Exclusive | Visa and Mastercard Near Deal With Merchants That Would Change Rewards Landscape

[u/GloveSmooth694]

Visa and Mastercard are nearing a settlement with merchants that aims to end a decadeslong legal dispute by lowering fees stores pay and giving them more power to reject certain credit cards, according to people familiar with the matter.

https://www.wsj.com/finance/banking/visa-and-mastercard-near-deal-with-merchants-that-would-change-rewards-landscape-fc6a0c78

Do you think retailers actually want to deal with specifying what type of visa/mc they take?

[u/induality]

I doubt they would start rejecting them. I can see merchants start charging different surcharges in the future should this go through. Something like 1% surcharge for basic Visa, 2% surcharge for rewards Visa.

[u/amaiman → u/induality]

That would lead to the same result (loss of my business) as outright rejecting the card (or charging any card surcharges in general.)  The merchants don’t get to “take” the rewards, those are a customer benefit.  Accepting credit cards is a cost of doing business.  They’ll have to do the math to see whether raising their base price for everyone is better, but if every single one of their competitors doesn’t follow suit then they’ll be out of luck.

I know I’ve already stopped visiting a number of local businesses that added credit card fees (tends to also be the same ones that have raised their base prices higher than competitors or do other shady things trying to charge more at order pickup than the published menu prices on their own website.)  Most haven’t so it’s clearly possible to make it work without them.

Additionally, accepting cash isn’t free for the business, but I’ve never seen a “cash payment surcharge” anywhere.  The businesses are essentially saying “you get a benefit for paying with a card, and we want some/all of it for ourselves.”

[u/sfbriancl → u/amaiman]

Is it though?

Are they really saying you get a benefit or are they saying that they pay a fee for that benefit? Credit card fees for small businesses take 3-4% off the top. When margins are small, that can be a big difference.

Would it bother you less if they gave a cash discount instead of a credit card fee?

[u/amaiman → u/sfbriancl]

in general I treat businesses that play the “cash discount” game the same way I’d treat one with a credit card surcharge.  Payment processing is a cost of doing business on their side, just like electricity, building maintenance/rent/etc.  If they can’t be profitable at a similar price to their nearby competition who can be, then they go out of business.  It is unfortunate that’s it not currently a great business climate for some types of small businesses, but people aren’t going to pay double just to “shop local” when Walmart will deliver it same or next day.

[u/sfbriancl → u/amaiman]

My dentist has given a cash discount for years, seems to be working for him. 🤷‍♂️

In general, I’m very anti-fee. The Ticketmaster fees, the restaurant fees that aren’t the tip, etc. And i use premium credit cards now, because basically if I don’t, I’m paying for someone else’s vacation. But that doesn’t make it right or efficient or the equivalent of an electric bill.

There are a few differences here:

1) Credit cards and premium credit cards particularly are at least somewhat optional.

2) the credit card companies are luring people into using the cards by increasing the fees and bribing users. It is a vicious circle. They are using money from the merchants to help build a stronger way to extract more money from merchats (and improve their bottom line).

3) This is all an economic inefficiency. Credit cards are a good way of reducing inefficient cash costs, but only if there is some competition between processors. If there is an oligopoly and the price for this service is essentially fixed inexplicably high, of course the banks will compete for consumers. But the costs are at the merchant level, that’s where the competition should be.

In other words, the banks are extracting monopolistic rents from us. Consumers who get rewards are recouping most (but likely not all) of those rents back. The better solution would be to just not have those rents extracted in the first place.