topic Re: Offsetting credit card processing fees in General Credit Topics

Offsetting credit card processing fees

Shmike — Sun, 21 Jan 2024 04:40:03 GMT

It's my understanding - at least in my home state of New Jersey - that their credit card processing fees. Do these fees in any way offset the amount of points or cash back we get on certain cards? Or is this just all superfluous, and we're just essentially breaking even? I'd appreciate any insight. Thanks very much!

Re: Offsetting credit card processing fees

GZG — Sun, 21 Jan 2024 05:04:37 GMT

@Shmike wrote:
It's my understanding - at least in my home state of New Jersey - that their credit card processing fees. Do these fees in any way offset the amount of points or cash back we get on certain cards? Or is this just all superfluous, and we're just essentially breaking even? I'd appreciate any insight. Thanks very much!

merchants need/do raise their prices in response to cc processing fees, it's an extremely large expense. the price of the thing just goes up, it's not a line item called 'credit card processing fee'

Imagine losing 3% on every sale you make?

in a world where all processing fees were 1%, merchants wouldn't have raised their prices as much as they have

but based on what we've seen in a post-pandemic world, merchants won't lower prices even if cc processing fees are slashed.

so basically, we're still ahead because it's doubtful prices would go down even if the fees went away.

Re: Offsetting credit card processing fees

markbeiser — Sun, 21 Jan 2024 10:47:19 GMT

Basically merchants have already set their pricing to cover the cost of accepting credit cards, so if you are not earning rewards/cash back by running your spending through credit cards, you are paying for something you are not getting the "benefit" of.

Re: Offsetting credit card processing fees

SeaProbe — Sun, 21 Jan 2024 16:52:31 GMT

@GZG wrote:
in a world where all processing fees were 1%, merchants wouldn't have raised their prices as much as they have

but based on what we've seen in a post-pandemic world, merchants won't lower prices even if cc processing fees are slashed.

so basically, we're still ahead because it's doubtful prices would go down even if the fees went away.

There were a number of studies after the Durbin amendment mandated reduced debit card processing fees. Merchants did not lower prices but rather pocketed the margin. Also, as banks lost those debit card processing fees, they responded by making up for that revenue in other ways… adding monthly service fees, raising the minimum balance to avoid monthly fees, eliminating rewards on debit cards. In practice, this was a give-away to the big merchants like Walmart and HomeDepot that lobbied hard for its passage although it was masterfully marketed as helping the consumer.

Keep in mind, the alternative to cards had been to accept checks which had a high handling cost not to mention bounced checks. The CC processing fee was significantly less costly to merchants - especially small merchants - than cash & checks.