Comment by injidup | Hacker News Reader

Comment by injidup | Hacker News Reader

3.5% per transaction in the USA!

In Europe it is capped at 0.3%. So much for market forces in the land of the free!

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

There is also a new EU law on the books mandating the provision of instant digital payments across the market. The critical paragraph in the law is that providers are *not allowed* to charge more for instant payments than delayed cleared payments. This will effectively drive the cost of retail instant digital payments to zero.

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L...

Quote from link:

``` PSUs are very sensitive to the level of charges for substitutable payment methods. The level of charges can therefore steer them towards or away from a given payment method. In national markets where higher transaction-level charges for instant credit transfers in euro have been applied, when compared to charges for other credit transfers in euro, the uptake of instant credit transfers is low. That has prevented the attainment of the critical mass of instant credit transfers in euro that is necessary to realise the full network effects for both PSPs and PSUs. Therefore, all types of charges applied to payers and payees for the execution of instant credit transfers in euro, including pertransaction charges or lump-sum charges, should not exceed such charges applied to the same PSU for corresponding types of other credit transfers in euro. It would be undesirable that PSPs circumvent the aim of that requirement. When identifying corresponding types of credit transfers, it should be possible to use criteria including the payment initiation channel or the payment instrument used to initiate the payment, customer status, and additional features or services. ```

The market force working here is the card issuer wanting the fee to be high, so mastercard/visa compete by increasing it.

that's also why we don't get any decent credit cards in europe - there's no money to pay for it

i think the US system is probably better for wealthy people who always use cards and actively play the game (and for the credit card processors of course). Euro system is better for everyone else

ps: is there some sort of contract that stops vendors from adding a "credit card processing fee"? maybe banning those clauses would be the best way to let market forces sort the issue out - once people see that they're paying 3.5% more to use a 2% cashback card, they'll start asking for other options

> that's also why we don't get any decent credit cards in europe - there's no money to pay for it

I'm totally okay with not paying higher prices so merchants can pay fees that subsidise credit cards benefits for a few.

Another way of looking at it is that every credit card in EU is better than in the US because the credit card companies are not taking with one hand and giving back less with the other. The money has to come from somewhere.

It’s a great coup of US credit card companies to convince credit card users that they are getting “free money” when it’s the exact same money they paid in transaction fees.

US credit can be indispensable for those taking career risks and those operating small businesses.

In any case, I don't pay transaction fees the merchant does. They're often not allowed to give cash or particular types of cash-in-kind store discounts. This actually just raises the prices for everyone.

The payoff for the merchant is it reduces some of the risk of taking cash money and stabilizes some of their transaction flows through their account. It's all probably worth slightly more than what the EU caps it at, but the solution to improve this discovery is to increase the number of transaction networks, not arbitrarily cut them off at the knees and ensure the market never grows to this point.

It's at least one reason to love bitcoin and other crypto. You don't need permission to conduct a transaction. Which, given the extreme costs of transactions there, was clearly sorely lacking in the current artificially scarce market.

> In any case, I don't pay transaction fees the merchant does.

Unless you're one of those operating small businesses.

> It's at least one reason to love bitcoin and other crypto.

Sure but what happens in case of fraud, or if I need to initiate a dispute ? What are the fees for that transaction ?

> Sure but what happens in case of fraud, or if I need to initiate a dispute ? What are the fees for that transaction ?

Well, yea, exactly. I'm pointing out two systems that are diametrically opposed and nothing in the middle. It highlights the fact the market is broken. This is one consequence of that.

> Unless you're one of those operating small businesses.

Ironically, I never took credit. Cash or Check only. Handling costs don't apply because the chain of custody is just myself.

Here in the EU I don’t think you can go cash only as a business. It’s just not an option.

I’m ignoring checks because those aren’t a thing anymore. Only people in their 70s might still use them.

The EU isn't one homogenous place in terms of local habits and practices.

In at least some countries you can totally get away with being cash only (although less so since the pandemic).

