mhop1027

$1 billion in gift cards went unredeemed last year. When you as a consumer either choose not to, or forget to, redeem a gift card everyone on the other side of the equation wins. Obviously, that problem isn't persistent in the FT community. And it's probably less of an issue with the bank issued cards, but I bet there's still some money being left on the table by less knowledgable people losing cards, throwing away cards with a balance, or forgetting to unload them.

http://www.marketwatch.com/story/1-b...med-2013-11-27

prasha11

If U were a program director, U will lose the job in a hurry....The points award seats availability is elastic depends on the traffic, there is buffer capacity (15%) for the future traffic growth. they always have few non-revenue seats which is valued at $'0' in their math, and its availability is at their discretion and not when U want to fly!

Andy2

http://www.forbes.com/sites/grantmar...r-the-economy/

I am not quite sure I understand why the author feels MS is bad for the economy, he offers little evidence of such, nor do I believe he reaches a conclusion that is consistent with the sensationalist title. But a little concerning that the article is in such a mainstream publication.

prasha11

U know the author is paid to write.
Reporters and Politicians are paid to hide the facts and spin the stories. The big money is in how well they can do it.

steventravel

He looks like someone I have seen at a FTU event. Hmmmm..............

MsArbi

Deleted.

blue432

I frequent a local Walgreens a lot, but do my ms at cvs because they accept cc payment for gcs.
Today I noticed a sign in Walgreens by the gcs stating "no checks, cash,credit or debit only". I asked the manager if this was correct(we are on a first name basis-again, I go there A LOT). He confirmed that it was correct, that they have been accepting cc as payment for a while.
I then asked if they lose money, due to the cc processing fees. He stated that they pay no cc processing fees on the sale of giftcards, and said that the $4.95, $5.95,etc purchase fees was all profit to the store.

KashG

This is a typical example of someone who doesn't understand economics writing a sensationalist article for a reader base that also does not understand economics.

It gets a lot of clicks.

cfarley137

I thought the article was quite reasonable. The conclusion was that there was a relatively small negative effect on the economy from manufactured spend because the number of consumers who engage in it was relatively small. I agree that if 20% of all Americans engaged in it, we would have some serious problems and the system would be unsustainable. At the very least, manufactured spenders are marginally inflating the GDP, but it doesn't constitute "useful" economic activity.

I'm in the retail industry, and my guess is that CVS pays about 1.5%-2% in fees per credit card transaction. This is the "interchange rate" charged by Visa/MC and it is typically not negotiable unless you have Wal-Mart type scale. And even then, it might be a tough slog to negotiate the interchange rate. This is why warehouse clubs like Sam's Club and Cosco don't take Visa/MC and have negotiated lower interchange fees and exclusive deals with the smaller players like Amex and Discover.

The big question is whether the CVS POS submits additional transaction level metadata to the credit card processors about your gift card purchases. Some processing software can submit this so-called "level 3" data, which shows line-level detail like SKU, quantity, item description, unit of measure, and discounts. If that's the case, then Visa/MC should certainly know you are purchasing gift cards, and would already have the data needed to charge you cash advances or exclude rewards on certain portions of your purchase. However, I'm not aware of consumer/retail POS software that does level 3 transaction processing. In my research level 3 processing data was specifically designed specifically for processing Purchasing, GSA, Commercial, Corporate, and other Business cards, and I've not seen any reference to using it in consumer retail POS applications.

Arbitrage650

If you just look at Manufactured Spend in a vacuum, then the credit card companies are probably losing since, theoretically, a person would only MS in profitable situations.

However, in the big picture, the money lost by cc companies to MS is vastly outweighed by those who carry a balance and pay interest on their "awards" cc. To these banks, losing money to MS falls under the price of doing business and it is a very small price (relatively).

cbn42

According to the Visa supplier locator, only a few stores supply level 3 data. I found a couple of Rite Aid's that provide "Level III Summary". As far as I can tell, CVS does not.

MsArbi

Deleted.

cbn42

I would imagine that a good chunk of CVS's "revenue" is payments from insurance companies for prescriptions, which is obviously not paid via credit card. Subtract this and their revenue is much smaller. Even if they are still one of the largest retailers, I have never heard of negotiating on interchange fees. Remember that interchange is paid to the acquiring bank, not to Visa/MC. The acquiring banks might negotiate with merchants on the discount rate (which includes the interchange fee). Materials from Visa and MC suggest that acquirers can negotiate interchange fees with issuers, but given that there are several card issuers in the US, negotiating with each one is likely not practical for an acquirer, and I don't see any reason why an issuer would be willing to negotiate a lower interchange fee given that they are entitled to Visa/MC's default interchange fee in the absence of a separate negotiation.

That is my understanding, but I am not privy to any insider information, and if Visa/MC were cutting special deals to certain stores, I'd imagine they wouldn't want to publicize it.

AscorbylPalmitate

no one smart reads Forbes nor WSJ. It is usually Bloomberg Businessweek or NYT DealBook,

AscorbylPalmitate

GDP is a dumb measure. 'create a problem, present the solution" increases the GDP. look at the healthcare and bigPharm industry.