you saying servers keep 90% of what you pay? Tip and otherwise? What country? How do you know? How could a business possibly operate in this reality?
dmoy 8 hours ago [-]
Not necessarily servers, just not into the register as a tracked transaction.
Tax fraud, essentially.
E.g. you go to the Minnesota State Fair, merchants may offer to not charge sales tax if you pay cash. It is shockingly brazen sometimes.
> How could a business possibly operate in this reality?
Extremely lax enforcement on the part of the specific US state's department of revenue
Great, so it is immediately deducted from my account and swiftly deposited into the recipient's account in 3-5 business days.
Onavo 6 hours ago [-]
For B2B transactions that's actually decent. And any disputes can be sorted out in court.
anjel 10 hours ago [-]
While cc banks are in these times starting to side more with vendors on charge disputes, its still far more recourse than bank drafts offer you in a transactional dispute
massagedpelican 9 hours ago [-]
20% more expensive than stripe, no?
Onavo 6 hours ago [-]
Cheaper actually, a lot less fees. Stripe is usually death by a thousand cuts.
asdff 10 hours ago [-]
If your employees are stealing you should probably nip that in the bud...
supertrope 9 hours ago [-]
Cash allows for many more opportunities for diversion.
asdff 8 hours ago [-]
You know they count the till against the reciepts right? And frequently have cameras over the register drawer pointed at the employee? And send people to jail who try to do this?
supertrope 8 hours ago [-]
My point is you cannot entirely eliminate insider theft just suppress it. Cash payments are a lot "leakier."
asdff 6 hours ago [-]
Not my problem as the customer.
vavooom 5 hours ago [-]
I like the vibe and overall writing style of this blog! Keep up the short little segments. Charcoal Grill and Doing Things Ten Times are my favorites:
VisaNet & friends make the modern consumer world go round. The fees they extract are a drop in the bucket compared to the economic activity that they enable with their networks. Many businesses simply couldn't exist without something approximating this.
You are literally linking to a page published by Visa's Investors Relations Department.
The problem is that like all cartels, they hold progress back. Things could be even more efficient than the current state of affairs. For example we could have open standards with thousands of local players, much faster settlement times etc...
There are also aspects such as the fact that due to this concentration of power, the whole world is subject to US sanctions, such that a EU citizen sanctioned by the US is effectively cut off from civilization.
bob1029 10 hours ago [-]
I like how providing an incredibly efficient payment network is framed as holding progress back.
I'd frame it as making the standards for competition very high.
I don't see people getting super ideological about their inability to create monocrystaline turbine blades or 2nm semiconductors in their garages. Why payment networks? Because computers? The overall network is way more complicated than a specific technological system or clever open standards document.
These networks would be usurped if someone could actually come up with a better system. The economy insists upon it constantly.
kiririn7 8 hours ago [-]
“It works extremely well” doesn’t establish “its prices and restrictions are justified”. much better, less parasitic systems are possible, look at brazil and PIX.
"These networks would be usurped if someone could actually come up with a better system" the problem is the network effects with payments is so strong that this is wrong. to explain it simply, Network effects and customer lock-in mean the best system doesn’t automatically win.
rednb 9 hours ago [-]
I 100% agree that their business is operated extremely well and delivers lots of value.
I am just saying that in my opinion, society would be even better off if this industry wasn't controlled by a cartel and i pointed 2 examples of how.
One difference between this and turbines, is that payment networks are sitting at the heart of the economy of countless countries. Turbines have a very different risk profile, much more modest and localized.
Russia was for example cut off from high-tech maintenance contracts but has been able to deal with it by manufacturing their own replacement part + there are maintenance cycles and spare parts so any disruption in service is not immediate unlike payments.
9cb14c1ec0 11 hours ago [-]
Yes. As a merchant it's pretty cool that the money just shows up and I don't have to chase down as much bad debt. The processing costs easily pay for themselves.
kiririn7 8 hours ago [-]
unfortunately those processing costs actually dont need to exist.(or atleast should be 10x smaller)
ks2048 9 hours ago [-]
It seems Visa revenue is $40B/year. You shouldn't compare that to the amount of economic activity they enable - you should compare it to how much it could cost to run a system like theirs.
pennomi 10 hours ago [-]
The problem is not that the tech is bad, it’s that the industry is a cartel with no viable way to disrupt the established players.
klabb3 8 hours ago [-]
> VisaNet & friends make the modern consumer world go round.
I mean, as opposed to what? You could apply this to any infrastructure cartel like with AT&T in the 90s or Comcast or 100s of historical examples. The alternative to a bridge troll is not ”no bridge”.
bob1029 6 hours ago [-]
The alternative to a bridge troll is "no bridge" if the bridge troll is the only party who has the capability to construct it in the first place.
foltik 1 hours ago [-]
Which is obviously not the case in this context?
7 hours ago [-]
amaccuish 10 hours ago [-]
Well, in Germany the "girocard", the local card network, is the most popular form of payment. So I guess, citation needed?
mococa 9 hours ago [-]
In brazil we have pix with 0 fees.
3pm 11 hours ago [-]
> The issuing bank keeps 2%
Is this why the best cash back credit cards give 2%?
nonethewiser 11 hours ago [-]
In the US. Not in Europe because interchange fees for consumer cards are capped at 0.3%
will_occam 7 hours ago [-]
Yes that intuition is correct, though the reality is much more complicated. The actual share to the bank is roughly proportional to the risk of the transaction/ tied to the type of credit card
US Bank for a brief period opened up a 4% card, but then closed it so quick that obviously the numbers didn't work out there.
2% seems to be a local maximum of cashback cards. There's a lot of 2% cards, and only a handful above that.
Makes sense?
pverheggen 11 hours ago [-]
2% is just an example figure, the actual rate varies
kriskrunch 3 hours ago [-]
How much do interchange fees increase prices in the US?
6thbit 7 hours ago [-]
If AI becomes a true commodity do you think OpenRouter/Stripe will evolve into this type of network that visa/mastercard represent today?
citizenpaul 7 hours ago [-]
Credit cards are the OG of rent seeking for the 21'st century. They recognized upfront that no one would pay their ridiculous middleman fees so they backdoor-ed the fee with the merchants and had them pass it on in price. Its on of the most insidious extraction engines ever made, Jesus would definitely flip their tables lol.
