Originally Posted by
rasheed
I think what this thread is trying to anticipate is what will happen in the free market with or without further legislation. Keeping to the forum's goals, the net for travel reward cards doesn't look very good unless many merchants decide to pay the higher interchange rates. Even a market change to lower interchange rates (as tmiw referenced) is all bad, the card companies will quickly reduce rebates. If much of Costco's Visa spend was not already on the Citi co-branded card, I would have imagined that other Visa issuers would have created an exception on rewards earned on those purchases. Discover had this .25% earn rate exemption for such retailers, but that does not seem to be the case currently in its current it card option.
The one good thing about interchange going down voluntarily (as opposed to a government-imposed cap) is that the level of decrease will likely be less. Maybe the highest-tier cards only command 1.5 or 2% interchange instead of ~3%, for instance. That would still be enough for rewards cards to net some value for cardholders, although less than currently.
Whether that'd be enough for the likes of Kroger, however, remains to be seen. I suspect they want something close to EU levels, or at the very least have the ability to say "no" to higher tier cards and/or charge extra for them.
Originally Posted by
rasheed
The discussion of allowing card surcharges (or rather, more widespread at the checkout cash discounting) is interesting. I don't think I would for most categories pay the higher price (especially for day to day spending). I think it can be hard to get above 2 cents redemption value on miles, and the airlines will be in big trouble if card spending dropped dramatically. My thought is the annual fee explosion of these past few years has been anticipating this (with essentially someone paying the annual fee, but not using the card much subsidizing the big spenders). This is just the new subsidizing methodology if we say those who don't use reward credit cards are currently subsidizing those who do.
Premium international travel can still net >2-3% in some cases, at least before taxes and fees anyway. The math starts getting kinda fuzzy if you weren't going to pay for that class of airline ticket in cash in the first place, though.
As for whether people will pay the surcharges, I think people who already don't carry around much (or any) cash might; the alternative is getting used to using cash again. Also, don't forget that surcharges/minimums aren't allowed for debit cards; while the merchants who currently impose them might not care, larger ones have the resources to be able to show the correct prompts and do the right thing on the POS end to ensure that only credit cards get that treatment.