Comment by jasode
2 years ago
>But how far does this go in explaining why merchants "choose" to participate in this program. The obvious answer would seem to be that they get no benefit from the system as it exists but have no real choice,
Some merchants like Amazon, Target, Home Depot etc do want the ability to refuse the "rewards cards" with higher fees but can't because of the current contracts they have for credit-card acceptance. If a merchant signs a contract to accept VISA cards, they must accept all VISA cards and therefore can't selectively choose to reject some VISA cards because of higher swipe fees.
https://thepointsguy.com/news/retailers-want-to-reject-rewar...
https://www.google.com/search?q=merchants+want+to+refuse+rew...
This is actually the reason lower fee cards exist. If every card had a 5% transaction cost no merchant would sign up for that card brand. If the merchant is convinced their average transaction cost will be lower because some of the cards will be cheaper you can get away with some expensive cards.
And this is why many small businesses in my area don't accept American Express cards full stop. Some don't even accept Discover.
Here in Europe I see AE accepted only for digital goods, high margin stuff or international (read American)chains
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I thought(maybe ignorantly) that a lot of merchants didn’t like Amex because it was so easy for customers to dispute transactions.
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This is interestingly regional: in the part of NJ where I live, every small business has an Amex "shop local" sticker on their front window
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Are they bound by contract not to offer a discount for casher buyers?
I ask because when I was in Germany (and, granted, this was a few decades ago) you got some percent off the price if you paid cash. Merchants there seemed pretty credit-card averse.
They used to be but the law was changed to make it illegal for the card companies to demand that they don’t offer a cash discount (or charge more for credit). Smaller businesses are doing that more and more since the pandemic to try to hold to their prices as long as they can.
Big companies do a similar thing by offering you a store card. Costco likely makes more money from you when you pay with your Costco card than if you pay cash, because they get the interchange fee very very low and have to pay to handle cash. Rumor was AMEX was eating the interchange fee AND paying them … because they more than made it up by the customers who made the card Top Card.
In the EU, the opposite of this happened: the EU directive PSD2 made it illegal for merchants to apply surcharges on purchases using consumer credit and debit cards from early 2018.
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That's still a thing in Canada and the US in various places, generally "mom and pop" run business.
Credit card fees for small orgs are like 1-2% so for a small biz that could pinch. Cash also lets you, uh, "fudge" your numbers for tax purposes.
There's a good sushi place near me that gives a 10% discount for cash. I'm fascinated by this.
(I still use a card because life is short)
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Where I live there's a mom and pop (well, mom and daughter) shop that sells relatively expensive clothes. They stopped accepting Amex because fees were too high, yet they basically apply a 5-10% discount by default if you spend enough...
Yeah I often see small print on the fuel cost per gallon as "cash price" .. I assume this happens mostly on low-margin products.
They used to but got sued over it, and in 2012 settled it partially by ending the practice: https://www.barclaydamon.com/alerts/What-the-Credit-Card-Set...
All the CC contracts I have ever seen only prevented you from discriminating against a particular card/brand if you took credit cards. You could offer a cash discount as a policy, but you couldn't charge AMEX holders an extra 1%, as an example.
They can do it now. In the past you had to offer same prices, although you could negotiate.
It’s usually motivated more by mom and pops skimming taxes than 3% credit card fees. If you do any kind of volume, there isn’t a ton of savings as cash management ain’t free.
The electronic equivalent is people who take personal Venmo at retail.
It's pretty expensive to take cash. First, you have to keep a float of money for change. Then you have to secure the cash until you deposit it in the bank. Then sink some time into counting and depositing it, before being charged by your bank for depositing cash. That must very quickly add up to a percentage point or 2.
The issue is that these costs of handling cash are largely fixed - marginally, if your store takes $100 in cash, your cash-handling expenses and effort stay the same, but if you take $100 by card, your fees directly increase. You avoid the expenses of handling cash only if you don't take cash at all.
Where I live it'd used to be possible to get a discount if you paid cash but it was deemed discriminatory against card holders and so it was banned. It's the same price regardless of payment method.
It removes the incentive for clients to use cash if a card option is available, makes them more used to paying by card, and hence decreases the competitiveness of merchants that don't offer card at all - until cards become so wide spread that many merchants don't even accept cash at all, like where I live.
