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Forget Google, time to end the Visa-MasterCard duopoly (medium.com)
1100 points by CM30 80 days ago | hide | past | favorite | 523 comments

I am reading so much incorrect information in this thread it’s maddening.

The card network (Visa, Mastercard, etc) do NOT make money on Interchange.

It’s hard to have a healthy dialogue on this topic if folks don’t understand the basics of how the card networks generate revenue.

Below is a decent primer.


I mean, technically no they don't. But that's just being pedantic. They charge the bank based on gross dollar volume, and the bank gets the money to pay for that from... interchange fees. The more volume the bank does, the more they pay and the more they get from interchange fees.

Interchange fee pricing is set based on how much mastercard charges the banks, so while technically true, the interchange fees are basically set by mastercard's pricing.

Interchange fee pricing is set based on how much MasterCard charges the bank

That’s not true though, or at least is a massive oversimplification. In the US, interchange fees are extremely inflated to allow banks to recuperate the rewards they give out to distinguish their card offerings from one another. The 2% cashback has to come from somewhere.

>In the US, interchange fees are extremely inflated to allow banks to recuperate the rewards they give out to distinguish their card offerings from one another. The 2% cashback has to come from somewhere.

And that's a bad thing, because it's essentially the poor subsidizing the rich. People who aren't able to get credit cards (or the "good" cash back credit cards) tend to be worse off financially than people who do.

+100! In Europe, they've limited interchange fees to a reasonable maximum. Banks can still make money, but don't offer crazy credit card rewards to the rich. I was sad to not get the rewards I was used to in the US, but happy that it was the greater good for society.

Also, with interchange fees at 0.3% and total card fees <1% for many shops, it's actually cheaper for sellers to accept cards than cash.

This is something people always miss in this discussion!

Cash is not free for the business. People always assume that businesses are losing out on revenue by accepting cards, and thar cards inflate the price for everyone.

But it's not free to accept cash - you have to manage your float, transport cash between the bank and your premises, and there can be bank charges to account for too. All of which can easily eclipse the cost of card fees, especially in markets like the EU where those are capped.

How do you figure? Is it from counterfeit money, or cost to transport the cash?

There is risk of theft too, not just robbery but from employees.

Usually the main reason some shops prefer cash is because they can put the cash directly in their pocket and do tax fraud on a percentage of their revenue.

Bringing cash to a bank either via deposit boxes or by collection is not free and coinage is even more expensive than paper. At least here in Europe

Yes, the fee for processing coinage and old notes is 50% in the bank I work for.

Wow, I just pour my coins into a machine that sorts and counts them for free at my bank.. oh right.. Credit Union!

The easiest one is the time it takes to correctly count at the end of the day. That can easily take an hour even for small shops. If you go card only, you can just lock the door after the last customer and leave. Accounting for revenues and discrepancies (which always happen) correctly is a huge hidden cost.

Banks charge to deposit cash in business accounts

This has always struck me as one of the more blatant and out-in-the-open financial inequalities in this country.

It’s also a fake one. As the other commenter said, the credit card system came about bec cash was very expensive to use for stores. They were passing along those costs to consumers, the fact that that’s now inverted by some stores (cash discounts) is only doable bec of the prevalence of credit cards.

Stores need to accept cash regardless, so there’s still some minimal added costs to using cash, but even with the offered discount it’s less than the credit cards...

however if stores stopped accepting credit cards they would quickly find themselves drowning in the same costs that credit cards were invented to avoid.

Germany is still way more cash-based and you see less consolidation of businesses into large chains than in the US.

I'm not sure I buy "drowning in the same costs". I think there's something more akin to a prisoner's dilemma here.

Germany is cash-based because of consumer behavior, not because costs are somehow lower. With corona, e-Commerce and services like SumUp more widespread Germany will inevitably catch up with other countries.


Not sure were you were. I am from northern Germany, around Hamburg.

But every single store that does accept cards (not every little store can bear the fees, though) has theses signs.

So I would counter your n=1 anecdotal argument with an equally non representative n=1 argument. No one learns anything, except that some shops in Germany ask for the use of cash-alternatives, others don't.

In Denmark, the majority of shops have little signs "Due to Covid-19, please pay by card or phone" or sometime "Due to Covid-19, cash is not accepted".

On a recent trip to Germany, I didn't see a single such sign.

Germany is changing gradually, perhaps due to the EU's limits on the fees Visa and MasterCard can change, but Covid-19 doesn't seem to have much effect.

I live in Berlin and recommendations to pay by card can be seen in many places with preference for contactless payment. In fact, share of non-cash payments visibly increased here and surveys show that German attitude is already changing.

Maybe this is temporarily? I pay with card now. But intend to go back to cash after covid19.

Germany has seen a huge shift over the past months. Before that, paying by card for small ticket items such as in bakerys was frowned upon (or just not possible), now it's used by the majority in some areas.

In Norway, it is still illegal for stores to refuse cash. I know of only one store that does get away with it; I believe they do because they are primarily an online shop. Their physical store is merely a convenience for customers who happen to live nearby. Many (most?) stores still ask customers to pay with a card, though. To help out, the banks have raised the maximum amount payable by contactless cards without PIN entry.

It is technically illegal to not accept cash in Denmark with very few exceptions (I checked, since it seems to be legal in Sweden), but maybe due to COVID-19 this got relaxed or is just not enforced anymore. Not that anyone would notice, nobody pays with cash anyway except for German tourists who aren't coming this year.

I feel like this is probably a good thing. Cash payments are a very healthy thing to have in addition to digital payments.

I live in Germany at the moment and I do see this in many places. On the other hand there are also still shops where showing my card gets me a puzzling look as if I'm some kind of time traveller visiting from the future armed with my mysterious shiny plastic card.

In Stockholm, Sweden, many stores have stopped accepting cash altogether. Even before Covid.

In Gothenberg, Sweden, for instance, you can't buy public transport tickets with cash. Which meant that when a beggar approached me and asked for some cash so he could travel home, I knew he was lying. I hadn't even bothered getting any Swedish cash when I visited the country.

Depends where you are I guess. I have seen them everywhere in Germany.

Well, I thought so too in the start.

But I asked someone in a popular local store ( Belgium) and consumer behaviour hasn't changed.

How is this relevant to Germany?

Because Belgium and Germany is very similar on cash payments.

Also, you mention Covid would be a stimulator for digital payments and that doesn't seem the case in Belgium. So I wouldn't know why it would be the case for Germany.

The change in Ireland has been significant, it's made contactless be the default way to pay. I think it has removed the idea that something like a cup of coffee was too small to pay for via card/contactless. I don't think I have actually used cash in a number of months.

Before COVID one of the main banks AIB was to introduce some extra charges but they stopped that charge increase https://www.irishtimes.com/business/retail-and-services/aib-...

In the US you are a criminal if your business is dealing with large amount of cash everyday. That’s how credit card got the market share. Companies make the law so you will use their system. They dont profit if you use cash whywould they allow you to do that.

What are you referring to here? There are plenty of cash only businesses in my city and the owners aren't being thrown in jail for it.

I’m sure it varies but the US has a bunch of annoying regulations meant to curb money laundering. For instance, if you deposit $10,000 or more at the bank, you are required to fill out annoying paperwork to prove you aren’t laundering money. If you don’t want to fill out annoying paperwork so you only deposit $9,000 at a time, that is literally a federal felony.

Maybe your city has a “safety of crowds” thing going on but when cash only businesses start going scarce, I bet the remaining holdouts start getting more and more scrutiny.

KYC (Know Your Customer) laws are not exactly unique to the US.

The money industry tends to be heavily regulated, and self-regulated (PCI DSS) for a reason. Crime happens there because that's literally where the money is.

I'm doing my part, though. I pay with cash whenever I can. In Germany that's easy (often the only option e.g. in restaurants). In Sweden, not so much. And then there are countries in between.

Yeah, I don’t know how other countries differ from the US in this respect. Maybe the “war on drugs” made us paranoid about money laundering to the point where it eventually ground down the cash economy. Or maybe it really is our addiction to consumer debt.

Yup, there are some that even accept checks.

It's more like folks don't want to get robbed by keeping everything in cash, and so they use banks.

That’s another factor for sure. I’m not sure if the timing lines up—I remember credit cards being more and more broadly accepted over time compared to cash even after crime rates in the US dropped—but the US still has pretty high crime rates for a developed country.

Quite a few places in London are cashless now, typically non-essential stuff like lunch, where transaction time is important, contactless is much faster. Cash costs are not insignificant, processing time, insurance, it's not really worth it when so few people pay with cash.

It's been accelerated sharply by the pandemic. The few holdouts changed tack. There's accessibility concerns for the unbanked.

At least we don't have hyperinflation. That's even worse for the poor. Though to be sure I agree with you. We really need to fix this, but it's not going to happen. Right now we're paying an enormous -unprecedented?- political attention tax that is starving lots of important issues of oxygen.

Inflation doesn't affect the poor so long as wages keep up with inflation. If you don't have money, there's nothing to inflate.

They did say hyperinflation.

Characteristic of hyperinflation, is that nothing keeps up with it. Forget wages keeping up: your very paycheck is worth less at the end of two weeks than it was when you received it.

Your comment makes me think you weren't even close to hyperinflation, ever.

Sincerely, a guy who survived 313 000 000 % inflation per month.

> Inflation doesn't affect the poor so long as wages keep up with inflation

Does it? In an inflationary environment the status quo is that your wages shrink. I guess it’s better than holding cash because you can renegotiate your wages back, but I don’t think rich people have most of their assets as cash.

> In an inflationary environment the status quo is that your wages shrink.

The US is a classical inflationary environment and wages have kept pace with inflation forever.

Indeed, inflation only, and intentionally, punishes those who hoard cash.

Not always, depending on your timeframe. eg. if you look at https://upload.wikimedia.org/wikipedia/commons/a/a4/United_S... there’s about 2 decades where the real wage went down.

