New Zealand has significant differences vs. the US (for one thing, most debit card interchange is capped in the US regardless of routed network) but this might be a cautionary tale for us--especially if contactless gets popular and ends up triggering more CC usage as a result.

https://www.newsroom.co.nz/2019/10/07/846601/banks-on-notice-over-no-paywave-dysfunction-1

Reading those tons of information about surging credit surcharges in the US keeps me thinking about the effectiveness of this program. What do you think?

It can only really work to lower interchange if most/all merchants surcharge. As it is, it'll probably just anger customers (possibly even if it's done to the letter of the card networks' rules). After all, how can all the other stores take cards without charging extra but this particular one somehow can't?

Accepting credit cards provides value to merchants as well. Increased sales volume, larger purchases per customer on average, impulse purchases, faster checkout, less cash to deal with depositing (and a lower risk of that cash disappearing), etc.

Merchants are not “losing 3.1%”. They are making an investment under the belief that accepting credit cards is better for the business than not accepting credit cards.

Depends. If the merchant is part of an industry where there are few other options, one could see it as losing money they'd have otherwise made--especially if most/all of their competitors are doing it.

There's a butcher near my house that is cash only. I don't go there, and I know many other people who do the same just because of the lack of CC acceptance. I asked him about it once. He doesn't want to "give away" 3%. All his competitors accept credit cards. He loses my business and that of a number of other people I know because he won't take credit. But all these people are invisible to him. He only sees it if someone walks into his store, wants to pay CC, and then walks out. All the people who have been there before and subsequently avoid his business, he doesn't see that. So he doesn't think he's losing much business.

Do his competitors charge the same prices as him? If they are charging more, then the people going there are foolish. No point paying 5% more in order to get 2% in rewards.

While a mom-and-pop business may miscalculate the benefit vs. cost, larger businesses have people specifically hired to crunch the numbers and decide these things. The supermarket near me that doesn't accept credit cards is probably the busiest one in town. But as tmiw said, it depends on the competition in the industry. Electric utilities usually don't accept credit cards, because it's not like you can choose a different company. In highly competitive industries, like restaurants, most places will accept credit cards and absorb the costs.

I don’t pick my butcher based on points/miles earned. I hate using cash, and I especially hate receiving coins in change. I hate having to keep track of whether I have enough money in my wallet, and guessing whether that’s enough to make my purchase, or whether I need to go through the added hassle of finding an ATM. When visiting this butcher, I have to remember the price-per-pound on everything he carries, and guess how thick he’s going to cut, or how big the chickens are that day. A credit card takes all the guesswork out of it. I need something, I go somewhere, and I buy it. It doesn’t matter what it costs, I can buy it regardless of what’s in my wallet, and I don’t need to waste time finding an ATM. There’s certainly value to me in a merchant accepting credit cards, but there’s also value to merchants in reaching customers like me who they otherwise wouldn’t.

Wegmans runs checks electronically and the account is debited immediately. I'm sure other merchants could to the same. The problem is, that's a waste of paper and the line moves slower, especially for those who have to ask for a pen.

Contactless credit and debit is the way to go.

Cash paying customers? Someone doesn't know the value of a, "cash paying customer". They are usually the poorest or least loyal customers.

If they wanted to offer a cash discount, I would accept that. But a surcharge means more calculating to determine value.

The hot dog merchant disclosed to me that a company was going around offering a program where there are no fees whatsoever to use their terminal. Once he signed up is when it was disclosed that he was under a 4 year agreement and that they add on the cost to the consumer.

Paying $2.50 for a hot dog is a high priced hot dog. All of his prices are on the upper end. The cost should be absorbed in his cost. Doing this has made me decide, to go somewhere else. I can take it or leave it, I chose to take my credit cards and leave his food behind.

Ran across this at an Induan buffet lunch this past weekend seeing $.43 on bill as Surcharge (3.5%). Owner kept going on and on about it being "legal" now, following up with, "You will see many restaurants doing it!"

That 3.5% would be considered a tip in my book.

It looks like it was itemized on the credit card transaction receipt which would indeed be part of the process of being allowed.

There are so many ways to look at this issue's progress. One is the dramatic increase of takeaway/online orders is leading to a significant increase in payment via app or online (this triggers the CNP provision which are the most expensive credit card fees possible). We already do see many online restaurant portals charging extra for menu items and so forth. There really isn't a viable online debit network in the US that isn't owned by Visa/MC these days. Many other countries have these options which work well for online purchases of these type without having a significant increase in the fees.

I am still pondering on what happened to all of these credit card benefits that essentially disappeared overnight (extended warranty, price protection, travel benefits, etc.). One could argue that credit card issuers are always trying to increase their profits. But they have also been doing that via higher interest rates (or more spread between key published rates and what they charge on cards), other fees, etc. I do believe MC and Visa were helping issuers negotiate these insurance policies historically. I actually am now thinking that the decision to remove these benefits is in part of preparation to some sort of new discount fee showdown with merchants still to come. If these surcharges become more prevalent, the fastest way would be for Visa/MC to cut rates dramatically (remember surcharges must be based on what is paid). I think that could stop the surcharge issue pretty quickly.

AmEx continues to report increases in reward costs. We will have to see if Chase says a similar message. Now AmEx has lots of padding due to their high annual fees, but I am unsure how that appears across the rest of the issuers. There does appear to be a pretty big battle for the wallet share at the moment with people who spend a lot on card having too many options on where to place that spend. Some of the deals such as Capital One offering targeted 4% rebates for mostly dormant cardholders (and then promptly getting Plastiq, a surcharge vendor, to lose Capital One access) are all interesting. This means that the issuers are having to drive volume and spend money to get that marketshare. Almost none of it benefits the merchant....

Did it cost that restaurant 3.5% to run your card? Would they have removed the surcharge had you used a debit card instead? If one of those wasn't going to be true, they're not following the surcharge rules.

Given that Durbin caps major issuer debit card surcharge at 0.05% regardless of how the card's run, it's not going to be as big of an impact as you're thinking.

Also, it is possible to route debit cards over non-Visa/MC for card not present transactions. Amazon, for instance, has done it for a while.

It was also traditionally a lot more difficult to take advantage of those benefits. Thanks to social media and online shopping, that's not really the case anymore--meaning that those benefits could very well be money losers for them even if interchange were guaranteed to always be at the same levels.

A lot of other places didn't see significant reductions in interchange until the government took action. If (and that's a pretty big if) surcharges become more common, the credit card networks will only reduce them the minimum amount necessary--and probably only for a subset of merchants.

The owner claimed that it cost more than the surcharge for him to run the card, with my component (co-pay) being necessary for him to defray the cost of the beautiful renovations that he's done to his place recently.