tmiw

Except any risk that is covered by the issuer is paid for with interest charges and other fees, not interchange. Anti-fraud efforts have traditionally been used to justify a significant part of the interchange fee in the US market.

In any case, I suspect that interchange will end up being reduced in the US eventually. I'm not sure how the networks would be able to justify the current levels now, especially since some of the merchants who are calling foul have significant non-US operations and have first hand experience of the disparity.

redtop43

Perhaps some of the larger merchants will try harder to steer customers to their own CC's. It will probably only work for customers who are HVC's for a particular business, but I can see a contractor dumping tens or hundreds of thousands a year at Home Depot/Lowe's.

A lot of people in the real world probably think that spending $5-$10K in a year at a particular merchant is Big Bucks. To us MSers it's just another day at the office.

mia

See also discussion in Credit Card Programs forum

https://www.flyertalk.com/forum/cred...l#post30253635

mikesyr18

And there lies the issue. If the sign says Visa is accepted, then Visa is accepted. There should be no discrimination between platinum, signature, and infinite cards.

It's unreasonable for customers to figure out which type of Visas are accepted.

tmiw

Signs saying "Visa Signature and Infinite cards are not accepted" or even "Rewards credit cards are not accepted" seem reasonable enough for customers to understand.

Also, what if getting rid of "honor all cards" prevents surcharges? Keep in mind the following from here:

I imagine that from the issuer's perspective, getting any interchange at all would be preferable to getting nothing. Not that I really want surcharges to be imposed or that rule to go away, mind you, but the latter could be a "lesser of two evils" sort of deal.

mikesyr18

People will never understand the difference of Visa cards and don't care to understand to.

"Rewards cards not accepted" is almost every card in existence. Cashiers can't even figure out Apple Pay/contactless or what payment methods are accepted now... Do you think they'll understand which credit cards have rewards? For the most part, cashiers are very dumb people when it comes to payment methods, even though it should be a job requirement to understand them.

If we see interchange fees drop to 0.05% or whatever, expect to see an increase in fraud protections at the point of sale, and little in rewards and benefits. But then again, that may be a good thing (if credit cards become less "tasty" for the consumer, the US may decrease it's overall credit card debt).

tmiw

It literally says the kind of Visa or MC right on the card. No need to know the differences between them.

Most of the non-AmEx cards mentioned on FT and elsewhere are at minimum Visa Signature/World MC. The regular Visa/MC cards that I know of have poor rewards (if any) and aren't really the ones merchants are upset about.

Also, as mentioned above, there's no need for most employees to get involved. Simply program the terminal/POS to reject anything with specific BIN ranges that correspond to the more expensive cards. Or if employees have to get involved, they can check the logo on the card to verify that it's an allowed card; I doubt they're that clueless.

If interchange is cut, I doubt it'll go to 0.05%. At worst it'll end up at EU levels (and that's if the government gets involved). Going to 1.5 or 2% wouldn't be the end of the world, even if does mean rewards are slightly cut.

Also, the networks are perfectly okay with all transactions going through without any authentication at all, so I doubt PIN preferring cards will be more of a thing (for example).

mikesyr18

You don't research smaller financial institutions then. Many cards with the same rewards structures are offered in different network tiers. I'll give you examples: Capital One Quicksilver, NFCU Cash Rewards, Empower FCU Platinum and World MasterCards (same rewards), BoA Cash Rewards, BoA Travel Rewards, etc. Are there some issuers that offer cards only available in Infinite, World, World Elite, or Signature? Sure, but most average to good rewards cards (the ones I listed) also have a Platinum tier.

Yeah, except the store's processor might have an issue with that.

I wouldn't put it past them. Many still can't even figure out Apple Pay/contactless, or if the store takes American Express or not.

Maybe, but it wouldn't be a slight change in rewards... It would be a major change in rewards. A 1% cut adds up for the banks when you're talking about billions being spent on cards every year.

Interchange fees help pay for fraud. If the banks take a 1% cut, they'll want more security at the POS.

rasheed

Well, I think the friction of the experience can't be good for the merchant. The only way it really works is if many larger merchants get on-board, but I think we expect that Visa and MC will cave and lower the rate (which will lead to a pretty rapid response from the issuers on reward rebate %s).