Fair enough.

I would note that chart begins prior to ending the gold standard in 1971, and it has tracked very well since 1995.

I was off-base when I said "forever." I should have said in recent history.

I think that's an oversimplification, because credit transactions tend to be 20%+ higher ticket sizes than cash purchases. In a way, the credit card surcharge baked in is something of a volume purchasing incentive. Further, the networks do explicitly permit cash discounts on card transactions, and always have. Merchants tend not to offer them, though.

> credit transactions tend to be 20%+ higher ticket sizes than cash purchases. In a way, the credit card surcharge baked in is something of a volume purchasing incentive

Funny you mention that, because that’s yet another case where it’s expensive to be poor. If you’re living paycheck to paycheck, barely making ends meet, you likely don’t have the cash flow to stock up on a sale. So rather than buying 18 months worth of TP when there’s a sale + coupon on the 64 pack, you are buying the 4 pack at regular price that costs twice as much per unit.

“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.

Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.

But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”

I have read the book when I was a child but seeing it everywhere on HN is starting to get on my nerves. There is a shorter way to get the idea across. "If you buy cheap you buy twice."

I read the books as a child, too, and I appreciate when those quotes come up. They demonstrate something about the books that never became clear to child-me, something I only dimly started to grasp when I was older and only fully realized a lot later: Those books go far far beyond an entertaining story. They are a pointed critique of society and politics. They have an opinion. They're not mere books for children.

And the point Samuel Vimes is making goes far beyond a simple "If you buy cheap, you buy twice." It extends that basic knowledge by realizing that some people have no other option than to buy cheap, forcing them to spend resources over and over and over again and still get a worse result in the end, and how this is a fundamental and systemic social unfairness.

> "If you buy cheap you buy twice."

And for the kinds of goods I buy, in most cases it doesn't hold up. Cheap shoes might be only 25% of the price of good shoes, but in my experience last 50% as long, costing less overall. Compound that with other chances of loss (getting dusty in the back of a cupboard and eventually being thrown out in a declutter), and cheap works out far cheaper

Note: this is a market inefficiency. In an efficient well-operating system, if you can afford ten dollars a year for cheap boots, you should be able to get some agreement with your employee or a local bank to get a loan for $50 boots plus some interest that's still gonna be less than the cumulative $10 you pay for fresh boots every year. If you will reliably have the money for $10 boots and can prove/provide evidence that you will, you should be able to get the $50 boots now. The problem is twofold: first, proving you are reliable can be hard, and second, even given credit people still often make purchase decisions that don't last long, partially because they simply don't know what sort of purchases are prudent.

Also there is a huge risk that the $50 boots aren't actually any better.

I don't disagree that this is regressive and unfortunate, although the bigger issue in my mind (and I get we can have two problems and solve both at once) is free parking. The poor tend to use transit but the cost of parking is baked into each purchase thereby subsidizing the wealthy, too. [1]

[1] https://www.vox.com/2014/6/27/5849280/why-free-parking-is-ba...

There’s a lot of transaction costs to charging for parking. Maybe with technology it can be completely automated but historically that’s been a huge reason for free parking.

A recent development: "Tap to pay" enabled transit systems are driving large increases in transaction volume.

It's a way around the truth in lending laws,* to make interest rates appear lower than they are.

Instead of 2% cash back for some, they could just add 20 percentage points or so to the interest rates of everyone else. If you think this is unfair, you're really just saying that interest rates are applied unfairly. But it doesn't sound like that's your actual thought process. Is everyone who pays higher rates subsidizing those who pay lower? How do you know?

*This is not my original idea, but something I read somewhere.

That’s not really how credit cards work though. You only ever pay credit card interest if you carry a balance from month to month. Cash back doesn’t just reduce your effective interest rate; your effective interest rate can already be zero simply by virtue of paying the full balance due every month. And the credit system does literally nothing to discourage this behavior; in fact, the credit scoring algorithms incentivize it.

The money for cash back comes from transaction fees. It would have to. People go out of their way to find ways of maximizing their return from these kinds of systems so any cash back scheme that could be too easily gamed would fall prey to these people. That actually happened once, albeit to a “merchant”. The US mint used to let you buy $1 coins, online, with a credit card, for $1 each and free shipping. You could literally buy your entire credit limit’s worth of $1 coins, deposit those same exact coins at your local bank branch to pay your credit card bill before it came due, and straight up profit from the cash back.

It's just a shell game. You think it's really different, but to the corporate bean counters the money is fungible.

You pay 2% in transaction fees, you may or may not get almost all of it back as "cash back".

In a world without significant transaction fees, we wouldn't have the grace period either, and the people who get the most cash back would pay lower rates and others higher.

The reason the powers that be like the current system and would lobby against a crackdown on fees is because it feels like they're giving you something with the grace period, and giving you something if you get cash back.

But it's just a play on psychology. If there's an injustice, I think it has to boil down to evaluating credit risk incorrectly.

> It's just a shell game. You think it's really different, but to the corporate bean counters the money is fungible.

Guaranteed per-transaction revenue is not fungible with interest revenue. Interest revenue is extremely discounted by both time value and default risk.

> In a world without significant transaction fees, we wouldn't have the grace period either...

At that point, most of the lower-risk customers who use credit cards would switch to debit cards, credit card interest would probably have to go up due to adverse selection and higher default risk, and credit cards would be a much smaller business overall.

There are costs associated with accepting and securing cash as well.

Isn't that the fault of the credit system though? Those who have access to more credit (or have better credit) are able to take advantage of these offers.

and that's why this is called systemic inequality - the inequality is built into the rules of the system.

I'll go one step further. This inequality is built into how humans work.

Most of us would not extend credit to somebody with low odds of returning it, so why do should we expect companies and organizations to behave differently? I feel like wrapping this up as in the pretty words "systemic inequality" is framing it as some constructed oppressive structure, which I'm loathe to do.

Sometimes humans are selfish, sometimes they are generous.

You don't like the term "systemic inequality" yet you're framing the problem in terms of our current system: very impersonal, only-the-numbers-and-ROI matters.

If you phrased it as "most of us would choose to exploit the more desperate because they have very little alternatives instead of willingly helping out" you might trigger different instincts. Instincts that would favor restricting interest rates and favoring a stronger social safety net.

There are more generous and forgiving systems that have existed successfully elsewhere in human history, so they're not incompatible with human nature, so yes, I think it's fair to characterize the American system as iniquitous.

Why should someone else's desparation and need be solely viewed through the lens of economic opportunity for someone else?

You don't even need RoI here, and I never even had that baked in. Any sustainable system of credit even would result in the same phenomenon.

In it's simplest form, to make a loan, you have to have the resources to loan out to begin with. Furthermore, dereliction of debt is expected. There is no guarantee that people will repay in a timely manner, and missed payments/discharged debts are not uncommon. As such, interest rates can serve to create a sustainable system by helping to cover these debts.

Discount any consideration of their ability to repay, and what you give is no longer a loan, but a gift. A gift at the cost of others that you loan to.

> very impersonal, only-the-numbers-and-ROI matters.

What would be a more personal approach when figuring out whether or not to loan the money to someone?

Deciding to lend to someone because you know them (they are "part of the community"), or they are a friend, or they are family. Of course it can be seen as more "humane" but it can also be seen as nepotism and/or a system excluding newcommers/strangers.

The condition is still the same. "Will he/she be able to pay me back/ return the favor"

And that condition will always benefit those who can return back. It's not about being newcomer or stranger, it's about being able to identify if it's a loan you can do.

That sounds like the personal system of honor being used for credit worthiness. Which wound up leading to dueling while doing a worse job of the primary task than banker evaluations. Needless to say all around it was a worse system with worse outcomes and worse externalities.

Not extending credit to people who are likely to default: makes sense

Denying a 2% discount to people who are likely to default: ???

Could argue that it "makes sense" in exactly the same way - when you offer the discount, you increase overall spend / demand, i.e. you increase the size of the loan, which is something that as the lender you would prefer to do toward people with better credit.

Do you think it’s not fair for credit card issuers to try to attract customers that have a higher value to them by offering rewards? Regardless, approvals are mostly based on credit history and not wealth. I was a low income earner for years but paid my bills and credit cards on time so I could get any card I wanted.

Lots of CC bonuses have a minimum spend specifically to filter richer customers.

The problem is not that the company is trying to make money, it's that this market has become an oligopoly with too much pricing power. With the prevalence of credit card purchases this is a tax on every transaction in the economy. Even people that don't use a CC pay a price set for those that do.

In the EU, interchange fees are capped at 0.2% of transaction value for debit cards, and 0.3% for credit cards.

This has indeed meant that rewards and cashback credit cards have largely disappeared (with the exception of Amex, which operates outside the interchange system?).

Rewards/cashback cards that do still exist are typically tied to specific retailers, with whom the issuing bank has cut their own deals.

AMEX is a three-party system, whereas Visa/MC are a four-party system. The difference is that AMEX themselves issue their cards, whereas for Visa/MC it's the customer's bank (on license by Visa/MC). Since the customer's bank sets the interchange fee, a merchant can't possibly know what it's going to be before the transaction.

With AMEX the merchant does know the exact fee structure and can therefore decide to accept or not to accept AMEX ahead of time. That's essentially the argument why the fees for AMEX were not capped.

Sounds like a Pyramid scam

> with the exception of Amex, which operates outside the interchange system?

Right, but try using Amex in Europe.

Outside of major international hotel chains, or where you can do your purchase online through Paypal, you may as well not bother asking if they accept it.

Outside of major international hotel chains, or where you can do your purchase online through Paypal, you may as well not bother asking if they accept it.

It's very interesting to hear that.

When I first started traveling to Europe, having an American Express card (or even better, AmEx travelers checks) was the best way for an American to pay for things. It's even written into some classic books and movies.