Now they do all kinds of accounting tricks to pretend that they have thin profit margins because they split up every part of the business into hundreds of 1-3% chunks of the profit. To sidestep regulation that already barely exists.
tflinton 4 hours ago [-]
Networks like visa and Mastercard don’t seem evil. If you’ve ever had to dispute a charge and got your money back easily or relied on the fact that even if their computers are down they’ll still take the risk and allow you to take money out of your account you’d find the fees they charge pretty minimal. Now the issuer bank… that’s where most of the fee and why most banks now have reward cards because the issuing bank can ask for whatever additional fees on top of what visa/mastercard does.
collabs 11 hours ago [-]
In my opinion, the only solution is everyone (individuals as well as corporations) gets a direct account with the federal reserve as long as you can associate a taxpayer identification with the account. Using it is voluntary but it is free of cost, paid for by taxes, and moving money to and from accounts is free of cost. Depositors would get the same overnight interest rate that banks do, and this interest is added every day. I think if we could make this happen, the chokehold of Mastercard and Visa can be greatly diminished. The disintermediation of commercial banks, the loss of credit card perks, and the added cost of customer service should be an acceptable cost of removing the parasites visa and master card from our economy.
most importantly, this opens up a lot of money that the federal reserve can hold directly, something that will become more and more important as bond yields go sky high.
Bratmon 11 hours ago [-]
How are chargebacks resolved in this situation?
This is an important question- most of the costs of a credit card providers come from dealing with fraud and chargebacks. That's partially because, under US law, credit card companies have to eat fraudulent charges if they can't get the person or company that did the fraud to do so. (Funnily enough, this is one of two places where protections for average people in the US are significantly better than protections for average people in Europe).
But credit card companies can keep their costs low by making a business decision not to renew the accounts of frequent chargeback-ers or chargeback-ees (even if they never officially found those individuals at fault). If the government had to make a payment system for everyone and take on all responsibility for all fraud, that would create an incentive with massive second-order effects.
SkiFire13 4 minutes ago [-]
> credit card providers
The article did an awesome job explaining what are the parties involved and you choose to use a generic term instead.
> dealing with fraud and chargebacks
A lot of that is offloaded to the merchant, which instead has to pay them on top of what they already pay to the issuer bank.
mopsi 11 hours ago [-]
You resolve it the same way you handle in-store cash purchases of products that turn out to be faulty.
There is no reason why fraud and contract violation must be handled by unelected and unaccountable payment processor, when the government has already set up a consumer protection system for disputes related to cash payments. The payment processor is best left as a dumb pipe that does what parties and (in case of disputes) courts tell it to do.
Bratmon 8 hours ago [-]
So, wait. Are you saying each transaction has to be individually approved by the account holder?
Because that would break the subscription-based billing model for a lot of businesses.
carlosjobim 9 hours ago [-]
You have to consider the interest of the involved parties rather than the efficiency of a system.
Making a purchase is (still) voluntary for the customer.
For everyday purchases at physical stores, cards are convenient. You just swipe and maybe put your PIN. But other digital payment methods or cash can be just as convenient. You're never going to chargeback a coffee, a sandwich, or your groceries.
But for distance purchases such as online shopping, hotel bookings, flight reservations and such, trust is the most important factor, not convenience. Cards have fraud protection. Other payment systems do not. These "unelected and unaccountable" people can actually help you if you've been the victim of wire fraud. Much faster and much less of a hassle than going through the courts. And if they don't help you, you haven't in any way, shape or form abstained from your right to justice through a court of law.
If customers can have that security and ease of mind, then they are much more likely to make a distance purchase. Which means that the vendor can sell their product. If the customer can't have that ease of mind, then the vendor will not make a sale.
So vendors who want to make sales will gladly accept cards. Anybody foolish enough to try to sell without making it easy for the customer to pay in their preferred way will go out of business.
Another point worth mentioning is that cards work instantly across pretty much all currencies in the world. You can go from anywhere to anywhere and pay with your card and currency exchange is done automatically. And in the past 10 years, cards have given very good exchange rates.
warkdarrior 8 hours ago [-]
> Cards have fraud protection.
This is only in US and it is needed in US, because US has very limited consumer rights regulation. EU has much stronger consumer rights (mandatory 14-day return windows for any reason, easy cancellation for subscriptions, mandatory 2-year warranties).
So the things that the (private) credit-card companies protect you from in US (via chargeback support and fraud detection) are things that laws protect you from in EU.
toomuchtodo 11 hours ago [-]
Customers can pay the credit card fee to get their chargeback insurance, if they choose, while others who can pay with cheaper instant payment rails can opt out. This is trivial with merchants able to surcharge credit card payments, as many merchants are starting to do (US mobile phone companies, US internet providers, Meta ad purchases, restaurants, etc).
diegocg 11 hours ago [-]
So the article shows how visa and mastercard are, by far, not the ones taking the largest fee, and the solution is to get rid of them?
Where are you going to do the transactions in your scheme? Because credit card transactions are not the same as sending money from one bank account to another. There are settlements, disputes, chargebacks, etc.
How is the central bank going to offer the same variety of products described in the article? I.e..
> Interchange fees vary dramatically based on the kind of card, category of spend, and even the metadata attached to a transaction. The network’s goal is to set fees that incentivize desired behaviors on their network, including using more secure payment methods (lowering interchange fees for merchants), or for companies to do more business spending (higher interchange fees on commercial credit cards).
Your scheme sounds like all these crypto guys who think they can replace credit cards with bitcoin transactions, as if they were the same thing
lxgr 6 hours ago [-]
> So the article shows how visa and mastercard are, by far, not the ones taking the largest fee
But they set the interchange rates and disallow (or at least have until recently, in the US) merchants to discriminate against cards based on rate or type via their “honor all cards” rules.
They are absolutely propping up and benefiting from the high fees.
toomuchtodo 11 hours ago [-]
Central bank instant payment system. The US has FedNow, and has had it for almost 3 years. It costs a few pennies to move up to $10M per XML message.
Walmart is currently trialing it to save $3B-$7B a year in interchange fees. No crypto, just XML messages through a mainframe at the Federal Reserve with a 20 second SLA.
> “It surprised me,” Henry said of adoption of Walmart’s first iteration of pay-by-bank, which is available online but hasn’t been marketed to customers. “It’s certainly surpassed our expectations of the amount of customers that have registered and actually use the payment type.”
> Walmart’s upgraded pay-by-bank offering will be rolled out in 2025. The transactions will occur over bank technology provider Fiserv’s NOW Network, which integrates with The Clearing House’s Real Time Payments network and the Federal Reserve’s FedNow. Until now, large retailers hesitated to launch real time payment options because many banks were not connected to an instant settlement system, meaning their customers would not be able to use the product. NOW Network aims to connect to as many banks as possible to reach 100% of deposit accounts by combining its own network with RTP and FedNow.
(as of this comment, there are 100+ instant payment systems live across the world; we should assume that all countries will eventually have an instant payment system, or integrate with someone else's)
FedNow is a payments rail, which is a long shot away from being a full retail payments scheme. The latter needs a disputes story, customer knowledge, merchant acceptance…
Take SEPA Instant, for example. It’s great for many things, but effectively nobody pays using it in stores or even online.
That’s a list of news articles (notably none about SEPA Instant, the closest analogy to FedNow!), not a response to my point.
