Sellers increase the price by the fee amount, savvy consumers with rewards cards can get back around 80% of that price increase, and regular non-credit-card-with-rewards holding consumers just subsidize the whole thing by paying the extra. It's a tax on people without rewards cards.
https://www.ftc.gov/business-guidance/resources/new-rules-el...
* Mastercard and Visa don't allow debit card surcharges, even if the transaction is run as "credit".
* American Express only allows surcharges if they also apply to all other forms of card payment. This includes debit cards, which interacts problematically with the previous rule; if you want to do a card surcharge while accepting all three card brands and remaining compliant with all their rules, you have to apply it only to Mastercard and Visa and not American Express, even though American Express is the most expensive.
* Several states still don't allow card surcharges, and others don't allow merchants to profit from surcharging (which makes it hard to advertise a uniform surcharge) or have regulations about how prices have to be listed if a surcharge is going to apply.
Rules like these don't make it impossible to do surcharges while remaining compliant, but they make it significantly harder than it'd otherwise be. I think this is the primary reason why most merchants still don't do them. (Well, that and that their competitors don't, but that could explain either equilibrium.)
Target, one of the largest retailers, offers a 5% discount for debit. Comcast, Tmobile, Verizon, ATT, Lumen, utilities, governments, and insurance companies also routinely charge extra for credit cards (or discounts for debit/cash).
Daycares charge more for credit card, as do doctors’ offices.
At least half the gas stations I see have long had higher credit cards prices.
Not to mention contractors for physical labor.
The change since 15 years ago is stark. If I wasn’t getting a minimum of 3.5% cash back on my purchases, I would use credit cards a lot less.
I did know that recurring utility-type payments, and payments of more than a couple thousand dollars, tend not to accept credit cards or to charge a lot extra for them, presumably because it's not as costly for them to make their users eat the inconvenience of setting up ACH payments. Most merchants can't get away with that. I've also seen it for gasoline but chalked this up to gasoline being an unusually fungible and high-demand commodity.
Do you know how they're handling the American Express problem? I don't think I've noticed a big contraction in how many merchants accept it.
I linked to a website that shows the federal government specifically allowing it. You can definitely get a 5% discount in your states’ Targets for paying with a debit card:
https://www.target.com/circlecard
> Do you know how they're handling the American Express problem? I don't think I've noticed a big contraction in how many merchants accept it.
It’s not a problem. Refer back to the federal legislation that prohibits payment card networks from dictating cash and debit card discounts.
It seems pretty uncontroversial on the internet that American Express has this policy, and I can't find anyone alleging that Dodd–Frank prohibits it. There is a class action lawsuit against American Express alleging that the policy is illegal (https://fingfx.thomsonreuters.com/gfx/legaldocs/zdvxngqeovx/...), but it makes its argument on antitrust grounds and does not cite Dodd–Frank—which it would surely do if there were a plausible argument that Dodd–Frank prohibits this. I don't know exactly how this squares with the text of the FTC's business-guidance page, but that page is a concise summary and doesn't get into all the details of the law, so my guess is that the situations it applies to are somehow different from what American Express is doing.
Your Amex lawsuit link is about Amex prohibiting different discounts based on payment card networks (see #4 at bottom of page 2).
Amex’s contract does not overrule the federal government’s rule that a merchant can offer a discount for debit and cash.
The Supreme Court upheld AmEx’s steering provisions in 2018.
The federal regulations specifically allow discounts, and presumably some lawyers will argue that a surcharge is different from a discount.
Amex is trying to do all it can, but still can’t tell a merchant they cannot advertise a discount for cash/debit.
If you get a full merchant account as a business, with IC+ billing or similar, your statement will itemize IC charges on every transaction and it’s based on the type of card the customer used.
If it’s Amex / Discover it might be 5% or more. This is why a lot of merchants are Visa and Mastercard only. If your customer has a cash back card, it will maybe be 4%. If your customer uses a no frills visa bank card, it might be 1.5%.
Across a large population of transactions it usually averages 2-3%. But if you have a B2B where all your transactions are from companies like mine, you’ll likely find it averages above 3%.
Businesses like stripe are betting that 2.9% is above the average they see across a very large population of transactions.
So it doesn't mean they increase the price of every product by 3%. One guy might charge more just for coffee, another do some other thing. But any extra cost you put on a seller of anything, the rational seller will make that back in sales somehow.
In fact, the low end of cash handling costs for a business will almost always be higher than the card fees alone, but of course there are other costs in managing card payments too, so it's not quite that clear cut.
If the cost is only being paid by one vendor then that vendor can't raise prices or else customers would patronize one that had lower costs and passed on the savings. But if every vendor has to pay 3% then prices are going up 3%, because then the competition has no cost advantage they can pass on and people only stay in business if they're making enough to justify not doing something else. (3% is more than the entire net margin in many industries.)
Cash is king for hiding transactions and avoiding taxes. If that's the situation then I won't say you don't deserve a cut, but for rules-following merchants taking cash isn't any cheaper than paying the credit card fees.
That’s not true at all, particularly for large purchases.
If I go to an electronics and check out with $5000 in electronics, there’s no way that handling cash incurs the same expense to the store as the 3% fee ($150).
Maybe for nickel and dime purchases, but that’s rarely the case.
Even a $50 dinner doesn’t cost the restaurant $1.50 (plus the $0.30 transaction fee) just to handle cash.
A store that sells $5k electronics is gonna lose a lot of sales if they attempt to save that $150 by only taking cash.
One, inertia. Companies haven't realized they're allowed to do it now. That'll change over time.
Two, there are ways to transfer "cash" digitally without paying the credit card fees (i.e. ACH), and there are reasons to want to use digital payments -- making payments over the internet being a major one -- but ACH is ancient and it needs some kind of modern open standard in order to do things like make a payment request and determine in real-time whether the source account actually exists and has sufficient balance to make the payment. Various attempts to do that are constantly being made and constantly being fought against by Visa et al.
Canada has lots of stores that offer a discount if you pay cash. Many have a minimum purchase amount for credit cards.
I think the assumption is they declare only a portion of their cash receipts.
If you take cash it means you have to hold it on site. To be insured you have to demonstrate secure handling for the insurer, which would include security systems and limiting the amount in the safe and register. Which means routine trips to the bank, which also incurs costs.
Like...that could all be true, but the rate merchants tried to ditch ever handling physical money rather suggests the fees were worth it (not to mention all the risk mitigation doesn't cover the increased danger to ones personal safety - walking $5000 to the bank is no fun at all).
It's typical to estimate the cost of handling cash anywhere from 4% to as high as 15% depending on takings and size of transactions.
Smaller family-owned businesses will just take cash to the bank - but it's super common for somebody to eventually surveil them long enough to rob them one day as they're transporting the cash to the bank.
It's pricey to handle cash!
Ran a micro business in UK for 15 years, cash cost as much to deposit as card did - employee time (counting, reconciling, making deposit) and bank charges for cash deposits. It also slowed down transaction time (which was almost all IRL).
E.g. they might not include staff time and incidental costs around cash transactions that aren't obvious because they're not linked to the individual transactions, such as reconciliation, time spent transporting the cash, costs of depositing the cash, insurance to cover storage of cash.
Also consider that it takes very little theft to tilt the balance, and even a tiny amount of theft by cashiers not putting through all cash transactions can make a big difference.
Yep. I worked as a supervisor in retail for a number of years and here's a list of cash handling costs that dont exist with card payments:
Making change on each transaction
Counting cash drawers in and out for each employee shift
Preparing daily bank deposits
Going to the bank to make deposits and get new change
Theft (by employees, external theft wasnt a problem for us)