New Credit Card Laws

[Clodfobble]

I do think educating consumers about fees to the merchant is valid. I had never thought about it until a daycare several years ago gave a "discount" if you paid by check instead of card, and also charged even more if it were a rewards card. I had no idea before then that those rewards are paid for by the merchants.

Now I do my best not to use a card if it's a small store.

[tw]

Originally Posted by Clodfobble

I had never thought about it until a daycare several years ago gave a "discount" if you paid by check instead of card, and also charged even more if it were a rewards card.

Over a generation ago, credit card companies obtained laws to ban a higher price for credit card transactions. So that you remained ignorant of how much the banks take. Whether the daycare skirted that law by offering a discount would be why we have lawyers and courts.

Credit card companies charge a merchant about 2%. And higher when the transaction is tiny (ie coffee). Productive companies with only an 8% profit margin means credit cards do a serious profit reduction. The profits were so large that credit card companies took a 'remove all stops' attitude when Walmart tried to create their own bank and credit card company. That 2% charge was something like 25% of Walmart's profit on a transaction.

We also know smart cards provide credit card benefits without banks taking a major slice from each transaction. Only America does not use smart cards.

[Lamplighter]

Credit card companies charge a merchant about 2%.
And higher when the transaction is tiny (ie coffee).
Productive companies with only an 8% profit margin means credit cards do a serious profit reduction.
The profits were so large that credit card companies took a 'remove all stops' attitude
when Walmart tried to create their own bank and credit card company.
That 2% charge was something like 25% of Walmart's profit on a transaction.

I realize it's a bit more complicated than this, but I think we are mixing apples, oranges AND bananas.
Not counting long/short term loans ... there are 3 basic sales modes:

Cash: You pay the merchant in cash $
Debit card: You use a plastic card to pay cash $ directly from your bank account
Credit card: You use a plastic card to borrow $ from the card company.

For a debt card, the merchant immediately has the $ in his/her account,
and for all intents and purposes the transaction is just like cash $.
The actual cost is the miniscule cost of a computer transaction.

For a credit card, the company is entitled to a fee for making
that short term advance of cash $ to the merchant.
Since the merchant still immediately has the cash $ in his/her account,
that fee is a "cost of doing this kind of business"

If the merchant doesn't like this "cost of business", it becomes a his/her decision.
Will he/she lose customers if they don't accept "credit" cards.
But there should be no significant fee for any "debit" card.

For the customer, the decision is only whether to patronize a business that charges more for using a "credit" card.

IMO, customers need not worry about what % of profit the merchant
is paying for a "credit card" transaction ... that is his/her decision.
But where the issue for customers lies is if the merchant charges less for cash $
than for BOTH "debit" AND "credit" kinds of plastic transactions.

Remember:
If your credit card is hacked, it's the plastic card company's problem.
If your debit card is hacked, it's your problem to prove to your bank it's entirely their fault ... Lot's of Luck !

.

[tw]

Originally Posted by Lamplighter

Not counting long/short term loans ... there are 3 basic sales modes:

A merchant should charge according to the transaction method. Debit cards costs had increased to about 1.5% per transaction. Began dropping to around 1% only after the Federal Reserve capped transaction fees.

The cap meant a debit card transaction could be as much as 21 cents. Why, when banks took money directly from the debit holder's bank account? Their costs irrelevant to the transaction fee since consumers are kept ignorant. Debit cards became even more profitable than credit cards. With charges far exceeding costs.

Credit and debit card costs must be opaque to consumers to protect high profit margins. Smart cards are also a threat to those profits. Innovation (ie smart cards) means transaction costs are even less - therefore another threat to high profits margins.

Other transaction methods include a bank draft or checks, account with the store, and smart cards. Also threats to bank profits IF consumers actually know what banks really charge. Banks need consumers to stay ignorant by banning surcharges for credit or debit card transactions and by keeping smart cards from consumers.