> As a result, there are no 1-2% cash back options for cards to keep track of or any other silliness, you can just use your credit card as a method of payment, without thinking about which card to use for what.
In other words, consumers get offered fewer options, which results in a far worse deal, overall, but in exchange they can avoid the hassle of evaluating all the better options they'd have if they hadn't been legislated away.
I'm not too familiar with day-to-day payments in the US (I'm in Germany), so please enlighten me if I have something wrong here. Is there an actual option I have as a consumer to avoid the fee when buying something?
My understanding: everybody pays the same price, independently of payment method. If the standard credit card interchange fee is 2%, then the vendor has to raise their prices by around 2% to make the same amount of money on the product. As a consumer, I would have to pay the 2% of the inflated price if I pay by cash (or debit card or something).
So I'm forced to pay by credit card with a cash back option or some other rewards to make back part of the 2% that were added on top of the original price.
I lose, if I don't play the game, and I'm back around a zero-sum-game if I do play along. In any case, the credit card company wins.
If the fees are capped, the vendor doesn't have to raise the price, and the consumer wins no matter the payment method.
1) The 2% fee might mostly be captured by the credit company and thus represent a net benefit to most consumers (at the expense of retailers) because retailers tend to want prices like 1.99 and would be reluctant to raise that to 2.01 because of the reduced sales. Over time there might be other options like slightly reduced portion sizes to help the store, but profiting a little bit extra on most products is hard, and profiting a lot extra on a few products is near impossible because consumers will buy from competitors.
2) The 2% fee isn't reimbursed equally to all consumers, so individuals with higher credit scores might have a preference for the current system even if it's a zero-sum game overall. (this point also easily allows arguments the other way in favor of regulating fees because we probably shouldn't be extracting an additional percent here and there from young people and those with financial hardships)
>The 2% fee might mostly be captured by the credit company and thus represent a net benefit to most consumers (at the expense of retailers) because retailers tend to want prices like 1.99
How does it benefit the consumer if the credit company takes 2%? I cannot see why it would make a difference to the consumer (at least in the short term) whether the retailer or the credit company takes the 2%.
That’s a valid pushback on my assertion that the U.S. market benefits consumers. It’s still true that you can do better than 2% if you’re diligent, but most people aren’t, so point taken that it may be a wash for even moderately tuned-in consumers. Thanks!
In other words, consumers get offered fewer options, which results in a far worse deal, overall, but in exchange they can avoid the hassle of evaluating all the better options they'd have if they hadn't been legislated away.