You don’t. The merchant you are buying from is choosing to pay 3% for credit card payments because they believe incentivizing people to pay with credit cards will result in them earning more (via higher prices or higher margin goods) than incentivizing them to pay with debit/cash.
If a merchant wanted to, it would be trivial for them to give you a 3% discount for paying with debit. In fact, Target gives you 5% off for paying with debit via their Redcard, but I suspect they do not advertise it because they still want their non savvy buyers to use credit cards. And they want to funnel their rewards seeking savvy buyers to the 5% discount since they bet the cost benefit for those people does not work out.
> You don’t. The merchant you are buying from is choosing to pay 3% for credit card payments because they believe incentivizing people to pay with credit cards will result in them earning more (via higher prices or higher margin goods) than incentivizing them to pay with debit/cash.
Today I picked up flooring from a place that gave a 5% discount for paying with cash or check. Many gas stations around here are around 3% less when paying with cash. At such places you pay extra for the convenience of the card.
Otherwise I think the incentive point is exactly right. My town allows you to pay for parking with a mobile app and CC. I’m sometimes charging a dollar total to the card for parking. Not much left for the town after the fees. But I always have my phone and can pay vs carrying cash or coins to pay.
My guess is the town makes more overall in parking fees because of that app
I don't believe that a merchant is allowed to do this? Probably very dependent on your deal with credit card processors but my understanding is that the default contract between a merchant and a credit card processor stipulates that you are not allowed to offer discounts to not use credit cards differently.
Of course if you are Target-sized, you get special treatment. My understanding is stuff like Redcard is basically just Target "giving back" their cut of processing fees...
A federal law was passed over 10 years ago allowing this.
https://www.ftc.gov/business-guidance/resources/new-rules-el...
> A PCN cannot stop you from offering your customers a discount or another incentive for using a certain method of payment, as long as you offer it to all your customers and disclose the offer clearly and conspicuously. For example, you can offer your customers a discount or a coupon if they pay with cash or a debit card rather than a credit card.
A class action lawsuit was filed, and the networks settled by allowing merchants to charge a fee only up to what they actually paid to process the charge if they inform the networks first. I gather most merchants don't inform the networks. And when they do charge surcharges, the fee they charge is obviously higher than the payment actually costs them.
https://en.wikipedia.org/wiki/Ohio_v._American_Express_Co.
The FTC site is pretty clear, and they are the regulator.
I think this was in the past or no longer enforced. I lost count now of the stores that will charge you a 2-3% fee for paying with a card.
Debit cards exist and partially solve the inconvenience of holding cash. But, they're really inconvenient in other ways. As a consumer I'll prefer credit cards most of the time just for the security benefits. If there's a breach at a merchant and my number is stolen I don't have to worry about my checking account being screwed up for however long it takes to sort things out.
It'd be nice if we had another option for cashless payments. Particularly, one that doesn't impose such a large financial burden on everyone. Yeah, rewards are nice but they're disproportionately allocated as well. I think it's fairly evident going forward cash will be handled less and less. Credit card companies are the incumbents and path to least resistance to accepting cashless payments, but they don't need to be the only option.
With real competition I suspect we'll see those swipe fees suddenly decrease. Unfortunately, some of the bigger attempts at non-credit card payments (e.g., PayPal) charge commensurate fees. So, maybe I'm off and 3% is the minimum needed by the middlemen to stay afloat.
The point of the whole sub thread is that a merchant can always accept a credit card but still incentivize use of debit or cash by giving a discount.
> Debit cards exist and partially solve the inconvenience of holding cash. But, they're really inconvenient in other ways.
What inconveniences?
I was replying to the point made by the parent; it wasn't a meta comment for the whole thread. Most merchants aren't happily accepting a 3% surcharge because it's causing customers to spend more. While that happens and it's a big reason store-branded cards exist, I'd hazard to say most credit card transactions are for the same amount someone would pay with cash and the store just needs to eat the 3% because people don't like carrying cash.
>> Debit cards exist and partially solve the inconvenience of holding cash. But, they're really inconvenient in other ways. > What inconveniences?
