cbn42

Of course merchants have an agenda. Their agenda is to minimize their costs. The agenda of a political think-tank is not to minimize merchants' costs. Therefore, if merchants and the think-tank disagree on how best to minimize merchant costs, I would go with the merchants.

I don't know if you've ever been to Australia or NZ, but when I was (briefly) there, credit card use was extremely low. I would say that less than half of adults have a credit card, and maybe 20% of stores accept them. They have their own debit card system which is free to both customers and merchants and which is used almost universally. Therefore, the market is much different and you can't draw direct comparisons to the US.

It is very common for groups arguing about policy in the US to cite data from other countries in order to make their points. Most of the time, they misrepresent it. The Obamacare debate is a perfect example. Don't believe everything that some DC-based special interest group tells you about what goes on in foreign countries. Remember that there are lies, there are damn lies, and then there are statistics.

alex_b

In the UK it has generally been the opposite, although this is specifically to do with the differences in pricing between debit and credit card processing. Merchants are charged a fixed amount per debit card (generally £0.15-£0.40) but a percentage of the transaction value for a credit card (1%-3%); pricing levels are generally on volume, although occasionally on risk too (card holder not present transactions being more expensive).

For high value, low margin businesses (i.e. travel agents) they often tack a surcharge onto transactions to cover their costs as do other big ticket purchases like cars (my dad bought his car on a credit card before the surcharges came in for the points).

Generally in the UK the prevalence of surcharging has remained fairly low, some low cost carriers (Ryanair in particular) have engaged in some dodgyness) as have a number of supermarkets who have done some magnificent tax-dodging through "paying" processing fees to wholly owned offshore subsidiaries. In general it didn't really effect me, I just used a debit card when I had to, or shopped elsewhere. I never encountered an internet or big box retailer with cc fees as it would remove their key advantage which is price.

JEFFJAGUAR

I bought tickets online for both EasyJet and Eurostar this past April. There were, I believe 4% surcharges forusing a visa credit card to buy the tickets but no surcharge for a visa debit card. Didn't understand it but sort of do now.

dcpilgrim

My guess is it will be just like baggage. Airlines will unbundle the swipe fee and charge the surcharge, but waive it for their affiliated card.

Dadaluma83

Just read the article about the convenience store group rejecting the settlement and they said the reason they rejected it was that it didn't go far enough. Ummm excuse me? Never mind the cash settlement which was the largest in history, now merchants can charge their customers for using a credit card and they think that doesn't go far enough? Jeez louise what more could they possibly want besides sticking it to the credit card customer?

Apparently who knows if the settlement will even be accepted like this. I hear it also has to be accepted by a judge. In any case the banks and retailers better come to an agreement that doesn't harm the consumer. The last thing I want is a surcharge, and if in exchange for no surcharge swipe fees are cut to a level merchants deem acceptable, and rewards still exist although less generous I would be very happy with that. Credit is very useful and the free float is a big one. If I still got to use my credit card everywhere surcharge free, but less rewards I would be quite happy.

Since I mostly fly United I have been thinking about cancelling my United Explorer card and going with the Sapphire preferred, but if there is a surcharge on the sapphire preferred for United tickets then looks like I would be better off just keeping the United card. I carry on when I travel for leasure so the perks on the card don't really interest me, I should make Premier Silver next year so I get the perks anyway. Oh well whatever comes of this I will still go with what payment method benefits me the most.

The leasure traveler is going to get screwed over airline and hotel bookings so looks like it is time to look into a paypal debit card, I refuse to get a debit card linked to my checking account.

Oh well, the gravy train of rewards cards was fun while it lasted.

cbn42

They wanted a cap on interchange fees, like there is with debit cards.

The settlement provides for a temporary reduction of 8 months, but after that time period expires, the fees go back to where they are. Merchants will have the ability to negotiate in groups, but effectively they will still have to pay what Visa/MC ask if they want to accept cards.

In my opinion, this settlement is slanted in Visa/MC/banks' favor. Merchants originally wanted a limit on interchange fees. Instead, they got:

1. a temporary decrease in interchange fees
2. the ability to "negotiate" interchange fees in groups (which appears to be meaningless)
3. the ability to pass on the fee to customers (which will be difficult to do, and is prohibited in some states)
4. some cash thrown at them.

guflyer

Since this is, based upon your analysis, in Visa and Mastercard's favor, do you think that this means that they will continue to provide bonuses and keep a meaningful points system?

gotofly

[QUOTE=cbn42;18899705]There are many countries (Australia, some parts of Europe, for example) where this is the norm. You can use a debit card (EFTPOS or whatever it's called) and pay nothing extra, because debit cards are cheap to process. If you want special return protections and frequent flier miles, you need to pay for them.

