Broadly, the interlocking restraints set and maintained by the defendants have forced merchants that accept any Visa and Mastercard credit card to accept all such cards, regardless of cost, thereby eliminating any incentive for issuing banks to compete by lowering their fees, the suit says. The lawsuit claims the challenged restraints have also prevented merchants from being able to steer customers to lower-cost payment options—for instance, by surcharging based on a customer’s use of a particular card. These and other restraints have prevented competition among issuing banks and other credit card networks, allowing the financial giants to raise their fees every year “without consequence,” the case alleges.
That is the crux of the problem though. By adding fees and then contractually forbidding merchants from passing those fees on to credit card customers, it is forcing non card users to pay for card users fees since the fees are embedded in prices. Plus they're even giving card users kickbacks in the form of points. So non credit card users end up paying more credit card fees than credit card users which is nonsense.
> So non credit card users end up paying more credit card fees than credit card users which is nonsense.
The business just makes more money on cash transactions. It would be interesting to find if the cost of cash handling/losses is comparable to the card processing fees.
It is no longer permitted for payment networks to prohibit discounts for cash or surcharging use of credit.
A few of the merchants I use regularly have credit surcharges now. It's pretty common at gas stations near me. Almost all business with my state or local government has a 3% fee for card use.
Fundamentally, I agree with the lawsuit. Logistically, this seems like a bit of a nightmare. No longer will it be "CC purchases will have a 2% extra fee." Instead it will be "If you have a Chase Spark card, the fee will be 4%. If you have a Costco Visa card, it will be...".
If merchant fees are < 1% if I use debit and ~ 4% if I use a rewards card, but merchant rules (set by the networks and enforced by the acquiring banks) say they can't accept amex and surcharge rewards cards but not debit cards, they can't reduce their costs by pushing me towards debit cards or non-rewards cards.
There's some other things they're challenging that could allow for more competition.
Removing the 'No-Bypass Rules' could allow for lower cost clearing if the acquiring bank is the same as the issuing bank and the potential for lower cost clearing when the the acquiring and issuing banks have a clearing relationship outside of the major networks.
Removing the 'No-Competing-Marks Rules' could allow for a card to be Visa + some upstart lower cost network; if the merchant supports it, great, if not, they can still process payment through Visa. I think US law requires ATM cards to be usable through at least two distinct networks, and there's at least some diversity in ATM networks as a result.
A friend of mine owns a restaurant that is pretty remote so lower business. He told me he doesn't take credit cards because he would be paying them a percentage for everything.
It is kind of like the mafia to a small guy like him.
I think he does do a few phone apps.
A waitress at another cash-only restaurant told me, worse than customers who hear they won't take credit cards are the apple pay folks. "They really get annoyed when they don't get their apple pay"
Franchises don't care. They can raise prices monthly or even dynamic price if they want to.
Kind of sucks for society because lots of the best/greatest restaurants are not franchises.
Depending on which sources you believe, the cost of handling cash can actually exceed credit card merchant fees.
Many cashless businesses, including bars and restaurants, do it specifically because handling cash is expensive if you actually do a full accounting for it.
I get what she's say, but it is kind of a weird comparison, because Apple Pay is more-or-less payment network agnostic. You can pay via credit, debit, or transportation card (and possibly others that I haven't used) on Apple Pay.
In the US you even have Apple Cash which is pretty close to digital cash equivalent... not really workable for a business with the $2k/week limit though.
The reality is that for most businesses, accepting credit cards, with their fees, results in more revenue overall (more customers).
If your business is low volume, cash only makes more sense.
A lot? Not sure about that.
>I think he does do a few phone apps.
Not if he's cash only he's not.
The European Union caps consumer card interchange fees at 0.2% for debit cards and 0.3% for credit cards
https://eur-lex.europa.eu/EN/legal-content/summary/fees-for-...
https://en.wikipedia.org/wiki/Durbin_amendment
This is explicitly about credit card fees.
and don't pretend like it's not possible, it's obviously possible: take the system and lower the fee to something proportional to the price of providing the service
if credit card rewards programs have to go to make it economically viable -- awesome, that would be a second win.
it's possible that with the fees removed cards still have rewards because the premium cards still want your business (they have other mechanisms for making money than just interest + fees, cf https://www.bitsaboutmoney.com/archive/how-credit-cards-make...)
however I maintain that credit card rewards are a net drain on society. Paying for things should just be paying for them, not a complicated system that generates fake money points that you can then turn around and spend in bizarre ways if you remember to. The whole system is stupid.
The current status quo is a result of free association. If people prefer to have credit card debt or use rewards programs poorly then I have no issue with continuing in this manner.
I totally agree. I propose the opposite of what this lawsuit is fighting: let's merge Visa and Mastercard. Throw in AmEx while you're at it. Since the concepts of competition, interoperability and standards are too foreign to people and having too many types of payment processors is confusing, we need to have a single payment processor. That way we can grumble at only a single party when they jack up processing fees for editing database rows or straight up debank us. Efficiency!
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