If I understand correctly, credit card terms forbid stores from offering two different prices (one for paying with and one for paying without), because if they didn't, some stores would offer a 2-3% discount for cash, and customers would switch to cash. Meanwhile, most people I've spoken with are happy with the system, because they feel like they're getting money back for free through cashback/reward programs, so credit card companies are incentivized to keep increasing their merchant fees so that they can give more money back to their customers. Restaurants/shops that don't accept credit get less customers, and are forced into the system as well. While the government could do something about it, they don't because they can track every credit card transaction (-> tax revenue), but they can't track cash. And cash-paying customers get to pay the 2-3% "credit card tax" on every transaction, which is so ridiculously backward.
Interestingly just around the time when this was introduced in mid-2015 all major German supermarket chains suddenly started to accept Visa/MasterCard; before they only supported the German Girocard system. The fees Visa and MasterCard demanded before were probably way too high.
Compared to that the 2-3% fees in the USA really seem to be very high as well.
In Denmark, we've had a special national card since the 1980s, called 'Dankort'. The fee for any transaction is 0.50 DKK, regardless of the transaction's size. This means that Dankort is almost always cheaper to use than Visa or Mastercard.
As such, almost every store in Denmark accepts Dankort. But - like every other place - they are not allowed to pass that charge onto consumers directly. So it mostly happens indirectly, i.e. the prices in the stores. It is important to note, that until a few years ago, there was no transaction fee on Dankort transactions. It was practically a public subsidised credit card system.
And it worked great.
Now the EU is requiring that bundled cards get a choice. You see, one disadvantage of the Dankort was that it only worked in Denmark. So they made a deal with Visa to make a bundled card, called 'Visa/Dankort'. In Denmark, it would use the Dankort part and abroad it would use the Visa part.
But now consumers are required to make a choice for each transaction whether they want to use the Visa or Dankort part. It might seem great that you get a choice, but there is really no reason to pick the Visa part in Denmark. But since stores aren't allowed to pass the costs directly onto the consumers who pick Visa, prices are likely to go up, even if just 1% of every transaction is suddenly a Visa transaction.
I assume these rules are part of the capping of fees in the rest of the EU, and many Danish observers also suggest that these rules probably work great in the rest of the EU, just not that beneficial in Denmark.
Are you sure they are not allowed to pass on the cost? In that case almost every store was violating that half a year ago when I took this photo: http://i.imgur.com/MA7VqnL.jpg
Anyway, the same regulation that introduced the application choice also stopped the schemes from prohibiting surcharges.
I don't know any better than you, but I have been charged for using Dankort a few times, mostly online, and charged more when I used a foreign credit card in supermarkets.
The choice part doesn't seem to be required by EU regulations. The German Girocards basically all include VPay or Maestro as well, but you don't need to choose (and in fact you can't even choose) which payment system to use because in Germany it will be most likely be Girocard by default.
So either the Danish implemented regulations they didn't actually need to implement or the Germans are not following the regulations.
It's the same in France. You can't choose whether you want to pay with CB or Visa/Mastercard.
Actually, CB (for "Carte Bleue") looks so close to the generic "carte bancaire" word for "bank card", that few people even know that it's just a national card thing.
I don't know if stores are allowed to charge customers differently for different payment means, but I guess not since I have never seen it. However some stores only take cards for a minimum amount. The largest chains though don't have any limit, and I've actually already paid amounts less than 1€ with my card.
Is there really still a separate Carte Bleue payment network? The brand was sold to Visa Europe in 2010 and there are no mentions anymore on the websites. I would be surprised to learn that they still operate a different network.
Looks like I mixed things up myself. Carte Bleue was apparently something related to Visa, and CB (for "carte bancaire") is the national network.
But people actually still often say "carte bleue" to refer to any kind of payment card (even a Mastercard one). Apparently just because it was the name of the first payment card in France.
So yeah, you have to swap carte bleue and carte bancaire in my previous post, I guess.
So either the Danish implemented regulations they didn't actually need to implement or the Germans are not following the regulations
Need to implement? There still is such a thing - albeit not much of it - as independent national legislation, even in these nightmarish sunsetting years of the EU.
It's required by the regulation and now also the contracts of MasterCard, Visa and even Girocard. It's just almost all German merchants that don't care following that.
BankAxept, and yes, my debit cards still has the logo, but it's been demoted from the front to the back of the card in recent years.
In the same timeframe, VISA and Mastercard have seen a surge in merchants participating in the system, like grocery stores that used to accept BankAxept cards only. This might have something to do with people changing their preference to credit cards with benefits like airline miles, but also to allow travelers access to what's more and more becoming like a cashless society.
>there was no transaction fee on Dankort transactions. It was practically a public subsidised credit card system.
i.e. You and non-participating parties were paying for it through taxes. So the transaction fee was hidden by layers of bureaucracy but was still existent.
One big item: The rate you are describing is just interchange, it went from an average of 0.9% to a cap of 0.3% in the UK. Merchants are not just paying 0.2% to 0.3% on DC/CC transactions.
To put this into context: Most (small) German merchants could pay less than 1% in total fees for credit/debit card transactions if they were switching their acquirer. Large chains pay less than half of that from everything that is publicly known. For German debit cards (Girocard) the large merchants pay a total fee of 0.15% which is probably much cheaper than cash handling.
And maybe that's a season why we haven't seen Apple Pay in Germany so far. In the USA Apple gets 0.15% of each transaction, but that would be pretty difficult in Germany if 0.15% is already the total transaction fee.
UK has the same interchange rates and they have Apple Pay.
The German banks are just too greedy and invested in their own shitty Girocard scheme which doesn't even support tokenization which would be required for Apple Pay.
Girocard is cheaper than anything that could be used in the UK. I don't know the UK situation in detail but I would be surprised if there are merchants paying less than 0.3% for some transactions which already is double of what the large German stores do.
I don't think the 0.3% is the full cost, I believe it's just the interchange fee (ie. what goes to your merchant bank, not the credit card networks or issuer).
> Compared to that the 2-3% fees in the USA really seem to be very high as well.
Keep in mind that US credit cards offer 2% cash back, so the system isn't actually handing a bunch of money to middlemen.
Some credit cards offer some cash back (usually 1% on most transactions, 2-6% on specific types of transactions). If you don't have a cash back card (e.g., you're using a debit card that is processed by VISA, or you're using one of the many non-cash-back credit cards), the card company keeps the entire fee.
Not exactly--there are companies taking a bite out of the fees all the way down.
I run two retail stores, and after initially using Square (which charges a 2.75% flat fee), we switched to a merchant processor that uses what's called "interchange plus"--where they just charge us the interchange rate plus a small additional fee.
Chase Visa debit cards are the #1 card we process, and our fee went from 2.75% with Square to 0.05%. Yes, you read that right! That is on a signature process, not a PIN.
We do have to pay a monthly fee now, but the savings is ridiculous--some $500+/month over Square's rates.
That $500/mo was Square's profit margin, basically. Our numbers showed that at about $5K-$8K/month in transactions, interchange plus processors will start to beat Square, and by the time you're doing $10K-$15K/mo in sales, it really starts to add up.
That makes sense. Square's niche is businesses that are too small to bother getting real merchant accounts. The convenience of not having to go through that process is what you're paying for. After a certain level of sales, it's certainly logical to "go direct" with a merchant account and eliminate Square's cut.
I build processor integrations and am working on several new ones now for EMV. I can confirm Square's pricing is ridiculous compared to what's out there. Bear in mind there are only like 6 companies in the US that actually process cards, but there are several thousand payment processing companies who are all taking a slice.
The bank may be limited in charging the fee but companies aren't. Credit card surcharges are quite popular in the UK. I notice them most on airfares as they tend to be quite expensive - Virgin Atlantic charges 1.5% surcharge for credit cards, for instance.
Airlines are almost the only place you will see these charges in the UK.
I've used credit cards for almost all purchases for many years, and the only other place a surcharge is likely is a tiny, struggling business, like a convenience store or a rural pub.
Quite a few car insurers as well (Aviva comes to mind). But yeah, I live in a rural area, so it's not uncommon for things like travel agents, independent hardware stores, etc, to have surcharges. I am not aware of any chain stores doing it, so it's probably unusual in more cosmopolitan areas.
