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Comment by tialaramex | Hacker News Reader

As I understand it usual US de-regulation means card issuers get to charge the merchant more or less whatever they want. So if they charge your grocery store $4 for the transaction when a rival does it for $1 then giving you $2 "cash back" is very affordable for them.

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The end result is a regressive wealth transfer from lower income people who can't qualify for rewards cards to high credit score, high income folks.

This is obviously horrible for merchants, but what's really gross is how regressive it is when it comes to poor people and small businesses. Unlike national chains, local outfits don't have the ability to negotiate favourable fee arrangements, so accepting CC payment puts them at another built-in disadvantage relative to well-heeled competitors. And of course, those fees end up baked into the price of everything, and are then carried by anyone who doesn't have a big-spender cashback/rewards card, but especially by people paying cash (whether by choice or because they are unbanked).

Hilarious to have this state of affairs going on while there's simultaneously a right wing panic about how carbon pricing will make everything a few percentage points more expensive. But I guess making everything a few percentage points more expensive so that executive credit card holders can get thousands per year in cashback and travel rewards is no biggie.

"The Payment Card Interchange Fee and Merchant Discount Antitrust Litigation is a United States class-action lawsuit filed in 2005 by merchants and trade associations against Visa, MasterCard, and numerous financial institutions that issue payment cards. The suit was filed due to price fixing and other allegedly anti-competitive trade practices in the credit card industry."

Another area where giving freedom to these businesses ends up screwing the average person. This is why I like the EU, they are strong on consumer rights. The naive would assume these businesses would naturally want to compete on these fees.

Sometimes the EU can be a bit too strong on consumer rights. For example, while charging excessive "processing fees" for accepting payment by card was a common scam, cards often do cost more to process than various other forms of payment here, and under the EU's latest PSD rules all surcharges for card use have been banned, even those that really did only cover the additional cost of the transaction.

I'd rather they err on the pro-consumer side, to be honest. I doubt those big banks and credit card companies will struggle to fight this and make their case for the appropriate exemptions if their scenarios warrant them.

It's not the big businesses I'm worried about. It's all the small ones, who are now obliged to take a hit of potentially 5% or more of a small transaction, because they have neither the power to negotiate the much lower fees that big companies have nor any longer the right to pass on the actual cost to their own customers to incentivize paying by a more cost-effective method.

Out of interest, where in EU are 5%+ rates a thing?

Here in Finland the base card-present rates of traditional merchant card service providers are around 0.3% for debit and 1% for credit, with no per-transaction fees so these apply to even small transactions.

Hmm, or maybe you were talking about card payments over internet? You might have a point there as per-transaction fees are more common there (e.g. Stripe takes €0.25).

Out of interest, where in EU are 5%+ rates a thing?

Hmm, or maybe you were talking about card payments over internet?

Yes, I was. For example, Stripe's current pricing here in the UK is 20p + 1.4% for European cards (so a transaction of around £5 has a 5% fee) or 20p + 2.9% for non-European cards (so a transaction of around £10 has a 5% fee).

Other online card payment services are broadly similar for small businesses paying the standard advertised rates.

Banning processing fees is anti-consumer, because it means that consumers who pay by a cheaper method have to subsidize the consumers who pay by the more expensive method (since companies will have to raise the prices for everyone).

Credit card companies won't fight bans on processing fees, because it actually helps them (the extra cost of the credit card is now hidden, and reduced, which means more people will use credit cards).

Additionally, this is a regressive policy, since it's easier to access financial products like credit cards when you're richer.

The blanket policy does have the effects you described, but more _often_ it gets rid of hidden charges or makes it trivial to prosecute them. Americans are apparently so used to these that it doesn't register, but Europe has been pretty effective at ensuring that headline prices must reflect the price you pay so as to be comparable.

Europe wants to ensure that if you say Product X is €10 and your competitor says it's €12 that's not just because you were better at lying than they were, the customers buying from you should pay €2 less for Product X. Transparency is essential to having a working market.

The most common place to see "processing fees" was online where in fact cash isn't an option anyway. A company would offer a product for seemingly less than competitors and then charge a "processing fee" which was really their profit. Committees looking at this stuff found that companies charging processing fees were fiercely resistant to a regulation that made them charge their actual cost, insisting that this couldn't be measured anyway and so the options were:

* Let companies advertise a price and then add processing fees of their choosing. As I said Americans are used to this, but Europeans see it as destroying market transparency.

* Forbid tacking on fees altogether (the option they took) so that prices must end up including the merchant's card processing fees the same way they include customer service call costs, warehousing, taxes or anything else.

* Regulate to try to ensure customers have a real way to avoid any processing fees, likely leading to years of court cases as courts rule out each individual sneaky new trick to make an "optional" processing fee in practice mandatory.

In the end I think the route the US chose ends up being more regressive, but I agree the European option isn't a panacea.

Depending on the industry sector, cash can effectively be several times more expensive to handle than the US market interchange fees. I don’t think it’s obviously horrible for merchants.

Visa interchange fees for the higher end rewards cards top 2.5% of the transaction. That's cost that the merchant has to pass on to the consumer in the form of higher prices.

The EU caps it at 0.3%, and the banks still manage to stay in business.

Can you explain what makes handling cash is so expensive? honest question.

If you handle enough of it, you probably wind up contracting with an armored car company to come collect it. Some gets lost or stolen, coins have to be rolled up for deposit, etc.

Till theft, the physical act of counting it and securely storing it, screening counterfeits, securely transporting it to the bank, etc. I don’t have direct links handy, but there have been some good insightful comments on the topic on this site previously. Hopefully they will turn up without much difficulty with a search. Sorry to have to pass the buck on a more detailed answer.

Handling cash is very labor intensive, you're paying your highest paid employees (managers) to count cash multiple times before/after shifts, bank runs to deposit, making change, rolling coins, etc. Plus the cost of physical security for that cash.

https://www.businesswire.com/news/home/20180130005244/en/New...

>New Research from IHL Group Shows Retailers’ Cash-handling Costs Range from 4.7% to 15.3%, Depending on Retail Segment

Loss from theft is a huge deal as well, there was a coffee shop in Baltimore that went cash-free because they were getting robbed so much.

https://baltimore.cbslocal.com/2017/02/02/cashless-coffee-sh...

There are definitely lots of merchants who don't take (or strongly discourage) cash— think Apple Store, IKEA, the self-serve tills at the grocery store, anything online. But the common element in all of those is that they're big companies who can negotiate better rates.

Independent retailers, restaurants, etc are put in an awkward position where not accepting credit cards can cost them business, but accepting them forces raising prices which can also cost them business.

Canada has an interesting option in the form of our Interac system for debit, which has more favourable fees especially for small purchases. Since every Canadian with a bank account has an Interac card, one common option for indies is to accept only cash and debit.

> Since every Canadian with a bank account has an Interac card, one common option for indies is to accept only cash and debit.

Except I hate using my Interac card for... well, anything... because if it gets compromised, it's my own chequing account that gets locked with the missing money.

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