My how things have changed.

I don't think American Express card have ever been a practical way of paying for things in Europe.

I would guess 90% of Europeans have never even seen one of these cards, unless they work in international hotels or tourist places.

I'm Dutch, and my dad had both an American Express and a Diner's Club card from his work. I never really understood why those would be better than other credit cards.

I got assigned an American Express card to pay for expenses when I got a job with British Gas about 20 years ago. It was a bit of a pain because it often wasn't accepted. There was definitely some sweet deal for BG to use Amex as, as has been said above 90% of Europe were using Visa/Maestro

In Poland AFAIK when you sign up for a card terminal the company that lends it to you usually gets a cut from the transactions (besides the bank and card companies).

And there is a lower % for normal/popular cards (Visa/Mastercard) and higher (even 4%) for Amex, so most stores just ignore it and remove the Amex symbol from their terminal.

And yet, my company provides Amex corporate card for bussiness travel, but we usually go to US, so Amex is more accepted there.

> It's even written into some classic books and movies.

That was one of the deciding factors when I was planning on getting a second credit card (so I'd have a backup while travelling).

I knew here in Australia they are not widely accepted, with only major retailers accepting it typically, but I thought that this was just Australia being backwards.

After spending the first two or three weeks trying to pay for things with it, I gave up except on checking into a new hotel.

I think it differs a great deal between countries in the EU. I'm Swedish and I have an Amex card and most of my friends and colleagues use Amex as well. I use it for about 85% of my spending each month. The only places in Stockholm that don't accept it are smaller coffee shops, restaurants that don't get that many tourists and mom and pop stores.

You could probably get by here with just an Amex card and cash, but I keep a backup card for the places that don't accept Amex.

Odd. I'd given up trying to use it by the time I got to Sweden.

Your neighbours (Norway and Denmark) were unwilling to accept it. I forget which supermarkets I tried it in in both of those countries, but three large chains all had their card terminals reject it and the staff looked at it like I'd tried to use a hotel keycard or something.

The big adoption driver in Sweden is the Amex SAS Eurobonus card which lets you collect air miles with the card. It's one of the few cards in Sweden that lets you "game" a points system slightly.

I wouldn't just have amex and cash in Sweden. My experience is that most places don't accept amex, and soon most places won't accept cash either.

I think it used to be that way, but it's slightly better now. I live in London. I have a friend who has an Amex and a normal card, and will always try to pay with the Amex first to rack up reward points. The only time i see him pay is when we're in a bar or restaurant together, usually independent places rather than chains, and i would say Amex is accepted over 70% of the time.

It’s accepted in a lot of places here in NL. I have a Dutch amex. Aldi, Jumbo, Hema, all accept it.


That AmEx have a website listing where the card can be used shows it is far less-accepted than Visa or MasterCard.

I'm not surprised supermarkets accept it. Does your local pizza takeaway, kiosk or bar accept it?

In NL, your local pizza takeaway, kiosk or bar doesn't take anything but the local system ("Maestro", but a different Maestro than anywhere else in the world) anyway.

There are still a few non-Amex cards that offer cashback with any retailer, although the amounts are small; e.g. Capital One (0.5%), Barclaycard (0.25%).

"The 2% cashback has to come from somewhere."

Yes, but in reality, the program comes from an upside down approach to overcoming the obviously anti-competitive practices that VISA/MC use to forbid retailers from offering discounts for not using VISA etc..

You can't say "Get 2% if you use cash instead of VISA". (Notice that nobody ever advertises that?) Because VISA doesn't allow it.

You also can't say "$1.99 + 20 cents processing charge" - no, the price must be listed including charges. (Notice that nobody every does this?)

But you can possibly find ways to give points, or 'cash-back'.

Until now ... [1]

VISA is now saying that even such 'cash back' rewards programs are a violation of its rules.

Have a look at the press release - it's positively Orwellian:

"In order to maintain a level playing field" -> "In order to avoid all transparency and maintain our hidden monopoly" we require that nobody can take steps which highlight the how our transaction fees are embedded in the price.

These are pretty blatant anti-competitive practices and taking them on is tantamount to taking on the entire banking system. It's not going to happen.

There would need to be an 'outside disruptor' like the Word Processor to the Typewriter kind of thing.

[1] https://www.pymnts.com/visa/2018/non-compliant-cash-discount...

The outside disrupter was supposed to be Apple Pay, but that didn't work and now Apple just issues credit cards (through Goldman Sachs). Visa/MC has such a monopoly stranglehold that getting kicked off their Network is tantamount to going broke. There are esoteric options aka Bitcoin, money order, check, but if being able to accept credit cards makes this drastically more difficult. (Ask the legal cannabis industry how it's going.) More modern attempts at disruption - Zelle/PayPal/Venmo are totally at the mercy of the banks. Who are quite happy with the status quo.

Apple Pay charges a fee as well. It also isn’t a payment system but a tokenization system similar to the chip on credit cards. Zelle was created by the big bank which is why you don’t see it at the small local banks. None of the competitor banks(fintech) have zelle support and I guess this isn’t their choice. They have to move money by ach with is much slower.

Any payment/money movement system needs a license and you’re still bound by federal rules on AML and KYC. It makes it hard to support the cannabis industry. AML laws will force you to report large cash movements.

They may be referring to Apple Pay Cash, which is an iMessage-based venmo style service where you cash out via ACH or pay in stores using your Cash balance.

Small banks can integrate zelle, it’s their choice they’re not being locked out

0.75 per transaction locks out the small banks. It would be the most expensive way to transfer money.

I wasn’t aware of the cost TBH. I guess they can always develop their own zelle substitutes if they feel it’s worth it, not sure the economics of that are in their favor. Just saying you can’t ignore the upfront investment the builders put into creating and maintaining it while also pointing to the unit costs they charge the network partners. I’m sure it’s all negotiable with volume.

Uhh my bank’s $30 to wire fee would beg to differ. Literally any fee less than that for a same-day transfer is worth it.

That’s what the banks pay to use zelle.

The $30 wire fee is what a bank charges you to make money and dependent on the bank. Underlying systems near free to use like ach for domestic wires.

My point is the bank could easily pass the cost onto the customer.

Zelle is just a facade on top of ACH.

The outside disrupter was supposed to be Facebook currency and I am glad it didn't happen as Facebook has enough power already and this would starting to go in WeChat direction.

The vending machine in my Apartment bldg has a sticker saying that credit card price is $0.10 more than the stated price and to use cash/coin to get the stated price. The machine does not accept bills or coins.

I should add because I cannot edit my comment that some of these parameters have changed in the last few years, however, it various by jurisdiction. Also, the universal incumbency established by these players was deeply entrenched before such programs were relinquished.

You can't say "Get 2% if you use cash instead of VISA". (Notice that nobody ever advertises that?) Because VISA doesn't allow it.

I see this all the time. * At more than one bookstore, the dry cleaner, markets, my current and previous landlord, my accountant, and pretty much every gas station since the 1990's.

* Pre-quarantine. Now I don't see anything.

There are cases, where the person you're interacting with isn't likely to be audited or doesn't have a direct contract with the payment processor.

Gas stations I find weird, in general. How did they get that exception?

It’s really only one chain I see doing that, and I’ve never bought gas from them and never will. The first time I lied in and they told me they were charging more for card I left.

They should have told you that they were charging less for cash.

Lots of gas stations have the 'cash' price listed on the sign

>Get 2% if you use cash instead of VISA"

Some gas stations where I live have a "credit" price and a lower "cash" price.

That's because US federal law no longer allows credit card companies to forbid cash discounts.

The above poster was incorrect.

(1) Cash discounts were always permitted ("2% off for paying with cash")

(2) Credit surcharges and minimums used to be forbidden, but they are not anymore ("2% surcharge for paying with credit, minimum $10 for card payments")

(3) It wasn't federal law, it was the merchant agreements that precluded credit card minimums and surcharges as a condition of signing up to accept credit card payments from each of the major issuers.

In Germany lots of places just don’t accept any cards besides Visa and MasterCard just because of the seller fees.

And even Visa and MasterCard took a while to get hold. I remember Aldi holding out for ages.

There are many places in Europe that have weird rules... Like some dutch places not accepting EU debit cards. Aldi in Ireland doesn't accept out of country debit cards.

I've also seen a number of gas stations in ND that have a $10 minimum for cards. This also carried over to some grocery stores.

Small dollar transactions really need a better solution. Idk swipe rates, but something like 2.9% + $0.30 being a total transaction cost of 5.9% is just insane. Especially if you’re business is majority small transactions such as could be the case in a bodega or gas station.

Yes that was a very odd thing about moving to SF: people using credit cards on <$5 transactions and merchants actually allowing it.

> You can't say "Get 2% if you use cash instead of VISA". (Notice that nobody ever advertises that?) Because VISA doesn't allow it.

> You also can't say "$1.99 + 20 cents processing charge" - no, the price must be listed including charges. (Notice that nobody every does this?)

We see these a lot in Australia. I wish they'd enforce the same pricing here for cash and card — I don't like to carry cash around, and I hate it that I have to pay a surcharge when paying by card.

We see a lot of those in Australia because the ACCC took on Visa/MC and won.


In Australia, there are two environments, the Visa/MC networks, and EFTPOS. EFTPOS is owned by the AU banks and is AU only.

A Visa or MC credit or debit card txn go via the Visa or MC networks.

An EFTPOS txn goes via the EFTPOS network, it's much cheaper.

In AU, the fees are regulated and must be disclosed to the user as an extra charge. Most businesses much prefer the EFTPOS network because it's much cheaper.

Until recently, the contactless environment didn't support EFTPOS, so it always used the Visa or MC networks. Same applies to Google and Apple Pay.

I remember being charged 5aud for paying by card at a hostel, being Swedish this was a very weird experience. While I do like the anonymity of cash, cards are very convenient.