I agree. The Visa Mastercard Amex system in the U.S. is crap. And I'm glad that Congress capped debit card transaction fees while issuers screamed bloody murder, and then as a result dropped all rewards from debit card purchases. But now it's on a level playing field akin to cash.
But the terms that forbid passing on the transaction fee cost to the consumer is wrong. It's an externality that causes us to all make the wrong choices. The business gets hit with variable transaction feed per customer, but that's aggregated, the merchant has no way of knowing which cards cause the highest fees to be incurred. If it were possible to charge the actual cost of transaction to the customer right at the moment of sale as I line item, just like government tax, we'd all be making smarter choices.
We don't even have to cap the cost, if people could see this, they'd overwhelmingly make a smarter choice possibly even driving the cost down less than the debit card fee cap.
> If it were possible to charge the actual cost of transaction to the customer right at the moment of sale as I line item, just like government tax, we'd all be making smarter choices.
> We don't even have to cap the cost, if people could see this, they'd overwhelmingly make a smarter choice possibly even driving the cost down less than the debit card fee cap.
The two problems I have with this are:
1) I'm not a partner in the business. I have zero interest in seeing fees and other costs "deaggregated," especially if I have virtually no control over them. And I am cynical enough to think that, since meaningful control is not really a thing, the marketplace will rapidly descend into "everybody does this and they all charge roughly the same fee so there's really no competition at all," like the random fees on telco stuff. Besides, under the current system, if the cost of taking cards is too onerous, stop taking cards. One of the most annoying trends in business in the last decade or so is the idea that the base price of an item or service almost seems to come out to be the amount of profit the merchant expects to receive and 14 items of below-the-line fees make up the actual cost of doing business. I don't care what a merchant's cost of doing business is. Put a price on the item, preferably the out-the-door price but that's just wishing for a pony, and if I'm willing to pay it, I will.
2) Unless and until the day arrives that the entire value of my transaction account can't be wiped out just because I dared use my plastic payment card at a merchant with less-than-realistic security measures, I flatly refuse to use a debit card. Yes, I know that I am technically not liable for fraudulent purchases on a debit card but the several-day delay between "oh shit this bad thing happened" and "ahh my money is back where it should be" is unacceptable. As is the stunning lack of any other consumer protections on a debit card ("had a problem with a merchant? Sort it out yourself, puny customer," is the reaction on a debit card).
The merchant clearly receives a benefit for taking cards as do I. But our interests are not aligned to the point that I should be the only one picking up the cost of that benefit.
(Oh, and it irritates me out of all proportion to the provocation how a lot of merchants handle the fees. "Your total will be $5.19." presents card "Oh, now your total will be $5.47 because card surcharge that's buried on a label sitting under the till." Grrrrrrrr.)
You obviously feel that using a credit card has value - why are you not willing to pay the full amount for that value? In other words, why do you insist that everyone else share the burden of paying your CC fees even if we choose to pay in cash?
> I'm not a partner in the business. I have zero interest in seeing fees and other costs "deaggregated,"
100% agreed. As far as I'm concerned, one of the things I'm buying when I deal with a business is minimized cognitive load. Any time I see somebody tacking on a bunch of extra fees that I can't control, I resent it. E.g., the "fuel surcharge" thing, or SF restaurants adding health care costs as a bill line item. Put 'em in the price and stop screwing with me.
OK you've mistaken my meaning. I'm saying a line item that says "your credit card fee" with a price that is the actual cost of the transaction fee. Not more, not less. You use a debit card, this would be $0.26, for a typical credit card $3.10. You would have control over this fee.
Right now the federal law actually says businesses can't pass on the cost of the debit card fee, but can pass on the credit card fee (not in certain states). But in either case you learn what your card costs you, rather than passing on that cost to everyone who uses debit cards, cash, or credit cards that incure lower fees to the merchant.
It's worth noting that cash is also expensive to handle at scale.
In the uk, nearly 20 years ago, the supermarkets started offering "cashback" on every transaction, where you bill would be increased by eg 10 pounds, and in return they'd give you a 10 pound note along with your receipt.
The genius being that they could save huge amounts on their cash handling/management fees by moving the value through the card networks instead.
(I believe this was via debit cards, which had lower fees and are by far the more popular card type in the UK, possibly in the EU as a whole)
>I believe this was via debit cards, which had lower fees and are by far the more popular card type in the UK, possibly in the EU as a whole
Indeed. The debit card charged a flat fee per transaction, so giving the customer money instead of paying the bank 0.x% for cashing it in was a logical choice.
I don't know the details of the fight between the merchants and the credit card companies but this is what eventually came out of it.
Since Jan. 27, 2013, merchants have had the ability to assess a surcharge on customers who pay with credit. However, if they choose to take this step, there are a lot of rules that must be followed, including:
- Notifying consumers that they’re being charged for using credit, both at the register and on the receipt. On the receipt, the merchant is required to state the exact dollar amount you paid in credit card surcharges.
- Charging customers only what they’re paying to the credit card payment networks in swipe fees (again, this is usually around 1%-3.5% of the cost of the transaction). In other words, merchants are allowed to pass on the fee to the customer, but aren’t allowed to make a profit on credit card surcharges.
- Staying on the right side of state laws. As of August 2014, nine states prohibit retailers from passing credit card surcharges onto consumers. They are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas.
- Limiting surcharges to credit card transactions. If you pay with debit, the retailer isn’t allowed assess the fee. This includes debit transactions where you sign for your purchase as opposed to entering a PIN. Only credit card users can be hit with a surcharge.
Before 2013, Visa and Mastercard forbade credit card surcharges. However, cash discounts were allowed.
The problem was the Most Favored Nation clause in the credit card contracts. Merchants could offer cash discounts, but they could not offer discounts to non-Visa credit cards.
Since the antitrust settlements, all four U.S. credit card networks have allowed surcharges. Also, the Most Favored Nation clause only applies to "equal or higher cost" competitors.
Walmart US could fight Visa by adding a surcharge only to Visa cards. Walmart Canada cannot. In 2013, a similar antitrust case was dismissed in Canada.
Thank you for taking the time to find a good answer.
> Staying on the right side of state laws. As of August 2014, nine states prohibit retailers from passing credit card surcharges onto consumers. They are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas.
Florida doesn't really prohibit it though. The last sentence of the the relevant statute is "This section does not apply to the offering of a discount for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, if the discount is offered to all prospective customers."
As a Florida resident I can tell you that if there is any enforcement of this, I've never seen it. It's very common to see verbiage like 'must pay x% if using credit' or 'credit cards additional $x', especially in non-chain restaurants. Some gas stations just list two prices. I don't like it, but I am not going to carry cash around so it's just how it is; I was almost denied service at a restaurant once for pointing out that their credit surcharge was not legal.
Cash is not free for the merchant: there's a cost associated with handling it.
Also, some merchants cater to a demographic that likes to use cards a lot and is sensitive to convenience; and making that distinction may cost the merchant in terms of customer appreciation.
Cash isn't free for people either the vast majority of banks either charge you withdrawal fees or bake them into your flat account fees.
If you are a large business then cash handling companies that securely transfer, count, and deposit / clear it for you charge the same and even more than many credit card companies.
Cash is only "cheaper" for really small businesses that handle the count and the deposit themselves.
And even then there are some fees because banks can also charge a deposit fee when you bring in unsorted cash.
Many business owners prefer cash so they can avoid paying taxes and directly insert the cash into their pocket. Its nearly impossible to trace whereas there is a paper trail left when a credit card is charged.
However, that's tax fraud and carries a risk of significant penalties.
But there are other reasons for preferring cash. For instance, a bank or authorities cannot quite as easily shut down your business if it runs on cash money, compared to having everything in bank which can be confiscated instantly, on-line.
There are indeed fees for a checking account at all physical banks I know of. Typically they waive the fee if you maintain over a certain balance so they can invest it while you're not using it and make a profit on it, which they then use to [more than] pay your fees and profit from. Many also have further restrictions e.g. Charging you a fee for checking accounts unless you have direct deposit set up from your employer into their checking account.
His point is, cash isn't free. It costs money to secure it, have guards refill ATMs, check it for fraud, etc. Somehow, as a customer of the bank, you're paying for it. Either though service fees, poor exchange rates, etc.
> There's also no fees for having a checking account
In the US, people with poor credit are often unable to get even a checking account. This is because banks figure those customers are not going to be profitable since they're not going to use the services they can earn fees on.
