Visa, Mastercard Agree to Lower Swipe Fees, Settling Long-Running Lawsuit
wsj.com
wsj.com
Is there a good primer on how all the pieces work and what the various incentives are and such? I found patio11's post[0] and this Fed investigation[1], and both were interesting but left me wanting more.
[0] https://www.bitsaboutmoney.com/archive/how-credit-cards-make... [1] https://www.federalreserve.gov/econres/notes/feds-notes/cred...
Mostly all the poor people in credit card debt pay for the flights of the rich.
Interest income is the largest of their revenue sources, and interest + cash advance + penalty adds up to well more than half.
https://www.fool.com/the-ascent/research/credit-card-company...
If you always pay down your credit card debt every billing period, you're considered a "deadbeat" because you're using the benefits of the credit card's payment processing but not paying in interest.
The best customers of financial institutions aren't those whom are financially responsible or flush with cash, but those regularly incurring 14+% interest on every purchase and paying overdraft fees.
For airlines in particular, the deals they allow through credit cards are more like loss leaders. They need to fill up seats because that's the nature of their business model. If you don't fill up enough seats to make up for the operating cost, the plane doesn't fly, and if the plane doesn't fly then that's one fewer route you'll have paying customers for. Airlines need to keep routes going, so they create incentives to keep people flying, which hopefully gets them into the habit of flying again even when they've used up all their rewards points.
That said, Goldman Sachs is sort of infamously bad at consumer banking, so I'd take their words there with a grain of salt. They lose a lot of money on most of their consumer banking endeavors: they lose like a billion per year on Marcus, they're actively trying to drop the Apple credit card, etc.
So at some level, of course GS is gonna say their best customers are the wealthy ones, because they largely haven't figured out how to make a decent business for anyone except the ultra wealthy.
So why do they keep offering me incentives to use their product? Is it the hope that one day, after 20 years, I'll finally overspend and they'll get to collect some interest from me?
You may be unlikely to overspend after 20 years because you are financially literate, but if you're paying off your credit card every month, you and I are very much outliers on the bell curve of net worth in the US. If you have an engineer job you almost certainly are an outlier. We aren't the target audience of these ads. There are a lot of people in the middle of the curve who mostly pay off their credit card every month but might slip once or twice, and they want to optimize that probability of slipping.
This isn't to say that they don't still consider you a low value user, since you're not providing them with much in terms of direct revenue. Yes, finance companies love it when you hand money directly to them and won't mind if you forget to make a payment after 20 years and and up paying interest.
You've paid off every month on time for 20 years, and they get 1% of that. For basically running some servers and balancing payments.
That's big money - debit cards do the same thing for what, 25 cents a payment? So once the credit card hits about $9 it's all gravy.
Your point is well taken, but even with a high credit score Apple Card is still at 16% (for us). And after a surprisingly/not surprisingly difficult time finding that interest rate, Bank of America is charging us friggin' 20%. We pay both cards off each month, so it doesn't matter to us. But it probably does matter to the less-well-off person paying probably 22-25% on credit card debt that they don't zero at the end of the month.
(EDIT: I see @denimnerd42 ninja'ed me on this point.) Though Goldman-Sachs was losing money on the Apple Card, apparently. How does that happen? From what I've read, Apple wanted a high approval rate, so folks that would be paying those interest rates each month were getting approved but the rate of default was high. Again, so I've read. But it makes me wonder if it isn't more desirable to have customers that pay it off each month, but put everything on the credit card and thus generate the 2% (or whatever) merchant fee on, say, the $8K they spend each month. It might be smaller revenue, but far more reliable with less risk of default.
But I do seem to have some vague recollection that some state like South Dakota knows not of this "usury" you speak of, and therefore the credit card company has a business address there.
That's why some high end cards charge a yearly fee. Its to recoup some of the rewards & perks costs in aggregate.
Yep, seems that 16.24% must be the lowest APR. My credit score is perfect, and that's the best Apple Card will do for me. All of my money (everything, groceries to utility payments, all of it) flows through the card and paid off every month. But that APR is a little nuts, so I keep an old credit union Visa around that has an 8% APR grandfathered in from 15 or 20 years ago. If for some reason I found myself needing to run a balance, even for a short time, that's the card I'd use.
