Shoppers Love Rewards Credit Cards, Retailers Hate Them | Hacker News Reader

Shoppers Love Rewards Credit Cards, Retailers Hate Them

wsj.com

42 pointslxm54 comments

Here in the UK I’ve noticed that Amex is not accepted by a lot of smaller businesses. When I ask why I’m told it’s because their fees are 4-5% - higher than both Mastercard and Visa.

The thing is reward credit cards really feel like the banks are fleecing merchants and giving a small portion as a kick back to the consumer. If card issuers want to provide an incentive to their customers then they shouldn’t fund it by charging the merchants more.

All that will likely happen is merchants will increase their prices and those without reward cards will end up paying more and getting less. It’s probably why on so many sites (especially airlines!) I have to pay ‘2% credit card processing surcharge’.

If Visa and Mastercard don’t want retailers to get selective then there needs to be a single charge rate - and I think it would be a good idea that this information is shared with purchasers at time of a payment.

When I operated a store in Canada, Amex would hold on to the money for an extra 30 days beyond the next monthly reimbursement cycle, unlike Visa/MC.

It's not just Amex - I found quite a few places in UK just straight up don't accept credit cards at all. It's cash or debit card only, again - because of higher processing fees.

Not these days, that's all but disappeared, at least in the Midlands where I live.

Amex though, very few places accept amex.

Wouldn't go for "very few", the majority (sure not all) of places do in my experience

The issue you refer to here was spoken about in a recent buzzfeed article that appeared on here :)

https://www.buzzfeednews.com/article/venessawong/were-all-su...

https://news.ycombinator.com/item?id=17450891

Interestingly a barber in the City (of London) I occasionally go to started accepting Amex recently. I had asked them the first time I used them (back in 2008) why they didn't accept Amex and it was for the high rates.

When I asked why they'd started accepting Amex, they said that the rates on some rewards cards they were accepting were so high that Amex was better value for them.

I also assume it was helped that the demand for Amex is higher in the City than the UK average.

I've noticed a lot of smaller places have started accepting Amex because they use iZettle machines or similar.

It's funny that many medium-sized business will reject Amex, while a little burger stand at a farmer's market will (sometimes) accept it.

Perhaps iZettle have decided to take the hit on the Amex fees and charge a flat fee to their customers.

Hi, I saw one of your old comments and was hoping we could chat about it as I'm going through something similar. Email is in profile if you're willing.

https://news.ycombinator.com/item?id=12099420

There is a saying that your business isn't going anywhere in London if you don't take AMEX.

Not only are there a higher percentage of personal cards but a lot of corporates use them.

>All that will likely happen is merchants will increase their prices and those without reward cards will end up paying more and getting less. It’s probably why on so many sites (especially airlines!) I have to pay ‘2% credit card processing surcharge’.

Those fees have been banned in the UK (I think it might be an EU regulation) now

If I go to Transferwise to buy foreign currency, I'm charged the same additional fee whether I fund my transfer from a debit or a credit card.

This doesn't seem right as it must be more expensive for them to process a credit card payment.

0.2% interchange on debit cards vs 0.3% on credit card. Within the EU they can't legally charge a card fee but can choose to say not accept credit cards or to charge a top up fee to all payment methods.

Transferwise do charge a card fee, here's what their UI has just offered me at the final confirmation screen:

"Choose your transfer type

Bank transfer Low cost transfer - 2.54 GBP in total fees Send the money from your bank account.

Debit card/Credit card Fast and easy transfer - 3.54 GBP in total fees"

That's a surcharge for paying by card vs a bank transfer.

It is EU and it doesn't apply to AMEX branded and issued AMEX cards (it does to say a British airways AMEX but not the platinum cashback cards).

...and yet many retailers who won't take Amex directly, will let you pay via Paypal, and Paypal do let you provide funds from an Amex card.

