Hacker News Reader

Comment by kuschku | Hacker News Reader

Girocard (in person) is 0.25%. GiroPay is 0.09€ per transaction, no matter how large. PayDirekt is 0.35€ per transaction, no matter how large. SEPA Debit is about 0.10€ as well.

Why are US-based payment services so fucking expensive?

View on HN

Credit card reward systems & points are not free. Comes at the cost of higher transaction fees that eventually get passed on to the customer.

I’ve found these schemes much less prevalent in Europe (with the exception of AMEX, but half of the vendors in Europe seems to not accept that anyway).

On top of that, in the EU, interchange fees are capped to 0.3% of the transaction for credit cards and to 0.2% for debit cards. This prevents it from becoming the points hell of the US market.

Although I'm pretty sure most of the rewards go to people willing to pay for premium cards because they make a lot of transactions. Do the people with free credit cards subsidize them? Maybe but it's not obvious. Of course, the people with the biggest reward cards are probably not paying much interest or late fees either.

> Do the people with free credit cards subsidize them?

Depends on the card. Interchange fees are much lower for basic cards so if you get at least 2% cashback, that's break-even. Of course cards with annual fees get a lot more rewards in the form of transferable airline points and have much higher interchange fees to cover that.

The interchange fee differences between credit card types are not very high, usually around 0.5%. You can see the public Visa interchange rates at https://usa.visa.com/content/dam/VCOM/download/merchants/vis.... Credit card companies play a lot of games with this too and will “upgrade” your card type if they think it’s worth it, even if you don’t make any changes.

The biggest variances involve non-exempt (Durbin amendment) debit cards.

Ah I thought the interchange rates would be 1% higher for the best cards, not 0.5% higher

I guess the lowest tier cards really do subsidize the rest.

Girocard was actually still significantly cheaper than the capped credit and debit cards (0.125% end-to-end cost (!)), and yet now we're seeing banks drop it because MasterCard has threatened to stop business with any bank that doesn't drop it.

IMO, the EU should either break up MasterCard & VISA, nationalize them, or build their own system (maybe unify Girocard, Dankort, etc?) and make that mandatory.

The difference between the MasterCard & VISA fees and e.g. Girocard fees is almost 2%. That's equivalent to paying an additional 2% tax on everything.

With that amount of money we could make all transit in the EU entirely free of charge and expand it quite a bit, yet all it's doing right now is make some rich assholes even richer.

Credit cardholders mostly get 1-3% back so it’s a bit of a wash.

Nationalizing a company that isn't really incorporated in your state is funny. EU has already limited the interchange fees on domestic cards. Plus, basically every EU country has some kind of a homegrown system.

Mastercard has warned banks that it'd stop cooperating with banks that still support the national card systems.

It's clear they're trying to kill those off, and it's working.

That's why merging the national systems and making that new, merged, EU wide system mandatory is absolutely essential.

> Credit card reward systems & points are not free.

I always treat them as a system for the corruption of myself. They pay me to use their card (for a payment!!!) and therefore I get corrupted and I become part of the problem.

Why are so many things better in the EU?

Haha EU isn't perfect, but from a super high-level and personal point of view (and there are millions of nuances within Europe), but generally there's more emphasis on the common good as a society, than what I've seen in the US

(I grew up in France but part of my family lives in the US).

A historian, Walter McDougall, author of the excellent "Let the Sea Make a Noise", was planning to write a history of America around the duality of the word "hustle", which can mean both "energetic, go get 'em attitude" and "scam". In America we are very accepting of anti-social or exploitative behavior as long as somebody's getting rich.

I also think a lot about the term "puffery", which in American law is when companies make false claims about a product, but in a fashion where everybody is assumed to know that they're lying, which makes it ok: https://en.wikipedia.org/wiki/Puffery

It really says something to me that we supposedly have such a deep expectation of commercial lies that it's acceptable. I think in a healthier country someone would say, "Wait, what if they just didn't lie?"

it's a way to exhert maximum control with minimal effort (in this case, talking about flow of capital)

https://en.m.wikipedia.org/wiki/Normalization_(sociology)

The EU has a cap on interchange fees, by law. The US has no such law, so they charge more, because they can.