Just have to remind myself to use it occasionally so they don't kill it for inactivity.
As a proud "deadbeat" in this category, the rebates are great, but I know it comes at the expense of broader society. Effectively, if you're wealthy enough (like many on HN are) you can use cash back rewards to get more money out of the system than you put in via fees, meaning at years end you will net back money over and above pricing to compensate for the transaction fees (IE, the prices of goods tend to be marked up at least 2% more to account for transaction fees). This is why 5% cashback rewards are a huge draw, even though you often have to manage categories, you can seriously come out ahead if you plan your spending accordingly.
This is why the wealthiest consumers - I'd argue to credit card companies they're the most important consumers - actually defend higher fees. Credit card companies know full well there is a subset of folks who will never pay interest, but they are also some of their strongest public defenders for the status quo.
Banks do not treat credit card customers as one uniform group, using the poor to subsidize the rich. They are multiple segments, with different business models in each segment.
High spend full pay customers provide revenue through interchange fees, marketing deals, and other sources other than interest. They are the most valuable customers, And the most obvious customer facing evidence of this is that they get the largest sign on bonuses.
Those paying interest & late fees are even more profitable than deadbeats. But make no mistake, the credit card companies love deadbeats too.
No! You're a highly profitable customer! You're the customer they offer $400 to to sign up!
Au contraire, it's more and more common for airlines' sales of milage/point blocks to CC-issuing banks to be the most important bottom-line contributor, with the value for milage program deals exceeding the rest of the airline's operations and assets altogether: [1] https://www.theatlantic.com/ideas/archive/2023/09/airlines-b... [2]https://airlinegeeks.com/2021/12/17/here-s-why-airline-loyal... [3]https://www.bloomberg.com/news/articles/2017-03-31/airlines-...
Not at all. Credit cards also earn the card issuer significant revenue via interchange fees: up to 3.5% of every purchase you make on the card.
With credit card transactions of ~$5T annually in the U.S., those fees are huge.
(In Europe, interchange fees are regulated and capped. But there are no such caps in the US, hence this lawsuit…)
If you had as much cash in the till as required to do business in the 90s; or took checks; or had employees that had to do regular bank runs; to insure against the loss via employees, robbers, etc it would cost a significant amount of each transaction to insure that, especially the liabilities of it.
Note that this complaining over fees is a privileged position, we are trying to slash visas margin, but if it didn't exist we would be BEGGING someone to come and run it this smoothly.
I disagree, if they didn't exist and the need existed it would be fairly easy to get a company going to facilitate payments.
China for one has settled on mobile app payments via QR codes for almost everything these days, credit cards are almost nonexistent.
Other countries have strongly leveraged the ability for instant communication to do many more things.
It's absolutely common practice. A few luxury businesses can get away with outsized margins, but everyone else in the physical goods business is working at 60-70% gross margins (so MSRP is usually ~3x cost). Grocery stores are outliers with absolutely razor thin margins.
In twenty years in e-commerce, I've never not seen prices updated to keep margins in a narrow band.
But no company will long run at a loss.
This is simply wrong. If it was true, then merchants would not care about credit card fees!
I was a college student, traveling, and generally carried low balances. I was very thankful that Chase handled it the way they did.
They’ve also likely made far more than that in overdraft and monthly fees from my chronically low-balance accounts which often didn't have direct deposit going into them so I’d have monthly fees for the sin of simply “having less than $5,000 and no direct deposits that month”.
Amex has accidental damage coverage for 30 days after purchase, and they fully reimbursed me for the $300 repair. Very happy about that.
Cash discounts have always been permitted in merchant agreements.
What was forbidden until a couple of years ago was credit surcharges however that restriction was removed in 2013. Unless forbidden by state law they're allowed everywhere in the US.
>Compared to cash, credit card transactions generally come with lower hidden fees for businesses. Here's a breakdown:
>Credit Card Processing Fees: There are fees associated with credit card transactions, typically a percentage of the sale amount paid by the business to the credit card processor. However, these fees are often lower than the cumulative hidden costs of handling cash.
>Faster Transactions: Credit card transactions are quicker than cash transactions, reducing checkout lines and improving customer experience. This translates to lower labor costs for the business.