It does seem the most effective situation barring a discount rate reduction so far has been blocking all credit. If you want to use credit, use the retailer card (which frankly has been around forever). That seems pretty easy to understand. It will lead to lots of Costco-like situations (only Discover or AmEx accepted). I think that issuer-only situations are very possible (only Chase or Citi accepted here). That will be a lot of fun too.

Another cooler alternative might be a terminal located in the front of the store where you just tap, slide or insert to see if the card is accepted. I am sure all of these big stores have terminals that are never used that they could use for that purpose.

So, some of the ideas here remind me:

1) Make sure to have diversity in card networks in your wallet (preferably each of the top three in the US).
2) Consider not going for the Signature or W/WE cards unless you really get some special card benefit or reward. It is okay to get that Gold or Platinum card. That is a big thinking change frankly.
3) Issuer diversity is still important. Try to find the right card from all of the major issuers, but consider having cards from other issuers too like Synchrony, Barclays, Capital One, etc. All of them have lots of great cards without the branding inflation. Frankly, if all of my Chase cards are Signature and a given merchant is not taking Signature, none of the cards are going to work (unless it is some sort of co-brand or Chase deal with the merchant).

cbn42

If they need to, they will figure it out. It's not that hard to look underneath the Visa logo and see if it says "Signature" or "Infinite". Banks may also make this more prominent if needed.

"Rewards cards not accepted" is almost every card in existence. [/QUOTE]

Not at all. While frequent travelers with high credit scores use mostly rewards cards, they are a small portion of the market. There are plenty of non-rewards cards out there, and there will be more if merchants start to incentivize their use.

They could easily be trained to look for the word "Signature", "Infinite", "Platinum", etc., under the Visa logo. However, this could also be hard-coded into the system.

Much as I hate to say it, I think this may be good for the US overall. It would hurt most Flyertalkers, but you could argue that it is unfair that cash and debit users are subsidizing our free flights. I think that issuers will cut rewards before they cut fraud protections.

tmiw

How many of the cards with Platinum tiers are subsidized by the Signature users?

Why would payment processors have an issue if it becomes allowed by the card networks?

Those have low use in the US. Meanwhile, cards are swiped/inserted a lot more often. Besides, if a particular merchant wants to do this badly enough, their employees will get the training and they'll make sure said training sticks.

It depends on the amount that they're cut. A cap of 1.5-2% likely wouldn't do much considering that there are 2% cashback cards out there now.

EMV's rolled out at enough places now such that this explanation is a pretty weak one from the card present merchants' perspective. And again, it's unlikely we'll adopt anything stronger than chip and signature/nothing regardless of what happens with interchange (which is a topic better suited for the EMV thread).

It'll be important to make sure that the savings are passed onto merchants if we go this route. Capping interchange while allowing payment processors to pocket the difference isn't really going to help much. If we can do that, I bet we'll find that many of the merchants who want to reject certain cards or surcharge them will find that it's no longer worth the trouble.

percysmith

True if the merchants involved are subject to competition and will pass on savings to customers equally. I said some time ago this points game is reverse Robin Hood https://forum.hongkongcard.com/forumSE/show/4324 https://www.flyertalk.com/forum/18759579-post11.html

We here in HK are subject to oligopolies due to high land rentals + government that is anti-competition ("Freeist Economy" should be read in Doublespeak) . Our recent "liberalisation" of fuel surcharges have been all increases by airlines (CX leading the way) and no decrease in base fares.

cbn42

Unlike the card networks, where Visa/MC/Amex essentially operate as an oligopoly, the market for payment processors is fairly competitive. Any processor that tries to pocket the difference will lose business quite quickly.

The US retail market is also quite competitive, and is becoming more so with online merchants growing and foreign companies entering. I have never been to Hong Kong, but if the retail market is an oligopoly or monopoly, then there is the possibility that they will not pass on savings to customers.

tmiw

Some are definitely not passing along the savings from the caps imposed by the Durbin Amendment. For example, Square still charges 2.75% for each transaction regardless of whether a debit card or credit card's used.

Not much in the way of savings was passed to consumers after Durbin, but that may be because many merchants didn't experience any cost reductions whatsoever.

percysmith