bigbuy

It was impossible to inflate my pricing because of two factors.
First, it was a supermarket which is highly competetive at around 2% net margins in the USA
Second, I was surrounded by 3 Walmart superstores which complicated pricing matters.
The only reason I started accepting credit cards was when the Federal Government mandated swipe cards for Food Stamps and changed the name to EBT. Since I was required to install the system, I just added credit cards to the mix.

tmiw

Debit network acceptance in the US is terrible, so dropping CC acceptance would effectively be the same as going back to being cash only for most merchants. Especially since some small business POS solutions (such as Square) don't even give you the option to route over debit networks in the first place.

OtherGuy

It's not really 3%. It's closer to 1%, but merchants are too stupid to shop around. If they did, they'd find other options closer to the true interchange rates, and getting it as low as 0.05% for debit cards.

hfly

And the largest merchants/chains effectively pay far less than what is quoted above through a variety of means, whether through their volume, the marketing payments that they receive or other means. I would posit that the top 100 merchants in the US effectively pay less than 1% when everything is included (which is difficult to calculate ON PURPOSE. What do you think that Costco, which exclusively accepts only Visa pays?! Much less than that (especially as they are a private "experience"). I find all the "small merchant" verbiage to be a joke. How many times have I been in a genuine "small merchant" and been offered 5,10,25% off if I paid in Cash? Is it more about the small merchant being "killed" by a 2-3% cost, or the fact that the "small merchant" is solely trying to dodge taxes? Similarly as many restaurants are trying to mess with people with all sorts of mandatory and "suggested" fees and commissions, does that 2-3% really make a difference? Same with delivery companies, I very recently cancelled an Uber Eats order, when I found the following: My $68.XX order included a $2.99 delivery fee, an $8.99 harmony fee (or some such other nonsense saying that it was necessary to get drivers wages over minimum wage in that State), A suggested (but automatically built in) 18% tip, and some of these were calculated AFTER taxes. On top of this when I looked directly at the restaurants own website I saw that each of the11 items ordered was a dollar cheaper when ordered direct (including 2 items which went from $2 to $3!) So this means in essence that a $36 dollar order was now going to cost me almost $69 or almost twice as much! So does this included 2.5% even mean anything in this calculation?

tmiw

It's going to depend on your merchant category and the kinds of cards your customers use. If your customers mostly use debit cards or lower-tier credit cards with few to no rewards, sure. A quick look at Visa's interchange document shows that there are still a whole lot of categories that are above 2%, though, even with the lowest tier credit cards.

(BTW, restaurants seem to be paying some of the highest interchange rates right now. This might explain why surcharging seems to be more common at those than most other places.)

In my experience, most of the places that would really rather you didn't pay with a card are still okay with methods that leave some kind of paper trail (such as Venmo or even paper checks). I'm sure there are still some that are trying to dodge taxes but I don't think it's as many as people think.

hfly

Generally I find that they fight it until they cannot anymore, and then just accept the situation. Sort of like how London taxi drivers would never have CC machines, then they did, but they were always out of order, unless miraculously one was taking a 50 quid plus trip, then Uber and others started taking all their cookies and they acquiesced. No restaurant can stay in business unless its margins on food run greater than 30% and beverages 70%, credit cards have been a factor in the restaurant business for over 60 years, an extra point of interchange and other fees is not what can hurt such businesses, whether big or small establishments.

ExplorerWannabe

I don't believe in free lunches and I'm pretty dubious of anything coming out of Durbin's office or mouth. If airlines and hotels need the revenue these loyalty program credit cards generate they will have to make it up with increased prices and fees. The end result will be no better for the consumer.

The big problem with this bill is that we have achieved a general economic stability with regard to the cost of goods and transactions. Some businesses offer cash discounts, others choose to add a surcharge for using credit cards, and still others just roll the charges up into the overall price. The latter solution means people using cash effectively pay for a service they don't use but figuring out the transaction is easier and quicker and many (most?) don't think it's worth the time and effort to save 3-4% on their bill.

At the end of the day, I think this bill is just one more example of legislation that adds bloat to the federal code without making things any easier or cheaper for consumers, producers, or merchants.

jayta78

Personally I think that the airlines & influencers are lobbying hard for that extra 3%. I don't think that it will majorly affect rewards. I don't think we get much in terms of rewards as of such anyway. We've learned to accept the quid pro quo. We think we're getting so much, but it's barely anything. When I heard of this legislation, all I thought was, oh no, I'll just go back to using cash or debit and no credit cards if the credit card companies can't offer me anything except the ability to purchase a large purchase ahead of being able to afford it. The amount of interest that these credit card companies get is predatory. So I don't feel bad that these airlines and VISA/MC aren't getting even more skin off our backs. We as customers need to be more media savy. I mean, they quote the Points Guy to make it seem like they're giving a voice to the rewards customers, but in reality the article is only giving a louder voice to an influencer who will definitely loose their cash cow if this legislation gets pushed through.