>Reduced Risk: The risk of theft and loss is significantly lower with credit cards. Chargebacks (when a customer disputes a credit card transaction) can be an issue, but these are typically manageable compared to stolen cash.
>Improved Sales Tracking: Credit card transactions provide a clear digital record of sales, simplifying bookkeeping and reconciliation for the business.
>Potential for Increased Sales: Offering credit cards allows customers to make larger purchases they might not have enough cash for, potentially increasing sales for the business.
Of course what is not accounted for is tax avoidance which cash can make easier for a merchant.
Let's assume 3% merchant fee, they get 3% of each charge, so $30 a month, for $360 in a year. Most cards max at 30% interest, which would be $300 a year (technically less because you're paying it off each time). Even with the 3% once, that's $330.
The banks aren't dumb. The interest they make is gravy.
It has been legal in the USA since Oct 2011 for all merchants to offer discounts for cash and debit card use.
https://www.ftc.gov/business-guidance/resources/new-rules-el...
A generous interpretation is that this is rewarding the customer for not making the merchant pay credit card fees.
A less generous interpretation is that this is to facilitate tax evasion.
The truth is probably a mix of both.
I have friends with small businesses that basically admitted to the latter.
Meaning if you have a card that charges the merchant high fees and gives their customers lots of rewards, the business has to either eat that cost or not take that card. They can't charge you more for AmEx.
It’s appealing to blame everyone but the consumer.
You, the person wielding the credit card, are paying for the flight.
You swipe your card, and when you paid money for something, seemingly, you also get a little bit of a flight with it.
This is kind of like going to a restaurant and swiping your card and enjoying the ketchup. You paid for the ketchup. In few restaurants can you go and eat the ketchup without buying something else. But they still sold you the ketchup.
Why does this have to be a big conspiracy?
It is definitely interesting that it’s this or that merchant bank swipe fee airline spin around turnaround thing. On the other hand who cares.
It is all obscuring the fact that you are buying the flights.
If the flights didn’t exist, 3% merchant fees would still be atrocious!
It doesn’t fucking matter to me if people spend money to buy flights, whether by buying them directly through airlines or via some brain dead savings scheme. You and I will never benefit from high swipe fees. You and I will never be billionaires. Absolutely nothing in the world would be lost or become less meaningful if CC providers charged less for swiping in the US, like they do in the rest of the world.
For cashback it depends where you live.
In the US, cashback will be likely be wholly or significantly funded by the Interchange Fee that the merchant receives.
The Interchange Fee is the fee the card issuing bank "skims off the top" from the fee the merchant is charged for taking your card.
In the US, interchange typically around the 2% mark. In the rest of the world its more like 0.2%, hence you can only really fund your loyalty programme out of interchange in the US.
Other sources of revenue the card provider can use are any annual fees they charge the customer, any penalties they charge the customer, and of course interest fees charged to cardholders who do not pay off their balance.
If your card company also runs a points scheme, then they can get extra revenue by selling points, either to you directly so you can "top-up" your balance, or in bulk to third-party companies who wish to offer points promotions.
> Like, who's paying for the flights? Consumers, merchants, airlines, banks?
If you are asking specifically about points-accrual card loyalty schemes where the cardholder accrues points which they can then use at a later date for flights, then that is all magical smoke and mirrors.
It boils down to the careful stage management of our old friends supply and demand.
Supply:
The card issuer issues your points. This sits on their balance sheet as a liability (the points are assigned a dollar value). i.e. at this stage it costs them nothing in terms of hard-cash, just a small technical accounting reduction in profits
When you "buy" your airline ticket on points, the liability crosses the balance sheet (the company raises an invoice to you which is paid with the points).
Demand:
This is where the other half of the magic happens. The company makes sure to limit the ability for you and everyone else to redeem points.
You will have seen this if you have ever tried to book a flight based on 100% points, you'll find very limited availability.
Of course you will have seen companies offer you to pay "part-cash/part-points", but if you look closely, the "exchange rate" on offer is generally very poor value for money.
I suspect I know the answer, even thought their rate is almost always the best available to me.
There are various studies online confirming this.