Some of the interchange fees are paid back to the customer in the form of cash back and other perks and rewards.

All of the services you mentioned are debit cards, not credit cards. US debit cards are basically free as well, it's just that nobody uses them.

>it's just that nobody uses them.

that's a bold claim. not everyone bows down to the uber robber barons of the credit companies. i have no credit cards and am surviving life just fine thank you very much. i know i'm not alone.

this discussion would be more productive with some data:

* 83% of adults have at least one credit card

* 41% adults actually used a credit card in 2020

https://www.federalreserve.gov/publications/2021-economic-we...

41% had credit card debt, presumably a larger amount used them.

Right. Unpaid balance over at least one month. Although some people probably just have a credit card for emergency purposes, I assume that most people who have a credit card do use it over the course of a year.

absolutely, just replying to the poster saying that only 41% used a credit card, which would imply majority of americans don't.

There's a bit of HN bias here. Just thinking of the lower income or non-white side of the country. So many people don't even have a checking account (4.5% households or 5.9million )[0] let alone a debit card. There's no way they have credit cards.

While it may be a low percentage number, 5-7million people is not "nobody". Question I would stipulate would be adults vs minors in that number.

[0]https://news.yahoo.com/number-americans-without-bank-account... (households translates to how many people?) [1]https://www.gao.gov/blog/more-7-million-u.-s.-households-hav... (7.1million from April 2022)

Yes credit cards are insane.

There should be no difference between buying a 50k car with a bank card or a 50 cent plastic bag. Both transactions use the exact same network.

One of the transactions carries more risk. Risk has a cost.

I don’t mean to defend credit card companies, but it’s not as black and white either.

But you’re paying the fee for credit cards anyways, just not getting anything in return including consumer protection that credit cards offer.

Yeah, no. In another comment, I mentioned shopping at places that give discounts for using cash/debit instead of credit. No all proprietors are greedy assholes to charge everyone for services not used. I choose to do business with these shops.

Sure some do, but it’s an exception rather than a rule. Generally you’re already paying the market up for the credit card fee but get none of the benefits.

Id rather take the benefits.

> it's just that nobody uses [debit cards]

Nobody in your bubble. Just off the top of my head I know a couple people who don't have a single credit card, one is mid-50s, one just turned 70.

> US debit cards are basically free

I agree that they're basically free to process payments from, but there are invisible costs to the cardholder associated with using them vs credit cards (less buyer protection, overdraft storms if you accidentally zero your account).

I'm not aware of any downsides of keeping at least one or two credit cards, except for the potential to put oneself in debt. Unfortunately for some people, keeping a credit card is untenable because they're unable to stop themselves from using them.

Actually, I don't even have a credit card myself. My comment was about observing the general behavior of businesses I frequent—only one (a cost-conscious grocery store) won't take credit cards. I've just never needed to go through the hassle of getting one, myself.

Absolutely agree re: cardholder costs. In addition it what you said about fees and liability (although I'm lucky to have a bank that doesn't charge overdraft fees), I'm probably leaving a fair bit of money on the table that I could be making back up with credit card rewards / incentives if I wanted to spend the time on it. My comment was only about costs to the merchant, since that's what GP was talking about.

> I'm lucky to have a bank that doesn't charge overdraft fees

Name-and-fame them (if it wouldn't dox yourself), that's awesome! Are they more lik ea credit union or more like a bank?

> I'm probably leaving a fair bit of money on the table

I have some family who keep ~8 (rewards/travel) credit cards and maximize the incentives by keeping in mind all the categories + percentages for each card, including the couple of them that have rotating categories. It's not a whole lot but it makes my head spin.

