re: 3% Credit Card Fee

quote:

---

My problem with this is that the merchant is allowed to offer credit without having to have a credit and collection department. Accepting CC is outsourcing the credit function to increase sales, yet now the merchant does want to pay the outsourcing fee that helps them increase sales.

---

I get what you’re saying in principle, but I think that’s a somewhat antiquated way to look at credit cards nowadays.

I don’t think that specific value proposition - outsourcing credit/debt collection - really matters for the vast majority of merchants today. A gas station isn’t in a position to stop taking credit cards and start running their own credit accounts in the first place. Customers don’t want to deal with that.

If you look at merchants who deal with larger purchases, I don’t think it really applies to them either. A car dealership who offers financing options is not absorbing the cost of collections. In fact, they’re getting a kickback while still outsourcing it. The cost of collections are built into the bank’s rates. But if you use a credit card, they have to pay for the transaction. Why is it different?

IMHO, the cost associated with collections/debt service should be built into credit card users’ rates as well. Especially when you look at the higher fees from AMEX and Discover. There’s no benefit to the merchant for processing via AMEX instead of Visa/MC. The customer is the one getting value, in the form of cardholder benefits and/or rates. So why should other customers have to subsidize those benefits?

I guess my position is this: I don’t really like blanket 3% fees but I also don’t have a problem with the general idea of merchants passing those costs back to the customer. In a perfect system, I’d think the merchant fees would be basically equal for credit and debit purchases and it would be a non-issue.

ETA:

quote:

---

I've seen many merchants take advantage of a 3% processing fee and surcharge 4.5%, blaming the banks, but the merchants have gotten greedy and don't want to incur legit costs of offering credit.

---

I do agree that it’s shitty when they try to take advantage for an extra profit, which I think is likely still happening even with a 3% blanket fee to customers.