That's 1%..2% of a huge chunk of consumer expenditure for something that evidently costs close to nothing to run (going by the Debit Card fees). If you earn $100,000 a year, spend 1/2 of it using credit cards, then at 1% that's $500 a year.
How much are you earning in rewards?
As for cash v rewards, the best way I've seen it said is: Rewards don't earn interest. So in general - due to inflation - the longer they sit, the less they're worth.
To your point, cash back gives you the opportunity to invest / earn interest.
It's incredible this day and age I have a more intuitive, user friendly and secure payment workflow for crypto - just scan a QR code - while for fiat payments I have to jump through hoops, manually copy static numbers and worry that someone else might steal and abuse the static password that secures access to my own money.
I would expect that if there was a "scan this QR code to pay" system, that the app you're using to pay would show you the amount about to be charged and that you would have to approve it.
I don't see anything wrong with it.
Apple Pay and Google Pay could have easily worked using QR codes rather than NFC. The cash register would just need a QR code that was an encoded JSON payload that included the amount to be charged, a merchant name, and a merchant ID. You'd scan it using your chose payments app and the app would say something like "You're about to pay $13 to Bob's Burgers. Approve?" and you click Yes and you're done.
manually copy static numbers and worry that someone else might steal and abuse the static password that secures access to my own money.
I'm not sure what this has to do with fiat currency.
Just read their reply as "traditional payment methods". Nothing really protects credit/debit card transactions, the security of which is basically the emperor isn't wearing clothes.
I'd even say the security to directly access my bank via customer support relies on obvious, basically public, identifiers that to me seem somewhat trivial for a potential attacker to socially engineer.
… parent's "solution" does strike me a bit like "meet the new boss, same as the old boss", though.
duh?
You already have a bank account, and your bank already knows how to talk to literally any other bank, because by law they have to all talk the same protocols, so you can just use your bank card to pay for everything, anywhere. No need for cards from private companies like Visa or Mastercard that saw a failed banking system and went "Let us fill that niche, it'll be so convenient! For a large fee, of course".
And it really is a failed banking system: the fact that Interac in North America was able to go "hey we 'invented' EFT and got your bank to sign onto that, because they refuse to directly talk to other banks so you can't move money from one account to another. It'll only cost you a dollar each time!" is just insane.
In the US you basically always get a debit card with a bank account but not everyone gets a credit card, either because they are wary of credit or can't get a decent one.
US consumers have credit cards on top of debit cards because they really, really want access to credit. Even overdrafting is really common and a desirable feature for a large chunk of the US population.
You seemingly know much more about the backend than me, so I am still a little confused by your comment, about Interac, for example. The US system allows for consumer-to-merchant debit payments no problem, whatever fees there are are totally invisible to consumers. (I think it's lower than the credit interchange fee?) I can also transfer my money from bank to bank without fees, although sometimes it takes a couple days. Where it really falls down is peer-to-peer instantaneous transfers. There are different things becoming popular but I don't think any of them are particularly good, and reversibility is really important in the US market and systems like Zelle don't seem to appreciate that.
Can’t do that if someone steals your crypto wallet or simply doesn’t deliver the goods/services you payed for.
I think attacking it from a different angle- a payment network owned by the merchants (as a cooperative) themselves, would be a better bet. Merchants used to lend money to their customers on account all the time, it makes sense for them to return to their roots and issue their own cards, that work on their own network (for interoperability).
I don't mean "it would be uneconomical", I mean the level of power required would present national infrastructure challenges if not be outright impossible.
at least to incentivize people through premiums to make it a little harder for their information to be stolen so that we as a society don’t have to pay higher fees collectively
That said visa/mastercard may have agreements that prevent this. If I were Amazon and interested in the long game I’d try to sue them for anti-competitive/monopoly status and remove that contingency.
What’s crazy is how we have a 2-3% inflation that could go away without these fees, and that’s not part the discussion on larger inflation.
There is no way to disrupt NFC payments and no need to - they are already secure, user friendly and can be used by any other major payment provider which gathers the critical mass.
I believe the infra is cheap while fraud is expensive.
What's even more damning is that the online payment flow is a retrofit over outdated and vulnerable technology. Payment fraud could be eliminated almost entirely by a new payment system design.