It actually supports my point: FedNow could be SEPA Instant (if it were to be widely supported and available to retail bank customers), but it’s definitely not UPI, Pix, Wero etc.
toomuchtodo 5 hours ago [-]
> Take SEPA Instant, for example. It’s great for many things, but effectively nobody pays using it in stores or even online.
My link mentions how Wero, replacement for US credit card rails in Europe, is being built on top of SEPA Instant. An adoption tracker is included, to show uptake progress. ~35% of tracked banks in scope in Europe for Wero have adopted it, as of this comment. They are actively building to get off of US credit card rail infrastructure.
In the US, similarly, it will take time to move off credit card rails, but we’ll get there. As mentioned, Walmart is already running live trials for pay by bank. I agree it is not fully operationalized yet, but it will be eventually. The most important primitive already exists (FedNow rails). Everything else is app experience and consumer training (for payment requests and transfers).
I see the pattern between the EU and US credit card -> instant payment transformation journeys, but maybe you don’t. Pix and UPI have shown how easy it is.
(Almost every deposit institution in the US currently has access to FedNow, per the Federal Reserve’s latest participant report, and through those deposit institutions and service providers, their customers)
SpicyLemonZest 9 hours ago [-]
> Walmart is currently trialing it to save $3B-$7B a year in interchange fees. No crypto, just XML messages through a mainframe at the Federal Reserve with a 20 second SLA.
Please tell your user that this SLA is much too high for many purposes. A cafe or such would lose a ton of money if every transaction took 20 seconds longer to conduct.
toomuchtodo 8 hours ago [-]
Works fine based on the evidence. It’s a maximum SLA, not every transaction. The economics are too compelling to ignore. Fast enough.
mlefer 11 hours ago [-]
A few years ago congress had a nice solution via a market mechanisms, have sufficiently large banks be required to have their cards support at least 2 card networks, via which the merchant may at at swipe time decide which network to run against. Unfortunately like any good idea, it died in congress.
carlosjobim 9 hours ago [-]
Travel and tourism is about 9% of the world economy, and by some measures considered the largest economic sector in the world. Visa and Mastercard will continue to be dominant.
collabs 6 hours ago [-]
And that's ok. We need an option, it doesn't need to be the only option.
Has the characteristics to implement the digital Euro. Plus guarantees anonymity of buyers. And should be extremely cheap to operate. But is not under bank’s control.
ale 11 hours ago [-]
Aside from the technical aspect I strongly encourage everyone to also read about VISA’s founder Dee Hock, still a very underrated figure in leadership and finance.
montenegrohugo 9 hours ago [-]
Some light self-promotion but also longer term thoughts:
A large part of the promise of crypto and stablecoins was to displace Visa and Mastercard rent-seeking. This didn't seem to happen. Most modern neobanks, our own included (https://peanut.me), actually seem to EMBRACE Visa and Mastercard. Almost all offer an actual Fiat card within their app, instead of boldly saying "No, pay with crypto, the future of money!"
This is somewhat disappointing in the short term, but longterm i believe it offers a clear transitory path to full decentralized money adoption. Already today we're seeing a growth in direct peer to peer payments in peanut, and merchants slowly starting to adopt it as well. I imagine the same is happening across the industry. In a competitive economy, the better currency (read: crypto, stablecoins) wins and eventually absorbs adoption.
my 2 cents
topranks 8 hours ago [-]
Crypto is in no way better money.
It’s slow and expensive and doesn’t scale.
The real answer is an alternative that relies on a centralised provider - or set of them - who use traditional databases and the like, but do things in a modern efficient way and don’t charge the same fees as the current card providers do.
gwbas1c 9 hours ago [-]
The problem is that bitcoin (and similar) are so computationally intense to run, that the transaction cost is much higher than Visa's.
Furthermore, a currency needs a government (or similar kind of body) to manage its stability, by printing (and buying) money. Otherwise, we'll see wide fluctuations in value like what happens with Bitcoin.
simonmales 9 hours ago [-]
True on the main chain of Bitcoin. Bitcoin payments on the lightning network are not computationally intense.
topranks 8 hours ago [-]
Hahaha haven’t heard that one in a long time. Cracked me up.
kburman 11 hours ago [-]
[deleted]
nosioptar 11 hours ago [-]
The answer to that is to "donate" to about 270 congress critters. Buying 5 motorhomes for supreme court members could work too.
9cb14c1ec0 11 hours ago [-]
> The answer to that is to "donate" to about 270 congress critters.
Not too far off. You gotta ask why such a lucrative business has a near monopoly, and the answer is not that potential competitors don't notice their profit margin.
tonymet 11 hours ago [-]
Don’t forget arbitrage, which is the withholding of transferred funds for 7 days while the capital remains in visa’s accounts for “investing” / speculation.
It’s like if you gave your buddy $100 to give to his room mate, and he decides to wait a week and gamble it on Kalshi
throw1234567891 11 hours ago [-]
You better don't look into how banks make money on your savings.
erfgh 9 hours ago [-]
You better don't look into how banks created your savings by creating loans that were used to invest into companies and thus pay salaries.
nonethewiser 11 hours ago [-]
>It’s like if you gave your buddy $100 to give to his room mate, and he decides to wait a week and gamble it on Kalshi
Or treasuries.
Its actually a minor part of rheir business.
And frankly who cares given that its a sustainable system. I pay on credit and then someone else pays. I dont give a shit of they are betting on how many times Al Roker says Trump on New Years Eve.
tonymet 7 hours ago [-]
The merchants , who need that cash flow
hungryhobbit 12 hours ago [-]
They tax our entire economy at X rate, while maintaining their infrastructure only requires Y cost ... and X is significantly higher than Y.
From the actual article:
> The payment processor keeps 0.35% ($0.35), then pays 2% ($2.00) to the cardholder’s issuing bank and 0.15% ($0.15) to Visa. The 2% is the interchange fee, commonly known as interchange. The 0.15% is the network assessment fee. 8
In other words, they get 0.35% of every transaction ... and it does not require anything close to that to maintain their network.
superxpro12 12 hours ago [-]
middlemanning is the most american of business ventures
einpoklum 9 hours ago [-]
I thought that title belonged to bombing campaigns and coups by shady guerilla groups.
9 hours ago [-]
gloryjulio 12 hours ago [-]
> and it does not require anything close to that to maintain their network.
If it's so easy to disrupt visa/mastercard payment network, they wouldn't be able to charge this much. Payment is a highly competitive business. We witnessed so many payment companies went under or were bought out, but these two stay for years and are still profitable.
The truth is their moat is considered very durable and hard to build. A global n banks to n banks payment network is not as simple as how people thought.
cassiogo 12 hours ago [-]
> If it's so easy to disrupt visa/mastercard payment network, they wouldn't be able to charge this much
If they have the US government behind them its much easier
Visa and Mastercard do not own the internet cables or the wavelengths. Anybody is free to compete, and that's why they have many competitors. It is very common for businesses to accept a variety of unrelated payment methods. There is no monopoly here.
tialaramex 12 hours ago [-]
That 0.35% feels more reasonable in 1976 or even maybe 2001 than it does today because technology changed so much. But maybe I'm wrong about that
If you're an American that 2% is a much bigger problem for your society. That's a direct funnel from the poor to the wealthy, it's not as a obvious a problem as "Trump gave the ultra-rich a tax cut" but it might structurally be more significant.
