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Visa, Mastercard Mull Increasing Fees For Processing Transactions: Report (reuters.com)
Visa and Mastercard, the two biggest U.S. card networks, are preparing to increase certain fees levied on U.S. merchants for processing transactions that will kick in this April, the Wall Street Journal reported on Friday, citing people familiar with the matter. From a report: Some of the changes relate to so-called interchange fees, the report said. Interchange fees are what merchants pay to banks when consumers use a credit or a debit card to make a purchase from their store. Fees that Mastercard and Visa charge financial institutions, such as banks, for processing card payments on behalf of merchants are also set to increase, the report said.
When you saturate the market to the point where you can't grow anymore, you got to raise prices. Their cost of doing business hasn't gone up, so there's no real reason to raise prices other than to appease Wall Street.
Google or Amazon could end you. It could happen fast and bad. All that's needed is a nudge, and raising merchant fees could be just that.
They should be lowering fees as an attempt to stave off the inevitable.
What needs to happen is that merchants start offering anywhere 1-3% discounts for cash or debit card purchases. Only then we will see a decline in the use of credit cards.
Oh, come on. It's totally a coincidence that both would raise their rates at the exact same time, right?
Recently, the two companies along with several U.S. banks, had to pay over $6 billion to settle a lawsuit brought by merchants who accused the credit card companies of violating federal antitrust laws by forcing merchants to pay swipe fees and prohibiting them from directing consumers toward other methods of payment.
How shocking. Gosh, if you can't trust a giant, international credit merchant, who CAN you trust these days?
Irony: Agile development has too much intertia to be abandoned now.
The reason they can do this is because the cost is being hidden from the consumer. Do you think someone would sign up for getting "2% cashback" if they were paying 2.1% more per transaction? Nope and yet that is what is happening. The cause of this is that stores are contractually required to eat the cost of the transaction fees and thus increase the price of goods to compensate. The result is that everyone is subsidizing the transaction fees, even if they pay cash which completely eliminates any desire to compete with lower transaction fees. Pass a law legally compelling stores to isolate the cost of the transaction from the goods themselves and the transaction fees will plummet because then credit card companies will have to compete for consumers.
If you are in favor the free market then you cannot be in favor of the actions of credit card companies.
Anons need not reply. Questions end with a question mark.
The problem is that the customer makes the decision on which card to use, but the merchant pays the fee, and is banned from passing the fee onto the customer. So Visa and MC have no incentive to lower fees, since there is no incentive for the decision maker to care.
The solution is to ban the ban. Merchants should be able to pass on the fee. If customers can see that Visa costs them an extra 3% on their bill, while AmEx costs them 4%, that will be the end of AmEx. It will also open up competition for lower rates from alternative payment systems. Discover Card had lower rates, but it never caught on because the lower rates didn't actually benefit the customer.
This is similar to healthcare. The insurance company pays, not the patient, so the person making the decision has no incentive to care about the cost. The obvious result is spiraling prices.
Why caffeinate yourself with a $5 Starbucks coffee when you can buy a 500 mL bottle of Mtn Dew for 50 cents?
Or we just use this tool called "the legal system" to regulate this behavior.
While a cash discount can cancel out the average credit card transaction fee, it does not allow for distinction between different fees for different credit cards. So the problem OP pointed out remains - there is no incentive for customers to prefer cards with lower fees over others. That is arguably the reason why the ban is crafted with such an "obvious loophole." Because the loophole seems to make the ban ineffective, when in fact the purpose of the ban is to prohibit competition between different credit cards. Not between credit cards vs cash.
At the 2017/2018 peak, I had two transactions with a low fee stuck for almost one month before they were finally accepted by the network.
Also, proof-of-work coins such as Bitcoin are energy wasteful by design.
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