The credit card companies are simply massive and slow monopolists begging to be disrupted, that nobody has the capital and courage to attack.
Who pays for the chargeback dispute process?
A company I've worked for has the letters to prove it. You do not want to get a certified mail envelope from MasterCard (not a merchant or bank, MasterCard) containing a letter with a short deadline.
Needless to say, shit got fixed. Quickly.
Couple this with the fact that interest rates are so high right now, that you would also likely get impaled on the interest of any loans you took.
Maybe ask for favorable terms from merchants, but then you are reliant on the wolves to bring a better life to the sheep.
So frustrating.
> The settlement would lower those fees by at least 0.04 percentage point for a minimum of three years.
> ... the settlement gives merchants the ability to impose surcharges on customers who have Mastercard or Visa cards...
> ... merchants would be able to make deals with banks to get them to use what they consider to be a preferred card.
Yikes. So, Visa/MC reduce their take but now the merchants are getting in on the game.
I fully support merchants being able to charge more for card or give a discount for cash. The fact they haven't been able to for 3+ decades is one of the reasons cash has died and everyone effectively has an extra 1% credit card tax on everything they buy.
That 1% tax has probably been a pretty massive drag on GDP. Imagine how many new schools we could have had instead.
Obviously for most businesses, thats a death knell, so most capitulate.
And the few places with competing payment methods (eg. Kaspi in Kazakhstan), Mastercard/Visa have ~zero fees, and sometimes even negative fees (eg. "special offer, you get half price use of the subway if you have a mastercard")
Cash has died because it is inconvenient, unsanitary, and risky to walk around with large amounts of it.
When I pay cash it's because (a) I'm getting a discount (b) I want to be anonymous and not give any personal information (c) my credit card isn't working on their equipment (d) I'm giving tips and worried that their company will take some of it (e) I buying/selling used items from a stranger and want to use an irreversible method of money transfer. If it weren't for these reasons I wouldn't ever use cash. It's inconvenient.
(e) can be served by cryptocurrency, I suppose, but there are other issues with it, like the stranger being able to see your account balance and then come at you with the $5 wrench.
Also, look carefully at the T&C for all of your payments. For example, Comcast charges $5 less for paying with a bank account instead of a credit card, which for most plans is worth more than your 2% cashback points.
Visa and Mastercard are mentionned, but Amex is also egregious to the point some merchant hide the support (bo amex logo or sticker anywhere) to only server customers who insist on using an Amex.
With more latitude, I Think everyone wins: the merchant can set amex prices 4% or more higher, customers get to decide if they really want to pay extra, and everyone else has cheaper prices [0]
And I'd personally still pay for the convenience tax to use a Visa/Mastercard card TBH.
[0] even if prices stays the same, more money going to the merchant would still be a win in my book. It's the actual entity providing me something, and arguably I'm choosing to pay them and am fine with them staying in business.
This is false. Merchants in the US have been able to give cash/debit card discounts since Oct 2011. I would be surprised if Europe did not have similar rules even before the US.
https://www.ftc.gov/business-guidance/resources/new-rules-el...
The reason many merchants do not is because they want to bet that people are able and willing to spend more when people pay with a credit card, as opposed to cash/debit card.
Note that many larger merchants do give discounts for paying with cash/debit, such as ATT/Target/governments/insurance companies/etc.
But do note that card fees are capped at 0.3% max for credit cards, so negligible in the grand scheme of things. Banks used to charge an arm and a leg for a terminal though, but a bunch of startups like SumUp broke that oligopoly and even random small stands in fairs propose card payments via them "for free".
The old settlement allows giving discounts to cash, to debit cards etc, but it doesn’t allow giving discounts to visa/Mastercard issued by particular banks/businesses.
The new settlement will allows merchants to pass the fees directly to consumers on issuer level thereby disclosing the fee of each card and promoting the transparency. Consumers can understand the cost associated with each card and make their tradeoffs
Interestingly there is a call out on the 2018 American Express SCOTUS judgement. I don’t understand that very well.
> Merchants can charge for using a Visa or Mastercard credit card, regardless of whether they can charge for using American Express, whose rules for merchants were upheld by the Supreme Court in 2018.