UltraSane 12 hours ago [-]
Credit card companies are mostly parasitic middle men but I have a credit card that I use for most payments and pay off the balance every month and effectively get 2% cashback with no interest costs.
losteric 12 hours ago [-]
The actual rates charged to merchants are variable, and typically higher for rewards/cashback cards. Basically, other people are subsidizing cards with higher benefits/cash back (of course as people shift, the merchant raises prices to compensate for the higher average fee, or just charge an additional Z% higher than your cash back)
warkdarrior 8 hours ago [-]
> other people are subsidizing cards with higher benefits/cash back
Ripping off other people is the American way.
tonymet 11 hours ago [-]
Goods (and services) are priced at what the customer is willing to pay. In this case, the alternative is cash or cheques, both have much higher loss rates. That’s why vendors are eager to take visa over cash.
hgomersall 11 hours ago [-]
No, the alternatives are any number of other solutions that are not given a look-in to the very lucrative duopoly. The network effects are prohibitive for upstarts.
tonymet 7 hours ago [-]
Can you give an example ?
hacker_88 8 hours ago [-]
Now try security of bitcoin
11 hours ago [-]
dzonga 10 hours ago [-]
in short they're TRUST networks.
which is also why crypto bros get confused.
shevy-java 11 hours ago [-]
Europeans really need to stop handing their money over to Trump-Visa and Trump-Card here. Canadians learned that lesson already. Why do european politicians not learn anything? Leyen even signed a surrender treaty where european taxpayers lose money that goes into the USA. I say stop it with the proxy-control from Washington.
FabCH 11 hours ago [-]
Europeans have alternative payment networks already. For example, CH has Twint.
They are actively being unified into a cross-border payment network.
Of all the things to complain, this is the one where they are actually doing something…
ranguna 9 hours ago [-]
As someone from an EU country: the only place where I use visa/MasterCard is at Amazon. Everything else I use my country's payment system, which is now joining with Italy's own and probably more in the coming years.
this article doesn’t do a good job of simplifying. the vast majority of Visa’s revenue comes from one thing called the ISO 8601 / ISO 20022 message, which is the name for a Visa’s authorization. the core service is transmitting this message between an issuer (cardholder bank) and an acquirer (merchant bank). all other revenue streams are basically a microservice on top of this core message transmission service.
LoganDark 5 hours ago [-]
ISO 8601 is just a timestamp format. Surely Visa must be using timestamps internally, but that couldn't possibly be their service.
ISO 20022 looks more like it.
Rendered at 05:55:07 GMT+0000 (Coordinated Universal Time) with Vercel.
Where I am it's increasingly common to see credit card fees when checking out. I get it, because merchants are being charged 3-5% of their total revenue. I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.
That’s why you don’t see the same kinds of credit card deals in the EU compared to the US.
The EU limits for card fees prevent this in Europe, which is very good.
Similarly, the "whales" in a casino get lots of "free" benefits, but only because they're losing a lot of money gambling. They paid for them.
Contrast with frequent-flier miles where businesses pay for plane tickets but the points go to individuals. That's pretty clearly siphoning off business expenses.
one cash, one credit?
the credit payer is clearly paying less, with the difference paid by increased prices overall. That is the cash purchaser paying the credit one
Are you saying it is intentional? Is it not more simply explained as simple greed by two companies colluding to keep competitors out of their market?
Pix, UPI, and a few more
I’s bet the proportion is way higher than 5% even if the overwhelming majority use their credit cards the same was as debit.
Other than that, I've rented cars, rented other things with a "X will be charged to your card if you return it late", unattended gas stations... all the usual places you'd think need a credit card. It's fine.
We do have a "negative limit" that banks often give you, which means you can go into the red and pay it back later, but that has nothing to do with the card, it works even for normal bank transactions.
Stripe don't do handle their own payment, they just wrap someone else's API, and pay them in percentages and dollars per API calls(idk about the ones behind Stripe, but I think I saw somewhere that those middlemen often charge both? Egregious, but they're literally old boys money men and they have lots of leverages against you).
What are truly different to credit/debit card systems are things like PayPal, Apple/Google and such gift cards with scratch areas, and Chinese QR payment apps. Those are the ones that don't (always) go through the CC ecosystem.
But even so, I still prefer the credit card instrument, used as a "charge card". For those that don't know, a "charge card" is common with businesses and is expected to be paid off every month. But it helps with managing your cashflow - e.g. you can keep your money in a savings account all month and make one transaction at the end - and it keeps your actual money from being at risk of fraud.
Most Europeans seem confused with how Americans use credit cards for everything, but about half of us use them as charge cards, paying them off every month.
That is a benefit, so I can see paying a small percentage for it, but I don't think that benefit alone justifies the 3-5% of a transaction that credit cards charge now.
Debit cards issued by smaller community banks or credit unions are exempt from the cap and carry higher interchange rates (often 1.0%–1.65% + $0.10).
All merchants should either do Surcharging or Cash Discount.
https://support.toasttab.com/en/article/Are-customers-charge...
There’s a whole industry of mid-sized banks just below that which are offering their services as sponsor banks to fintechs that want to earn the orders of magnitudes higher interchange rates while still getting debit acceptance/less surcharges and being allowed to offer a debit product.
Under subparagraph f)A seller or lessor shall not impose a surcharge if a customer elects to pay for goods or services by Check, cash, debit card, processing as a debit payment, or gift card.
eCheck is considered a check.
https://colorado.public.law/statutes/crs_5-2-212
https://www.congress.gov/crs-product/R41913
https://www.ftc.gov/business-guidance/resources/new-rules-el...
American sellers have had the option to collect however much extra they want from people paying with credit cards, and many do. The government, utilities, mobile network providers, insurance, schools, healthcare, gas stations, home contractors, etc all usually collect at least 2% to 3% more if a buyer wants to pay with a credit card.
I am down to only using my credit cards for retail purchases, restaurants, and travel. Otherwise, the extra cost of paying with credit cards don't make sense and I pay with debit card or electronic money transfer (ACH/Zelle).
Basically, the sellers that continue to collect the same price from credit card users and non credit card users are those who believe that incentivizing credit card usage will result in sufficient people paying sufficiently higher prices such that it offsets the processing costs of the credit card transaction (and the chargeback risk).
The big difference is that with a debit card, it's your money that is hit by fraud. The debit card is basically just a proxy. You have to go file a police report. You have to hope the bank will give you the money back.
