Retail merchants have capital tied up in product; what difference does it make if its on the shelf or already in customer's hands? ... sure cash strapped people always pay more. But the reason the rate is so high; 3% on month > 36% APR b/c of network leverage and government regulations.
> what difference does it make if its on the shelf or already in customer's hands?
Actually, it makes a huge difference:
1) I pay property taxes on all inventory held on the shelf at the beginning of the year
2) I can offer a discount to move product off of the shelf now at a lower rate (equivalent to paying a higher transaction rate) to achieve actually present cash-flows
3) I can write-off inventory that sits on the shelf too long and depending on my accounting method, I may have to claim income on a sale today, even though I haven't been paid yet.
> % on month > 36% APR b/c of network leverage and government regulations.
No, it's 3%. Period. Not 3*12, just 3%. Don't conflate accrual of interest with acquisition costs. That'd be like saying that since labor on production is 2% of COGS, firing everyone increases my yearly margin by 24% (at best, it would be 2%, if you could still produce). Consider that any method of capturing payment, whether cash or credit card, has an acquisition cost (time, money, labor, etc.). Paying a 3% fee on CC optimizes time and labor in exchange for money.
Merchants want zero fees, and instant payout (like cash), but "wait a minute" you might say. Don't businesses pay taxes, and how do you think those tax dollars are spent (in a non-gov't shutdown state)? Partially keeping the dollar bill presses running.
Herein lies the problem. Cash is a government-run operation, and credit card networks are privately owned. We forget that our cash system doesn't run itself and isn't free to operate, so we take cash for granted, and undervalue or ignore the "interchange" fees.
By changing their perspective, merchants might see that zero fees is unrealistic. It's an unfortunate(?) consequence of leaving the bartering days behind, and joining a money economy.
People also forget that cash isn't free - you have to protect it (with a safe/locks/doors/armoured cars), count it, process it, watch for counterfeits, have change on hand, deposit it, and so on. And it's flammable.
Given a choice, there are lots of (big) businesses who would switch to debit/credit exclusively if that was an option, especially with the existence of branded credit cards. Home Depot would love nothing more than having all its customers using the HD credit card.