I think it's fair to pay for convenience.

Definitely, but 5aud for a single low value transaction is a bit steep.

Well, there is a cost when you use your card.

If there is no price differentiation, this just means everyone has to share the cost, rather than the people who choose to use it

> I don't like to carry cash around, and I hate it that I have to pay a surcharge when paying by card.

So you think your use of a credit card should be subsidized by people who pay in cash?

People who pay in cash are subsidizing the store’s costs to handle cash. Paying employees to count the cash (usually after closing), putting it in the safe, distributing the cash to cash registers, refilling when they run out of change, paying for the security service (Brinks etc) to deliver cash to/from the bank, insurance against robbery...

Cash is not free for a store to handle. Stores pay transaction fees on credit cards, sure, but they save on all the costs of cash. A hypothetical store that takes credit cards only would not have any of these costs and their vulnerability to robbery/theft would be limited to merchandise and capital only, saving the cost of insurance against theft of cash. For some types of businesses (services rather than retailers), this makes their office a pretty unattractive target for burglars and eliminates employee theft of cash.

This is an interesting argument, but it is not backed up by actual store behavior.

Stores generally try to give extra charges for using credit cards, not the other way around.

It seems like the fair thing to do, should be to allow a store to do whatever it wants, and make these credit card requirements illegal.

So, it would be allowed for stored to charge extra for either cash or credit, whatever they choose, and the credit card companies would be forbidden from stopping this.

That seems to be what we have in The Netherlands.

It's common for online stores to charge a few percent extra for credit card payment (the base price usually applies for the most common form of online payment, iDEAL, which is cheaper, I guess because the banks cut out Visa/MC).

On the other end of the spectrum, there are some physical stores and restaurants (usually chains) that don't accept cash. They're allowed to do that, given that they state so very clearly upfront.

> "Cash is not free for a store to handle."

that's like saying opening the doors everyday to customers is not free. it's true, but misses the point. handling cash, like paying for utilities, is a fundamental cost of doing business, and so it should be, because the right to anonymity and privacy is woven into cash. not so much with electronic transactions, which are optional, alternative costs.

No, it's not a fundamental cost of doing business, and many businesses no longer so that.

Your argument is one for considering exposing the cost of any payment mechanism to the customers.

(Especially when the cost between different payment mechanisms differ a lot.)

Indeed. And if stores make their accounting and realize that cash handling costs more than credit card handling, they should be able to add a cash surcharge as well.

It just happens that they dont want to do that, because dealing with cash is cheaper

In many places, paying cash is faster than paying by card. Before contactless, with optimized (rounded) pricing, you would often get 3x the throughput (nowdays less) and for small transactions the fees were ridiculous (smaller with contactless).

I wonder how much more expensive credit cards actually are? Cash costs money/time to handle and deposit, it's easily stolen, and easy to commit fraud with (like the classic move where a drive thru employee pockets the cash from a sale without ringing it up)

One issue I know smaller retailers sometimes have is that it can take a long time to get cleared funds into their account.

One small cafe near a place I used to work said it usually took 30-60 days for funds to clear into their account after a card transaction. That, for them, was a major problem as it meant that they couldn't then pay their suppliers in a timely manner when cashflow was highly variable.

Then again, a bakery I visited that was in a small town said they'd stopped taking cash, as they got robbed some huge number of times.

The computerization of order taking and kitchen tickets would seem to make it harder to charge a customer without ringing it up? I know you could cancel it in the system, but that's gotta be counted somewhere where a manager is going to see it eventually?

Depends on how much you can trust your employees.

> So you think your use of a credit card should be subsidized by people who pay in cash?

I don't think it should be so clear cut like that. The credit card processing fees charged by the processor is a cost of doing business and should just be factored into the pricing without being explicitly passed on to a subset of customers. For example, a shopping centre or convenience store may have toilets that only a subset of customers would use. Should the customers who bought something without using the toilet be "subsidising the cleaning costs"? If a store offers online ordering, should customers who ordered online be "subsidising the rent of the physical store"?

If the toilets cost 3% of revenue, then yes they should charge separately for using the toilets.

Or rather, they should have the option to do so.

It's a valid business decision to NOT charge extra for the toilets, too. Just like shops usually don't charge people who are a bit slower in the checkout line more for taking up cashier time.

This used to be the case, but it isn't anymore.


Plus, plenty of gas stations show a cash/credit price on their signs.

The merchants are no longer allowed to block this behavior.

That's applicable to legislation, private contracts can still require no surcharge.

Interestingly, in Japan most electronic shops (like Bic Camera or Yodobashi Camera) have a point card where you get 5% not directly as cash back but as "points" that you can use any time for a further purchase.

But that's only if you pay by cash, you don't get any point by paying by card.

Yodobashi offers a 5% discount if you pay with visa card. Combine that with the 8% tax free deduction if you hold a temporary tourist visa.

> You also can't say "$1.99 + 20 cents processing charge" - no, the price must be listed including charges. (Notice that nobody every does this?)

The place I went to yesterday for lunch did this. This is in Silicon Valley. I believe it was a 3.9% credit card fee.

You never see that in Europe. What you see is shop owners claiming their POS is broken.

You were always allowed to offer cash discounts. What you weren't allowed to do was impose credit card surcharges. That was recently eliminated.

I find it pretty nuts that the person who chooses the payment method doesn’t pay the charge. I always try to pay with cash if I can help it.

You’re correct in 99% of cases. Somehow gas stations can advertise different prices for cash.

Since Jan. 27, 2013, all retailers have been allowed to charge a fee for using credit. However, there are a lot of rules which are hard for regular retailers to follow, but easy for gas stations to follow, which is why you mostly only see it at gas stations.

Like some kind of virtual coin.

The ability to purely make transactions is trivial - you can just use a debit card. The value of credit cards comes from other factors like fraud protection, SCI compliance, actual credit, etc.

Debit cards also charge some fees, but typically lower.

The fraud protection of credit cards mostly comes out of the pockets of the merchant, I think? So the merchant could give people a discount for using means of payment without a chargeback, like cash.

You are right about the actual credit. Though eg in Germany people usually use their overdraft in a same way that American seem to be using their credit cards for short term credit.

(For either convenience is the main selling point. The fees and interest rates for overdraft and credit card debt are usually quite high, I think?)

Sure, but the base rate comes from MC/Visa. Precessing credit cards is a low margin business. It's basically a race to see who can charge as close to the MC/Visa rates as possible.

This isn't really about Visa-MasterCard, it's about a darling like Stripe charging 2.95% because 3% is customary.

People will freak about their customary rent/take being threatened. They gotta come out of the woodwork and justify the charge... somehow. A HN proxy battle!

They want to eat too.

And these technicalities matter a lot. They make, in some cases, the difference between legal an illegal. Not understanding them leads to wrong conclusions.

So formula wise it would be something like this?

d = dollars t = transactions count

I(d,t) = Interchange total profit/cost to a bank from fees in and out F(d) = scaling function for interchange returns based on cash pushed through as an arbitrary function G(t) = transaction cost function based upon arbitrary scaling.

I(d,t) =F(d) - G(t)

I agree with the OP that we need to be informed in order to have the conversation.

But..... You have the main point here. The whole premise of monopolies is that monopolies dominate bottlenecks, and use them to generate outsize revenue and protection from competition.

Facebook doesn't make money directly from whatsapp. It can be used to generate data for FB's main advertising business. Most importantly, it helps maintain facebook's dominant position in social media. That position is revenue generating.

I agree that understanding the mechanics are important. But, we can't keep treating monopolies as innocent of monopolistic practice until proven guilty. The reason we have antitrust in the first place is that monopoly positions lead to monopolistic practices. We need to assume monopolistic practices exist in the case of a monopoly. When one monopolistic practice (eg amazon marketplace or adwords) has been proven in court, this should be treated as proof of monopoly, not a standalone violation.

Same with the CCs.

True, also in many EU countries credit cards do matter much less. For example in Germany card payment is normally done with EC cards (girocard,vpay,etc), including NFC based payment. For long term recurring payments SEPA is common, for one time payments simple bank transactions over online banking. This includes online payment for services like Amazon. Oh an not to large local payments (e.g. restaurant) are also very often done in cash. Credit cards are only needed for a German person in two cases: Travel and non EU online shops (but which often have pay pal through which you can use your EC card!!).

EDIT: Warning in some German cities (e.g. Berlin) you will find a lot of cash only restaurants, mostly due to high costs of payment terminals not being worth it due to most people paying with cash anyway. Like the a local restaurant from where I live they bought a payment terminal it broke in some stupid accident no insurance want's to cover so now it's back to cash only.

Hi, fellow German here. I know that "EC card" means "girocard" in the common vernacular, but if we're talking about payment systems, I think it's important to be correct.

These cards used to be called EC card, however MasterCard now has all the rights to the EC brand. In fact debit MasterCards with EC branding are starting to pop up now.

You either want to speak of "girocard" which is our own payment network or "debit cards", which includes the likes of Maestro V-Pay, but also some Visa and MasterCards. In the same sense, you don't need a credit card for most online shops, you just need a Visa/MC (some will only take credit, but most will take debit).

And as for PayPal: they don't use your "EC card" either. PayPal offers to process the charge by way of direct debit, which is (now) a SEPA process and totally unrelated to any debit or credit card you may have. It just so happens that girocards list your SEPA account info.

/rant. Sorry, this is just one of those things that gets me.

I just want to present a counterpoint to your claim that in the EU, CCs matter less: there are countries in the EU like Sweden where cash is virtually non-existent. Basically everything is card-based here, I've even seen panhandlers who accept electronic payments in Stockholm.

Paying by card is common, paying using a Credit Card not necessarily. I'm French and I'm semi-ashamed to admit that when at a store abroad the clerk asked me "debit or credit?" for payment I had to ask him to explain to me what this quaint exotic incantation meant.