When the credit card gets hit, it's the credit card company's money and they will seemingly chase the fraud to the ends of the earth to recover it.
They try to squirm out of that of course. But in general getting your money back isn’t too tricky even with a debit card.
You don’t even pay for the fraudulent credit card transactions in the first place! There’s no money for them to return!
I kind of disagree. I think what's happened is the bank would prefer you to believe that. Imagine I kept my money at the bank, and deposited $10000 with the teller. Immediately afterward a robber follows in and steals that $10000 from the teller. Does the bank say "oh no Mr. TheChao! A robber stole your $10000!". I mean, no? The bank got robbed. Just because the bank's digital security is more tied one-to-one to dollars and its easier for a robber to steal from "my till" doesn't mean it was me who was robbed. It's the bank's job to stop that.
> Bank official: Sit down Mr. Coleman, I'm, I'm afraid I've got bad news about your account.
> Mr. Coleman: Really?
> Bank official: I'm very sorry to say that someone's stolen your identity.
> Mr. Coleman: Oh God! Do you know who it was?
> Bank official: Well -- they said they were you, but uh--
> Mr. Coleman: Of course. So, um, what happened?
> Bank official: Well it was on the bank website, someone logged in, and committed identity theft electronically.
> Mr. Coleman: I see. Did they take anything else?
> Bank official: Uh, no.
> Mr. Coleman: Oh good, so all the money's still there...
> Bank official: What?
> Mr. Coleman: Well: it's just my identity that's gone -- none of your money?
> Bank official: Well no, they did -- they, they, emptied your account. It's identity theft, they took all the money.
> Mr. Coleman: That sounds more like a bank robbery.
[continued] -- see https://www.youtube.com/watch?v=CS9ptA3Ya9E for the full skit.
Just as a handy thing to chuckle over and then link others to, if the topic comes up again.
But in the case of debit card, the card ties the money to your account. It is actually that.
It's as if someone would steal from a personal safe at the bank.
Practically, Reg E is essentially as strong as Reg Z.
Sane ways to organize payments:
- Merchant gives you a bill-id. You input it into your bank website - where you see the bill amount being charged. You accept, and bank pays merchant.
- You give merchant your card number (that's the only information - no expiry, no ccv, no name). A notification pops up on your bank website asking if you want to pay what the merchant is requesting. You accept.
- You go to your bank website and obtain a random number, either allowing a single transaction or a recurring transaction. You give the merchant the number. After merchant charges it, no other merchant can charge the same number.
That's basically how Blik works in Poland. With the exception being that the number is random 6 digits randomly generated when you open the app, that is active for ~2 minutes. So you don't deal with the issue of very long and error prone numbers to copy.
Much better way to pay online.
https://en.wikipedia.org/wiki/Blik
It’s entirely the US credit card industry and its regulating bodies’ fault that it has made neither mandatory in the way that e.g. the EU did, and is in fact fighting any attempt to do so tooth and nail (please think of the conversion rate!!)
it is that different treatment of debit/cc fraud that pushes people towards high fee cc.
it is cc fraud protection that justifies high cc processing fees.
without cc fraud there is no need in visa/mc duopoly.
The system is broken. No one with the power to fix it has any incentive to do so. Might as well get what you can.
Crazy-person-but-actually-really practical-idea:
Nationalize one if these networks. Maybe Discover.
The US government should provide us digital currency. The simplest way is to force the current systems to do that. All that rent they collect in terms of transactions fees shouldn't be profit for a private business but fees of the government.
There are plenty of great examples from this century all over the world.
Even Iran has a better payment infra than the US.
That is a big claim. What would prevent someone from setting up something equally as good in the US, aside from the network effect and users unwilling to try something new for uncertain gain?
In Iran, they simply don't have much choice, so banks use the only network available to them. It just happens to have been built in this century, so it's not as archaic as Visa.
Here in the US, I guess only regulators could realistically create a new network and have enough power to convince banks to adopt it.
Nothing, of course, stops anyone from creating a new network. But the network effect is THE driving force here, it's not a minor factor.
That's the banks (lenders), not the payment networks.
>Crazy-person-but-actually-really practical-idea: Nationalize one if these networks. Maybe Discover.
The central planners want to. It's called FedNow.
Normally I'm not a huge fan of privatization but the way it's done here works great. The fees are set by the state and the agency gets a percentage, so if an area is underserved someone just opens another one.
Visa and Mastercard are a cancer.
That was 15 years ago. Now, living costs have gone up, I'm getting taxed to death by not just governments but increasingly more by businesses themselves ("benefits fees", "installation fee", "convenience fee", guilt-tip screens, sneaky price increases, etc.) so now I feel no guilt in playing the system to get at least some of my money back. Now I just churn 1-2 credit cards a year to pay my taxes and get some of it back in the massive sign up bonuses, which more than cover the transaction costs, fees, and then get me another few thousand back.
If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
Deal? No? Okay, you continue paying your merchant fees and I'll continue reaping the credit card bonuses to the maximum possible.
That is only "nicer" as it allows to evade taxes. (Which some may consider nice)
But cost for cash is comparable to card payment if looked at seriously
* You need working time to count it
* You need working time to bring to bank (or request pickup, which costs)
* The bank will charge the deposit
* The bank will charge for the change you need
* In the shop the cash has to be protected (safe? Protection against robbery)
* This requires procedures for shift change etc (thus training time and prolonging working time)
* There is a risk of fraud (counterfeit, swap tricks etc.)
* Employees might have sticky fingers
Unless you're handling huge amounts of cash, cards are WAY more expensive to deal with IME, especially because the fees scale as a percentage of revenue, so you can't just increase sales and lower your margins.
I bought a cheap cash and coin counter for about $400 on Amazon, which means it takes me about 2m to count whenever I need to balance the register.
For reference, with my POS I pay about $400 per MONTH in card fees (square).
It does take time to bring it to the bank, maybe 5-10m a week for me.
My bank does not charge for deposits or change; this would be insane and I've never encountered this in the US.
Counterfeits aren't generally an issue for small bills in practice; for $20+ we use a 50c testing pen that takes about 2s per transaction.
Sticky fingers are easily caught by balancing the register after each shift which is again about a 2m operation with cash and coin counters.
Overall I would be taking home about $500 more a month if all my customers paid cash, which is a big deal for a low margin business.
Some smaller banks in Australia do but the big ones all have cash and coin ATMs which are free for account holders.
I love being able to transact without the payment processors knowing anything about my customers, and they appreciate it, too. My cash payers are usually very grateful.
Where are you not getting this? You mean taxes on top of the retail price? You would pay cash, if the merchants colluded with you in evading taxes?
This seems to still be pretty reliable for most things in brick-and-mortar stores, FWIW.
I will admit that sometimes I do have fun playing the game (certainly a lot more when I was younger), but not often anymore. I feel like I "have" to do it, because there's no such thing as a free lunch, and as such stores price in the fees and so I might as well get it back in the form of traveling, but it is very weird that we just expect credit cards to do that.