Could there be improvement to the legislation? Oh heck yeah. But it's a small step in the right general direction. I think as consumers we should be bolstering our support for small businesses. If God forbid something should deteriorate in terms of talks or communication with global providers, we need to be able to rely on small local businesses to provide for our needs.

tmiw

It's been proven multiple times in multiple countries that cutting interchange directly affects rewards, though. The most recent domestic example being the Durbin Amendment and debit rewards basically disappearing altogether afterward.

I think this is more viable in places that actually mandate real security for debit cards (for example, mandatory PIN for most/all in-person transactions and 2FA for online purchases). There's a lot more risk in using debit cards in the US, unfortunately, which is why many people recommend using credit cards for everything.

(Yes, per the supposed "zero liability" policies of banks and the protections given to us by laws such as the Electronic Funds Transfer Act, you're not supposed to be out money in the event of fraud. But that's not going to help you if that fraud causes you to overdraft and/or be late paying your normal bills.)

Even if we accept that something has to be done to rein in interchange, I don't think this will help as much as people hope. This assumes that it works out much the same way debit did, though, where most stores never bothered running debit cards as anything other than regular Visa or Mastercards in the first place; it's very possible that stores will be a lot more eager to force CC routing over alternative networks this time around, especially if it's easier to hide (due to e.g. not needing PIN either way).

jayta78

However, perhaps the same thing for debit cards can be done as they did with credit cards on Google pay or Apple pay where they come up with a virtual card number linked to the bank account number through the debit card? I think this is a viable alternative for those using debit cards. Personally I'd rather something to be done than keep it at the status quo. Small businesses are dying because locals don't support them enough with pressure on our government representatives to help the entrepreneurs or those who are trying to keep our own local economy thriving instead of all the big box stores and clubs. I love Europe for the reason that small businesses can survive and thrive and provide different and interesting ideas - different from the status quo

tmiw

Debit cards have supported Apple and Google Pay for a while, but unfortunately both of those services still aren't used nearly as often by Americans compared to people from other countries. (For example, the vast majority of people that we saw in Ireland a few months ago were tapping phones and not physical cards.) Even tapping physical cards instead of inserting them still isn't as commonly done yet and might never become the case, especially if certain merchants continue getting away with keeping their contactless readers turned off or otherwise inaccessible to customers.

Smaller stores are always going to pay more simply because they don't put through nearly as much transaction volume, and stuff they could do to get around that (like surcharging for card use) only makes the bigger players more compelling for the average consumer.

On top of that, many smaller stores may not even get the option to route credit cards over alternative networks without having to change their POS system and/or merchant processor. For instance, I don't see Square ever letting merchants route cards other than over the big four networks considering they never allowed debit routing in their entire existence as a company.

fuyao

loyalty programs, yes, but cobranded credit cards? not so much.
EU interchange limit:
for debit: 0.2%
for credit: 0.3%
Visa+MC card scheme fees are up the roof though since they are not limited under the EU law.

So the only 'profit' an airline can make on a co branded card in the EU is 0.3%, and they still have to split that with the issueing bank.
Thats why you don't see many consumer miles earning cobranded cards in the EU anymore.

2 expections: AmEx (since they are not restricted under the EU law) and corporate cards.
Thats why you still see corp. cards with mugh higher cashback offers than consumer cards.

Overall, a limit on interchange fees (and card scheme fees) is good for the consumer, since it brings down the price for the product.
Its easy math, if the merchant has to pay less for payment transactions, they can lower the price.

tmiw

AmEx isn't actually exempt from the EU interchange caps.

The Durbin Amendment didn't really lower consumer prices per this Federal Reserve study. Granted, Durbin's caps were nowhere near as wide-reaching as, say, the EU's caps (not to mention that a significant amount of transaction volume likely switched to credit cards in response, likely contributing to the current bill in Congress today).

Isochronous

Credit cards are great. The smart benefit and the irresponsible and foolish pay. This is a good incentive structure.

moondog

I don't think it's accurate or fair to brand small business owners as foolish and/or irresponsible.