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Visa and Mastercard agree to lower average credit card interchange fee below 1%

ca.news.yahoo.com

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Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#51

Post by rahimnathwani »

The article says:

  On Thursday, the government announced a deal with the two card companies that will reduce interchange fees for in-store transactions to 0.95 per cent, on average.
And then claims that this means:

  That means on a $100 purchase, if a customer pays with a credit card, the retailer will get at least $99, where they previously would have kept as little as $97 in some cases.
This is wrong! Interchange is what banks pay to other banks. It's not what retailers (the acquiring bank's customers) pay.

So, the retailer's bank will get at least $99.

The article is suggesting:

* Customer pays $100

* Retailer's bank pays $0.95 cents to the cardholder's bank

* Retailer gets $99 or more.

If this were true, the retailer's bank would be left with 5 cents or less. This seems implausible. The retailer will almost certainly get less than $99.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#52

Post by dguest »

woodruffw wrote: post #27
Waterluvian wrote: post #4

> That means on a $100 purchase, if a customer pays with a credit card, the retailer will get at least $99, where they previously would have kept as little as $97 in some cases. I absolutely love the heavy lifting “as little as” is doing here. > Businesses with annual Visa sales volume below $300,000 will qualify for the lower fee, as will those who do less than $175,000 from MasterCard. That’s revenue, not profit. S…

> I absolutely love the heavy lifting “as little as” is doing here. My understanding is that grocery store margins are typically between 1% and 3%, so even "small" shifts in the interchange rate can have massive impacts on their bottom line.

I would assume that grocery store margins are that low because they price competitively, so this will just drop prices by a few % and the grocery store margins will stay the same.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#53

Post by Dalewyn »

woodruffw wrote: post #27
Waterluvian wrote: post #4

> That means on a $100 purchase, if a customer pays with a credit card, the retailer will get at least $99, where they previously would have kept as little as $97 in some cases. I absolutely love the heavy lifting “as little as” is doing here. > Businesses with annual Visa sales volume below $300,000 will qualify for the lower fee, as will those who do less than $175,000 from MasterCard. That’s revenue, not profit. S…

> I absolutely love the heavy lifting “as little as” is doing here. My understanding is that grocery store margins are typically between 1% and 3%, so even "small" shifts in the interchange rate can have massive impacts on their bottom line.

Not to mention parent poster neglected to take the wider picture into account.

That $2 dollar difference comes out to $20 over ten transactions, $200 over a hundred transactions, $2000 over a thousand transactions, and so forth. That is a huge difference.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#54

Post by ramraj07 »

godelski wrote: post #42
ramraj07 wrote: post #41

Earlier quoted context omitted.

Nationalize a universal payment interface like india did. India, a very corrupt, bureaucratic place with billions of people did it. There’s no excuse but lobbying. Credit card rewards are evil. They incentivize crafty behavior to secure miles or whatever and shaft normal people who just want to live life and get what’s equitable without playing shenanigans. I’d rather live in a world where when you pay for a coffee,…

> Nationalize a universal payment interface like india did > a very corrupt, bureaucratic place with billions of people did it. You're not making a great sell here... you're just saying that this is a thing that a corrupt country does and therefor others should.

I said it’s something even a corrupt country was able to do that is universally loved and accepted. The fact that the US isn’t able to do it suggests it’s in someways far more corrupt than even India.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#55

Post by ulfw »

kondro wrote: post #18

You don't want to see the Australian interchange rates… https://www.visa.com.au/about-visa/interchange.html

Australia is the only country I've ever been at that heavily discourages using a credit card because almost every single shop charges you 1-2% MORE for using a credit card, including international hotel chains, restaurants etc. THAT is something that should be outlawed.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#56

Post by e63f67dd-065b »

godelski wrote: post #50
AmericanChopper wrote: post #23

Earlier quoted context omitted.