You may also save far more money going cash only. E.g. some local restaurants near me give you like 5% off paying in cash. Gas is generally cheaper cash price vs card price or debit fee. You have a big job with a contractor, tell them you might be interested in paying cash and they might offer you a substantial discount.
There are a lot of good reasons to dislike the market structure and game theory of card payments in the US, but please don’t accuse consumers of being short-sighted or irrational.
The only way to break the cycle of self-reinforcing incentives would be swift regulatory action. Absent that, playing the game is the rational move at the individual level for both merchants and consumers.
Sometimes they'll give even more than 5% because they can keep it off their books completely, but in those cases, they want physical cash--not just a check to avoid credit card fees.
How much privacy really? If I get mostly $20s from the ATM, and the merchant does daily deposits of most of the $20s they get, why wouldn't banks start scanning and tracking serial numbers (if they don't already), if my purchasing habits are actually valuable?
The life of most currency notes is bank to customer to merchant to bank, and the bank could just track serial numbers to figure out your spending habits.
Practically, it would make little sense. The actual life of most currency notes is bank1 to customer to merchant to bank2, and there is a large probability that bank1 and bank2 are different entities. And then, so many more people use the credit card system, and it is so much easier to track people there, that the ROI on tracking people using cash would be low.
I would be very surprised if any bank tried to scan currency note serial numbers.
> The site was officially launched on December 23, 1998.
Even then, you have to think twice. If you get scammed of cash, it's gone. If you get scammed in a credit card transaction, there is a fighting chance you can dispute the charge and have it reversed in their face.
You know that credit card feature of providing some insurance coverage on things like vehicle rentals? It may look like small print, but I actually used that. By some amazing fluke, I damaged the bumper of a rental car; the credit card coverage took care of it. I filled out minor paperwork and never heard about the issue.
Speaking of rentals, in many rental situations (even simple power tools at your Home Depot or whatever) you get charged a deposit on the card which comes back when you return the thing. It's just a number in database. With cash, you'd have to fork that up over the counter; very unappealing.
Some people are dumb and think tax refunds are free money when in reality they’re an interest-free loan to the IRS.
Money is fungible and instantly redeeming rewards for a statement credit is almost always the optimal way to use credit card rewards.
A person who wants to fund a vacation with rewards can simply redeem the rewards for a statement credit while simultaneously transferring that amount of cash to a HYSA or similar.
Uhh I have no credit cards where redeeming for credit is the optimal play. Every single one has 'offers' that give a further multiplier on the dollar amount of the points. Eg redeem $80 of points for a $100 home depot gift card.
I felt like if I didnt spend $1 on something that was the equivalent of me spending $50 to get those same credit card points
I use a cashback card, because most merchants will charge me the same regardless of payment method, and getting a 4% discount (+ time value of money) is the lowest cost to me. If I use some other payment method, the merchant may keep more of the transaction amount, and that's great for them, but it doesn't improve my customer experience. If interchange fees are strictly capped and cashback cards disappear, I wouldn't be upset; but while they're here, I'm incentivized to use them... following economic incentives while doing economic transactions seems like the right thing to do?
This is called "Regulate the max fees" like Europe did, where they still have functioning credit card networks, including good fraud coverage, but you aren't expected to dance for the credit card company for peanuts of kickback.
All of them do the same : ensure I get the money from the customer. Of course it's a larger project to run this in the whole world, but shouldn't it scale to less along with the number of billions of customers instead of the other way round ?
This is an insane amount of money. They killed micro-transactions, they killed the business model of the Web in favor of ads, the only popular way to do microtransactions right now.
I thought in the EU the maximum interchange fee for consumer credit cards is capped at 0.3% of the transaction value.
I don't want to put responsability on anyone, I don't know who takes what in the chain, but I see the fees in practice.
I took the cheapest PSP I could find in Europe... Stripe is way more expensive, taking 25 cents of fixed fee !
Are you sure of these values? Because that's different from what I was told, which was that CB was cheaper for transactions of more than 10 €, because their fees were fixed, not rates like Visa and Mastercard.
From what I've just read (not counting the possible extra tax by the bank of the seller):
CB: 0.20% + 0.00117 € ⇒ 0.00317 € for 1 €, 0.20117 for 100 €
Visa: 0.20% + (0.01% to 0.014%) ⇒ up to 0.00214 € for 1 €, 0.214 € for 100 €
Mastercard: 0.20% + (0.15 to 0.17%)
The 0.20% is for the "interchange" described in the article. So it applies only when the seller and the buyer do not have the same bank. The maximal rate is fixed by the UE, and AFAIK everyone use the max value.
Yes perfectly sure, just checked. I'm not saying these are visa fees vs CB fees. Lots of actors in the chain. But that's what I'm paying for each card type.
It's only available in the US, many countries have lower interchange fees and prohibit sending this data.
This is not a scheme to get enhanced targeting data for personal transactions.
Ive heard of casinos trying to pay out winnings using some kind of prepaid card, where theyd also get info about how people spent their casino winnings. Lots of ways to leverage that data.
They primarily don’t deal with cash because cash is a pain. It needs to be physically taken to a bank and protected from theft by both staff and random robbers with guns, it needs to be counted all the time, and you need to maintain the right denominations to make change.
I have reservations about businesses getting rid of cash, especially if they’re turning away people who don’t have alternative ways to pay, but I certainly understand why they do it.
It’s also always awkward when a coffee shop is like 95% credit, and you try to hand them cash and they look at you like you’re Rip Van Winkle.
I think the key word is debt when bills state "for all debts, public and private." (And a couple more categories under the law. [0])
At the moment you're asking for the drink, you are not in debt to the coffee shop, they're setting a precondition on an exchange. [1] Now, you might have a case if they let you run up a tab...
[0] https://www.law.cornell.edu/uscode/text/31/5103
[1] Yes, there are a positive number of milliseconds where somebody owes somebody something, but pedantic software intuitions don't always apply to law, and overall that's a good thing.
> This note is legal tender for all debts, public and private.
See also USC §5103:
> United States coins and currency [...] are legal tender for all debts, public charges, taxes, and dues.
Thus a private person is only obligated to accept cash as repayment for a debt, not for purchases.
Companies simply get ahead of that law by refusing to provide the service or good.
Works in retail bc at the till they can just say 'no cash no business deal'
Doesn't work in other ventures so easily.
It is along the lines of 'we reserve the right to refuse business to anyone'
Not accepting cash is probably more to do with not wanting to deal with it, not needing to trust employees with it, keeping poor people out, and preventing robbery.
Credit card companies and banks know basically squat about your purchase except in certain circumstances (buying gas or flights causes more data to follow, called L2 or L3 data), or if they work with a data enrichment provider. There is a lot of action in this space right now, but the banks are hardly equipped to handle more data even if it became available.
