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Comment by cwkoss | Hacker News Reader

Sounds like the real villains are the credit card companies who have the market power to enforce fees on cancelled payments. They are so entrenched no one is even questioning their position anymore.

Visa and Mastercard are massive drains on our economy - it's ridiculous how unquestioningly their 3% tax on commerce is accepted.

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In Australia, this is regulated and they can charge no more than 1.5%. https://www.accc.gov.au/consumers/pricing/card-surcharges

This could be changed overnight with 1 piece of legislation.

The American system is too deeply tied to capital to have a policy that actually helps citizens and small businesses get passed. The second a government official proposed something like this, the espionage arms of the credit card corporations would come down so hard on them and arrange for them to fail their next appointment (through "lobbying")

CC companies are genius.

They charge companies 3% -> companies embed that 3% in their prices -> customers get a 1% refund from CC companies.

- If you do NOT use a CC, you effectively pay _more for CC users_ (3%!).

- CC companies make the customer feel like they have a benefit, while in fact, they are net payers too (2%).

- They have access to all (private) data of the customer, which is extremely powerful in this age and time.

I honestly have no idea how the hell the US public is still deluding itself to not make this illegal.

Are the only ones that get it so content with their 1-2% pieces of silver that they're fine in trading the wellbeing of the less fortunate?

On the one hand, 3% cc fees are much higher than what would be set by a competitive market and are only possible with an oligopoly. On the other hand, the convenience that they allow for not carrying cash is often worth more than the 3% to consumers/merchants like me. E.g. any online payment. So while it's massively overpriced, it's still a win win usually, and I think that's probably why people aren't madder about it.

Yeah, the convenience of having drinkable tap water is also worth >3% of your net income. But luckily, because of competitive markets, it's often <0.1% of your income.

Isn't water one is the canonical examples of a natural monopoly?

what city in the US has a competitive water distribution system?

You say "only" as if this isn't the majority of the american bourgeoisie.

Pretty much all of finance, Landlords, IP trolling - the rich will unashamedly collect undeserved rent on anything they can up to and slightly over the line of the law.

It's a prisoner's dilemma. If we collectively switched to a payment system with lower transaction costs, we would all be better off. But as an individual, it is in your best interest to use the credit card with the highest rewards program, because you have to pay that extra 3% either way.

Agree, and specifically for prisoner's dilemma/tragedy of the commons scenarios we have the option of regulation, which corporate propaganda has labeled as "government intervention is always bad".

And we also taught our children to be ethical and aim to do good, even in school, which helped.

You've articulated the exact sentiment that I have to others before.

What can we do about it? Is trying to out-lobby i.e. regulate the CC companies the only way? I noticed that other countries don't seem to have this problem.

What prevents a new credit card company coming in and competing with a 2% transaction fee and undercutting visa/square?

Is it barrier to entry? Or would such hypothesized credit card company eventually cave to greed once they got big enough and move to 3% fees?

Evil genius

Debit card interchange fees have been regulated (aka price controls) in the US since at least 2011 https://sgp.fas.org/crs/misc/R41913.pdf

That article is about businesses charging excessive surcharges to customers (e.g. Jetstar back in the day charging 5% extra for Visa/MasterCard, when it only cost them 0.7%).

There are no laws against high processing fees; Afterpay takes around 8% for example.

There is in the EU, at least:

> Specifically, the regulation:

> * caps interchange fees at 0.2% of the transaction value for consumer debit cards and at 0.3% for consumer credit cards;

From https://eur-lex.europa.eu/EN/legal-content/summary/fees-for-...

No cap on corporate cards, though.

That, too, could be solved with 1 piece of legislation.

There are, and both Visa [0] and MasterCard [1] have both recently been in trouble for it. Instead of it being a specific maximum, however, it must be "reasonable" and allow for competition. The network also chooses the cheapest routing, by default.

[0] https://www.accc.gov.au/media-release/visa-undertakes-to-add...

[1] https://www.accc.gov.au/media-release/mastercard-in-court-fo...

In the EU, those caps are 0.2% for debit cards and 0.3% for credit cards.

Visa and Mastercard typically only keep the fixed fees on refunded charges, the $0.30 part of the typical "$0.30 + 3%" fee structure.

Square is saying they'll keep the whole 3%. That's obviously different and not Visa/Mastercard's fault - Visa is refunding it to Square, Square is keeping it. Stripe is now doing the same thing too.

The fixed cost is the processing fee and that cost includes processing refunds. The percentage is the "interchange fee" and is supposed to represent the agreed take of the processing network for that settled transaction.

https://www.businessnewsdaily.com/16583-credit-card-processi...

I don’t know if it’s worth 3% but the convenience of not having to have and handle cash is worth something, for both buyers and merchants.

If a business doesn’t accept credit cards, they’re going to lose a lot more than 3% in lost transactions.

Depends on the business. The Barbershop I go to is cash only, doesn't take reservations, and has always had a 30+ minute wait. I assume the uhh.. tax flexibility of cash payments is worth a lot

Thank you for your anecdata

Cash still works and if you can get enough people to go back to using it then credit cards will have to change or be more ripe for disruption.

The convenience of credit cards — and customers' willingness to spend more when they are accepted — is worth more to retailers and customers than the processing fees.

I for one never carry cash, and I will happily pay any extra transaction fees from local businesses for the opportunity to reduce the size of my wallet, the cost/risk of casual theft, and the need to queue at an ATM for cash as part of my daily life.

Debit offers most of these benefits though, at much lower expense.

I use credit because with the rebates it’s rational for me. If retailers offered a sufficient cash discount to wipe out the 1% rebate, I would move most of my volume to debit or even to direct debit.