If you're a small business, Paypal charges are also high compared with standard debit and credit cards, but my understanding based on conversations with people in the SMB space is that somehow the marketing types think the benefit of having a "pay with Paypal" button on your website outweighs the additional charges. For the moment, anyway.

I'd rather pay with paypal than use a company hosted credit card processing system.

For paypay security isn't simply a cost center, their whole business is keeping these transactions secure. For a regular retailer, their business is selling some product, security is just an added cost.

By your statement, I have to assume that you don't really know anything about the history of paypal or the internal workings of the company.

Of all the online payment solutions, I think paypal is the most security-free solution I have come across so far. And the one that works the hardest to get your money into the system and to make sure that you can never, ever get your money back out.

getting money in and never getting it out has nothing to do with using it as a credit card processor.

One argument I've seen on PayPal is that it some people use the balance as an "off the books" place in family finances.

Stereotypical narrative: The wife will have a fit if she sees a credit-card transaction for an expensive hobby item. But if you just see "PayPal transfer, $300.00", or better yet, nothing because you paid out of a balance you filled up by selling junk on eBay, it has plausible deniability.

"It’s probably why on so many sites (especially airlines!) I have to pay ‘2% credit card processing surcharge’."

IIRC these surcharges are now illegal where you live.

There should be credit card charges added to every bill. This way we would have competition to make things cheaper instead if pointless reward systems - the sole purpose of those being to stifle competition.

If the stores want to give discount for paying with card they could do for example 0.5% or 1% and add the rest of the charge to the bill so there is still incentive for CC companies to compete.

As it is customers paying with cards get a hidden discount in comparison to those who pay with cash. Shops are forced to cover that discount as well. There is no incentive to provider cheaper payments either as the customers won't benefit. We really need a law that prohibits those hidden charges.

That could be an interesting approach, although I suspect the current arrangements between credit card processors and retailers are more complicated than a simple fee that would be known at the time of each transaction.

If you charge credit card customers extra, credit card companies block you from network.

That is not true everywhere.

In Australia, despite vociferous opposition from the CC lobby, it's legal for merchants to charge reasonable fees to cover CC costs and many do. Free Amex acceptance, in particular, is quite low.

I feel like maybe the store should just receive the payment in full. Then e.g. Visa could decide how best to make money off the system (say by charging the credit card users fees for usage).

The EU has recently gone in the opposite direction by centrally banning such surcharges: https://www.moneysavingexpert.com/news/2018/01/cards-fees-to... ; https://www.bbc.co.uk/news/business-40655333

This really does feel like a hidden subsidy to cards, presumably with the aim of moving towards full cashless operation. Norway is almost there already.

The EU also capped interchange fees though, in most cases at least.

I'd rather pay whatever payment fee (cash, debit, credit) the merchant sees fit. I have no problem paying a little more for my own convenience, but I'd rather not subsidize Amex and corporate cards.

It's vital to protect our "the advertised price is the price you pay" rules. Before these fee rules we had e.g. Ryanair advertising prices that were only available when paying with one rare credit card, and a substantial surcharge on all the cards people actually used.

I believe merchants can still offer a cash discount, which seems like a better way of handling it: cards shouldn't be subsidised, but advertised prices should be the prices when paying the way most people actually pay.

What always surprised me is how much we're willing to put a few private firms in the dead centre of the cashless economy vision. Even assuming Visa and Mastercard stay in business forever, what's going to prevent them from pulling the plug on legal businesses that are too controversial, or enforcing a "it may be legal in YOUR country, but we won't let you accept payments because it's not in OURS" paradigm?

I'm surprised there's nobody developing a 100% state-run payment processing network which would be a near drop-in replacement for the current credit card networks. Things like bank wires and ACH aren't really set up to provide responses fast enough for retail point-of-sale.

In my area a lot of gas stations are now using signs with two prices: the cash price and the credit card price with the cash price being lower. It seems some merchants are starting to be able to handle this at scale to rebalance.