Many (not all) banks have requirements to keep your account free. Number of debit card transactions/bill pay, minium balances, direct deposit requirements, etc.
"Going to your banks ATM" isn't very convenient 99% of the time unless you never leave town. You end up going to the closest ATM. Especially if you are on foot.
There are many ATMs which don't charge any fees at all, even for other banks. I'm on the other side of the country as my credit union, and I have lots of options for fee-less withdrawals. Although you may end up paying a fee if you need money quickly and you just go to the nearest one, which may or may not charge a fee.
I've never seen one that doesn't charge anyone at all in the US.
Credit unions have alliances that they can join to use each others ATMs fee free, same with banks. That doesn't change the fact it's often inconvenient to go to an ATM you don't have to pay for and you need to pay sometimes.
Poster you replied to is talking about deposits, not withdrawals.
Banks treat cash very carefully. If you bring in a stack of cash that they have to count once to see how much it is and then again to verify it's going to take time and they might charge you for that.
> Poster you replied to is talking about deposits, not withdrawals.
They literally said "withdrawal fees."
I don't know of any bank which charges you to deposit cash. I occasionally drop off large stacks of cash and have them count it—there's never been an issue.
It is true that business bank accounts typically aren't free, but that isn't what the poster was talking about.
If you get paid via direct deposit then you almost certainly have many options for getting a free checking account regardless of what city you live in.
My interest rate is maybe 0.3%, so they're definitely making money on that.
But that's not a "fee." Obviously banks cover their operating expenses somehow. That doesn't mean they charge me to have an account or to deposit cash (in fact, charging for deposits would be counterproductive).
They do it directly or indirectly, I don't know how US banks works but usually over the world bank accounts vary accounts with no/low fees give low interest and vice versa.
I think, for small businesses, the problem is that the setup cost and fixed operating costs are amortised over too few transactions to be negligibly cheap - and that's before considering the slightly higher actual transaction fees for such businesses.
Square, iZettle and I think PayPal and a few other are doing things in this area, leveraging smartphones, but it's still early days.
The Square POS terminals using tablets (it is iPads?) that rotate for you to sign are nice. I especially like how they'll automatically email you a receipt, which is great for reimbursements or filing taxes because it means I don't need to scan anything.
I've never been impressed with anything using a cell phone though. It's too clunky of an experience. I get that it might be useful for farmer's market and other very small retail situations, but when I'm going into a retail store, a real POS terminal is better.
Some (most?) gas stations make more money on the convenience store than on the gas itself. So setting up a scheme to encourage the customer to come in the store is in their interest. They make it super easy to toss in a side item with the gas purchase.
Good context. Lottery tickets, tobacco products, monster energy drinks, coffee, soda, 5 hour energy, protein bars and beef jerky are evidently where the money is made.
This is true. Gasoline is sold with almost no profit. It's one example of a perfect competitive market converging on zero profit (at least for the retailer). Gasoline is a commodity, it's all the same and everwhere it's sold there are usually several competing retailers and prices are highly visible from the street.
I suspect it's quite common. Gas is an ideal loss leader -- the price on the sign, and your need for gas, gets you into the station. But now you're there, and you're less sensitive to the price of a Coke or bag of jerky.
But there are a lot of markets where price competition drives down the margins for the "main" product, so that the retailers make up their profits on smaller stuff. I've read that a store selling electric guitars or bicycles makes relatively little profit on those items, but instead, makes their nut on accessories, things that wear out, service, lessons, etc.
It was the same in Indiana. Most commonly gas stations charged two prices, one for regular and one for a cash discount. The reasoning was that they weren't making enough profit from fuel to cover the cost of the credit transactions with the price of gas as it was. The cards had different tiers for the fees, and when gas went up, more common people went over into the 2nd or 3rd tier.
Additionally, some small restaurants and shops did the same thing. Usually these folks get charged more for processing credit cards than the large places.
Specs Liquor in Houston (a pretty large operation) offers a flat 5% discount off your total for not using a credit card. Everything in the store has a "cash price" and a "regular price."
And some Australian retailers charge extra for specific cards with higher fees (eg JB Hi-Fi stores have a surcharge for using AmEx or Diners Club cards, which typically charge the merchant more than Visa or Mastercard do).
I was going to link to The Good Guys and their "Pay Cash Pay Less" marketing, but it appears they scrapped their cash discount after finding customers increasingly prefer to use electronic payments:
No, customers prefer to pay electronically. The linked article points out that cash sales in Australia have crashed from 70% to just 47% and is on a fast decline.
I think the point of removing the cash discount is they can use the 'extra' 3% margin earned on those remaining cash sales to subsidize lowering their price via credit card to be more competitive. Their business is based on offering the lowest prices, but the cheapest price was cash only. The discount for cash no longer lures customers to come to their stores, so there's no incentive for the store to continue passing on the discount to the customer.
Yes, you have this exactly right. It is one of the most diabolical scams ever. It is essentially a 2-3% private tax on the entire retail economy. If the government did that, the torches and pitchforks would come out in an instant. But because the cost is hidden behind regular retail prices, no one cares. (Well, that's not quite true. The merchants care. But they are too busy running their businesses to organize an effective opposition.)
You may be too young to remember when a person had to carry a significant amount of cash around all the time, and/or a checkbook, to pay for routine purchases. When every payday involved going to the bank, waiting in a queue to deposit your check and get enough cash to get through to the next payday. It was a PITA.
Compared to the convenience of direct deposit, ATMs, and card transactions, most people would think it's well worth slightly higher retail prices.
It's both. The cash-back part is a scam. They take 3% out of your back pocket and hand you back 1% and you think you've gotten a good deal.
Modern technology enables secure money transfer to be provided at an order of magnitude less cost than the credit card companies charge. Competition is supposed to take care of egregious inefficiencies like this, but the banks have an effective monopoly, enough regulatory capture to keep out competition, the ability to fob all the risk of fraud onto the merchants (who pass it on -- tacitly) to the consumer, and hence no incentive to change, and so they don't. That is the scam.
Credit cards do more than just move money around, though. And capping fees isn't ever going to be practical without shifting the risks around.
I pay for most things with a credit card. Here are the value-adds that I receive in exchange:
* net-25 payment terms (eg free short term credit)
* anti-fraud: the money isn't actually taken from my account until I make a payment at the end of the month. This gives processors some skin in the game to solve fraud.
* warranty extensions
* risk of losing cash, either by loss or theft
* centralized accounting. No data entry.
I'm not saying the system is perfect. It can definitely be improved. But, personally, that's a pretty nice set of value that I receive in exchange for using the cards.
Is 2-3% excessive? Probably could be cut back. But if I'm getting 1% back, we're now talking 1-2% that it costs me. Seems likely that a big chunk of that is due to fraud, which isn't something that would disappear by legislating lower rates. (additionally, it opens the opportunity for me to churn cards. I haven't done the math, but I open 2-4 accounts per year and receive ~$500 in rewards. $1k in signup bonuses is at least 3-4% of my credit card spend. For those who are able to safely take advantage of the system, you actually can be net-positive PLUS receive the benefits above)
I do understand the frustration for people using cash, because they typically pay for these features regardless of whether they want to. I also sympathize with folks who want their purchases to remain more anonymous.
For me, however, the value is greater than the cost.
I don't want to legislate lower rates, I want to remove the regulatory barriers to entry for competition. And yes, credit cards do more than just move money around. This is part of the problem. Sometimes I want to just move money around, but in the U.S. it is actually impossible to do it in a way that is 1) fast, 2) cheap and 3) secure. There is no technological limitation to this. It's purely a result of regulatory capture by the banking and traditional money-transfer industry (e.g. Western Union) serving as a very effective barrier to entry for any competition.
Venmo and the like are pretty effective at all 3 for personal use. Acts as a trusted intermediary so you don't give your bank info to anyone you're paying/receiving payment from.
Nope. If you really think that, you'd totally support the merchant putting the exact cost of the credit card transaction on the receipt. Free markets require all parties have all information, but right now this is largely obfuscated so people aren't making informed choices.
In the United States it used to be this way up until a couple years ago. Now you can offer discounts for paying with cash. There was some case and settlement in 2012/2013(?). Most have to offer a "cash discount" and not a credit card surcharge.
The "terms" may forbid that practice (discount for cash) but I see it all the time especially at smaller merchants.
