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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?



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