The EU caps all card interchange fees at 0.3% for credit cards and 0.2% for debit, which is an order of magnitude lower than some of the fees in the US.
That’s why you don’t see the same kinds of credit card deals in the EU compared to the US.
Note that the caps were introduced because the EU already had widespread use of bank cards, but local schemes were being replaced with Mastercard/Visa debit - the caps were brought in to prevent the duopoly from profiteering. (Apple/Google pay also use Mastercard/Visa virtual cards in the EU.) Before the cap, credit cards had way higher fees and there were some reward cards, which led to merchants simply not accepting Mastercard/Visa. Local schemes included Mastercard-owned Maestro (used in Germany, The Netherlands and for some reason Brazil) but also local schemes like Belgium's Bancontact/MrCash. It's unfortunate some of those schemes didn't just merge and started competing in foreign countries as well.
At least in Germany as far as I'm aware all banking cards are in fact "simple" visa cards who uses "V-pay", since 2012/2014?
Personally I "like" or prefer V-pay because it made payment in the EU more easily for me without the need of a credit card even 8 years ago.
Since the pandemic, I only pay for a (real) credit card (with daily billing) because some goods or services can only be paid with a "real" card, like more expensive cars at a car renting company or sometimes hotel rooms and the like.
In general I try to pay with cash so nobody needs to pay extra fees. But more and more smaller businesses prefer electronic payments. Then I use the banking card with V-pay and to state it again, the real visa card is only used when no other options are available.
Processing cash is by far >not free<! In fact, it costs a lot of money due to all the things involved (counting/collection/recycling etc). Anf it inwolves additional risks for the handling party.
In the past I handled cash as an employee and as a volunteer. Like even a quiet night at a bar can sum up to a few thousand EUR.
Yes handling cash is not free.
But compared to some charges or fees it's often quiet cheap.
Sure you need to think a head like how much small change money you will need or how much cash for change in general.
You also need kind of routine and flow for counting and handling but even if I had to count up to 10k EUR in small bills t does not needed more then half an hour incl putting it into the safe or on the way home putting it into the banking machine...
At least in Germany it's not that big of a deal breaker.
I know of a large restaurant chain with some "bigger" branches: They often have to count two or three times with different people to be sure, that the amount is correct. Every evening.
Then you have transport companies which pick up the cach (or refill ATM) - you pay there for every time they stop, and you pay a tiny fraction per bill processed etc. (though, most restaurants do not use these services)
Then you finally have the very high risk of getting robbed.
You just triggered my PTSD. Worked in a gas station in college and changing over the till was a PITA -- I had to account for every cent, could be written up over 50 cents (too much or too little) and it was always this crazy dance to change over when we were busy since it messed with the counts.
I know: It is just hell! There is a gas station near my location, which closes the door from 23.45 to 24.00 for just doing this and handing over to the group.
That time costs money, the safe costs money, having cash attracts criminal elements like robbers or dishonest employees, your employee might get robbed on their way to the banking machine making it a workplace hazard, security guards costs money.
In 2009 Sweden had 58 armored car robberies, in 2018 there were 1. This used to be a big concern in Sweden, now it's basically a nonissue.
There were 1154 store robberies in 2009, in 2018 there were 515. Muggings are also down considerably. 2022 was the first year with zero bank robberies. This is mostly thanks to the much lower use of cash.
People often say that but does the cost for handling cash really scale (even approximately) proportionally with the number of transactions or revenue?
Or is it more binary that you have to decide, you either handle any cash and have the cost associated with it, or you refuse to take cash at all?
If the latter is the case, then avoiding cash altogether seems somewhat unrealistic where I am from. And if it doesn't scale then it makes a lot of sense cost-wise to try to do as many of your transactions with cash as possible.
Depends on, sure there is some "efficient frontier" where it flips.
Think about all the supermarket chains, handling millions of cash daily; in my region, those are relying heavily on outsourced cash recycling companies - why? Its more effort/cost if they would do this themself.
I'm quite opposite. I avoid any places that don't accept card payments, because it usually means they are avoiding taxes. And I don't have cash on me, or wallet. Only phone or sometimes only my garmin watch (with garmin pay).
I think that there was a recent HN thread that linked to an article which argued that the credit card system of USA has the purpose of taking money from the poor and giving them to the rich, and the estimated amount of the money transferred in this way was huge.
The EU limits for card fees prevent this in Europe, which is very good.
Assuming they pay their credit card bill themselves, it's effectively a volume discount for big spenders (though that "volume" goes to multiple vendors). The argument that the money "comes from" other customers is sort of like claiming that when you "save money" by buying things on sale, the money comes from other customers who paid full price. Actually you aren't "saving money" at all; you're spending money.
Similarly, the "whales" in a casino get lots of "free" benefits, but only because they're losing a lot of money gambling. They paid for them.