The 2018 Ohio v Amex ruling is about steering provisions not violating anti trust laws. Basically, Supreme Court ruled that AmEx could prohibit merchants from offering cheaper prices to Visa/Mastercard/Discover credit card users.
https://en.wikipedia.org/wiki/Ohio_v._American_Express_Co.
This ruling was actually very beneficial for tech companies.
It would be funny if, due to this settlement being only for Visa/Mastercard, merchants can charge different prices for using Visa or Mastercard credit cards, but American Express credit card users still gets to enjoy the lowest credit card price, while American Express gets to enjoy the highest credit card merchant fees.
There are trillions of dollars misspent by politicians on not building schools, not Visa or Mastercard's fault.
A couple of snippets relevant to points being discussed:
> (10) ... Competition between payment card schemes to convince payment service providers to issue their cards leads to higher rather than lower interchange fees on the market, in contrast with the usual price-disciplining effect of competition in a market economy. In addition to a consistent application of the competition rules to interchange fees, regulating such fees would improve the functioning of the internal market and contribute to reducing transaction costs for consumers.
> (11) The existing wide variety of interchange fees and their level prevent the emergence of new pan-Union players on the basis of business models with lower or no interchange fees, to the detriment of potential economies of scale and scope and their resulting efficiencies. This has a negative impact on merchants and consumers and prevents innovation.
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32...
Edit: "our company" -> "my employer" for clarity.
https://www.acquired.fm/episodes/visa
https://www.acquired.fm/episodes/saving-the-planet-with-bett...
The fees they charge are ridiculous, doesn't cost that much to keep a payment network up. I did work for visa one time and it was clear they had not just money, but m o n e y.
20 years to get "justice" in our system.
By the way, I think Mastercard-Visa shows that the question of whether Apple is a "monopoly" is largely irrelevant, as far as consumers and developers are concerned. Any way you slice it, in the US or worldwide, Apple and Google are a duopoly, and that's not healthy competition.
> The pact would lower the rates by 0.04 percentage point and keep them there for five years.
Seriously?
I'm no expert and I know the numbers have to be small given costs and such, but… 0.04%?
That said, this part looks more important in the long run:
> The proposed settlement would create some changes to give merchants more choice on accepting cards, allowing them to guide consumers to cards that have lower fees. It would also give small businesses the ability to form groups to negotiate swipe fees, similar to what large retailers already do today.
"We don't take Amex" is already annoying enough without adding "we don't take Visa Signature/Infinite or Mastercard World Elite" to the mix.
Big corporations, thank you for those points. Even if everyone used debit they wouldn't lower the prices anyway.
Or the most powerful and capable government in the world could get off its ass and operate electronic money accounts and transfer as infrastructure, with a constitutional amendment on an individual not being able to lose their ability to send and receive money to their electronic money account.
One might wish that were true, but I am seeing a disturbing proliferation of "no cash accepted" signs here in Seattle.
Is that even legal? I thought retailers must accept all legal forms of tender.
This is such a misconception that the federal reserve has a page on it.
https://www.federalreserve.gov/faqs/currency_12772.htm
>There is no federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise.
The federal reserve addresses state/local laws:
>Private businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise.
These laws are new and only exist in a few locales.
The laws are new because the practice they react against is, generally speaking, a recent problem.
I'm seeing more cashless stores in my area and it disturbs me. Hopefully my state can adopt a similar law. I am also increasingly seeing cash prices versus card prices. I'm more inclined to pay cash for smaller shops where 3% matters to their bottom line. Plus it's always good to have a dollar on hand for buskers.
Not to mention the reduced risk of miscounting/counterfeit currency, or robbery.
The only advantage is if you want to scam the irs.
Try renting a car or hotel without a credit card.
Also debit cards are typically used by poorer people who are riskier for them.
Debit cards save them on processing so they would prefer it if all else were equal. They’re not all stupid so the reasons must be sound.
Few people here have credit cards, so everyone accepts debit. That includes Hertz.
Credit cards have limits, too, just the same as debit cards.
Again, let's look at the last time I rented: you can't do what you're suggesting, as such a charge would be (instantly) declined.
> They can’t do that with a debit card if you don’t have enough in the account, it will reject.