I also see it on any "public" transaction. Try to pay your property or income taxes, university tuition, etc. using a credit card -- there will be a "processing fee" tacked on.
My company is tiny in terms of revenue (<1,000,000 per year), and our interchange fees with VISA are 1.5x% . I have a hard time believing that a giant like wallmart can't negotiate a better rate.
2-3% is the top rate applicable only high risk traffic with the card not present.
That's certainly not the case in New Zealand. A lot of restaurants will charge more for credit card, most computer stores will add ~3% for credit cards as well.
Also, most appliance stores will give you a better discount when haggling if you pay with cash/debit card.
In Portugal, very few places accept credit cards, or even debit cards in many cases. This is mainly so the businesses can avoid the crazy fees. It's inconvenient, but the prices are probably slightly cheaper, so people don't really complain.
It's also used by those business as a way to avoid paying the full taxes owed by underdeclaring profits. Notice the trend of high cash countries and low tax revenue/struggling underclass. Spain, Portugal, Eastern Europe, Greece.
Restaurants in Germany as well. When you ask them why they don't accept cards, they usually say something like "I don't like government surveillance" and you know whats up.
Some countries in the EU started requiring cash registers and receipts and some merchants were able to make some quite good revenue improvements in the month they were introduced :)
Portugal is in the EU so how come CC fees can exceed the EU maximum which is a fraction of a percent? (and likely less than the cost of cash handling for all but the smallest merchants).
I suspect you're misunderstanding that that limit applies to. Until you are taking substantial revenues as a merchant, you are surely going to be paying more than a small fraction of a percent in credit card processing fees one way or another.
Small merchants probably pay north of 2-3% to some intermediary provider (I hope a future regulation will cap this as well). I still see almost no merchants that don't take credit cards here though - likely because when card use reaches a critical mass you 1) lose too much business if you don't accept cards (I can go 6 months without touching cash) and 2) The amount of cash shrinks to a point where there marginal cost of the next cash transaction is also pretty high, e.g if you do 1000 card transactions and only 10 cash transactions in a business day then each cash transaction has to carry 1/10th of the cost of cash handling for the day.
> credit card terms forbid stores from offering two different prices
I don't know about (aboot?) Canada but the Durbin amendment outlawed that restriction in the U.S. So any merchant is free to offer a discount for cash.
But as you rightfully note, consumers are generally happy with the card system. Many receive a 1-2% discount or other benefit via reward programs, so the opportunity to steer consumers to cash via discounts is limited.
I feel like cash has a ton of disadvantages that people ignore when they complain about credit card fees.
First, I have to find an ATM somewhere. Luckily my bank reimburses ATM fees, but many don't. Plus, I can only take out $20 at a time. If I want to buy something that costs $5, I take $20 out (+ a $3 fee which is 15%, a hell of a lot more than credit cards charge). Now, do you think I'm going to put the remaining $15 back into the bank? Hell, no. I'll find something else to spend it on. So this $5 purchase effectively cost me $23. That 2-3% doesn't sound too bad.
I pay 1 or 2 ATM fees per year, because I just look for credit unions, and the vast majority of CUs are in mutual networks where ATMs are fee-free for each other's members. Even while traveling -- finding a CU ATM in the Denver airport put a big grin on my face.
What ATMs do you use where you can only take out $20 at a time? I usually see caps of $200-300 and once in a while, on the nasty-fee ATMs they're $100 but I just find another one.
By your logic, when I'm out of cash and make a $300 withdrawal to buy a $3 snack with it, the other $297 evaporates instead of sitting in my wallet like real money.
It's weird to me that so many people refrain from carrying cash on the logic that they might be mugged or lose their wallet. Okay, those things could happen, but how often? I've been mugged zero times and lost my wallet once in the last 20 years. Assume I had $150, half my usual withdrawal amount, in the wallet at the time. How long does it take someone to rack up $150 in ATM fees while trying to avoid that exposure? Quite a bit less than 20 years! I'd wager most people spend more on fear fees than they'd potentially lose if they simply carried the cash, because the loss events are so very rare.
> credit card terms forbid stores from offering two different prices
This is known as surcharging. The rules differ by country, the same goes for interchange. To give you an example: my country it was forbidden to forbid the merchants to do surcharging (no really). Essentially the merchants where allowed to do surcharging. Then interchange was regulated down and the ban on forbidding surcharging was lifted. In theory the acquirers or payment schemes could forbid the merchants to do surcharging. AFAIK none of them did.
What you can do as a card holder is file a charge back over the surcharge amount. These get accepted.
Not exactly. (In the US) It used to be that a store could offer a "discount" for using cash but not a "fee" for using credit/debit. The most common example is gas stations-many have been doing this forever.
However starting in 2013 merchants can now charge a processing/convenience fee. This came about as per of a class action lawsuit I believe. There are still several state and municipal laws and nuances to consider though.
The alternative would be that companies either don't accept credit cards at all (inconvenient) or charge an extra 2-3% for credit card purchases.
I don't see how that is any fairer than forcing cash customers to pay the full price as well. Somebody is losing either way, and I see absolutely no reason that cash should be privileged.
> I don't see how that is any fairer than forcing cash customers to pay the full price as well. Somebody is losing either way, and I see absolutely no reason that cash should be privileged.
The problem, as criddell points out (https://news.ycombinator.com/item?id=11888198), is that it's not a matter of whether or not to charge cash customers full price, but of whether or not to force cash customers to subsidise the fees the merchant must pay for credit customers.
Undoing this is still forcing cash customers to pay full price, but credit customers to pay full price + the associated extra fees. Pretending that the difference is a "cash discount" rather than a "credit fee" is, I think, just terminological skulduggery (much like stores where every item is always on sale).
It's more fair because the consumer pays a 2-3% premium for the convenience of a credit card vs. counting out cash, and people who don't want that convenience aren't obliged to pay for it with universal price inflation. Since this is a choice that the consumer makes, it's reasonable to make him pay for it.
In practice, I think most traditional retailers like it when consumers use cards because it makes their lines go faster and wouldn't really increase their prices for most card carriers if they were allowed to do so (AMEX might be a different story). The cashier doesn't have to wait for the consumer to fumble around for the correct combination of bills and coins, the customer doesn't have to wait for the cashier to count out change, and that means the line moves faster and the retailer can process more transactions and make more money.
It would seem reasonable if that could be applied consistently to all payment methods.
If I decide to use digital currency could I opt out of all the associated costs related to cash? Including printing it, shipping it, storing it, transporting it, counting it and other aspects that a digitized monetary transaction automatically handles?
Interac (debit cards) charge 5 to 10¢ per transaction and that's about it (+ presumably a fixed monthly fee). Everyone has an Interac card (if they have a bank account).
One problem with Interac, however, is that most banks have limits on how many transactions can be done per month, or pay additional fees. The fees can easily add up to ~ 100-150$/year for an average bank account. We can go around it by leaving 2000-3000$ at all times in the bank account, or get a credit card. Win-win for the bank. So yeah, Visa deserves the pushback.
I work in the payment processing industry and I am just disgusted in the way everyone operates (particularly Visa / MC). Low security, trying to push liability, etc. All of this to shave money off of the transactions at just about every step of the way.
Gas stations make most of their money off the convenience store and not the pumps. If you pay cash, you have to walk into the store so you're more likely to buy a high margin candy bar. The greater than 3% discount could be trying to incentivize entering the store.
> Meanwhile, most people I've spoken with are happy with the system, because they feel like they're getting money back through cashback/reward programs
I am not happy with the system since I categorize the money back programs essentially a corruption of the buyers in order to keep them on the card.
I want to pay safe, fast and easy. No higher prices and no cashback incentivation program needed for me.
Just so folks understand: in Canada (actually, pretty much everywhere but America) every bank issues it's own non-credit-card affiliated debit card that can be used to pay for things at stores (or get money at the ATM). So this is annoying, but not a huge deal.
I'll get to the cash, get told "sorry, no visa", and take out my debit card to pay that way instead. Really not a big deal.
It's just Walmart annoying their customers to try to prove some point to Visa.
A few years ago the pinguins took over (https://www.youtube.com/watch?v=x48eLs8tnJo) and basically every card in the UK is now either Visa/MasterCard/Amex and very few Maestro.
Ah. That explains why when my Maestro card expired, it was replaced with a Visa Debit card.