When I finally understood how that system worked I also finally understood this weird trope in American movies where a character has a half a dozen credit cards in their wallet, and they burn through those as if it were free money for some reason. That never made any sense to me up until that point.

Counterpoint, my partner got very sick and I burned my savings then borrowed money from every source I could, including credit cards. I knew I was accepting awful terms, but they gave me money and that’s what I needed at that moment and it was the only way I could get it.

I’m not asking for pity, I knew what I agreed to and I’ll pay it but sometimes high interest revolving credit (credit cards ) only choice you have.

That's not really a counterpoint. You had a rare situation and would have taken money from anywhere I guess

As long as it's not a pay day loan everything is fine. If you need liquidity then credit cards are a perfectly sane option. What I never understood though is why you would use a credit card when you don't need to borrow money, which is how most people use them.

I get like a $1000 a year in cash back using credit cards and they all charge no annual fees and I pay everything off in full automatically so I never pay any interest. Add in the consumer protection and the fact that it builds your credit giving you better mortgage/auto loan interest rates, why on earth wouldn't I use credit cards?

> why you would use a credit card when you don't need to borrow money

To build a credit score. When everybody lives in debt, it is expected for you to do the same.

my bank just tops it up after each month. no interest gets charged. i mostly use it abroad and for online purchases.

How the customer settles with the card issuer is not really relevant here. Many US card transactions draw from a checking account instead of a line of credit, but from the merchant's perspective it is just like any other Visa or Mastercard.

The fees for debit transactions are much lower, though.

I know this is the case when actually doing a PIN debit transaction (e.g. not Visa or Mastercard), but do you have a source on Visa/MC debit transactions costing less? Neither Stripe [0] nor Paypal [1] mention that.

[0] https://stripe.com/pricing#pricing-details

[1] https://www.paypal.com/us/webapps/mpp/merchant-fees

Stripe and PayPal aren't charging you on behalf of the credit card companies--they're making money off the transactions themselves. They're not going to charge you less for processing a debit card payment any more than they'll charge less for cheaper credit cards (using Visa instead of AmEx). Besides debit and credit transactions, there's also atm/direct transactions that cost even less (and likely have no fraud protection from your bank; the links I have posted below don't say much about this as it's not used often). Credit cards are also allowed to charge extra (though merchants rarely do around here, except at gas stations), but my understanding is that that's illegal with debit cards.

See here for info: https://www.fool.com/the-ascent/research/average-credit-card...




> I know this is the case when actually doing a PIN debit transaction (e.g. not Visa or Mastercard), but do you have a source on Visa/MC debit transactions costing less?

PIN/contactless debit transactions go through VISA/MC here and they definitely cost less, see below.

However, not 100% sure about remote online/web transactions - most of those providers here are "contact for pricing", but e.g. BlueCommerce and Checkout.fi seem to have a single rate for card payments - though it could be the difference is just "averaged out" (like e.g. iZettle does for card-present EMV transactions: 1.95% for all cards).

Couldn't find an up-to-date English price list for Nets Finland, but here is a 2017 one in Finnish: https://ttlsystems.fi/wp-content/uploads/2017/10/SME_Hinnast...

Base rates: VISA Debit 0.41%, VISA Credit 0.91%, MC Debit 0.42%, MC Credit 0.92%. Additionally +0.04€ per transaction.

Remote transaction: +0.30%, foreign EU +0.10%, foreign non-EU +1.30%, corporate card +0.80%.

SumUp Finland: https://sumup.fi/maksupaate-hinta/

0.95% VISA/MC Debit, 2.75% credit cards.

Debit card (bank card) transactions in the US require a PIN. Credit cards require a signature but most gas stations require a zip code.

It would be nice if the US had PINs like Europe does for credit cards.

I make around $1500-$2000 a year in cash back from my credit cards and $195 in fees. 6% back for groceries, 3% for gas, 3% on online shopping, and 3% for restaurants. All my household utilities and bills are run through my Delta card to collect miles and a $200 yearly voucher.

> It would be nice if the US had PINs like Europe does for credit cards.

Some cards do offer this feature, all issued by credit unions as I recall. Spokane Teachers Credit Union, First Technology Federal Credit Union, and State Department Federal Credit Union are the three I know off the top of my head. Target's MasterCard version of its REDcard also has a PIN but you cannot apply for that card directly.

(I have cards from each of them, except SDFCU, and have considered getting that one simply because it would be a chip-and-PIN Visa card and I don't have that particular combination.)

Chip and PIN is exactly what I want. I’ll see if my credit union offers one, Delta Community Credit Union.

I have six CC , my total AF for them is $2500. Every year I got at least $6500 back from using those cards. Not to mention travel insurance, car rental insurance and purchase insurance which comes with those cards and it's worth at least $600 a year.

> Paying by card is common, paying using a Credit Card not necessarily.

Care to expand on that?

Here are the statistics for Denmark.

"International Credit Card" are a small fraction of the total -- under 5%. The vast majority of transactions by number and value are by debit card.

(The national/international distinction is between Dankort, the Danish card payment system only used on most debit cards here, and the foreign companies like Visa and MasterCard.)


Dankort is dying though and some banks don't bother issuing it, some of my coworkers just have a Visa but not a Visa/Dankort. It works just as well. I doubt my Fitbit even supports the Dankort bit of the card, but I have never had any difficulty paying anywhere.

(For international readers, in Denmark, unlike Germany, the national debit card can be combined with a credit card on one card and then the terminal just chooses automatically)

Card != CC. The point is that in EU there's less motivation to use credit cards than in USA because the situation is better for payment cards that are not credit cards. If you refer to Sweden, I believe that the split there is that something like 40% of the cards are credit cards, and the majority are not.

Likewise in Australia. The only difficulty I've found using a debit card in recent years is when renting a car: with a debit card, they generally want to put a "hold" on the account for a few hundred dollars.

I can't get a credit card anyway since my income isn't high enough, and I wouldn't want one because they charge annual fees in Australia.

Banks in Australia run their own payments system, so it's possible to pay by card without going through Visa / Mastercard. Some cards issued by banks don't even have the Visa / Mastercard affiliation, but I think the Visa / Mastercard debit feature is needed it you want to make card-not-present transactions online.

There are a number of credit cards in Australia that do not charge annual fees. Many require being linked to an active transaction account, but not all.

They generally don't have any kind of linked reward points structure, but that's not a huge loss as most of those got nerfed after the ACCC changes a while back (see elsewhere in these comments).

I see there are some of these around these days, perhaps it wasn't so common last time I was looking which was at least 5 years ago. But at this point, there doesn't seem to be much benefit in having a credit card. I'd also be unlikely to qualify for one, either due to not having a stable income of $20k plus per year, or because I'm not a permanent visa holder in Australia, despite living here for over a decade.

As a Swede, I thought the CC number would be lower. Most people my age never had a credit card.

I do have a Visa DC and a MC CC for redundancy if my bank is down, most people I know doesn't even get why.

You are correct, credit card transactions are about 18% by number and 25% by value.


(Seriously, people, these kind of statistics are extremely easy to find. No need to make them up!)

I have a DC and cc from the same bank.. not sure if it gives much of any redundancy, but it was the best deal on a cc I could find.

In Sweden, the best CC deals are the petrol station branded CCs (Shell/Circle K) as they both give you cash backs, have some insurance, have the standard grace period, and are "free".

It's a bit balkanized, with Swish taking the place of Venmo in Sweden, and other local variations elsewhere.

Here in Portugal its "Multibanco" network that is used. That's why "MB way" got that "send money thorugh phone numbers" in 2014, and worked with every bank without commissions.

Very few people even have credit cards.

Places like restaurants and groceries still usual demand something like "minimum 5/10€ to use card", but those signs are disappearing.

> It’s hard to have a healthy dialogue on this topic if folks don’t understand the basics of how the card networks generate revenue.

same for so many finance and legal topics

you should see the stuff people say in cryptocurrency land, you can even agree with their technology but still be surrounded by the weakest arguments

This is one of the reasons I generally stopped paying attention to the cryptocurrency world.

The number of voices with an accurate understanding is far outweighed by the number of people with some kind of personal and ideological axe to grind about (insert some combination of one or more of: government/regulation/inflation/economics/etc) and from my perspective the whole scene got increasingly wild.

George Selgin sometimes writes on cryptocurrencies. He knows what he's doing.

Though I mostly read him for his writings on eg the private mints that solved the British small change shortage during the industrial revolution. https://www.goodreads.com/book/show/3392302-good-money

I wonder if this could be done intentionally. It's cheaper to make a view popular with a niche, disliked group than to make the opposite view popular with a large voting bloc

I wouldn't say intentionally, there is solidarity around frustration with domestic and global banking systems, but they've just evolved from a limited view within the community.

Well they "do not" in the same sense inflation is "not" a tax on anyone holding cash, right?

One way or another every fee must be absorbed by someone that pays.

No, it's that the wrong "they" is used.

Interchange goes to issuing banks, not Visa/Mastercard, and that's a big part of why the system is so stable as any competing scheme with a lower interchange will not be offered to customers because it won't be as profitable for the issuers. And, if needed, they can use the whole interchange amount for marketing and cashbacks to make any new scheme uncompetitive, because if it has lower interchange, then it can't match that without losing money.

And the someone that pays is ultimately the consumer. They are the ones all of this is for and produced by.

The article does not indicate that VISA/MC makes their money directly from the 'interchange' but it's perfectly valid to indicate that VISA/MS are in fact the lynch-pin of the credit card 'system oligarchy'.

In particular, it is they that are able to set rates for transactions, and do anti-competitive things like ban e-retailers from offering relative discounts like 'save 2.5% if you use cash' etc..

It's absolutely an ancient cabal banking network, that would be disrupted in any normal, competitive system.

2.5% of a transaction considerably too much, were there efficiency, it would be less than 0.5%.