A bit hostile towards merchants, but very nice for consumers imo.
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Which is the reason the cut is now capped and card acceptance is higher, even for credit cards (0.3% for cc, 0.2% for dc). Though low-margin businesses like grocery store still don't accept them (credit cards) due to the marginally higher fees in some countries.
What I want to do is pass on the exact processing fee to my customers, then they can choose their payment method based on how much it is going to cost them. I might then choose to cover a portion of the fee for electronic transactions, because they mean I save money vs processing cash. But the customer would pay the excess.
I would need a system that can display to the customer what fee they would be charged with their selected payment method, and be given an option to switch to a less expensive payment method.
It's already impossible in the USA to know what you're going to pay for something until you get to the checkout line. This just makes it worse.
Why not go even further? Itemize the marginal cost of maintaining your property's parking lot for those customers who visit your business by car? Charge customers a "store heating fee" in the winter? Customer support fee if they talk to anyone? Just as ridiculous. Processing credit cards is just one of many costs of doing business that you need to account for when you price your products.
> Itemize the marginal cost of maintaining your property's parking lot for those customers who visit your business by car
This isn't that uncommon, quite a few places in Europe do this actually.
Usually there's a barrier at the parking lot entrance. You get a ticket when entering, which you then have to put in a machine when leaving. The machine calculates your fee based on how long your car was parked. Modern systems are far more automated and use license plate readers instead.
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I can give discounts to customers however I want to, thank you. As long as the customer knows what card they are going to use, they know exactly what the cost will be. I am all for posting sales tax rates as well as any transaction processing fees at the door, too, though.
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> Why not go even further? Itemize the marginal cost of maintaining your property's parking lot for those customers who visit your business by car?
Aka... charge for parking? I mean? This is pretty common? I've always found it annoying that stores will validate parking for motorists but if I choose to take public transit or bikeshare, I don't get any corresponding debate.
They eliminates your ability to advertise prices honestly, without overwhelming your customers with detail that will distract them.
I will clearly state which payment methods are free and which ones the customer will pay a conveniance fee or recieve a discount if they use. I will clearly show the customer at checkout what their total is with their chosen payment and shipping (if applicable) options would be, and give them the opportunity to change their selection. It is about customer choice and convenience. You are welcome to shop somewhere else that bundles these expenses into the price of the item and givea you no choice in avoiding them.
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... So just like US sales tax already does? I'm not saying it's a good system, but I'm already paying some random amount on top of the sticker price for everything I buy, depending on what state, county, and city I'm in at the time.
Do you actually want to do that? When a customer wants to make a purchase, I think it is best to get the hell out of their way and not go stand between their wallet and your wallet, blocking their money and yapping about fees or some other completely unimportant stuff.
Can't you just print up a sign for this?
I've seen signs that say stuff like "Prices listed are for cash, 3% surcharge for credit cards."
How many different fee tiers are you as a retailer really trying to charge?
Ahhh yeees, the Ryanair strategy. Everyone's absolute favorite airline.
How do i know you are being transparent with the surcharge? What if you add 2% for a card payment when your actual overhead is only 1%. I suspect this is the reason why EU made these type of schemes illegal many years back. It just creates bad incentives for stores to add random fees everywhere.
How do you even calculate the processing fee of cash on a single transaction? A lot of comment here seem to assume cash is free, when in fact you need a safe, take time to go to the bank, security transfers, counting it, and so on.
I think there's some technical reason you can't do this, because even gas stations don't. They just have a separate cash/credit price.
That just seems like an irrational amount of energy to spend on 1-3%. I guess you’d get a lot of payments nerds?
Some donation platforms do this! They show and add on the processing fee for VISA/MC and Amex separately, and Amex is a little higher.
Do they account for the different interchange rates on different classes of cards within a processing network? Not every merchant will want to be that granular, but I think it is worth it for big ticket items.
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They should A/B test this. My theory is that this creates some amount of friction. I was all set to donate $100, but now I have to go find my debit card or figure out some bank transfer nonsense and by the time I get back (if I get back) my motivation to donate has diminished.
Donation platforms ought to do some analytics on this. If I’m giving money, I want it to be simple without requiring me to second guess.
