Is Visa taking 2% out of all my transactions?

#1

Post by TekMol » Sat, Apr 30, 2022, 2:39 PM UTC

Today I got an email from Upwork telling me that I now have to pay a 5% fee on top of the payments to freelancers.

What cought my eye is that I can reduce that 5% to 3% if I pay via bank account billing instead of credit card.

Is that because Visa is charging 2% for every transaction?

Isn't that insanely hight? Do they provide anything in return? Or is it just because they have somewhat of a monopoly?

Upwork is processing about $1B of payments per year. While still not making any money on it.

Meanwhile, Visa is taking $20M out of that?

Re: Is Visa taking 2% out of all my transactions?

#2

Post by orbz » Sat, Apr 30, 2022, 2:50 PM UTC

Yep, that’s credit card processing fees. Standard across the industry.

See https://www.bankrate.com/finance/credit-cards/merchants-guid... for further info.

Re: Is Visa taking 2% out of all my transactions?

#3

Post by andymoe » Sat, Apr 30, 2022, 2:51 PM UTC

Typical credit card transactions fees range from 1.5-3.5 percent so the 2 percent is not a terrible deal and businesses usually just eat it in retail and work it into the prices.

Usually there is language in the contract with the processor agreement that prevents businesses from charging different prices for credit card vs non credit card buyers.

Re: Is Visa taking 2% out of all my transactions?

#4

Post by wmf » Sat, Apr 30, 2022, 3:25 PM UTC

Multiple companies take a cut of each credit card transaction: the acquiring bank, the payment processor (e.g. Stripe), the network (Visa/MC/Amex), maybe the issuing bank. The fees add up to 2-3%.

Re: Is Visa taking 2% out of all my transactions?

#5

Post by f0e4c2f7 » Sat, Apr 30, 2022, 3:38 PM UTC

That is correct. Most retailers build this into the price of the item and you have to pay it anyway even if you're paying cash.

Sometimes you may notice that retailers will charge less if you pay cash, or will have a minimum for using the credit card machine. Especially at low volume places. This is because it's possible to even lose money on fee's if it's an especially small transaction.

Visa and mastercard essentially offer an $850B duopoly for payments.

Like most monopolies the quality and price of service is not actually that good.

Re: Is Visa taking 2% out of all my transactions?

#6

Post by humanistbot » Sat, Apr 30, 2022, 3:46 PM UTC

Where do you think that 1-1.5% cashback rewards on your credit card come from? It's your cut of their cut.

Re: Is Visa taking 2% out of all my transactions?

#7

Post by humanistbot » Sat, Apr 30, 2022, 3:52 PM UTC

f0e4c2f7 wrote: post #5

That is correct. Most retailers build this into the price of the item and you have to pay it anyway even if you're paying cash. Sometimes you may notice that retailers will charge less if you pay cash, or will have a minimum for using the credit card machine. Especially at low volume places. This is because it's possible to even lose money on fee's if it's an especially small transaction. Visa and mastercard essentia…

> Like most monopolies the quality and price of service is not actually that good.

I can go all around the world with just a single piece of plastic for payment. Some merchants only take local physical currency, but any merchant that has an internet connection can get a device that will securely charge my account in about 5-10 seconds max, automatically converting between local currencies. It is as close to what science fiction writers in the 1950s imagined. If there is fraud, I as a consumer pay none of the costs. Say what you will about the price and cost to merchants (most of which goes back into my pocket as points/cashback), but the quality of service is fantastic.

Re: Is Visa taking 2% out of all my transactions?

#8

Post by toomuchtodo » Sat, Apr 30, 2022, 4:01 PM UTC

humanistbot wrote: post #7

f0e4c2f7 wrote: post #5

That is correct. Most retailers build this into the price of the item and you have to pay it anyway even if you're paying cash. Sometimes you may notice that retailers will charge less if you pay cash, or will have a minimum for using the credit card machine. Especially at low volume places. This is because it's possible to even lose money on fee's if it's an especially small transaction. Visa and mastercard essentia…

> Like most monopolies the quality and price of service is not actually that good. I can go all around the world with just a single piece of plastic for payment. Some merchants only take local physical currency, but any merchant that has an internet connection can get a device that will securely charge my account in about 5-10 seconds max, automatically converting between local currencies. It is as close to what scie…

If you want to pay 3% more for that privilege (as a transaction surcharge), I think that’s fine, but others should be able to opt out of the rake when there are suitable instant payment alternatives (which there are in 54 countries, with the US getting instant payments next year). Pushing financial specific ISO messages on a bus should cost cents, not percentages, per transaction (US instant payments will cost $0.045 for up to $500k in value transfer, for example [1]).

Otherwise, you’ve got 3% drag on your economy for the benefit of some and the middlemen facilitating extraction. It was magic 30 years ago, today it should be as boring and profitable as residential water or electric service.

[1] https://www.frbservices.org/news/press-releases/012722-fedno...

Re: Is Visa taking 2% out of all my transactions?

#9

Post by disadvantage » Sat, Apr 30, 2022, 4:05 PM UTC

humanistbot wrote: post #6

Where do you think that 1-1.5% cashback rewards on your credit card come from? It's your cut of their cut.

Cashback rewards are largely worthless and so small as to be negligible IMHO. I can understand the extreme-couponing aspect for people who budget down to the penny, but for me it's basically useless.

Re: Is Visa taking 2% out of all my transactions?

#10

Post by junofan » Sat, Apr 30, 2022, 4:06 PM UTC

humanistbot wrote: post #7

f0e4c2f7 wrote: post #5

That is correct. Most retailers build this into the price of the item and you have to pay it anyway even if you're paying cash. Sometimes you may notice that retailers will charge less if you pay cash, or will have a minimum for using the credit card machine. Especially at low volume places. This is because it's possible to even lose money on fee's if it's an especially small transaction. Visa and mastercard essentia…

> Like most monopolies the quality and price of service is not actually that good. I can go all around the world with just a single piece of plastic for payment. Some merchants only take local physical currency, but any merchant that has an internet connection can get a device that will securely charge my account in about 5-10 seconds max, automatically converting between local currencies. It is as close to what scie…

The price is hidden, which is kind of uncool.