Edit: monopoly->oligarchy

>> It's absolutely an ancient cabal banking network, that would be disrupted in any normal, competitive system.

The fact that banking wasn't a cabal led to the creation of Visa & MC, they provide the function of operating a deliberately independent interchange so competitive banks can work together without having to talk. The fact they havent been replaced isnt due to a lack of "normal competition", its just a system that has built in network effects (but is sticky unlike most social networks).

Dont get me wrong - banks love cabals! Thats why domestic switches (led by central banks) are replacing the scheme networks in most countries for domestic transactions with the domestic switches being linked for international transactions, pushing Visa & MC out.

>> 2.5% of a transaction considerably too much, were there efficiency, it would be less than 0.5%.

I think your wrath is misdirected - that 2.5% may be stated in a Visa/MC press release, but it doesn't actually come from Visa or MC! The banks set interchange through the schemes. You add in 5000 different schemes thats not gonna change the fact that your bank is going to try to get the best bang for their buck if they "acquire" merchants or "issue" cards.

The porn thing is linked too, banking is a heavily regulated space, easy to put pressure on. Acquiring banks get in trouble easily, they rely on schemes to blacklist anything which could land them in hot water. Even if there was no MC/VISA banks would still be paying random service providers to operate blacklists. The only difference would be that it would be cheaper. And typically thats not a good thing.

Banks are a cabal, that they needed VISA/MC was merely a need to 'standardise' a transactional network.

The evidence that they are an oligarchy lies in their power to set prices. Which points right to the definition of what a monopoly is.

If such systems were truly competitive, and we had say, 5 completely different systems that were truly competitive, the price would not be a total of 2.5%. The price would be set by the market, not the providers of the service and it would be much, much lower than 2.5%.

( MASTER Card Ha! They are both making a SLAVE out of you.

I don't get it -- Amex and Discover are still providing healthy competition, so the "duopoly" the author complains about seems to be largely irrelevant. Competition between cards is thriving and consumers benefit -- witness the miniscule transaction fee the credit card companies keep after paying your rewards back of 2% to 5%, when you pay your bill on time.

The article's main point is that such large companies are a cybersecurity risk, and that the government should regulate/nationalize/globalize payment infrastructure.

Unfortunately, experience tends to show that governments would be far worse at providing secure, low-cost payment services. Also, credit cards already are highly regulated when it comes to consumer protections.

So, this article is just not making a lot of sense to me.

The article (particularly the linked tweet) somewhat addresses your point: Amex and Discover may offer a superficial degree of competition for consumers, but banks have to obey Mastercard and Visa's rules even when it comes to offering bank accounts to merchants, otherwise they (and therefore all their other account holders) can't participate in the 80% of card transactions that are on the Mastercard and Visa networks.

If you're a bank who wants their business customers to receive payment via Mastercard, you are not allowed to give a bank account to or otherwise handle payments for anyone on the MATCH list, otherwise Mastercard will shut off your bank's access to their network completely, probably putting you out of business. There is little transparency about how entities end up on this MATCH list. The article does not propose an exact regulation, but the end goal would be that a single company can't arbitrarily shut people out of most of the financial system.

I have seen many stories of legal and legitimate businesses for things like weed (legal in the stores location) and legal porn sites getting their merchant accounts shut down because the payment processors just don't want them to deal with it leaving cash as the only option.

Weed is still federally illegal in all locations in the US.

Good point that perhaps "regulation" is not a good thing, and that the most free, common payment method is the decentralized one: cash.

People laugh about bitcoin, and the implementation surely has its drawbacks, but the idea of a decentralized digital payment system is alluring.

The hard reality is there’s a high rate of fraud and chargebacks in a lot of these types of businesses. It’s a tricky one for the merchants to manage but things like 3DS2 should help, maybe, if they ever sort it out properly...

I see your point from a merchant perspective. A thought: Why don't merchants in high-risk categories such as porn, gambling, etc. use debit transactions instead? Where they wait for funds to be transferred into their account and settled before providing goods and services.

CC rewards seem like a indirect regressive tax. Wealthier consumers who can afford to pay on time and have better credit ratings are subsidized by poor consumers who actually use the "credit" part of "credit card".

And, you would be correct, in a sense. Wealthier consumers benefit disproportionately from CC rewards compared to less wealthy consumers:

Paper from 2010 showing this: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1652260

News article with a good summary: https://www.reuters.com/article/us-usa-fed-wealthtransfer/cr...

+1 for actually supplying sources!

tldr: >> ...the lowest-income household ($20,000 or less annually) pays $21 and the highest-income household ($150,000 or more annually) receives $750 every year.

If people didn't spend money they don't have the problem you describe dissolves. No one has to use credit cards and being financially literate is an individual responsibility.

If companies weren't allowed to offer predatory lending towards financially illiterate the problem you describe dissolves, this is actually much easier to implement than individual responsibility.

Ah yes, the old "let's block stupid (poor) people from accessing financial instruments for their own good" argument while at the same time having legal gambling.

predatory lending != lending.

Predatory lending generally refers to companies like payday loan companies and cash advance companies which feed off of forcing people to continuously borrow until they can't borrow any more.

Lending should absolutely be accessible to everyone in some way or another, especially in a world where a transmission failure can lead to a lost job if you can't afford to fix it right away.

It’s predatory the moment it feels too high to you.

Hey, if you want to argue that gambling should be more restricted, then go ahead.

It is highly restricted in many places.

The actually financially literate know how much more buyer protection you get with a CC than with any other form of payment.

And why is that? It's a beautiful example of regulatory capture that led to credit cards gaining advantage over other payment methods.

Such protections should either be scrapped or extended to cover all methods.

> Such protections should either be scrapped or extended to cover all methods.

You are free to invent a payment method and provide all these protections to your customers. Why would you want to remove protections that CC companies are providing to their users?

> financially literate is an individual responsibility.

Is being able to read and write an "individual responsibility?" How about the ability to communicate in a language at all? What about any other basic core skill that would make a person capable of learning more things to make them "productive?"

"Individual responsibility" as it pertains to these topics is at best a misnomer, if it even names an existent thing at all.

Surely you don't think it's ok for, say, a Company Town to exist? Can you extrapolate from there why it's not ok for credit card companies to bamboozle less educated Americans for money?

I would encourage you to frame your disagreement with statements and facts. Asking questions expecting the reader to draw the same conclusion as you isn't a useful discussion mechanism. Especially when the reader doesn't agree with you.

I'm not sure what the relevant facts would be around an extremely value based argument of who is responsible for educating a society.

I guess we could look at the general fact that education is one of the better investments to increase a nation's GDP, bit I'm more concerned with the ethics than the money.

Here are some facts: https://nces.ed.gov/naal/kf_demographics.asp#3 , about 14% of adults in the US in 2003 had little to no reading skills.

Yes, I realize you’re not being genuine, but those are all your responsibility to do/learn. Although everything you mentioned is what you should learn as a child, so we have a moral/social code for parents and the community along with some help from schools to teach these basic principles.

I could follow your argument if the card issuers weren’t transparent in their pricing and terms like payday loan companies. However, the interest rates are laid out very clearly several times as you apply and are approved as regulations demand. I’m all for education but at some point you have to let people do what they want with their money.

I am being genuine.

I'm not sure the country has taken the necessary step up in early education to even have the population have a baseline understanding of what interest rate is. I didn't learn that anywhere in elementary, middle, or high school. I had to figure it out on my own.

I don't think that's acceptable. I think that leaves our population vulnerable to predatory companies, who have a disproportionate ability to lobby the government to allow them to stay predatory.

I envision a capitalist hellscape where the population is kept purposefully reapable.

You mean to tell me all my woes in life aren't some form or another someone else's fault?

I'm ignorant to CC companies' financials. But I would have thought their revenues are driven by transaction fees, which end up ultimately getting passed down to the buyer through higher prices. Would be interested to learn more though about CC economics. It would indeed be sad if CC rewards operated like a regressive tax, as you say.

If you have poor credit, you get a crappy credit card: low limit, high interest rates, no rewards.

If you've got great credit, you get a high limit, slightly-less-astronomical rates, and all the rewards.

The cost of the rewards is (as I understand it) mainly carried by the transaction fees, spread out over all purchases everywhere. So you have pointless price increases for people who /don't/ use credit cards (like me) or have poor credit, and the benefits of that 'tax' going to users with good credit (ie, rich people). So, yeah, it's a wealth transfer to people with better credit.

I had poor credit at a point in time. I "bought" a credit card to build my credit by putting a deposit. After 1 year of on-time payments I was able to graduate to a credit card with cash back. The system didn't feel punitive to me, and honestly, I had poor credit in the first place because I was irresponsible while in college.

You just described a scenario in which you were systematically bilked for at least a year —- paying full retail prices, which presumably paid for full transaction fees, which in turn did not pay you any rewards —- so you could graduate to the privilege of being allowed to purchase a consumer line of credit that reduced the level of punishment to something merely appropriate.

There are relatively few businesses in the world that can rip someone off for a year, then allow them to pay a more reasonable fee in exchange for guaranteed business, and still have the consumer claim that the system “doesn’t feel punitive.” The whole thing is kind of brilliant.

It was a painful year that taught me a lesson. Looking at how fiscally responsible I have become, I really have no complains.

It's not financial responsibility or learning lessons, it's the fact that you consider earning cashback to be a reward for the ordeal you endured.

By participating in the cashback scheme you're putting more people through that ordeal by means of higher fees.

The only way to win is not to play.

I don't consider earning cash back to be a reward, but I see the credit card as a product that lends money based on a risk evaluation.

At that moment in my life, the risk on lending me money was high and therefore the product I could access was limited. There was little incentive for the bank to risk lending me money, so I needed to purchase my way into rebuilding my credit. As the risk in lending me money decreased, banks became incentivized to offer me lines of credit so the cash backs kicked in.