Contrast with frequent-flier miles where businesses pay for plane tickets but the points go to individuals. That's pretty clearly siphoning off business expenses.
That is the cash purchaser paying the retailer more than they need to. There's no conservation law stating that store revenue is a constant and missed revenue from one customer must be made up for by another, nor that every additional operating cost must be directly pushed onto customers.
Similarly, we do not say that October shoppers transfer wealth to Black Friday shoppers, even though the only tangible difference from your scenario is an irrelevant temporal one.
> Actually you aren't "saving money" at all; you're spending money.
You are spending money, but you are spending far less money than the poor spend when paying for exactly the same products or services.
If I want to buy a few server CPUs or a few server computers or a few "datacenter" GPUs, I have to pay at least 2 or 3 times more than billionaires pay for them.
The same if I want to buy any other kinds of components that can be used to build things, e.g. power MOSFET transistors.
There is no "economy of scale" here, because those products are already fabricated in the high volumes that reduce their production costs.
For shipping, the costs are typically the same, regardless if the recipient is a big company or a small company or an individual, so they do not justify the price differences.
Even when the handling and shipping costs were bigger for small quantities, a small business or an individual could just pay the difference in handling and shipping prices, but that does not happen in reality, when the discounts given to the rich are many times higher than the shipping costs.
This policy of huge discounts is one of the main causes why all the markets end up in being dominated by monopolies or quasi-monopolies, because it is impossible for new entrants to compete with the incumbents, who pay much less than them for everything. Thus the biggest companies end up selling mostly between themselves, excluding any others.
Discounts on volume deals are yet another thing since a higher volume helps the business exceed the break-even threshold faster. Also, volume deals have a favorable management effort to income ratio compared to single transactions.
Huge numbers reduce manufacturing costs, but only because they justify investments that are uneconomical at lower volumes. The business would still go bankrupt if they don't read breakeven.
Economies of scale are a real thing and not just because of monopolies wanting to deny new incumbents.
The model is inverted here, though. The whales essentially get the big discounts at the expense of those who go into debt for one reason or another. That's why there's an argument of wealth transfer up. The "biggest spenders" will end up paying little or no interest
I reached the midpoint of the podcast without seeing a proper argument against this then I gave up.
It tries to argue that higher reward rates are necessary to attrach customers that pay a lot (for credit card companies) and that lower income people are generally subsidized by taxes (obvious but unrelated), but at no point (until where I read) it seems to address the issue of merchants having to generally increase prices due to these cards.
> lower income people are generally subsidized by taxes
Pretty flimsy argument to begin with. Because the rich then argue to lower their taxes and/or simply not pay them and the whole system falls apart. Not to mention that lower income people paying more to keep afloat debt than taxes (which at worst is a much better interest deal for an installment plan) is a much worse model for society.
Looking now at that, it does a poor job of making a true refutation.
What that article explains, is that the system of credit card fees and rewards that is used in USA is extraordinarily complicated, variable and obfuscated in comparison with other countries, so it is extremely difficult to discover who gains most and who loses most.
So the conclusion is more like "there is insufficient evidence because we cannot access all the required financial information" for the claims of the other article and the refutation itself presents no evidence that the claims of wealth redistribution are incorrect.
Do you have a link? Highly interested in that thread. Do you know if people discussed how state solutions faired? I'm assuming something like Pix from the Brazilian Central Bank does an even better job at prevention while providing a public service.
It may be a partial factor. Similar to how CC companies have a logical reason to reject high charge chargeback items , but may also be ideologically driven to push certain agendas as well.
Wouldn’t it be simpler for European countries to simply raise the VAT and redistribute the proceeds to poor people, rather than regulate the interchange fees if the concern is inequality
VAT is a regressive consumption tax. Raising VAT, hurting poor people the most, skimming a bit off the top and then "redistributing" it back to them would make no sense.
Do you mean a higher corporate tax paid by companies like VISA and Mastercard?
Either way, the solution is already on the horizon: Digital Euro.
In what way? There are many sources of inequality. Trying to play whack a mole with each one seems much more laborious than simply deciding how much inequality you want in society, and then setting it with the tax code
Inequality isn’t as simple as pulling one tax lever, and not all levers are equally effective at all points of the pull. Dead-weight loss is an important concept when designing tax policies, otherwise why not simply eliminate ALL taxes in place of an expanded VAT or income tax or corporate tax or whatever.
Note that these are interchange fees charged by the networks. Unless you're operating at massive scale, merchant account suppliers still charge the shop whatever they want. The shop is paying far more than 0.2 / 0.3%.
2.5% for credit and 25c fixed for debit is the usual ballpark.
The rates you're quoting are far higher than you get without negotiation from various providers these days . SumUp, as one random example, quote a flat 1.39% _on their free plan_.
That’s why you don’t see the same kinds of credit card deals in the EU compared to the US.