The latter is more widely accepted for online shopping (only some merchants accept Maestro, whereas everyone accepts Visa and Visa Debit usually works there), so I was happy.
In Brazil, you can enable the same card you use to manage your bank account and withdraw cash as a Visa/Mastercard credit card. So every time you make a purchase you get a prompt like this
1. CREDITO
2. DEBITO
where you choose if you want to pay with credit or debit.
Last year I went to the UK on vacation. While paying my bills I noticed most people wouldn't know what to do when prompted. They would look confused and just hand me the card machine and let me handle it.
When I use my card outside the UK in a country where this is the norm (e.g. Italy) I am asked to choose the 'circuit' before paying, but the only choice I am given is "VISA DEBIT" - this is on ATMs and Chip&PIN machines.
I don't think any UK banks have their own payment network. The cards you get to access the account directly are debit cards (usually Visa Debit or Maestro), some (i.e. children accounts) give you a 'cash card' which only works at that bank's ATMs.
As far as I can tell, virtually all UK banks issue Visa Debit cards nowadays. Certainly Halifax, HSBC (First Direct), Natwest, Santander, Lloyds and RBS do which covers most of the population.
In the past a lot of cards were Switch, which became Maestro and then everyone dumped it for Visa.
Fortunately we still have the Link system where you're not charged for using an ATM that doesn't belong to your bank. cough Canada cough.
In Canada, debit transactions are run through the Interac network, which is a non-profit set up by the Canadian banks. Interac also has an email money transfer service which is widely used.
Canadian banking is different from everywhere because the market is protected from foreign competition. It makes Canadian bank stocks good to own, but makes banking expensive and annoying for Canadians.
All true, but the system arguably has some important advantages. The rate of tech adoption (e.g. Interac) and the relative insulation from global banking turmoil are two that instantly come to mind.
I hate the banks as much as any red blooded Canadian but it's important to remember that our system is the envy of many other countries.
It's with good reason that the former Bank of Canada governor (Mark Carney) was recruited to head up the Bank of England and also serves as the chairman of the G20's Financial Stability Board.
Except its still a debit card, with all of the problems of debit cards, and none of the additional protections you get from using a credit card.
Somebody steals your credit card and goes on a spree? Call your bank, dispute the charges, and life goes on.
Somebody steals your debit card? Good luck, money is gone from your bank account, and BTW, your mortgage and auto payments just bounced, so we're going to tack on some overdraft fees too. Have a nice day.
> Somebody steals your debit card? Good luck, money is gone from your bank account
I had $4000 stolen from my bank account via a compromised debit card. The charges were reversed the same day. The bank is still liable for fraudulent transactions if you didn't authorize them.
My bank issued me a debit/ATM card by default. I asked, and they replaced it with a plain ATM card that's not a debit card.
They also had this insecure-dy-default behavior allowing checking account overdraws to start pulling out of savings. It's worth checking that setting, too.
I was interested to read in the comments on a different topic that businesses typically have a deposit-only account, a withdrawals-only account and an account in the middle.
As a family, we set up an extra account at Schwab to write checks and do automatic payments against. There wasn't any additional cost to us - having some money sitting in the account is hardly worth worrying about with what Schwab (or anyone else) pays in interest.
The big benefit to me is that the account doesn't have over-draft protections. I have to manually move money into the account from a different account where paychecks, etc. go into. That account can't write checks, etc.
If our account is compromised, well, we lose (temporarily, I hope) what's in there but not the cash that accumulates to pay for property taxes, etc.
ATM vs Debit/ATM is a good call, I will try and switch my current debit cards.
Overdraw protection is tricky. For example Ally offers it for free for me. If I really did accidentally overdraw my checking, I would want it sucked from my savings. However if someone stole my Ally debit, I would not want both my checking AND savings drained...
You can mitigate by keeping two accounts. In your debit card account you keep a minimum balance and transfer funds in as needed to cover purchases. For automatic ACH payments (mortgage, etc.) have those come out of the other account that does not have a linked debit card.
So worst case you are without a small amount of money during any dispute/fraud resolution period, but your major regular ACH payments are not at risk.
The downside is having to monitor your balances closely and transfer funds more often (which can sometimes involve a fee but if you shop around you can find banks that don't change a fee for inter-account transfers).
The way I do it is my salary goes to a online savings account (~2% interest) that's not linked to any cards. I have a debit card I move money over to when I need cash out or to use it (simple with the bank's app). Then I have a CC (used for utilities etc) which I pay every billing period from the savings account.
Apparently debit cards are less awful now than when I stopped having to use them.
People can do what they want, but I'm personally very uneasy about directly exposing my bank accounts, so I use credit cards as a buffer. Moreover, I don't have a lot of faith in banks not engaging in shenanigans that I've seen them do to me before, like transaction reordering, double charging debit transactions, debiting charges immediately, while sitting on deposits for up to a week, etc.
Not sure what you're talking about. As others have said, I've had fraudulent transactions on my debit card, and my bank called me to let me know, reversed the charges and cancelled the card and sent me a new one.
With credit card, that easy?
I had some fraudulent transactions in my credit card and I had to
a) File a police report
b) Do an (offline)report and document every transaction I considered to be fraudulent
c) Sent these reports to the bank, where they would go thru it (some sort of committee) and if accepted I would be refunded.
Quite-a-hassle, took several hours to do those reports...
(This is Danish/Finnish bank, Danske Bank. I'm no longer their customer)
>Somebody steals your debit card? Good luck, money is gone from your bank account, and BTW, your mortgage and auto payments just bounced, so we're going to tack on some overdraft fees too. Have a nice day.
In Canada the account holder is not liable for fraudulent transactions, whether it is credit or debit... a benefit of our highly regulated banks.
A few years ago TD Bank Canada changed its TD Bank branded debit cards to a Visa branded debit cards it wasn't before that just an Interac logo no Visa affiliation. I don't know why TD Bank did it but it's now linked to Visa and it seemed rather sudden.
I wonder if that means my TD Bank Visa brand debit card won't work or if it's only Visa credit cards?
Well, it can be used as a credit card for online purchases. You can also use Interac Online with it for Canadian online merchants, which there are relatively few of.
Canadian visa debits are still interac cards, and most retailers in Canada have their machines set up to only allow treating them as such (because fees). This is actually a bit annoying when the interac network is down, but not the credit card network.
I'm not sure what extremely pedantic point you're trying to make.
The relevance of the parent you responded to is that a Canadian shop not accepting Visa (or Mastercard) is only a very mild inconvenience because there are other widely used payment networks.
I don't see what you're not understanding. If you live in America, then surely you are aware that Visa + Mastercard are overwhelmingly dominant as payment networks, yes?
Obviously Discover, Amex and Diner's Club exist, but they are barely worth mentioning. Hardly anyone (proportionally) carries those cards, and only a few merchants accept them.
In the United States, for a merchant to refuse Visa would be suicidal. In Canada, it's almost a non-issue because all the debit cards are processed on another, non-Visa network.
In Canada, direct debit is by far the most popular payment method (it over took cash over 15 years ago) and Visa plays no role in direct debit purchases. 100% of all direct debit transactions are handled by the ubiquitous Interac network, not Visa or MasterCard, and everyone with a bank account has an Interac card.
So, while dropping Visa is still kind of a big deal, it's not quite as big a deal as it would be in other countries where Visa handles both credit and debit purchases. Certainly Walmart will know how much Interac is used over Visa.
But here's the thing. Interac has no rewards program, and it charges the consumer a flat fee with each transaction ($0.15 I think? I don't know, I stopped using Interac 15 years ago). Yet, Interac is hugely popular.
Meanwhile, we're all paying a hidden 2% tax on everything to cover the credit card interchange fees whether we use a credit card or not. It's a completely unacceptable situation and it's hard not to be on the side of the side of the retailers (even when they propose ham-fisted solutions like CurrentC).
I'm in Canada, I've wandered into a few convenience stores in the last year that still tack on 25 or 50 cents if you use debit. No extra charge if you use Visa/MC or cash, though.
Rail against the credit card companies if you want, but realize this is Walmart, not an orphanage. This story is part of a negotiation between Walmart Canada and Visa. They want outrage. They want us to get mad. They want this on CNN (not likely considering what just happened). Public outrage puts pressure on Visa to cut them a better deal. Walmart admits the intention to cut a deal eventually. Let the heavyweights fight it out amongst themselves. I choose not to participate in the farce.