Rebuilding my credit has allowed me to access lower rates on my mortgage , investments loans and other financial tools that have greatly contributed to my quality of life. I would consider that to be the reward.

The problem is that the credit card "lending money" function is not what transaction fees pay for, and these fees are paid by all market participants -- including cash customers. People should be able to separate the payment function of a credit card (which is what merchants pay transaction fees for) from the "line of credit" function that banks make money on. However, this scenario would be less profitable for the industry, and so a small cartel of payment card networks and operators have worked hard to jam the two functions together. As a result, everyone (including cash customers) is heavily penalized for merely participating in the economy, unless they also purchase a profitable and risky line of credit.

It's frankly a brilliant scam, and the fact that people don't think it's a scam is its most brilliant aspect.

Discover has a secured card that earns cash back.

Of course, the system is designed to encourage you to be irresponsible in college.

It can get way worse than revenues being driven by interchange fees. Banks like Wells Fargo and Capital One operate like a classy pay-day loan company, targeting sub-prime customers who are more likely to not pay on time. I'd recommend reading this for more info: https://newrepublic.com/article/155212/worked-capital-one-fi...

Wealthier consumers also have more to gain on the luxury perks offered by cards. If you value 5 star hotel stays and airport first class tickets then you get more of the "value" back from the card fees. But actually with chase you can get a lot of those fees back on non-luxury redemptions too, but you'd still have to be rich enough to travel.

It's not government. The same incentive structure for businesses matches better to loyalty cards.

Are they?

Visa/Mastercard charge merchants 1-2% interchange fees for each transaction.

I'd guess that people putting $20k a month on their Visa (I know a few that do) are paying for themselves with the interchange fees.

The vast majority of that fee that merchants pay goes to the bank, not Visa or Mastercard. And a vast majority of what the bank gets in that fee goes back out to the card owner in the form of rewards. You see merchant fees of 1-2% because that is pretty close to typical rewards paid out on credit cards.

There's a bit of misunderstanding in your statement. Most of the money made by companies in payments systems comes from transaction fees, not from interest. When companies offer you better rewards, that's them competing to have you use their credit card rather than the competition's.

Sorry to tell you but that's not true. Literally the top Google result says the contrary:

> "Out of the various fees, interest charges are the primary source of revenue." [1]

Yes, credit cards charge a large transaction fee, but wind up refunding a large portion of that back to the consumer in the form of rewards, so these days that's not the main source of profit.

[1] https://www.valuepenguin.com/how-do-credit-card-companies-ma....

It's not though. No one is forcing you or anyone else to sign up for credit cards - it's a choice, unlike taxation.

It's not optional, though.

I still have to pay the higher transaction costs even without a credit card, because the credit card companies require that vendors have the same prices for card or cash, resulting in higher prices for everyone.

I've seen stores (e.g. electronic stores) offer reduced prices when paying in cash vs. credit card. Is this law only in the US?

Reduced prices for cash used to be against the Visa/MC merchant terms. They lost a lawsuit over it, but it's fairly ingrained by now.

You'll see cash discounts at some gas stations, and the occasional small coffee shop or takeout place will have a $10 minimum, but otherwise it's gonna be the same price most places.

Seems like an opportunity to raise awareness for this information then.

Will you go to jail or pay a fine if you don't use a credit card? No?

Then it's nothing like taxation and it is optional.

Think of sales tax. You have the option of paying it or not buying things; it's not optional.


We've warned you before about personal attacks, so I've banned this account. If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future.


Work on your reading comprehension...

The card companies charge merchants for transactions. The merchants raise their prices to cover those transaction costs: For a very long time (and still, in a few places) it was against the card company's terms of service to have a card usage surcharge. A very few places now have 'cash discounts' or don't accept cards at all, but these are by far the exception. As a result, /everyone/ ends up paying for credit card rewards, even those who don't use credit cards.

How would you pay for things online, many of which are not available in person? Or stores/airplanes/services that don't accept cash?

Debit cards? The other option is to use a Credit Card but pay off at the end of the month. Why is that so difficult? That’s literally like a Debit card except for the additional “buffer” of safety and security from your bank account.

Every debit card I've had has still involved a credit card company in some way - they've all had the visa logo on them.

That's true, I am not too familiar with the finance system, how come a debit card needs a middle man such as VISA? They help with the transaction between two banks?

The situation is that there is a network called Visa Debit that some banks use for their network for debit transactions. It may seem new, but it evidently dates back as far as 1982.

I'm in Canada. With one exception, no bank client card I have had (which were all usable for debit) had any Visa logo on it. That includes current ones.

The exception is one TD client card.

The situation is explained here:


TD is one of the banks that offer Visa Debit. This TD client card is also Interac-branded, so I'm guessing that the card will use the Interac network for domestic transactions, and in that case its Visa Debit personality does not come into play.

Those are not the only two networks for debit/ATM in Canada. There is also "The Exchange":


(used by a lot of smaller banks and credit unions).

The Canadian Credit Union Association also runs an ATM network called AccuLink.

It's important to know which network your card uses if you want "ding free" transactions. E.g a "The Exchange" card can be used at an "Interac" ATM, but there will be a fee.


That doesn't make it any less of a duopoly. The whole point of the article is that visa/mc have too much power and there is a lot of systemic risk by having only two competitors in this industry in particular.

Even if they aren't extending credit they're still facilitating the transaction - it's not like the visa sticker is on there for marketing purposes

Not what we're talking about in the OP comment.

That's what I was talking about - even if they aren't charging fees, they're involved.

There's plenty of cases in technology where "but we don't do anything with your data!" is not a good enough excuse. Many of us still argue for decentralization or federation or user controlled data, etc. Similar concerns I have for visa.

I get the impression you don't think much of me. That's ok, but why did you feel the need to tell me?

alt_f4 is a troll. I don't think they understand what we're arguing about lol

your mum is a troll

I can't think of a bank that doesn't use a card that works as a credit card when it comes to online transactions.

They're still visa or MasterCards though...

> Visa does not issue cards, extend credit or set rates and fees for consumers; rather, Visa provides financial institutions with Visa-branded payment products that they then use to offer credit, debit, prepaid and cash-access programs to their customers.

Everyone in Europe uses debit cards. You don't have debit cards in the US?

It's a plastic card, it is issued by your bank, it's still using the visa/mastercard network, but instead of credit, it is tied to actual funds in your bank account.

> "No one is forcing you or anyone else to sign up for credit cards - it's a choice, unlike taxation."

Tell that to the increasing number of shops that no longer accept cash.

Is this really a thing outside of SF? I haven't seen any cashless stores in my city yet. In fact, 3 of my favorite restaurants are still cash-only.

Strange, about 2y ago, on our visit, there were lots of places in SanFrancisco who didn't accept cards.

you can't rent a car without credit card, they won't accept debit card or even debit VISA/MASTERCARD, it has to be full on credit card

I don't know anyone personally that owns a "credit" card. Virtually nobody uses them here in France and I think in the rest of Europe, it's always debit card. Never had an issue with renting cars.

It is a common issue for French people renting cars outside of France - search on Google, there are hundreds of angry people who ended up with no car because agencies in other countries refuse debit cards (debit immediat)

Why would renting agencies refuse debit cards? You get your money, just like credit cards...

My guess would be single message (debit) vs dual message systems. They probably want to hold / authorize a large amount first as insurance.

What's strange is that you can authorise on debit cards (at least french ones)...

I should have been more specific, In the past few years I have rented cars in Europe, in the US, in South Africa and in Australia. Never had an issue. I generally use Avis or Budget, sometimes a local company.

That's not true at all. It's certainly not common to require credit cards for car rentals in Europe. Must be an American thing.

>Virtually nobody uses them here in France and I think in the rest of Europe,

Definitely not the case here in the UK, credit cards are very common.

Other than renting a car or a hotel room, it seems you can conduct most if not all of your affairs without a credit card. Credit cards can be relegated to those limited transactions.

Most of the large car rental companies in the US will let you rent with a deposit on a debit card.

The governments must step in and ban interest altogether. This is only fair, and will force banks and businesses to transact morally with customers.

Every time I pay for something in cash at a store, I’m paying for those 2-5% rewards, even though I won’t partake in them. This happens because the credit card companies, by dint of their crushing market power over small retailers, can force stores to charge identical cash and credit prices. I suppose a well-functioning competitive market would fix this problem, but weirdly enough Amex and Discover don’t seem interested on competing to offer a better deal to retailers.

Credit card fees and rebates are such an amazing example of how systems can fool human beings. The entire system clearly could not exist in a frictionless, well-functioning marketplace —- but people seem hard pressed to actually figure out how the whole thing works. It’s kind of brilliant.

> I’m paying for those 2-5% rewards

Well.. you're paying a 2-5% higher price, but the merchant gets to keep all of that; it's not as if they have to also pay that fraction into their transaction processor.

> I suppose a well-functioning competitive market

You ever see retailers that offer a discount card? Like, spend $50 here get $10 off in the future? Typically they'll only offer those for cash transactions. This is why.

Anecdotally, I have never once seen those discounts limited to cash transactions in the United States

In a properly competitive market the merchant doesn’t really get to keep it. Presumably they set their prices to a value that is X% higher than where they would normally set their prices without the need to pay transaction fees. If exactly half their business is paid in cash/debit and half in credit, then X might be set to something like half of the excess CC transaction fee. Then the credit card customers get to split up all of those rewards amongst themselves, and the cash/debit customers get nothing.

So get a rewards card. Some percentage of the sales taxes go to support programs I don’t agree with or use. And I can’t escape that. However, one could start a cash-only store if one wanted.

You are also ignoring the cost of cash. Theft and cash handling isn’t a zero cost. Why should I, as a credit card user, be forced to subsidize losses due to cash handling? We could also talk shoplifting as well; policies that don’t punish shoplifters means I get to subsidize that as well. We could go on and on and ultimately it gets absurd. If you don’t like the price, go somewhere else and the market can sort it out.

