Toronto Star article on credit card fees

[VivienM]

http://www.thestar.com/business/article/545726

What amazes me is that it seems it costs MORE for merchants if you pay with a Visa Infinite-type thing than with some "ordinary" card...

[angel_wing0]

yeah i thought we all knew that...it costs more for the merchant if we use platinum/infinite type cards.

[Newbieinvestor]

Can you sum up what they say?

I refuse to read the Star due to their left wing big government bias and being a mouthpiece for the Liberals.

They always rant about business, landlords, conservatives, yet keep quiet on government corruption and when I lived in Toronto I received monthly calls asking me to subsribe (hmm, business!) For such a paper, they certainly have some interesting classified ads (money!)

However, this could be a good article.

[Jucius Maximus]

Considering that studies have shown people are willing to pay more on average (something like 12-18% more) than when paying cash, I think the retailers and credit card companies are coming out on top.

The losers are the people who spend outside their means and then get bogged down with interest payments.

[angel_wing0]

Considering that studies have shown people are willing to pay more on average (something like 12-18% more) than when paying cash...

i have to agree, nothing beats free 30 day loans ...but 12-18% more seems kinda high.

[chicadam]

Basically when you use your credit card, the merchants pay a processing fee, and depending on which card the charge could range form 1.7% to 2% of the purchase.

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Merchants should not ***** about this fee, they get people spending on things they may otherwise would reconsider. 2% is high but its worth it, merchants get there money while banks have to chase for it and absorb the interest, that's worth the 2%.

[Jucius Maximus]

i have to agree, nothing beats free 30 day loans ...but 12-18% more seems kinda high.

It's from a Dun & Bradstreet study. D&B is a business information company dating back to 1841.

I think it might not be 12-18% higher for RFD users, but we don't represent an aggregate of how most people act.

[angel_wing0]

It's from a Dun & Bradstreet study. D&B is a business information company dating back to 1841.

I think it might not be 12-18% higher for RFD users, but we don't represent an aggregate of how most people act.

indeed, to be honest i wouldnt want to pay more than 10%...lets say if i m given a choice to pay say, $630 with cash or $700 with cc, even if its the 2% cashback amex, i m willing to pay cash and get the savings.

[tng11]

indeed, to be honest i wouldnt want to pay more than 10%...lets say if i m given a choice to pay say, $630 with cash or $700 with cc, even if its the 2% cashback amex, i m willing to pay cash and get the savings.

Unfortunately it's not like we really have a choice as CC fees are built into a lot of stuff we buy, only thing I can think of are asian restaurants who give a cash discount of like 10% where you really save by using cash, otherwise it's just a reality we have to live with. And I have this bad feeling that a lot of places that give these heavy cash discounts (10%) are avoiding taxes and I do not want to support businesses that do so.

What really pisses me off is some places have that "minimum" BS and if I had the time like the people on creditboards, I'd report each and every one of them. Or those businesses who subjectively take credit cards, worse case was I bought $40 of stuff at a place at St. Lawrence Market and they refused to take CC because it would "cost them too much", even though they have a sign saying they take Visa.

[Potsman]

Basically when you use your credit card, the merchants pay a processing fee, and depending on which card the charge could range form 1.7% to 2% of the purchase.

------------------

Merchants should not ***** about this fee, they get people spending on things they may otherwise would reconsider. 2% is high but its worth it, merchants get there money while banks have to chase for it and absorb the interest, that's worth the 2%.

I think this article is somewhat misleading.. It's been several years since I had a business Visa and M/C account, however, when I was an account holder the rate does not fluctuate based on the type of CC someone pays with. The Commission rate is established in a contract between the merchant and the bank and does not change unless the contract is adjusted. I can't remember if there was a minimum comission on a transaction but don't think there was.

It does look now though that banks are using this reason to charge more comission to the merchant in order to cover their reward programs. I do feel for the smaller merchants as they are the ones bearing the brunt of this. IN the end, it is the little guy that get's it as they suffer and yet in these hard times, banks are still managing to record quarterly profits in excess of a billion dollars.

[DanielCarrera]

indeed, to be honest i wouldnt want to pay more than 10%

You are missing the point. The fact that people pay more when they shop with credit cards is not a conscious reaction. Nobody thinks "gee, I have a credit card, I think I'm going to spend a little more". Everything happens in the subsconscious and it is roughly speaking an issue of credit cards not feeling like "real money".


There is another human bias, discovered by the field of behavioural finance, which makes people feel that the credit card limit is the amount of money that they are "allowed" to spend. That is, if you have $500 left in your credit card limit, then it's ok to spend $500 on something. In turn, when paying cash, the amount of cash in your wallet is the amount that you are "allowed" to spend. This isn't an overwhelming force, but it does mean that people have a broad tendency to spend a little more when paying with plastic.

Finally, people have a strange utility function, whereby spenditure "now" is more painful than arranging for your future self to spend the same amount of money in 30 days. Again, this isn't an overwhelming force, but it does make people spend a little more when they buy on credit.

[DanielCarrera]

What really pisses me off is some places have that "minimum" BS and if I had the time like the people on creditboards, I'd report each and every one of them. Or those businesses who subjectively take credit cards, worse case was I bought $40 of stuff at a place at St. Lawrence Market and they refused to take CC because it would "cost them too much", even though they have a sign saying they take Visa.

I don't see anything wrong with that. The merchant's job is to make money, just like everyone else. This is part of how the economy works. If the merchant saves money, that money makes it back into the over-all economy. In a competitive market place, the money will make it back in the form of lower consumer prices. In a less competitive market place, the money will make it back in the form of increased spending by the merchant, who is also a consumer. There is nothing wrong with the merchant wanting to save money and as a consumer you will, in general, directly or indirectly benefit if the merchant removes an external source of expense. Every dollar that the merchant has to pay in credit card fees is a dollar that you as a consumer have to pay in the form of increased product prices (it's actually a little worse than that, thanks to sales taxes). Therefore, you should be supportive of a measure by the merchant to reduce this external cost.

[dealtacular]

I think this article is somewhat misleading.. It's been several years since I had a business Visa and M/C account, however, when I was an account holder the rate does not fluctuate based on the type of CC someone pays with. The Commission rate is established in a contract between the merchant and the bank and does not change unless the contract is adjusted. I can't remember if there was a minimum comission on a transaction but don't think there was.

It is now a higher rate for Infinite cards only, AFAIK. This is a recent change.

[Jaytee]

Another example why the 2% cashback Amex is awesome.

[VivienM]

There is another human bias, discovered by the field of behavioural finance, which makes people feel that the credit card limit is the amount of money that they are "allowed" to spend. That is, if you have $500 left in your credit card limit, then it's ok to spend $500 on something. In turn, when paying cash, the amount of cash in your wallet is the amount that you are "allowed" to spend. This isn't an overwhelming force, but it does mean that people have a broad tendency to spend a little more when paying with plastic.

Finally, people have a strange utility function, whereby spenditure "now" is more painful than arranging for your future self to spend the same amount of money in 30 days. Again, this isn't an overwhelming force, but it does make people spend a little more when they buy on credit.

There's also something else: many people don't carry tons of cash. It's harder to make an impulse purchase if you have to find your bank's nearest ATM (or get robbed in fees) and withdraw cash, then go back to the merchant and buy the thing.

And what if it's 5:45 and the store closes at 6? Then you have to come back the next day....