If a donation platform takes Apple Pay, the friction is even less. I don’t want to fill out your stupid long form, create a password, share my address or whatever.
But, I’m one person — this might be an interesting Masters thesis topic to study the behavioral economics of donation platforms.
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That would cause a massive customer support and frustration problem as regular customers don't know or care how their card is classified and would complaint that it doesn't work. This would affect both the merchant and the issuer negatively.
Large merchants also pay much less for interchange generally.
Small merchants negotiate with Stripe for a flat fee to accept all cards. Big merchants negotiate with the networks and pay varying prices for varying rewards amounts (or however they get the deal structured).
Interestingly my flat fee with stripe is less than my reward rate on my credit card for some categories. It obviously is against the contract terms and probably considered fraud but I could theoretically make about 1.4-3 cents on the dollar (depending how you value points) by charging myself money.
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If only Walmart would take contactless payments.
It has more to do with making Walmart Pay the only contactless option to drive adoption of their mobile app.
I confess that I don't understand what the big deal is. It takes 5 seconds to slide the card into the machine. Personally, I find fumbling with my phone takes longer as does figuring out where the reader wants to tap the card if I'm not familiar with that particular store's system.
> Personally, I find fumbling with my phone takes longer as does figuring out where the reader wants to tap the card if I'm not familiar with that particular store's system.
Aren't both of these just symptoms of unfamiliarity with the tech?
I resisted phone payments for a while, until one day I forgot my wallet and quickly added a few cards to my phone. Now I'm severely tempted to use it more often—my phone has a wallet button on the lock screen that jumps me straight there ready to pay with my default card. I've definitely experienced some friction the two times I've used it, but it seems pretty clear that that friction is temporary while I'm still becoming familiar with it.
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Even then, I can tap with the card, which tends to register faster than inserting too. No garbage proprietary software required to be installed on my phone, and I still get contactless.
> It takes 5 seconds to slide the card into the machine.
It sure does, and then 45 seconds while the machine ... thinks about life, and then 15 seconds for it to say "chip read error, reinsert card" and then another 45 seconds for it to reconsider the nature of reality, and then listening to a fire alarm sound that they chose for the success alarm. Excellent UX, no notes
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I often leave the house without even my wallet these days. With my phone being my car key and my wallet and my transit pass, there's little reason to carry anything else.
I use it on my watch. Double click the side button even when my watch is under a jacket and just hold it in the vicinity of the reader. It’s very easy once you get used to it.
Same, and I note that the OVERWHELMING majority of other customers that I see at the grocery store or Target are still inserting plastic credit cards into the readers (I do think swiping is going extinct though, as the readers push you to insert instead).
However, this is HN and not at all typical of the U.S. or world overall. Even though we frequently lose sight of that.
> I don't understand what the big deal is. It takes 5 seconds to slide the card into the machine
For most people, there's the time to get their wallet or equivalent out of pockets or purses, fiddle to get the card, put it the correct way and swipe (but not too fast or too slow!). Vs a phone/watch tap which is usually much more convenient.
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I realized while waiting in line why Apple Pay makes sense to some people but not me: They're all on their phones in line, I'm not. So for them, it's a cc in pocket vs a phone already in hand.
It means you've got to take the card with you.
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I like contactless just because for some reason, my cards always get beat up and the chips become problematic on my cards after about a year. They just sit in my wallet. But half the time I go to pay with my card, I have to dip twice because the first time, the chip reader always says it is unable to read the chip.
I've also had issues at Walmart where I know some lanes to flat out avoid because the chip readers will always reject my card for unable to read the chip. With my phone, this isn't an issue. Even if I get a new card, wait 8-12 months and its the same problem again.
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Presumably they do not because they want to track you via your credit card number, and permitting Apple Pay (maybe others too) would hinder that.
It's more that they want to try and convince people to pay with Walmart's own lower-cost (to them) app if you want to do contactless payments from your phone. If they made it easier to use Apple Pay, why would anyone ever use their app?
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Apple Pay is just as traceable if they want it to be.
They’re just stubborn and want people to use their option (and card, if possible).
As it is you can load any credit card into the Walmart app and pay by pointing the “check price” barcode camera at the screen.
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I presume the same.
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