It seems there was a time when as a consumer it didn't make sense not use a rewards card, but now that the ramifications are becoming apparent it is likely that some people may opt to switch back to cash.

I'd love to pay cash, but it just doesn't make sense given the rewards and the benefits of the reward credit cards. Citi Double cash gives me 2% back and does price matching. That is a huge savings over the course of a year.

Here in New Zealand, retailers will often charge a few percent extra for credit card purchases, and a lot of smaller shops won't accept them at all. EFTPOS (basically like a debit card in the states) seems to be much more commonly used, often with contactless terminals.

It seems to work well - I do have a rewards credit card, but certainly couldn't get by with just that card.

In New Zealand, EFTPOS costs the retailer a fraction of what credit card transactions do. When you swipe/insert your debit card, it goes through the EFTPOS system. But when you use the same card contactlessly, payment is processed by the credit card company and the retailer is charged a credit card fee or similar. That's the reason many retailers don't accept contactless payment.

The banks and card companies would surely love for EFTPOS to die, but the retailers love it. There's a reason every card issued today supports contactless payment, and you can't opt out.

The rewards motives are 2 fold: 1) to have the customer user their card (obviously) 2) to centralize spending in one card, so that the card holders have your information and spending habits

Some cards give better rewards for some type of shops. Amazon has their own CC as well.

Outside of the US/Canada most people get CCs from their bank and not from 3rd part vendors though.

I'm not familiar with Reward Credit Cards, which seems to not have taken off in France.

Cashback here is opt-in, bank- and retailer-specific. Meaning that my regular MasterCard from Bank B used to purchase stuff at retailer R gets me x% cashback. So in a way, retailers' woes won't (shouldn't) happen here...

This isn't just about cash back -- it's also about cards that provide points for airline/hotel/etc. loyalty programs.

Air France, incidentally, seems to have several Mastercard-branded cards which reward with Flying Blue miles.

Well, most cards in France are not credit cards any way, they're debit cards.

Sometimes you can have credit cards with deferred payment (everything at the end of the month instead of immediately) but actual revolving credit cards, like in US are pretty rare.

If you charge credit card customers extra, credit card companies block you from network.

This should be illegal but it's not.

It is illegal in some countries like Australia.

I feel like the right to reject would lead to awful problems. How do I know if the particular card I get would work at a particular shop etc. There is certainly a problem, but rejecting cards outside of the normal Visa/Mastercard/Amex system is not the way forward and would be very confusing.

http://archive.is/gEOen

This always reminds me of the alternative : cash [0].

[0] https://news.ycombinator.com/item?id=13782561

Taxpayers already pay quite a bit to keep the cash system running. I think it would make sense for the state to provide baseline infrastructure for electronic payments.

Just a question. I saw this thread more than a day ago.

"32 points by prostoalex 1 day ago | past | web | 32 comments"

https://news.ycombinator.com/from?site=wsj.com

How come it's on the front page with "32 points by prostoalex 7 hours ago"

How did "1 day ago" change to "7 hours ago"?

Isn't it curious that in an age where people want more privacy and control over their data that shoppers would love these kinds of cards?

How is it any worse than other credit cards?

Paywalled, but yeah; it'd be nice if everyplace used something like GNU Taler instead of credit cards.

https://taler.net/en/index.html

While we're at it, please get rid of tracking and 'membership' cards too - just give me good prices on all the things every day.

They need to invest in a better website and make it friendlier for customers and merchants if they want to make that a thing.

GNU have never been good at design

You'd have to have buy-in from some lending institution, and presumably they'd be the ones to make the user facing documentation/education to fit their clients.

However if it's only one bank we're right back to where we are with PayPal, where there's only one provider facing consumers / sellers; instead of competition to drive the markets towards actual efficiency and liberty.

No paywall: https://finance.yahoo.com/news/shoppers-love-rewards-credit-...

Solution to this problem already exists, it's called cryptocurrency. Yet people still trash it

Reply on news.ycombinator.com