An example is my cell phone bill. Verizon offers such a huge discount for direct debit that I do it. Otherwise I would certainly use credit.

My kid's university housing bill accepts credit card payments with no added fees, so I get my 2% back on that. The tuition bill can be paid by credit card but they tack on a 4% fee, so tuition gets paid by check.

Rinse, repeat with most vendors.

Except with debit the risk is now back on me to make sure my PIN doesn't get stolen/skimmed/whatever. Transactions are less convenient than a single tap, and (at least in the US) requires paying attention to see if places even support debit.

Ironically, many smaller shops don't support it, even though it would theoretically be cheaper per-transaction, because the up-front costs and hurders are higher than a Square account.

Not really, because you have to embed the CC costs into the retail price. So even if you pay cash, you pay for CC fees indirectly. While only the actual CC users get some minor cashback. So non-CC payers have the highest cost.

Yeah, I'm really thinking of going cash-only personally just out of principle. Not that it will affect anything other than my own inconvenience though.

I went to a Chase last week. They didn't have any cash. I filled out a withdrawal slip and finally found a teller. She just told me to use the ATM. I didn't have my card with me. That's why I went in the branch and used the withdrawal slip.

And on top of that there's so many businesses that just refuse to accept cash now.

Ever since they got rid of floppy drives, I can't figure out how to insert cash for online purchases?

I know this is a contentious topic for some on HN, but one thing I like about blockchains is the way fees are used feels more fair and just.

I especially like the lower transaction speed, worse environmental impact, and the inability to reverse a fraudulent transaction.

lol they just cant help themselves

Seems to me that the real villain is the network interchange companies. The credit companies which use said networks are numerous and are in reasonable competition with each other, continually eroding their share of the transaction fee to provide more and more compelling 'rewards' to their customers.

Once upon a time people dreamed that blockchain would provide the network, operating in a distributed fashion that isn't dependent on one or two companies, and bet big on it becoming that, but obviously that didn't pan out.

I don't know enough about the topic to analyze whether 3% is high or low, but I don't think it makes sense for them to refund the fee in the case of refunds. They have provided the same service, same costs. So I would hardly call them villains for that aspect.

If your baseline is “same service, same costs”, then the fees from Visa/MC should be a fixed amount rather than a %.

They provide a service and they charge for that service. What part about this is so villainous?

I agree that is not a consumer friendly situation but on the grounds that it because its effectively a duopoly and not because they charge for a service they provide.

These monopolies never benefit the consumer. The best ways to approach this are 1. the government to break up the duopoly, 2. a competitor to come along to introduce more competition, or 3. the consumer can get fed up and go back to using cash or carry a laptop around to transfer bitcoin until said companies are forced to break up and consolidate to a better product. These solutions are tried and true.

I am tired of hearing people complain about a service and still continue to use the service.

From a user perspective, I get a lot of benefit from credit cards. I get cash back, an interest-free advance, the ability to do chargebacks, very low liability for lost/stolen cards, etc.

If I got 1% or 2% lower prices, would I give all that up? I doubt it.

I get 2% cash back on all my purchases. So they are going to have to drop prices by more than that. And I also get the protection of the cc company if my card info is stolen or a company doesn't deliver what they promised.

Cashback on credit cards is really just a rebate on the CC fees that are baked in to all prices. It's still a net economic loss for consumers, just not as bad as if you weren't taking advantage of that.

Credit cards only seem like a good deal to consumers because it is hard to reason about n-th order economic effects. The profits these companies make are ultimately coming from all of our wallets.

It's a net economic loss for consumers as a class, sure. That doesn't mean it's a loss for each individual consumer.

I'm not against lowering CC fees. But the idea that they're just rent seeking is very silly.

Yeah, I'm aware of "churning". AFAIK its only possible to beat the system by taking advantage of many temporary offers in series and distorting your spending to get the 'free' value offered by their featured partners. i.e. you can only beat the system to the extent that you value airline miles and gift cards as their cash equivalents.

I'm not even talking about churning, though that can be a thing too.

I need to use something for purchases, and each method of payment has pros and cons. Even if using a credit card had a visible 2% additional cost, I'd use it on certain transactions. If I'm dealing with a vendor I might not trust to do a refund, a cc lets me do a chargeback. If I'm concerned about holding large amounts of cash, a cc lets me limit my risk exposure. If I don't have the cash currently, a cc give me an interest-free advance until the statement due date (between 20-40 days in the future).

We can certainly argue about whether those things are worth 1% or 3% or .02%, but they're worth something to consumers.

Yea people keep talking about the convenience of not having to carry cash. I think the best benefit of a credit card is that you can do a chargeback if you're fraudulently charged or if the company does not deliver on the obligation of the purchase. Which I've had to do more and more lately as companies increasingly hide themselves behind powerless frontline customer support punching bags. I've done more chargebacks in the last two years than I have in the 20+ years I've had my Amex card.

France has its own payment network, CB (previously Carte Bleu). Payment cards emitted by French banks are usually both CB and Visa, which allows French banks to route payments through CB rather than Visa. This could probably be done by other groups, national or otherwise, with little effect on users.

https://fr.m.wikipedia.org/wiki/Groupement_des_cartes_bancai...

A lot of local shops near me pass the processing fees to their customers. Usually with a small sign at the register that says 3% added for credit card payments.

In my wife's small biz, she was paying between 1.8 to 2.2% for Visa and MC and 2.8% for Amex for in person. The 2.2% dealt with rewards cards.

and yet Apple/Google/Valve can take 30% :)

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