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Comment by thescriptkiddie | Hacker News Reader

Another thing to consider in that credit and debit card processing fees, which in the US are substantial, especially for small merchants that can't use large volume to negotiate a discount. This amounts to a ~3% hidden "tax" on all transactions, the bulk of which goes to one of four enormous corporations.

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The US needs to get on top of this. Most other places I know of don't have the cashback cards because they limit the fees that can be charged.

The flip side of this, of course, is that in places with limited fees it is now cheaper for the merchant to use a card than to deal in cash, as cash has to be counted, reconciled and banked, has security requirements for transport etc. In places like the UK and Australia, lots of small merchants now operate in a cashless way because it costs less.

The US already caps debit card fees at near zero. There is no need to regulate credit cards fees.

Merchants are free to charge credit card users whatever extra fee they want.

This is a surprising point I never see raised, that cash has its own overhead costs, just that they're diffuse (training and paying employees to close and count the registers, hiring Garda trucks to transport cash) versus explicit (processor fees).

3% is presumably still far higher than cash's overhead, but the rate is so entrenched in the US that I wonder what it would take to get it dislodged.

3% is not for electronic payment, 3% is for accepting credit card payment. Debit cards are much, much cheaper. And merchants are free to charge credit card payers an extra 3% or whatever they want to cover credit card costs.

https://www.ftc.gov/business-guidance/resources/new-rules-el...

> Beginning October 1, 2011, interchange fees for certain debit cards are capped at 21 cents plus 0.05% of the transaction value.

https://www.federalreserve.gov/paymentsystems/regii-average-...

> In 2020, the average interchange fee per covered transaction was equal to $0.23. This value has not changed significantly since Regulation II took effect on October 1, 2011.

Hopefully, the upcoming FedNow system will make electronic payments effectively free.

https://www.federalreserve.gov/paymentsystems/fednow_about.h...

> 21 cents plus 0.05%

This would seem to make it potentially quite expensive on small transactions?

People use cards for the most trivial amounts here in Australia. Apparently the typical transaction fees are apparently 0.5% for debit and 0.9% for credit, which means that yeah, I just wave my phone to buy a donut...

It is definitely too high for small dollar amounts.

This website has links to payment processors that show the different price for merchants with small dollar amount transactions:

https://www.cardpaymentoptions.com/credit-card-processing/de...

For banks not covered until the regulations that cap fee, the cost is only 1% + $0.04. But it seems the banks that are covered under the regulations are charging the max allowed, 0.05% + $0.21.

Over here in Portugal, many small merchants don't accept card because of this, or at least have a notice mentioning "5€ minimum to pay by card".

3% is actually not bad for what it gets you: fraud detection, not having to lug cash to the bank every day, reduction of theft and employee mistakes, better recordkeeping for taxes, a way to handle refunds, and cleanliness. Small merchants often use Venmo where I am, and they save 3% in exchange for that awkward dance of sending payments.

Vendors can choose to accept only debit cards and not have to pay 3%. Accepting debit cards is basically free in comparison.

But why do we need a 3rd party middle man fornwhat used to be a private transaction between two individuals?

If the government is going to replace cash with technology, why can't it do it itself and not involve some trabsbational bohemoth like Visa or Mastercard?

Supposedly, that is in development:

https://www.federalreserve.gov/paymentsystems/fednow_about.h...

I thought this for the longest time and couldn't believe how often it was overlooked

Then I ran across an article talking about business owners for whom handling cash (there are many associated costs, safely transporting it, employee theft risk, time counting it, so on)....is actually more costly than the credit card middle man fees so they stopped accepting it.

Surely it varies case by case but still I was a bit flabbergasted

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