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Comment by lutorm | Hacker News Reader

Yeah, this was my thought too. Since everyone else who uses a credit card pay no fee, and I have to pay 25c to Dwolla, I'm actually subsidizing everyone else's credit card fees.

If the credit card fees were passed through to the customer it would work, but with the current "socialized" model there is no customer incentive.

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Credit card fees are passed on to the customer. They are included in the price of everything you pay. The merchant is the one saving money with Dwolla, and hopefully passing on the savings to you.

Except that the CC companies forbid merchants from passing the extra costs on to CC users.

Yes, in the sense that they can't charge customers paying with a credit card a different price. However, because payment fees are an expense to their business, merchants absolutely pass on that cost to customers - it is reflected in the final price of whatever they are selling. In a sense, the non-credit paying customers subsidize those paying with a credit card.

Of course they/we do. But, the Nash equilibrium is at 100% credit card use: if I stop using credit cards at vendors, I lose out on the benefits (interest-free loan, chargeback ability, rewards, purchase tracking through Mint), in return for a savings of 1 - N/(N-1) * transaction fee = zero. I have an incentive to keep using charge cards.

But merchants are allowed to give customers a discount for paying "cash" (actual cash or debit as the debit fee can often be passed onto the customer).

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