It is rather about which party is going to get their "cut" of the payment action. I doubt Walmart's prices go down by 2.7% if they were to renegotiate credit card fees to be the same as debit card fees. But regardless I think the crying foul is overall better because people should know that credit card fees are excessive, and maybe they should pay more attention.
I'd prefer it if merchants could and would line item the exact fee for my specific card for this specific transation, as a line item, just like sales tax.
>I'd prefer it if merchants could and would line item the exact fee for my specific card for this specific transation
that would be excellent, and as a merchant i'd love if it were possible. we save a lot of money by paying a variable rate, so a transaction on a platinum card or something that pays a higher cashback to the cardholder costs us more than a basic card. We don't even know what the processing fee for your transaction was until the end of the month when our gateway provider invoices us.
it is not. risk is covered through the interest rates the cardholder gets charged - higher risk cards are higher interest. Reward program costs are paid by the transaction fee the merchant gets charged.
As a selfish consumer, I really couldn't care less who gets what share. I only care about the price. How walmart arrives at that price is their problem. Should it be higher than elsewhere, I'll go elsewhere.
What we are seeing is a p_ssing contest between two big hitters that has spilled out of the boardrooms. These negotiations happen every day without us hearing a peep. Perhaps I'd be mildly interested if this was a spat between walmart and farmers or some a sympathy-worthy small business, but this is Visa.
I was one of the hopeful for a Bitcoin, or another blockchain-based currency, to cut out the middleman, all the while maintaining the convenience of spending my money as I see fit. The middleman are the 5 to 7 companies that touch a credit card transaction from POS to the bank, each taking a small cut. I am confident most HNers probably already know.
Unfortunately the door didn't shut on big credit/transaction processing/bank asses fast enough, so all them have developed blockchain-based instruments to ensure they get a cut of any future transaction that flows. Short of a sudden worldwide adoption of Bitcoin by merchants and consumers overnight, this does not appear to be happening (fingers crossed), I am not sure how the market will take care of the fee situation; I'm not fond of government regulation via caps, since it will hinder other creative efforts to change the system; the disparity is what will drive an innovation (I hope). I think a player willing to take less would start a price war and gain more volume.
The passivity of acceptance of these fees by the majority of consumers without any noise, is similar to how regular paycheck income tax withdrawals are like bleeding people drop by drop; they don't seem to care too much. As opposed to saying, 'Hey we'll take that 28%' all in one chunk on April 15th. People would revolt, or get very angry ;)
So I think it is cool that a big player is shaking up the sleeping giant of VISA and company. I will follow this to see how quickly VISA cuts a deal. I think the Walmart letter paints them against VISA in a good light. In any case, it has brought scrutiny and public awareness to the issue.
Bitcoin still has a middleman – namely the miners that are getting paid directly through transaction fees and indirectly through inflation. Sure, it might be cheaper overall (which is not a given when you would dramatically increase transaction volume) but don't delude yourself thinking it cuts the middleman out completely.
Yes, but that is only one middleman, not 5 to 7, and my point had to do with the banks playing catch up to consolidate them as one middleman taking the collective cut of the 5 to 7 others.
I took the equivalent of $250 USD out of a Malaysian ATM with my Bank of America debit card. I was charged a $3.50 ATM fee by the Malaysian bank. BoA charged me $5.00 ATM fee, AND an $11.00 foreign transaction fee based upon the amount. I know they hedge exchange rates, but they already took the $5.00, and $11.00 is a lot more than my Bank of China account charges me 3x less to take money out in the US on my BoC debit card.
My credit card is not too bad, but the merchants are paying fees too on top of the 5 to 7 middlemen. Bitcoin or other would only be an improvement. People make the claim they want a bank to call or email with issues. Well, you cannot even email most issues to BoA. I have tried. You need to call them. They can send you secure messages in online banking that you can reply to, but you cannot initiate an issue.
I'll take the lower, single fee, that although not fully anonymous via tracking, is better than high fees with no real benefits. Trust me, I'm not delusional on this, only wishing for the better deal for me.
Right. It's around us$0.05/transaction. First of all, it's lower, and second, it's a flat charge instead of a percent, which is probably more fair for users.
...Visa and Walmart have been unable to agree on an acceptable fee for Visa transactions. As a result we will no longer accept Visa in our stores across Canada, starting with our stores in Thunder Bay, on July 18, 2016.....We sincerely regret any impact this will have on our customers who use Visa and remain optimistic that we will reach an agreement with Visa.
This is nothing more than a negotiating ploy to get Visa to cave to Walmart's demands before July 18. No major retailer can afford to stop taking Visa. They may take the hit and carry through with it for a while just to show Visa they're serious, but it won't last very long.
"No major retailer can afford to stop taking Visa."
That remembers me Steve Jobs, the iPad and flash, when he decided to remove flash video. I recall so many people saying "nobody could tell that to the people, people will demand flash, Apple is screwed".
Turns out they could. Your website needs flash? fine, my millions of high income iPad users wont be able to see it.
Wallmark is not a major retailer, it is THE BIGGEST RETAILER in the world!!
By the way, if Wallmark wants they could "help" people transition to Apple or Google pay. Everybody has a smartphone and the only thing is needed for people to use it for paying is getting used to it.
Wallmark knows now alternatives exist so they can exert some negotiation power.
It's not quite fair comparison. Everyone hated flash and quietly agreed that it must go sooner rather than later. On the other hand, most people like paying by card and find it convenient. I don't like carrying cash around and mostly skip places that don't accept cards, so unless Wallmart is the only supermarket in town, they will lose costumers.
While I agree with you, it's much harder to just not go to a website that doesn't work properly than it is to just either not buy toilet paper, or have to go to the bank and get cash to buy it.
Spoken like a Silicon Valley kid. In my town, nobody uses anything but cash or card at WalMart. And I don't see how phone vs pad is meaningful here - I'm not browsing WalMart, I make the decision to go there or somewhere else before I even get in the car. And if they can't take my money, I won't go there. No chance for them to help me/ coerce me to do anything.
I don't really know how common it is in retail nowadays. It's certainly preferable to card for high value payments. E.g. try paying income tax or property tax by card. It will cost you a certain % extra in fees.
Likely - but here's the thing; this could very likely be permanent if they see no noticeable drop in their revenue / profits; or not enough to offset the money saved by refusing to accept Visa.
More to the point - a lot of banks offer both Visa & Mastercard, so for most folks it'd be just a case of swapping cards if they don't already have one (if they feel inconvenienced by the lack of Visa payments).
I think you vastly overestimate the need for Walmart in a person's life if you think they will actually switch their credit card to Mastercard with their bank just so they can shop there.
While this article is about Canada, in many Midwest US communities Wal-Mart is the store. Mom and pop grocery stores shutdown years ago after not being able to compete. The nearest Kohl's/JCPenny's could be an hour drive away. Everything you buy on a weekly basis comes from Wal-Mart. A policy change like this in America would drastically affect many Midwesterners lives.
Very much so. I will often drive past the local Walmart at well after midnight and see a nearly full parking lot. The number of people who shop there is huge, and they do it because they are living on narrow margins and saving $0.50 on a jar of peanut butter is something that matters to them.
I think you vastly underestimate both the buying power and brand loyalty shown by people who choose to shop at any retailer, especially discount ones like Walmart.
Cashiers will almost assuredly offer a Walmart branded MasterCard or Amex if they were trying to buy with visa.
Bingo- Walmart has both eliminated visas Costs and developed a new revenue stream. And I imagine their quants know how many of their visa customers have alternate credit cards or debit capabilities.
> No major retailer can afford to stop taking Visa.
I disagree. Walmart is a huge, major retailer. A lot of people who shop there do the majority of their shopping there. As an example, I have an American Express card. Why? Because I was doing most of my shopping at Costco. It's really not that much of a hassle to get a new credit card. Way more of a hassle to not be able to use a credit card (and get sweet, sweet cashback) for the majority of my shopping.
Walmart customers will do the same. I bet a lot of them will already have non-Visa credit cards, which they can simply start using. The rest will either switch to cash or get a non-Visa card. The power is in Walmart's court here. They offer a lot more value to customers than Visa does. I don't care at all what company's name is written on my card, but I do care that it lets me buy things where I want to.