If this happens, I don't think there will be massive changes. Credit card companies may actually reduce their interchange fees in order to avoid losing market share to other forms of payment. Rewards programs may get weaker, as they did for debit cards after the Durbin amendment. Paypal may get more popular. But people are not going to start carrying wads of cash or checkbooks around again.[/QUOTE

I went to south Africa and this is their normal practice in malls and shopping centre and all the vendors are not even equipped with accepting credit cards
]

chelmkamp

AND to maximize profits. Just like the card issuers, the networks, everyone else in business. None of the above sharing the same agenda as the consumer, which is to get something for the lowest price someone is willing to sell at. This is what markets are all about. Various think tanks represent all of these different groups. There's nothing sinister here.

What is sinister is that fee structures allow merchants to hide true costs when advertising a product. It becomes more difficult and more complicated for the consumer to gather enough information to make a wise purchasing decision. We've seen this with the airlines. We even see it with State governments whose politicians claim to have "low taxes" but then charge a fee for everything under the sun.

Generally, in my view, the best thing is to let the market determine prices. Visa/MC are surely not innocent of anti-competitive practices in the past, but charging whatever the market will bear in swipe fees and telling merchants they can't surcharge doesn't seem anticompetitive to me. If merchants don't like it, they can accept other forms of payment. If customers demand otherwise, they will have to work the costs into their prices. This is the life of doing business.

I've been to NZ. If you read farther back in the thread, you'll see it's where I first encountered these ridiculous surcharges. The Crowne Plaza I stayed at one week before the surcharges took effect offered me, the consumer, no lower room rate the following week after they began the surcharge. Where's my savings? (And who pays for $3k in hotel charges with cash?)

The EFTPOS system is definitely not free for merchants. There's no such thing as a free lunch, even down under the down under. Merchants pay bank fees and interchange fees and equipment rental fees, in addition to Visa/MC processing fees which are permitted to be surcharged. They also pay for shipping, electricity, etc. These are all the cost of doing business, but could you imagine a store that charged you an electricity surcharge for shopping after dark?

Ragnarok

http://www.nbr.co.nz/article/nz-cred...pril-wb-118627

Credit card use as a proportion of total spending : 42.9%

And if a merchant think accepting credit card cost them more than not accepting them, they can choose to stop accepting credit cards.

Like that grocery store that I go to frequently, they take PIN debit only.

But they are consistently cheaper than their competitors, so I often shop there.

cbn42

My guess is that banks will continue to have robust rewards programs. The reason is that rewards programs are funded from the interchange fees on the transactions, and this settlement does nothing to reduce the interchange fees they receive, after the 8-month period ends. (It does allow merchants to negotiate fees in groups, but I'm not sure how much of a difference that will make.)

In fact, in one sense this may even strengthen rewards programs. Since merchants are now allowed to surcharge in order to nudge customers toward debit cards which are cheaper for them, banks will lose revenue. One way of making this up would be to enhance rewards programs on credit cards in order to get customers to use them more.

cbn42

I'm a bit confused with your argument here. You say that the market should determine prices, but isn't that exactly what a surcharge is? The market will determine how much people are willing to pay to use their credit cards. If customers demand no surcharge, as you suggest, merchants will provide it. If customers are willing to pay a surcharge, merchants will charge it, but if a merchant charges too much, he will lose customers and go out of business. How can the market determine the price if the charge is prohibited?

It is the same with any other charge. For example, the power company doesn't prohibit a store from charging customers a lighting fee. However, customers are not willing to pay it, so stores don't charge it. If they did, they would lose customers. If a store had low enough prices that people were willing to pay it, then they could charge it. In other words, the market decides.

mtkeller

I know Hilton charges them in Australia. Very few people would elect to settle a hotel bill in cash, so it seems hotels can pretty readily get away with charging the fee. I do think the US market is different to the other countries that have implemented fees to date, so we'll have to see how it all shakes out.

millere2

I just saw a little segment on our local news about this and they were saying Kroger is looking into putting side by side pricing on all of their products if you pay with cash/credit or adding the fee on at the register. Hopefully they do not end up doing this but if they were to it seems like a lot less expense for them to add it on at checkout, and not print all new price tags for every item. Hopefully larger retailers like Walmart and Target do not add them and then I think other chains like Kroger will not add them.

chelmkamp

No because the surcharge is being permitted (mandated) by a legal process, not by the market. If the market were driving the surcharge, the courts (and in some countries, the government) wouldn't be involved.

Merchants are also consumers of the card processing services. If they don't like the cost, they don't have to accept cards.