Ok I’m not sure if it’s an EU thing or not then but I think here in Italy, if you run a business, you’re not legally allowed to go cash only.

It’s just not an option. You must accept traceable payments either via cards or direct bank transfer.

To provide another data point, in France you are allowed to refuse credit cards or checks. Cash is the only payment method that you cannot refuse but there are exceptions for that as well.

EU has no credit?

It does, and it's usually free if you pay in full every month, just like in the US.

Given the interchange cap (0.3%) and current interest rates, this interestingly looks like a losing product at a first glance (the cost of capital for an average due date of 6 weeks after the purchase date is higher than 0.3%).

> It’s a great coup of US credit card companies to convince credit card users that they are getting “free money” when it’s the exact same money they paid in transaction fees.

The transaction fees aren't explicitly added to only credit card transactions - they are baked into the price so people who pay cash and debit are also paying a fee. Credit card rewards therefore reallocate money from people who use cash/debit cards to people who use "reward (credit) cards".

The US system is a tax on people paying with cash.

  ps: is there some sort of contract that stops vendors from adding a "credit card processing fee"?

Yes, and getting rid of that restriction was part of this settlement.

> why we don't get any decent credit cards in europe - there's no money to pay for it

What are Visa and Mastercard's net take rates in the U.S.? (As in, out of that 3.5%, how much do they keep on average and for premium cards?)

It’s a bit more complicated: Even in the US, it’s not Visa and Mastercard taking the entire 3.5%. The largest part of that goes to the issuers, who pay a significant fraction back to the cardholder as rewards.

Depends on the card type, merchant type and transaction type but about 0.14%

> is there some sort of contract that stops vendors from adding a "credit card processing fee"?

In EU it is not allowed to charge the customer any kind of extra fee for using a card. Though obviously it only works well together with the 0.3% cap on the actual fees the vendor pays.

https://europa.eu/youreurope/business/finance-funding/making...

> You're not allowed to charge your customers extra for using a credit or debit card. This applies to all card purchases (in shops and online) made throughout the EU.

This is market forces at work! Everything is working according to plan

It's also increasingly common to pay without the credit card companies getting involved at all and have the payment completely free. At checkout you're just presented with a QR code which you scan from within your bank's phone app and which populates all of the payment details. Then you just tap pay and because the bank to bank payment is instant the checkout page will update within a few seconds and you're done. The downside is that this kind of payment is not insured and you cannot do charge backs (so smallish amounts only).

It’s a tax on those who don’t have access to credit.

why "no access to credit" should be taxed? Sounds more like abuse of weaker.

Parent comment wasn't endorsing it, just explaining it.

>3.5% per transaction in the USA!

Wow that's pretty high, no wonder the number of crypto bros imagining taking on Visa through crypto.

On the bright side, at least they don't add tips. It could have been %3.5 + %20 = %4.2 total.

Given that people usually tip by card, in a way they do (not sure if businesses usually subtract the processing fee from the amount they pay out their workers).

> In Europe it is capped at 0.3%.

... and yet, in practice, passing card payments through something like Stripe still eats up 10%.

> So much for market forces in the land of the free!

Yeah, 25% VAT is much better than 3.5% fee that you mostly get back via cashback & free credit.

Sales taxes (which also exist in most of the U.S. btw) fund public service. Credit card fees go to fund the Visa CEO’s third Lambo.

0% VAT on staple food, 5% on common commercial goods, 20% on services, and 40% on luxury products.

[edit] tbh the 0% on staple food isn't really allowed by the EU (it is ultimately a liberal institution) but it's tolerated.

You pay taxes in the US as well

So much for market forces in the land of the free!

How is this not market forces? Europe is using anti-market forces regulations to artificially lower the price, while the US is letting the market (ignoring some monopoly and collusions arguments of course) find the 'natural' price of a product. "Market price" doesn't necessarily mean lower price.

There can not be a “natural price” without competition.

Even the most pro free market economic theories have the core assumption that the free market only leads to efficient pricing under a set of core assumptions.

These include low barriers to entry, strong competition, perfect elasticity on both the consumer and producer side, and no mono/duo/oligopolies that prevent those from working correctly.

This is a classic oligopoly where the free market does in fact not work to find the "natural" price.

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