It's not really that hard to see why a business charging $5-20 per transaction from people who all have phones and credit cards anyway might choose not to accept cash.
surely a million times less expensive than a subscription to a POS....this is not a strong argument.
I'd say employee theft is the only reason a coffee shop would be "no-cash", and fear of robbery in a few places.
The best way to pay for poor services already rendered and move on with life is to simply pay via card. Didn't like that haircut? Terrible food at the restaurant? Hold onto your cash and slip them the card.
I think that hiding the CC fees into the price that you pay with all payment methods should be illegal.
Where did you get this number from?
[1] https://www.ihlservices.com/product/the-cost-of-cash-handlin...
What actually is the source of such costs? The cashier still has to be paid even if the customer is using a card. Presumably there isn't anywhere near that much theft from registers, or people messing up giving change?
"Does IHL Group have any connections to merchant providers?"
> IHL Group sells market intelligence, vendor directories, and lead generation data to the electronic payment industry.
Cash handling costs is a real issue though. Not counting under-reporting income, credit cards cost the most at US intercharge levels of 1-3%. Then the all-in cost of cash handling. The lowest cost method is debit.
BTW, I used to handle around $7M/year in credit card transaction in the USA, and if you got actual hand-written partial numbers on a signed contract, then we could avoid nearly 100% of charge backs, as we always delivered on our end. I think in 14 years, we had around 10 charge back attempts, and our merchant provider loved us. The only time I ever magically lost a charge back was to a Visa executive for ~$10k, and our merchant provider just shrugged. Whatayagonnado?
Bad service = card always.
Tax fraud, essentially.
E.g. you go to the Minnesota State Fair, merchants may offer to not charge sales tax if you pay cash. It is shockingly brazen sometimes.
> How could a business possibly operate in this reality?
Extremely lax enforcement on the part of the specific US state's department of revenue
https://gocardless.com/
* https://tautology.town/2026/02/14/learning-charcoal-grilling...
* https://tautology.town/2026/04/03/ten-times.html
https://investor.visa.com/news/news-details/2016/Visa-Commis...
The problem is that like all cartels, they hold progress back. Things could be even more efficient than the current state of affairs. For example we could have open standards with thousands of local players, much faster settlement times etc...
There are also aspects such as the fact that due to this concentration of power, the whole world is subject to US sanctions, such that a EU citizen sanctioned by the US is effectively cut off from civilization.
I'd frame it as making the standards for competition very high.
I don't see people getting super ideological about their inability to create monocrystaline turbine blades or 2nm semiconductors in their garages. Why payment networks? Because computers? The overall network is way more complicated than a specific technological system or clever open standards document.
These networks would be usurped if someone could actually come up with a better system. The economy insists upon it constantly.
I am just saying that in my opinion, society would be even better off if this industry wasn't controlled by a cartel and i pointed 2 examples of how.
One difference between this and turbines, is that payment networks are sitting at the heart of the economy of countless countries. Turbines have a very different risk profile, much more modest and localized.
Russia was for example cut off from high-tech maintenance contracts but has been able to deal with it by manufacturing their own replacement part + there are maintenance cycles and spare parts so any disruption in service is not immediate unlike payments.
I mean, as opposed to what? You could apply this to any infrastructure cartel like with AT&T in the 90s or Comcast or 100s of historical examples. The alternative to a bridge troll is not ”no bridge”.
Is this why the best cash back credit cards give 2%?
https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-in...
2% seems to be a local maximum of cashback cards. There's a lot of 2% cards, and only a handful above that.
Makes sense?
Now they do all kinds of accounting tricks to pretend that they have thin profit margins because they split up every part of the business into hundreds of 1-3% chunks of the profit. To sidestep regulation that already barely exists.
most importantly, this opens up a lot of money that the federal reserve can hold directly, something that will become more and more important as bond yields go sky high.
This is an important question- most of the costs of a credit card providers come from dealing with fraud and chargebacks. That's partially because, under US law, credit card companies have to eat fraudulent charges if they can't get the person or company that did the fraud to do so. (Funnily enough, this is one of two places where protections for average people in the US are significantly better than protections for average people in Europe).
But credit card companies can keep their costs low by making a business decision not to renew the accounts of frequent chargeback-ers or chargeback-ees (even if they never officially found those individuals at fault). If the government had to make a payment system for everyone and take on all responsibility for all fraud, that would create an incentive with massive second-order effects.
The article did an awesome job explaining what are the parties involved and you choose to use a generic term instead.
> dealing with fraud and chargebacks
A lot of that is offloaded to the merchant, which instead has to pay them on top of what they already pay to the issuer bank.
There is no reason why fraud and contract violation must be handled by unelected and unaccountable payment processor, when the government has already set up a consumer protection system for disputes related to cash payments. The payment processor is best left as a dumb pipe that does what parties and (in case of disputes) courts tell it to do.
Because that would break the subscription-based billing model for a lot of businesses.
Making a purchase is (still) voluntary for the customer.
For everyday purchases at physical stores, cards are convenient. You just swipe and maybe put your PIN. But other digital payment methods or cash can be just as convenient. You're never going to chargeback a coffee, a sandwich, or your groceries.
But for distance purchases such as online shopping, hotel bookings, flight reservations and such, trust is the most important factor, not convenience. Cards have fraud protection. Other payment systems do not. These "unelected and unaccountable" people can actually help you if you've been the victim of wire fraud. Much faster and much less of a hassle than going through the courts. And if they don't help you, you haven't in any way, shape or form abstained from your right to justice through a court of law.
If customers can have that security and ease of mind, then they are much more likely to make a distance purchase. Which means that the vendor can sell their product. If the customer can't have that ease of mind, then the vendor will not make a sale.
So vendors who want to make sales will gladly accept cards. Anybody foolish enough to try to sell without making it easy for the customer to pay in their preferred way will go out of business.
Another point worth mentioning is that cards work instantly across pretty much all currencies in the world. You can go from anywhere to anywhere and pay with your card and currency exchange is done automatically. And in the past 10 years, cards have given very good exchange rates.
This is only in US and it is needed in US, because US has very limited consumer rights regulation. EU has much stronger consumer rights (mandatory 14-day return windows for any reason, easy cancellation for subscriptions, mandatory 2-year warranties).
So the things that the (private) credit-card companies protect you from in US (via chargeback support and fraud detection) are things that laws protect you from in EU.
Where are you going to do the transactions in your scheme? Because credit card transactions are not the same as sending money from one bank account to another. There are settlements, disputes, chargebacks, etc.
How is the central bank going to offer the same variety of products described in the article? I.e..
> Interchange fees vary dramatically based on the kind of card, category of spend, and even the metadata attached to a transaction. The network’s goal is to set fees that incentivize desired behaviors on their network, including using more secure payment methods (lowering interchange fees for merchants), or for companies to do more business spending (higher interchange fees on commercial credit cards).