I just have a Costco visa and I use it for everything that isn't from Amazon (for which I have a set-and-forget Amazon visa) or Apple (because I'm not going to turn down 0% financing for 24 months with the Apple card). I'm also leaving money on the table... but I don't exactly clip coupons and I even throw away produce (!) that has gone bad through neglect.

I assume because the US credit card customers are obsessed with reward points and miles and it need to be paid by someone. It's usually the merchants through high MDR. The merchants pass on the costs to the card customers or debit card/cash payers.

Prior to those gimmicks the rates where higher than now. I hoped Google to follow through with their pricing cuts, but yielded rather quickly.

As a consumer in the US I always pay with a credit card when I can. The businesses have already baked the credit card fees into their pricing so I might as well get a few percent back from my card plus the extra purchase protection, etc.

There are companies that offer lower prices when paying cash/debit specifically to only charge the credit card fees to those using credit cards.

It used to be a big thing in the US at gas stations where they advertised the 2 different prices. I don't know the details, but at some point that stopped happening. I was under the impression some rule change, but it is making a come back. I don't know if some consumer protection laws were made the revoked or whatnot, but it is possible to not have to automatically be charged for credit card fees if you're not using credit.

> It used to be a big thing in the US at gas stations

Hah, as a European that lived in California for a while this always seemed so odd to me. I just dug up a picture of my car that I took at a gas station, and there's prices in the background: Cash $2.94, Credit $3.11, for regular gas, and the date on the picture is the 4th of July, 2017. That's quite the difference but roughly in line with credit card fees.

It makes sense that gas stations would do this, it's a pretty slim margin business.

You still sometimes see this. My understanding is that it's usually against merchant credit card contracts however. You also used to see cash only stations but that's almost certainly vanishingly rare these days.

based on experiences with vending machines, could you imagine the nightmare of cash only pay-at-the-pump? <shudder> we'd have gas lines like the 70s not because of shortages, but just from people trying to pull their bills along the corner of the pump to flatten them out.

Doesn't preclude a cashier that typically still exists. Also Arco had cash machines up until a few years ago and I never encountered a line at one.

psst, look up. over your head was a joke. nothing to be taken seriously. we have cashierless grocery stores, hardware stores, and every other store. why would you think a late night 24/7 gas station wouldn't go cashierless too?

Need to work on your jokes. ;) The reason is that a significant amount of the profit is in the convenience store. Also security reasons... someone to call the police.

have you honestly never seen a cashierless gas station? you suggest that convenience store is profit center, but as you say, those have to be staffed. what do the numbers look like if it's just gas with cashless pumps and no staff? then, raise the rates of the fuel because "shortages", and I can see it being profitable for less headache. i can think of at least 3 of these stations within 20 miles of me. potentially faster turnover as you don't have people parking at the pump while they spend 15 mins inside. there's a lot of interesting positive aspects to this, and it seems that more are willing to try it.

I haven’t but don’t go to a lot of them. Too much vandalism here, but could see it in a safer place.

In some situations, there is an allowance to demand a surcharge for accepting a card. It comes with very narrowly standardized rules, because it basically is supposed to be "exactly the cost to accept the card".

From what I've seen it turns into a compliance mess outside of in-person retail, because many states have regulations and gimmicks on top of it, and the system will end up kicking out a rejection code if you ask for the wrong amount, or on the wrong customer. It's obviously intended that you just bake the cost in for everyone because that avoids people blaming the card networks for higher prices.

The only time I've seen it in person was when I went to make the initial payment on an auto lease; the dealer had a sign up saying that there would be a 3% credit surcharge, which exceeded the 2% cash back I expected from Citibank, so I used a debit card instead.

Debit card transactions are basically free in the US too.

Interchange fees were legally limited in the EU, not sure about the UK specifically. The reason why EU banks don't have these fancy premium credit cards with 2/3/5% cashback.

Reply on news.ycombinator.com