I gave an example further down in that paragraph: "If there's a breach at a merchant and my number is stolen I don't have to worry about my checking account being screwed up for however long it takes to sort things out." It doesn't even need to be a security issue. There's been no shortage of incidents where a merchant double-charges, charges the wrong amount, doesn't release a hold in a timely manner, etc. where my cash is locked up with no recourse. To limit such impact, I have a daily spending limit set. That's helpful, up until I need to make a large ticket purchase. I'd love to see a debit card system that addresses these problems.
The merchants that do not offer lower debit prices choose to pay the extra 3%. It is up to the customer to decide if prices at merchant that gives debit discount or merchant that does not give debit discount are better.
> If a merchant wanted to, it would be trivial for them to give you a 3% discount for paying with debit.
It makes more sense to me for it to be a surcharge for using a credit card, but the last I knew the credit card companies disallow that in their agreements. Discounts get confusing and bump up against weird cases like minimum advertised pricing and potential taxation on the discount.
Debit cards can get a bit weird when they function as credit cards. A customer may use a debit card but swipe it as Visa or Mastercard and the fees the merchant pay will be different, setting up a constant source of frustration at the register.
I have never heard of this. Merchant gets the revenue, merchant pays the tax. If the debit price is $10, then the sales tax is on $10, and if the credit price is $13, then the sales tax is on $13.
> Debit cards can get a bit weird when they function as credit cards. A customer may use a debit card but swipe it as Visa or Mastercard and the fees the merchant pay will be different, setting up a constant source of frustration at the register.
Visa and Mastercard are payment card networks (PCN), they can perform both debit card and credit card transactions. If the card says debit on it, then it will be a debit card transaction with debit card fees. And no one should be swiping anymore, so I do not know what “swiping it as visa or Mastercard” means. It either says Visa or MC on the card, and that’s the PCN it’s going to use.
Debit cards are multi-branded. STAR is a popular debit network. Running a transaction over a debit network is far cheaper; often the merchant only incurs a flat fee for the transaction, and most card terminals give the customer a choice.
don't forget skimmers
Why are you putting the onus on the retailer? Don't assume malice or intent from them.
I operate online businesses; so 99% of my sales are credit card. I get the occasional wire/ACH or a check in the mail. I'd love to not pay 3% of all my revenue to credit card processors, but most people want to use credit card / PayPal / etc. because it's more convenient for them.
I'm happy to offer a discount if someone wants to pay via a non-credit card, but I don't raise my prices because of it. I just have to suck it up and eat that cost. My margins are not high and I would've made about 27% more last year had I not had to do that. You're welcome.
Because it is their choice.
> I'm happy to offer a discount if someone wants to pay via a non-credit card, but I don't raise my prices because of it
This makes no sense to me. As the leader of the business, you have the option to
1) deny all credit cards
2) accept all credit cards, but not offer discount for debit cards
3) accept all credit cards, but offer a discount for debit cards
It is just a business decision, and if you are not choosing 3, one would hope it is because you are earning more profit by going with option 2.
Since we're on HN, I'll mention Stripe. I don't use Stripe - but they act the same way.
All of these don't bill for "credit card" they bill for "card".
You thought... prices were dynamically changing per acquisition channel, or that credit borrowers were "privileged" because they took a credit risk and got a "reward" coming from... the merchant ??? Man, what a beautiful world that would have been :(
People seem to forget processing cash isn't free. If you're small, it's a trip to the bank. If you're large, it's an armored truck. Employee theft is a problem. Counterfeit money is a problem. If we pretend it's 1% instead of 3% (since you can get 2% cash back), 1% for not dealing with the downsides of cash sounds ok.
The closest I can think of is when a bank tried to charge my son for using their coin counting machine because he didn't have an account there (he's a minor, but I had an account).
https://www.bankofamerica.com/salesservices/smallbusiness/re...
https://www08.wellsfargomedia.com/assets/pdf/small-business/...
While I think it's ridiculous, a 0.3% fee for over $20k in deposited cash per month doesn't sound unreasonable for handling risk.
Personally, I wouldn't be banking with either of those companies because I think they just exist as parasites. Find a good credit union.
Consumer banking is a very different beast to business banking.
Which they use to fund cash back programs...
Net income is a weird number so I tend to ignore it for this kind of stuff.
Certainly I could have missed the payback style stuff they do but I thought that was included in the number I checked.