Your scheme sounds like all these crypto guys who think they can replace credit cards with bitcoin transactions, as if they were the same thing
But they set the interchange rates and disallow (or at least have until recently, in the US) merchants to discriminate against cards based on rate or type via their “honor all cards” rules.
They are absolutely propping up and benefiting from the high fees.
Brazil's Pix costs ~$10M/year to run: https://whatispix.com/
This is much cheaper than the entire credit card ecosystem skimming ~3% off of the economy. Efficiency!
FedNow Is Live - https://news.ycombinator.com/item?id=36801491 - July 2023 (1022 comments)
Walmart is currently trialing it to save $3B-$7B a year in interchange fees. No crypto, just XML messages through a mainframe at the Federal Reserve with a 20 second SLA.
> “It surprised me,” Henry said of adoption of Walmart’s first iteration of pay-by-bank, which is available online but hasn’t been marketed to customers. “It’s certainly surpassed our expectations of the amount of customers that have registered and actually use the payment type.”
> Walmart’s upgraded pay-by-bank offering will be rolled out in 2025. The transactions will occur over bank technology provider Fiserv’s NOW Network, which integrates with The Clearing House’s Real Time Payments network and the Federal Reserve’s FedNow. Until now, large retailers hesitated to launch real time payment options because many banks were not connected to an instant settlement system, meaning their customers would not be able to use the product. NOW Network aims to connect to as many banks as possible to reach 100% of deposit accounts by combining its own network with RTP and FedNow.
Walmart Plans Instant Bank Payments, Cutting Out Card Networks - https://news.ycombinator.com/item?id=41593450 - September 2024 (3 comments)
https://news.ycombinator.com/item?id=49433164 (citations)
(as of this comment, there are 100+ instant payment systems live across the world; we should assume that all countries will eventually have an instant payment system, or integrate with someone else's)
https://www.pymnts.com/wp-content/uploads/2026/09/PYMNTS-Int... [pdf] (September 2026 revision)
Take SEPA Instant, for example. It’s great for many things, but effectively nobody pays using it in stores or even online.
It actually supports my point: FedNow could be SEPA Instant (if it were to be widely supported and available to retail bank customers), but it’s definitely not UPI, Pix, Wero etc.
My link mentions how Wero, replacement for US credit card rails in Europe, is being built on top of SEPA Instant. An adoption tracker is included, to show uptake progress. ~35% of tracked banks in scope in Europe for Wero have adopted it, as of this comment. They are actively building to get off of US credit card rail infrastructure.
In the US, similarly, it will take time to move off credit card rails, but we’ll get there. As mentioned, Walmart is already running live trials for pay by bank. I agree it is not fully operationalized yet, but it will be eventually. The most important primitive already exists (FedNow rails). Everything else is app experience and consumer training (for payment requests and transfers).
I see the pattern between the EU and US credit card -> instant payment transformation journeys, but maybe you don’t. Pix and UPI have shown how easy it is.
(Almost every deposit institution in the US currently has access to FedNow, per the Federal Reserve’s latest participant report, and through those deposit institutions and service providers, their customers)
Please tell your user that this SLA is much too high for many purposes. A cafe or such would lose a ton of money if every transaction took 20 seconds longer to conduct.
You can apply to a fund to implement this system.
https://nlnet.nl/taler/
A large part of the promise of crypto and stablecoins was to displace Visa and Mastercard rent-seeking. This didn't seem to happen. Most modern neobanks, our own included (https://peanut.me), actually seem to EMBRACE Visa and Mastercard. Almost all offer an actual Fiat card within their app, instead of boldly saying "No, pay with crypto, the future of money!"
This is somewhat disappointing in the short term, but longterm i believe it offers a clear transitory path to full decentralized money adoption. Already today we're seeing a growth in direct peer to peer payments in peanut, and merchants slowly starting to adopt it as well. I imagine the same is happening across the industry. In a competitive economy, the better currency (read: crypto, stablecoins) wins and eventually absorbs adoption.
my 2 cents
It’s slow and expensive and doesn’t scale.
The real answer is an alternative that relies on a centralised provider - or set of them - who use traditional databases and the like, but do things in a modern efficient way and don’t charge the same fees as the current card providers do.
Furthermore, a currency needs a government (or similar kind of body) to manage its stability, by printing (and buying) money. Otherwise, we'll see wide fluctuations in value like what happens with Bitcoin.
Not too far off. You gotta ask why such a lucrative business has a near monopoly, and the answer is not that potential competitors don't notice their profit margin.
It’s like if you gave your buddy $100 to give to his room mate, and he decides to wait a week and gamble it on Kalshi
Or treasuries.
Its actually a minor part of rheir business.
And frankly who cares given that its a sustainable system. I pay on credit and then someone else pays. I dont give a shit of they are betting on how many times Al Roker says Trump on New Years Eve.
From the actual article:
> The payment processor keeps 0.35% ($0.35), then pays 2% ($2.00) to the cardholder’s issuing bank and 0.15% ($0.15) to Visa. The 2% is the interchange fee, commonly known as interchange. The 0.15% is the network assessment fee. 8
In other words, they get 0.35% of every transaction ... and it does not require anything close to that to maintain their network.
If it's so easy to disrupt visa/mastercard payment network, they wouldn't be able to charge this much. Payment is a highly competitive business. We witnessed so many payment companies went under or were bought out, but these two stay for years and are still profitable.
The truth is their moat is considered very durable and hard to build. A global n banks to n banks payment network is not as simple as how people thought.
If they have the US government behind them its much easier
https://thepaypers.com/payments/expert-views/pix-hits-a-wall...
If you're an American that 2% is a much bigger problem for your society. That's a direct funnel from the poor to the wealthy, it's not as a obvious a problem as "Trump gave the ultra-rich a tax cut" but it might structurally be more significant.
Ripping off other people is the American way.
which is also why crypto bros get confused.
They are actively being unified into a cross-border payment network.
Of all the things to complain, this is the one where they are actually doing something…
European Parliament committee backs digital euro - https://news.ycombinator.com/item?id=48645468 - June 2026 (2 comments)
Gov.uk has replaced Stripe with Dutch provider Adyen - https://news.ycombinator.com/item?id=48415217 - June 2026 (235 comments)
Goodbye Visa and Mastercard: 130M Europeans switching to sovereign payment - https://news.ycombinator.com/item?id=48207004 - May 2026 (777 comments)
Wero – Digital payment wallet, made in Europe - https://news.ycombinator.com/item?id=47038965 - February 2026 (132 comments)
Europe's Banks Launch Wero Payments to Dislodge Visa, Mastercard - https://news.ycombinator.com/item?id=41666833 - September 2024 (88 comments)
Unofficial Wero Adoption Tracker - https://www.werotracker.eu/
https://en.wikipedia.org/wiki/Wero
https://en.wikipedia.org/wiki/Single_Euro_Payments_Area
ISO 20022 looks more like it.