Originally Posted by
josephstern
1 - The "discount rate" or fee that merchants pay to their bank to accept this card is probably greater than 3% on average. Yes, the average Visa is close to 2%, but this is a Signature with features, and there is a different schedule on the interchange list for this type of card. No merchant pays only 2% when we use this card.
On the merchant account I manage, we pay 1.5% for normal MC/Visa and 2.3% for rewards cards, etc. This is a small business. I imagine large companies do better.
Originally Posted by
josephstern
2 - While getting 3% from merchants seems like it should make a 2% card profitable, even with customers who pay in full each month, the proof is in the pudding. No other bank offers one; the one that did is pulling it. It's just not profitable or there would have been competitors.
Well, on this we agree. And the discount rate has to be split three ways: the merchant acquirer (merchant's bank), the card issuer (customer's bank), and Visa (the network).