> Credit card rewards are a regressive tax on the poor Maybe credit card loyalty systems are specifically, but if you want to make comments about the entire system of credit cards then you should look at the entire system of credit cards to figure out who’s subsidising who. On the other side of credit card rewards the fact that revenue from high spenders subsidises credit account defaults. If you chose to only focus…

For those not understanding this comment, think about microtransactions. Who "subsidizes"? The people that can spend a lot but are also addicted. Connection? People that spend a lot on credit cards and gather late fees but not enough to ruin their credit or lose their card. You know who banks love? That person who has 5 overdraft fees on their checking account per month while maintaining a healthy balance in their sa…

Yes, of course there's more nuance than "fuck the poor". I almost never attribute malice to any actor -- the structural effects of systems are mostly organically evolved over time, nobody woke up one morning and designed the system to fuck over anybody in particular, just to make money.

I'm basing my view on the classic Boston Fed paper https://www.bostonfed.org/publications/public-policy-discuss... . I don't keep up much with the literature, so you can probably find rebuttals and more complex models in the last 13 years of economic research, but I think the big picture largely stands -- all prices are increased by 200bps, and super-prime customers get most of it back as a rebate on their credit cards.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#57

Post by 55555 »

ramraj07 wrote: post #41
adrr wrote: post #35

Earlier quoted context omitted.

Cash is more expensive to take as a payment method than interchange unless you’re cheating on taxes.

Nationalize a universal payment interface like india did. India, a very corrupt, bureaucratic place with billions of people did it. There’s no excuse but lobbying. Credit card rewards are evil. They incentivize crafty behavior to secure miles or whatever and shaft normal people who just want to live life and get what’s equitable without playing shenanigans. I’d rather live in a world where when you pay for a coffee,…

FedNow is launching soon. It won't support chargebacks or reversals, which merchants would love, so they may offer it as a payment method (if this is possible). Consumers will then be able to save a few % at the expense losing their ability to contest the transaction. Unless credit card agreements mandate the price be the same regardless of payment method, or something.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#58

Post by e63f67dd-065b »

arcticbull wrote: post #48
e63f67dd-065b wrote: post #45

Earlier quoted context omitted.

Maximum interchange is public, but most of those numbers are lies -- big merchants negotiate their own rates, and big merchants are a big chunk of most CC spend (Amazon does not pay a number that appears on that sheet, for example). Costco (in)famously negotiated that number down to basically zero. It's true that Visa/MC technically doesn't keep any of the interchange -- but the interchange goes to the issuing bank,…

I’m pretty sure their average take is the number I provided from their FY2022 statement.

The link shows their consolidated revenue across the entire world. If you have a source that breaks it down to the US, and specifically US revenue on their credit products (Visa is by far the largest issuer of debit cards, for example, and debit cards got their fees capped by the Durbin amendment), I would love to take a look.

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#59

Post by 55555 »

godelski wrote: post #42
ramraj07 wrote: post #41

Earlier quoted context omitted.

Nationalize a universal payment interface like india did. India, a very corrupt, bureaucratic place with billions of people did it. There’s no excuse but lobbying. Credit card rewards are evil. They incentivize crafty behavior to secure miles or whatever and shaft normal people who just want to live life and get what’s equitable without playing shenanigans. I’d rather live in a world where when you pay for a coffee,…

> Nationalize a universal payment interface like india did > a very corrupt, bureaucratic place with billions of people did it. You're not making a great sell here... you're just saying that this is a thing that a corrupt country does and therefor others should.

Are you American? Have you lived abroad? Here in Thailand (a "poor" "third-world" country) all individuals and businesses can send instant money transfers with no fees at all 24/7. It's an incredible system. I think the truth is that it has less to do with corruption and more to do with the fact that people who implement technology first end up later with, on average, worse technology. (If you build the first rail system in the world you'll have the worst rail system in 50 years.)

Re: Visa and Mastercard agree to lower average credit card interchange fee below 1%

#60

Post by thegrizzlyking »

ramraj07 wrote: post #41
adrr wrote: post #35

Earlier quoted context omitted.

Cash is more expensive to take as a payment method than interchange unless you’re cheating on taxes.

Nationalize a universal payment interface like india did. India, a very corrupt, bureaucratic place with billions of people did it. There’s no excuse but lobbying. Credit card rewards are evil. They incentivize crafty behavior to secure miles or whatever and shaft normal people who just want to live life and get what’s equitable without playing shenanigans. I’d rather live in a world where when you pay for a coffee,…

Miles just allow airlines to transfer portion of business expense for personal use.
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