> Why should I, as a credit card user, be forced to subsidize losses due to cash handling

How about the store gets to decide what to charge?

Most stores seem to believe that credit cards are more expensive, which is why they try to offer discounts for cash.

So the facts do not back you up.

You shouldn't be forced to subsidize anything. That's the whole point. At a minimum: the government should recognize the market power imbalance between card processors and small businesses, and ensure that the stores can set their own prices appropriately. If cash or debit is genuinely more expensive, let stores reflect that fact in their prices offered to consumers -- rather than prohibiting it via a contract they can't say "no" to.

The government can make a law that says credit card merchant agreements cannot prevent a shop from making cash prices lower than credit card prices.

Then shops will have two prices cash price and credit card price. Then people will use cash more, and the government will lose some of the information they get from reading everyone's credit card transactions.

Do you think this affects the government's decision? Or are politicians simply bribed by visa/mastercard?

Imagine if companies charged 2-5% less because they didn't have to fund CC company marketing tools like cashbacks.

That is common. My grocery store, my bodega, my doctor's office, my dentist -- they all offer a 5% discount for paying in cash.

Obviously not everyone does it, but it's certainly not uncommon.

On the other hand, there are also a lot of costs associated with handling cash. The expense of tracking bills and coins and going to the bank every day is not insignificant. So it's pretty easy to argue that there's no reason for cash discounts either, because handling cash can actually be more expensive than handling cards, particularly when you're doing it for only 5 or 10 percent of customers.

That's a little different. They offer discounts of 5% because they then don't report the income and don't pay taxes.

The CC companies are only taking 2.5%-3.2%. If they're offering a 5% discount for cash - it's almost certainly tax evasion.

You're forgetting the percentages are on top of a ~$0.30 flat fee (though obviously this varies).

So if you buy a $2 Coke, it's not a $0.054 fee (2.7%), it's $0.354 (or a whopping 17.7%).

Maybe my dentist evades a few taxes, I dunno. But people buy cheap things at the bodega, so it probably is closer to the actual fees.

If the merchant doesn't offer the same cash discount for debit cards, then it's tax evasion. Debit card fees are a few cents, and the only reason to offer a big discount for cash, but not debit cards, is to not have the transaction on paper and hence evade taxes.

How could I know are my card credit or debit from system's point of view? I have two cards in my bank, both are exactly same MC cards, embossed, and all (not some Maestro variation). One card is linked with my current account — I have real money at this account, my employer pays my salary by transfer to this account and such. I can not pay if thus account is depleted. Second card is linked with credit account, where I have some limit, and I need to pay off in 28 days after end of each month or I'll pay draconian interest. But cards are exactly the same, with very similar numbers. And I never had any problems with any if these cards, like one works and other doesn't. Is one of my cards debit and other is credit or they are credit both?

Based on your description, you have one debit card and one credit card.

If it says debit on the front of the card, it is debit.

I’ve never seen this work in person, but some people claim their debit card worked as a credit card and whatnot. Even if that is true, all merchant systems I’ve worked with allow the merchant/cardholder to select debit or restrict transactions to only debit.

Both cards don't have words "debit" neither "credit" on them. I need to be really careful to use right one, as they are virtually indistinguishable. Yes, from my point if view one is debit and one is credit, but I wonder is it possible to know what does payment system think about them? I dream about bank for geeks, where all technical information about each transaction could be seen in web interface :-)

That's interesting. I've never seen a debit card not say debit on it somewhere.

I don't think that "tax evasion" is a fair assessment.

This isn't the full picture. Debit card transactions might only be a few cents. But you still have to pay a fixed cost for the machine and related bits. For some businesses, that cost might be too high to justify.

I have hundreds of experiences with small merchants, and it’s definitely a fair assessment. With chip and pin (at least in the US), there is no risk of chargebacks and the money gets transferred in at most 2 days. Total cost of accepting debit cards is minuscule, unless your a kid running a lemonade stand.

Also, chargebacks are a cost to merchants. In many cases, merchants will have money clawed back until they prove that the charge was not fraudulent. This requires keeping copies of receipts, signatures, etc. So, the true cost is far higher than just the transaction processing fees. Remember, the credit card companies make the rules and decide who gets to keep the money in a dispute. The merchants have to decide if they will accept credit cards because customers demand it or if they will go with cash only and lose out on potential sales.

There are payment standards like UPI in India and mobile number based banking , which offer transactions for very less or no cost ( mostly debit driven )

UPI is great and so is NEFT, many other Asian countries are in talks to replicate these successful models in their own countries.

Also, India came up with RUPAY which is a great answer to VISA/MasterCard monopoly. But somehow it didn't catch up in usage I think.

Indeed, let's imagine. I'm guessing that the increase in seller revenue and decrease in consumer price would sum to... somewhere between two and five percent.

No one cares about numbers like that. That's way, way below the convenience threshold for a typical consumer. Most of us, me included, would rather pay an extra 3.5% than fiddle with deciding on which card to use.

Which is to say: the market has spoken. We've settled on the duopoly not because it's a trap but because it actually maximizes utility. The uniform convenience of "credit cards just work" has quantifiable economic value. And it turns out to be somewhere around 2-5% of the transaction.

Businesses aren’t required to accept credit cards.

But it obviously hinders their business if they don't, in the US at least. Even most food trucks typically have Square terminals (or similar) for card transactions.

Which leads me to believe that it's generally worth it for businesses, despite the "fees".

So, Europe?

I don't get it -- bringing up Amex and Discover is like bringing up Bing and DuckDuckGo when people talk about the Google monopoly.

I was curious if this was true so I looked it up. AmEx + Discover have 20% - 25% market share depending on the metric you care about. Bing + DDG have 8%



The stats are all over the place. This report says Amex + Discover is ~11% of US purchase volume in 2019. https://nilsonreport.com/publication_chart_and_graphs_archiv...

The article references [1] which says,

"Visa holds a 60% share of the credit and debit card market, followed by Mastercard with 30%, according to Ellis, with American Express far behind at 8.5%."

That puts Discover + AmEx at 10% or so.

1. https://www.reuters.com/article/us-visa-mastercard-stocks/sw...

Except Amex is the highest end card used predominantly by financially secure individuals. Bing is... not that.

Except in practice, the vast majority of Amex users also have Visa/Mastercard just in case (e.g. Visa/Mastercard users are close to a superset of Amex users).

Also it’s like bringing up search alone when talking about web.

In reality an intermediary called “payment processor” handle all CC brands in single system and they are the ones enforcing ideological punishments to merchants.

Like there’s web search and web browser, card networks and payment processors both should be brought up.

> In reality an intermediary called “payment processor” handle all CC brands in single system and they are the ones enforcing ideological punishments to merchants.

Yes, payment processors enforce the rules, but don't typically make the rules.

As I am sure you can imagine, this can result in plausible-deniability-type finger pointing ("we don't make the rules" / "we're not responsible for the rules being misapplied") when an organization is cut off.

Amex and discover maybe popular in the US, but rest of the world still has a duopoly. I'd say 90%+ cards in India are visa/mastercard.

India also recently introduced RUPAY which is an alternative to VISA/MasterCard duopoly. Don't know about the success and usage of that though.

As someone who has never used visa or mastercard and only discover for credit cards (I do have a visa debit card) I second this sentiment. There is no duopoly from my vantage point.

But since the retailers can't offer discounts for cash transactions, people who pay with cash are being over charged and subsidizing those fees.

That really depends on where you live. It seems pretty confusing because (a) federal law made surcharges for using a card legal under a 2013 settlement with Visa and MC, and (b) there have been a bunch of federal court cases, including a 2017 Supreme Court case, that invalidated some state laws that prohibited surcharges.

Interestingly, even now that many merchants are allowed to offer a discount for using cash, most don't because they've likely figured out (a) if they lose just 1 sale in 30 it's likely a net negative for them, plus (b) people are likely to spend more, especially on impulse purchases, when using a card, and (c) there is just a sense that it can be annoying to customers to have to pay more for using a card, taking away from customer goodwill.

Retailers can offer discounts for cash transactions, per the Durbin Amendment to the Dodd-Frank bill of 2010.


It depends on where you live. 10 states have laws that prohibit or restrict discounts for cash transactions: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Some of those restrictions have been invalidated by federal courts, but I was somewhat confused about which states were affected.

Perhaps this is explicitly allowed (you did say restrictions) but in Kansas it isn't uncommon to see gas station signs displaying a cash price and a card price.

I have definitely personally seen many instances in which you get a discount paying in cash in California. Maybe they get away with it because they technically frame it as charging extra for paying with a card?

Weird, because in three of those states (New York, Texas, and California) I have used cash to get a cash discount in the last year.

I imagine it's because of lack of enforcement?

All three of those states I believe had their surcharge bans invalidated by federal courts. Texas' law was declared unconstitutional in summer 2018: https://faq.sll.texas.gov/questions/9631

Well, after trying to negotiate cash discounts ~25 years ago on a couple fairly significant purchases for me (furniture) I gave up and joined them... By carrying a discover card, which at the time was just about the only cash back card in existence (the only one I knew about).

So, I still favor the discover (despite now being part of Morgan Stanly?) for most purchases, but when its rejected I fall back on a MC with a cashback program.

That program pays for my computer hardware...

> But since the retailers can't offer discounts for cash transactions

Citation needed.

Sure Amex and Discover provide alternatives but if you want to start a credit card company you dont get to tag team with those two at all as far as I can tell. Which I think is a bigger problem. If you as a bank want to start your own credit card you have to go for the most supported provider to even attract potential credit card holders.

The competition between credit card issuers is healthy. It's the payment processor side that isn't (though micropayments seem poised to disrupt the space).

No one uses or takes those.

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