My Costco used to only accept Amex and all debit cards, but about a few months ago started accepting Visa and no longer accepting Amex. I have always used my debit card with no problem, and now am able to use my Visa for bigger purchases.
Why a negotiating ploy? I doubt there is any other replacement for Walmart that accepts Visa and offers comparable level of price and range of products. Thoughts?
Huh? No major retailer can afford to stop taking Visa?
This is a good way to make people notice that at the end of the day, it's the retailer that sells you stuff, not Visa. They merely run a bunch of servers and rent-seek.
Sure, it's a negotiation ploy, but Visa has more to lose than Walmart. Walmart Visa customers will just switch over to Mastercard or American Express. Costco also doesn't take Visa, but they do take Mastercard. It's clear that Mastercard will negotiate, but Visa seems to think they're above that.
Costco has been pointed out already but there are other major retailers doing this. Loblaws discount arm "No Frills" being one example. (Loblaws is the largest food retailer in Canada with over C$30B in sales).
What do you mean? This is like saying "The only reason you use a towel is to get dry", implying "you are a cheater". Yes, towels are to get you dry, and yes, it is "This is nothing more than a negotiating ploy". I don't get why one would use the word "ploy" here as if something cunning that few people notice or understand is happening.
"To keep prices low we continuously assess opportunities to lower our operating expenses...
Customers will continue to be able to use...American Express."
Thought this was funny given that Amex must have the highest interchange & fees. Their statement still makes sense because Walmart is saying Visa fees in Canada are too high compared to their rates in other markets.
Maybe Target will win some market share, but I doubt it. I think customers will switch cards or go cash. Walmart is too good at what they do.
AMEX could negotiate their transaction fees down, right? Walmart is very well known for playing hardball with suppliers, so maybe they give credit card companies "take it or leave it" offers as well.
Costco Canada dropped Amex two years ago [1] and I was stuck with an Amex card which is not as widely accepted as Visa or Mastercard. Amex tried/are trying all kind of tricks to not have these cards closed. The best one yet was zero percent for one year - I had colleagues max the card and put that money in their savings account just for the one year interest.
You bet that Walmart negotiated an excellent rate with Amex.
>I had colleagues max the card and put that money in their savings account just for the one year interest.
I'm skeptical, since "cash advance" usually has its own stipulations regarding interest rates, and is capped below your credit limit. All for, what, $150 annually per $10,000 in arbitrage? That's an hour of work for many people here.
Before the housing crash and subsequent credit tightening and lower interest rates, you could get 5% on a standard savings account. That, coupled with negotiating no fees on a 0% balance transfer check could was more lucrative. I can't imagine it being worth the hassle and short-term credit hit for the paltry savings rates today.
I had the same thought, but perhaps it is just a matter of being a huge retailer means being in a position to negotiate a sweetheart deal from AmEx vs the rest of us.
Seems to vary. e.g. My local coffee shop puts a surcharge on all card transactions...except Amex. And thats in freakin europe...so there are definitely case by case deals going on.
I lived in Singapore and I still have a bank account there. A year ago my bank bumped foreign transaction fees on credit cards to 3.5%. This is a robbery. I immediately cancelled that card. I recall the website said the most of the fee is what Visa (or Mastercard) imposes on them. Either way that's not acceptable.
In the U.S., Visa charges banks a 1% foreign-transaction fee. However most banks in turn charge their customers either 2-3% (tacking on another 1-2% themselves), or on more premium cards, eat Visa's fee and charge the customer 0%, while advertising it as a "no foreign transaction fee card".
I saw a couple of American Express cards in US with no foreign transaction fees. As an expat and nomad I really wanted to get one of them. Unfortunately no financial services in US are available no non-residents* (bank accounts, stock trading accounts, robo advisors, credit cards, etc)
* please don't complain that jobs and profits are going abroad if your country won't do business with foreigners. It is often hard to order products from US because almost nobody ships abroad (Amazon does, but not all products). Anyway, this is off topic, sorry about that.
The Visa/Mastercard fee is nowhere near 3.5%. Your bank is trying to make profits for itself.
"Visa and MasterCard each charge 1 percent of purchases as a foreign transaction fee. Most banks add an additional 1 percent or 2 percent, leaving your total fee at 2 percent or 3 percent. "
That's the number I came up with after doing some calculations too.
1% VISA
2% Bank charges
Whenever possible, I try to avoid using the cards.
All those promotion gimmicks they give to people to sign up for the cards, and all the spend-this-get-this-gift are all cheaper than the fees. Go figure.
In Canada, most CC agreements with merchants do not allow the merchant to pass the fee on to the consumer. You can't charge $102.04 for a $100 product if the customer is paying with Visa. Thus the total cost to consumers is completely hidden.
The marginal rate within a certain tolerance is reasonably flat, of course, but in a slightly broader perspective, it's not. It's obviously not a clear-cut linear rate (like with CCs), but handling more cash is certainly more expensive. Insurance, mistakes and "wastage" all increase as the sums of money handled goes up. Also, more money takes more (expensive, background-checked) people to count, and it means bigger safes and more frequent pickups.
They are (at least according to rule 5 here: http://www.fcac-acfc.gc.ca/Eng/forIndustry/publications/Laws...). Not sure why I haven't seen it in practice; maybe the regulation is new like the American equivalent. I'm not a fan of making it a discount vs allowing merchants to charge a surcharge though.
Mountain Equipment Coop use to have give a discount if you didn't pay with a credit card. They eliminated it saying it wasn't fair to people buying online.
The backstory here is probably that Walmart was able to negotiate fee discounts with MasterCard and American Express, but Visa refused to budge. So now Walmart is punishing them for our benefit.
"By screwing us on the kinds of transactions we make the most of you're hurting our profit margin and giving us less wiggle room to undercut the competition by offering lower price. Therefore screw you, we're not taking your cards. Oh and BTW we hold the moral high ground because we serve the poor"
-IIRC the vast majority of prepaid bank cards use the Visa network.
-The vast majority of bank cards are issued by employers who don't want to deal with the costs associated with paper checks (not a bad thing by itself).
-The vast majority of prepaid bank cards are issued to people without bank accounts (i.e. poor people) and have shit terms (which is a different issue).
-Poor people typically buy lower priced, lower margin goods and make transactions for smaller amounts.
-Walmart moves a ton of lower priced merchandise relative to the amount of higher priced merchandise they move.
-Even at a fixed profit margin per dollar, the more small transactions are made the lower the profit margin (because 100 people buying 1 $1 item takes more cashier time than 1 person buying 100 $1 items).
-IIRC payment networks usually have a fixed minimum cost of a few cents or have cost brackets based on transaction size.
Therefore Walmart's statement makes sense (or maybe their PR people are really good at their jobs and I analyzed that exactly how they wanted me to).
A few years ago the Illinois Secretary of State wouldn't accept VISA at DMV facilities because they weren't allowed to pass the fee to the consumer. (Mastercard and Discover let them though.)
In Finland Lidl didn't earlier accept credit cards at all. Now they do. Everyone's been wondering when they start surcharging the credit card fees. Personally I think it's the right way to do it.
I'm not aware about any store doing it right now. Only some on-line stores charge extra for different payment methods and 'handling fees', which naturally vary based on selected payment method.
The last sentence made me feel like this is Walmart trying to force Visa's hand in this. This seems quite surprising to me in any case. Most (maybe all?) Walmarts I've been to have ATMs in the front, so it's not like people won't be able to get cash at the store. They'll probably just have to pay the $3 (or whatever) fee.
The prices have to be the same for everyone. The fee is paid by the retailer. The more people use a card with a high fee the more likely the retailer has to raise the prices (for everyone). At least in my country that is so by law, you cannot let customers pay fees for their payment method of choice. It's the reason (that in my country) we see "minimum purchase" requirements posted if you want to pay with a card, and that credit cards are only accepted at pricier stores - or at large retailers who managed to negotiate a better deal for the fee.
I wonder what's the reason for laws like that. It's only natural that the customer pays the fee. If we had laws like that that would actually allow for competing methods of payments as there would be pressure from customers on their card/other method providers.
I have seen this condition as a contractual requirement by Visa&MC - in essence, you either comply and have the same prices for cards as for cash, or you don't get a merchant agreement and cannot take cards at all. And the country-by-country difference was a simply a result of their anti-trust laws, whether the card network is free to impose such a condition or forbid you from accepting cards, or if such restrictions are treated as anti-competitive and the merchant is free to choose.
