I would ditch credit cards the moment all the merchants I use would give me a 2% discount for paying cash. Using credit cards is perfectly rational until then. What's more, it's rational even for credit cards that don't earn any rewards or cash back, let alone ones that do.
Merchants are usually liable for fraud losses (both the loss in good or services + a fee imposed by the bank for the privilege...). This is on top of the transaction costs. Those transaction costs do not cover fraud liability or losses.
>I would ditch credit cards the moment all the merchants I use would give me a 2% discount for paying cash. Using credit cards is perfectly rational until then.
Only if you don't fall behind on payments and start paying the card their exorbitant interest, as most people end up doing.
I'm surprised, because there's a couple of local stores that have a purchase minimum for credit cards but not debit cards (I'm in NYC). Also, I remember Jet.com used to offer a (very small) discount if you paid by debit card specifically, although I think they've stopped that in recent months.
If they have a purchase minimum, it's because they generally have low ticket values, sub $25 average receipt value. They exchange a low percent (as low as 1.00% on average vs ~%1.75) for a per transaction flat rate (say $.25-$.50 per transaction). The minimum is a way of keeping the processing costs in line (sub 3% for example).
The debit cards have different regulations which as far as I understand, don't exist (ie, it's like the old credit card contracts where they didn't allow you to charge a separate price for cash transactions). This is only my assumption.
There was no discussion on what regulations we had to follow for our merchants when it came to bank network transactions(the deals are brokered on a per bank basis, you can see which networks your card supports by looking at the back of the card for instance). Because of the segregated nature of the debit networks, they have less clout than visa or mastercard.
But why would you want to do the credit card company's work for them? That regulation is in place purely because of political bribery by the credit card industry.
The consumer-friendly thing to do is to charge proper rates for things with higher processing fees, like credit cards, and not subsidize them by punishing everyone else.
>But why would you want to do the credit card company's work for them?
I'm not sure I'm following. The reason you'd do it is because you want to pay for a small purchase with your debit card. Like if you run into a gas station and buy a soda and a bag of chips but don't have cash on you.
>That regulation is in place purely because of political bribery by the credit card industry.
It's in place because it was determined that people shouldn't be subjected to a minimum purchase amount for paying with their own money through their debit card. (As opposed to paying with borrowed money through a credit card.)
>The consumer-friendly thing to do is to charge proper rates for things with higher processing fees, like credit cards, and not subsidize them by punishing everyone else.
Again, I'm not following. We're talking about minimum purchase amounts. What's punishing someone else?
I had around $25K stolen via a skimmed debit card from my Chase checking account (in a few hundred separate transactions). I finally noticed after about 6 weeks; they never did until I told them. This despite the fact that all the fraudulent transactions took place at least 100 miles from my residence, some as far as 2000 miles away. I did get all my money back eventually, but it took a month or two and a ton of back-and-forth in person and on the phone to sort out the bad transactions from the good ones (mostly due to their lack of attention to detail). I stopped using debit cards after that (and started monitoring my daily balance).
As a small business owner in a past life, it’s probably because you don’t need to; not many businesses have customers looking to shave pennies off the price. The margins and competition in gas stations don’t happen elsewhere, I think.
And you don’t want to. Adding another set of prices and complication isn’t worth it to the business owner.
Nah, they've been fine with cash discounts for a long time. They only became okay with surcharging / adding a fee for cards as a result of a lawsuit in 2013. They'd still prefer businesses offer a cash discount, though. They know customers generally don't take them up on it, but also don't feel punished like they do with a surcharge.