Ironically, it is more likely to decline on the credit card we gave them, than on the debit card we were trying to give them; the limit on the debit card is higher (since it's backed by cash, and not credit…)
> they can charge the arbitrary amount of damage you do to the car
(This would have been a specific violation of the contract we had with them, as the car was insured with them. But I do understand some people insure through their personal auto, but even there, the matter is going to need to be settled via the insurance.)
The way car rental works is that they put a "hold" on some credit amount. So they would know at rental time if your card is too limited and will decline to loan you anything.
Your contract with them probably gives them the right to do this.
I don’t know what to tell you, these are the reasons. They don’t just want to pay an extra 2.5% processing.
As a general rule, you can assume if all the players in a large and competitive field do the same thing, and it doesn’t make sense to you, and the alternative you think is better is both obvious and easy to implement, then it’s because they know something you don’t. I assure you, major car rental cos know everything they need to about the difference between debit and credit cards.
(Even still, I don't think "has credit card" is a good proxy for credit worthiness.)
“Has credit card” is obviously a coarse filter, just as creditworthiness is a coarse filter for “won’t wreck my car” but I’d bet you anything you’d see at least a 150 pt FICO spread between people who pay for things with debit vs credit. There’s only one reason to use a debit card and not get the rewards of credit (assuming the price of either is the same) and that’s that you cannot be trusted by a bank and/or yourself to not spend money you don’t have. This is particularly exacerbated with car rentals in particular since so many credit cards include car rental insurance, making it significantly more expensive (either in immediate cash or expected value of risk) to use debit.
And, “doesn’t have a credit card” is actually a pretty good proxy for either “not creditworthy” or “some kind of weirdo”, with neither of these being the people you want to let use your $25,000 car for $250”.
Legally no one has to accept cash except for "debts, public and private". If a business is selling you something, they can stipulate any form of payment since it isn't a "debt".
And yet, I can't pay my mortgage off with a briefcase of cash.
I think this has a lot of caveats too. Not least of which hide behind "KYC" and anti money laundering laws
I won't worry too much about the word "off" since paying early is a fussy contract thing.
Otherwise, have you tried? I'm pretty doubtful they can refuse.
App stores provide, among other things, the CDN for app downloads and updates.
I don't know about you, but damn near every app on my phone is getting updates multiple times a week. That bandwidth, and the architecture to provide it at scale up to "hundreds of millions of devices", is not free.
Google, for example, provides a massive toolkit of functions and services as part of the Play Store that's not built-in to Android itself. Both companies provide an entire development environment for free. Etc.
Also not free is the infrastructure to run the stores, nor provide security and quality review services. Apple does a lot of automated and human inspection of apps, and while it's not perfect in many ways (and perfect is an impossible standard anyway) it's still an important, valuable service that costs a fuckton of money to run.
Credit card networks mostly just pass transactions around, with some fraud stuff. Almost everything is handled by the processors and banks.
Really, the problem here is that credit cards don't have competition from wire transfer services that are common in the EU, for example. For decades it's been possible to instantly pay another person or a merchant for a product or service and them to see the transfer happened. Zelle is the only thing that comes close in the US, and it was started by a couple of large banks who were fed up with the lack of modernization of the US wire transfer system. We're the laughing stock of the world, taking days for a wire transfer to go through...
If someone gets my Card and Pin I don’t get back that money; at least not easily. But if someone steals my credit card I get that money back immediately.
I travel quite a bit so I am aware that credit cards don’t work like that everywhere. But, for US issued credit cards the fraud protection alone make them hard to beat.
Not great for the merchant though.
They already did, as well as the expertise, so the extra expense is not large in relation.
I think Stripe's way of doing things is better because it's inline with the actual expenses they incurr. To their servers, there's no difference between a $1000 purchase and a $1 purchase. The cost to them remains the same so the transaction fee should account for that cost. Let the customer figure out how to eliminate that cost without hiding it from them.
Scaling by purchase amount subsidizes smaller purchases, but it allows merchants to take way more money than needed to process the transaction from larger transactions and most people don't even know that it's there and that they are paying significantly more money for an item than they need to.
All these card rewards just waste people's time and in the end, the house always wins. This whole reward game is a direct result of this percentage merchant system and I'd rather not have it.