It is interesting that they think that would work. For me personally it would simply mean that i would not buy stuff from them, as they are unable to accept my money. AKA they would lose 100% of the revenue compared to 1-2% or whatever the percentage is.
So they just started a campaign of attrition? They're going to lose unless other companies get on board. I'm assuming Canada was chosen intentionally, based on the data, to minimize losses. But this is going nowhere unless others follow suit.
Isn't Amex the most expensive of all the credit cards? At least that's what I would expect, given that Amex has the best rewards, and most customer-friendly service. I'm surprised Walmart would continue to accept Amex but not Visa.
Amex up until recently has charged an annual fee to consumers, which probably eliminates the bottom 10-20% of the market.
Probably, Walmart and other retailers just eat the cost of the Amex retailer fee because it's a relatively small fraction of transactions; plus, there's a competitive advantage to accepting a wider range of plastic.
True, but my point is that up until recently, American Express charged higher annual fees and higher merchant fees than Visa, Discover, and Mastercard. 10-15 years ago there were many smaller retailers who would not take AmEx. Now they have several products that are "no-fee" to the consumer, though of course still with merchant fees.
Walmart is trying to leverage its market power against Visa. You can leverage your market power against Walmart by shopping elsewhere if you so desire.
Walmart believes, probably correctly, that people like you shopping elsewhere will be the lesser effect compared to the difference in transaction fees to Visa.
But lowering the fees is a good thing. It's a cash cow for the credit card issuers, and you pay it in the end - and you also pay the higher retail prices if you yourself don't use a payment method that the retailer has to pay a high(er) fee on because the fees are priced into the items. The only thing bad is that the large retailers like Walmart have a much easier time negotiating significantly lower fees while small retailers have to pay whatever the card processors are asking for - which in my country is as much as 2-4%. Here is an example calculation: https://www.cardfellow.com/average-fees-for-credit-card-proc...
It can be viewed as simply as "when fees goes down, something else goes up," as well. You also have to consider that many people invest indirectly in Visa through mutual funds. There are many other factors.
If your bank only offers Visa cards, it might still be possible to use it as a debit card, since those sorts of transactions have a different sort of fee if I remember correctly. Contact your bank for details.
Or you know, use cash. Don't shop at walmart. That sort of thing.
> Following an evaluation of credit card transaction fees in Canada and the rest of the world, we have concluded the fees applied to Visa credit card purchases remain unacceptably high.
> (...) requires us to keep costs as low as possible.
Sounds pretty to-the-point to me. Remember that for 'budget' stores and chains the bottom line should translate directly to customer benefit (ie. lower price).
An added anecdote: I've run a startup with high-priced goods/services with low profits and card expenses are a huge PITA and will cost you a considerable amount of money.
The idea of carrying around cash for every transaction puzzles me. I pay almost exclusively with credit. I get a push notification to my phone for every transaction. At the end of the month, I get a nice CSV file with all my transactions for analysis and budgeting. I get a 1-3% rebate on all my purchases. If my card is lost or stolen, I hold no liability. With cash, the liability is all mine. I hate using cash, and only use it when I must.
Right on the money. In the US at least, there are a ton of laws and protections for consumers when it comes to disputing charges and credit card fraud in general. It is much harder to do this with debit.
Have had only debit for 20years and never used credit. I have not seen a single transaction rejected because the visa/MC debit cards weren't credit cards. Either they aren't countless or they must be focused to a few countries.
And what happens when someone snarfs your number and clears your bank account out? How do you pay the rent? With credit, it's the banks money that gets stolen, and they worry about getting it back, not me.
For consumers, credit vs debit is in theory about the same, in practice it's slightly different. The main difference though is consumer vs business. A business debit card attached to a checking account, is the same problem with fraud as the checking account itself, the burden is almost entirely on the business not the bank.
> With credit, it's the banks money that gets stolen
Regardless of debit or credit the CC company always has responsibility if there is fraud. With debit I might risk having an empty account for a longer period of time after an incident though (Refunds might take a while).
It's a reality in the states. But, yes, it's weird.
We model credit worthiness largely on past payments of credit; which means that we are incented to use the system.
I don't see using my credit card as really "using credit." I use it as a charge card and pay every bill as it comes; so it's merely a (30-59 day) float. I, of course, have a difference financial capability than much of the US, and recognize that privilege. For many people, CC float is what let's them live paycheck to paycheck and is the first brick in Americans penchant for debt.
That being said; there is a huge benefit to many consumers having a short term credit facility. It's as if the CC industry made a micro loans initiative. (And then proceeded to abuse it).
Debt isn't bad. I recently purchased a car. Given my credit, I was offered 1.8% financing with first months interest paid for. If I took it, they would throw in a bunch of perks like lifetime oil changes, loaner cars for repairs, etc. I did, drove home, immediately paid off the loan, and continue to enjoy the benefits. No worrying about bank checks or cash or whatever. Credit makes my life so much easier. Credit and even debt is not the problem - it's living beyond your means.
What I did was take the money I would have used to pay the car off, and instead put it into a term deposit for the same duration as the loan payments, thus earning myself a couple percent above the loan rate with no risk.
The thing is, all of those benefits to you come with hidden costs. Those costs will almost universally be dumped on the merchants, because the large payment services take advantage of their dominant position to set horribly one-sided terms.
In practice, that means you're paying more to the merchant, possibly quite a lot more in some cases. That 1-3% rebate is going to translate quite directly into a 1-3% increase in sticker price. That lack of liability if your card is lost or stolen is essentially a mandatory insurance scheme with everyone paying a premium on sticker price to fund it.
It's really no different to, say, all those offers to buy something on-line but then return it for a full refund if you don't like it. In industries like clothing, a significant fraction of customers will abuse this by doing things like buying some nice clothes, actually wearing them once or twice, and then trying to return them. Often the return will be accepted even though the merchant knows very well that the clothes have actually been worn and they can't restock them, because it's too much trouble to argue the point. The bottom line is that if you're that abusive customer then the refund deal is great for you, but everyone else is paying higher prices for your clothes to cover the merchant's wastage due to abuse.
Of course there are other advantages to digital payment in terms of keeping records of what you spent (and potential disadvantages in terms of privacy if others have access to those same records) but to me that's a separate issue to the direct financial implications of paying by different methods.
Retailers eat the cost in order to get the customers.
Cc processors earn the cost. Banks, in order to get customers, pass some of the dough back to consumers in marketing and rewards.
So it's somewhat fairer now than it was ten years ago with similar fees but less rewards. But an economist would say that optimal would be to massively reduce fees and take away rewards.
I suppose they meant "authorized by your bank at time of purchase" and not "done on a website". The former is for example not done if the merchant uses one of those old imprinter machines. There is no way a bank can send an SMS when they don't know of the transaction.
"online authorisation" means the POS terminal authorizes the transaction with the issuer. EMV is a complicated protocol and that may not always happen for whatever reason. One example is the terminal has no internet connection but the terminal may also be programmed to not do it in certain cases for various reasons (eg. speed up checkout).
In these cases your issuer will learn about these transactions when the nightly batch job finishes. I don't think you want to get an SMS at that time.
Even if the authorisation is successful the final transaction may not happen, may happen at a different time or may happen over a different transaction amount.
You can certainly get a notification at the time the issuer finds out about the charge. Typically that's instantly, but on an old imprinter machine it may be delayed. You still find out as soon possible.
Ok, that can be different elsewhere but my experience with German cards in some European countries is that contactless payments are almost always online authorized even if no cardholder verification is required.
If I understand correctly, credit card terms forbid stores from offering two different prices (one for paying with and one for paying without), because if they didn't, some stores would offer a 2-3% discount for cash, and customers would switch to cash. Meanwhile, most people I've spoken with are happy with the system, because they feel like they're getting money back for free through cashback/reward programs, so credit card companies are incentivized to keep increasing their merchant fees so that they can give more money back to their customers. Restaurants/shops that don't accept credit get less customers, and are forced into the system as well. While the government could do something about it, they don't because they can track every credit card transaction (-> tax revenue), but they can't track cash. And cash-paying customers get to pay the 2-3% "credit card tax" on every transaction, which is so ridiculously backward.
I hope Walmart's decision snowballs.