I don't like retailers storing my credit card info in dodgy databases that end up on the dark web. I understand that stores don't want to lose all their profit to interchange fees. That's reasonable. At the same time, I personally wouldn't be so dogmatic about using Apple Pay or an Apple Card if I hadn't had my debit card ganked five times in the last seven years. In other words, they've brought this on themselves, and any store that supports chipless transactions is part of the problem. (I can't wait until Apple Pay or an equivalent is widely accepted online, and then I'll be preferential about that, too.)
When I was in the US (Nevada and Cali) I was so surprised how many places don’t accept contactless payment. Here in Hungary, even the smallest convenience stores accept it.
I was in a bookstore in Brooklyn that didn't have contactless when I asked, and the cashier said, "we're a bookstore, we don't have that sort of thing".
I replied, "I paid for a bottle of water in a vending machine with this 10 minutes ago."
How many stores are in Botswana vs how many are in America? How many in America were taking credit card 15 years ago vs Botswana? And those 15 year old machines that still work, the CC companies wanted the retailers to pay them to replace the machines for chip and pin and got push back. There's a reason why you used chip and pin in BFE, and not at the Chinese restaurant down the street.
In America, retailers wanted the freedom of owning their terminals. This was rational, given near-usurious fees from credit card companies in the past. However, it means that now, retailers must finance their own upgrades, and so we all suffer.
Oh, it's freedom--but freedom for whom? Freedom from what?
The financier's freedom from regulation makes it easier for them to limit the freedom of the financed. The borrower's freedom from deception makes it harder for the banker to achieve record profits.
In this case, the merchants got their freedom, and it seemed like a win for consumers too... until it was time to upgrade.
I remember commercials like 15 years ago advertising the contactless cards but never have actually seen anyone use them in the US except for things like Apple/Android Pay. Lots of CC terminals have the symbol but it's never used. I remember a waiter in Europe trying to tap my card on the CC terminal multiple times before I mentioned that it's just a chip.
Which is what irritates me most when Apple brags about how Apple Pay has made way into Contactless payment in US and how many Contact less payment terminals has been added due to Apple Pay.
When the rest of the world had the whole system in place waiting or crying for Apple Pay. In the early days they couldn't be bothered.
Apple Pay was introduced 5 years ago, yet in 2019 they somehow managed to sign up ( or make it work ) with more regions and banks than all of the 2017 and 2018 combined.
They were so fixated on certain market like Germany and Australia as if they were blocking procedures.
I hope most of the world dont have to wait 5 years for Apple Card.
Ultimately the problem is with the banks/issuers who refuse to support and require more secure solutions like chip cards, instead of clinging on to the hopelessly outdated standard of authenticating payments with knowledge of a number printed on a card.
That's strange... I wonder if some card issuer has a quality problem? I haven't had any issues with mine at all, but I've had a lot of issues with the barcodes slowly wearing away.
This probably has more to do with user abuse than card quality. After all, it’s just a piece of plastic.
In the Netherlands all ATMs are chip only for all debit cards (which everyone uses) and this isn’t an issue at all, if you take reasonable care of your belongings.
I have a TD bank card, which has both a stripe and chip. These cards are dirt cheap construction and material, and printed on demand by a similarly cheap machine. The stripe and chip contacts are visibly worn down and I've sat on this card quite literally 12 hours a day for 4 years. It still works nearly flawlessly. Something is very strange and broken about your card/wallet/habits I think
I've been running into that a lot... I'm replacing my card once a year because the chip stops working. It's one of the most embarrassing things when your card is declined repeatedly and there are people in line behind you. Or worse you're on a date and your date thinks you're overdrafted.
This system is completely convoluted, with the incentives all over the place between merchant, bank, CC processor, consumer. It's the kind of thing that will never change until you go to a different country or start an alternative payment system that is 10x better, because no one has the power or will to displace the existing infrastructure.
Consumers don't care because they don't (directly) pay the bill for these benefits, and only see the kickback rewards as a positive.
Banks don't care, actually they like it, because rewards help them attract customers who don't care who pays.
Merchants can't put up too big a fight because they can't leave unless they're big enough to stomach the loss in revenue, or can make customers shift payment method (like Costco, say).
CC processors love it because regardless, they get payment traffic and commissions.
Whereas in other countries, this system would be crazy.
People with no money can't get credit cards. People with and without credit cards (usually) pay the same price for any given item, and since credit card rewards are payed for by merchant fees, that means that every time someone buys something with cash a percentage of their money is being skimmed off the top to subsidize those who buy the same items using credit cards.
IIRC, even now they're still not allowed under the network rules.
A cash discount IS allowed. So, a $.10/gal cash discount for gas is OK. The register having a sign that says "we charge $.75 for card transactions under $30" is not. Not that you don't see that all the time...
(It's been a while since I've drank the regulatory alphabet soup on this, could be mistaken. )
> Businesses are allowed to impose a surcharge on credit card purchases made on Visa and Mastercard, under a court settlement that took effect in January 2013.
I don't think this is true. I lived in the UK, and there were same costs for cash and card. EU laws have this statement:
>Today’s ban means that it will be unlawful for retailers to charge additional fees when someone uses a particular credit or debit card, or other payment systems like PayPal, to make a purchase. This will ensure consumers can be confident that there won’t be any nasty surprises, and they won’t be penalised for wanting to pay in a particular way.
The article states that the fees are higher because it is designated an "elite" card. American Express cards also have a higher fee than the standard Visa or Mastercard and plenty of retailers complain about that or refuse to accept Amex.
> American Express cards also have a higher fee than the standard Visa or Mastercard and plenty of retailers complain about that or refuse to accept Amex.
American Express isn't Visa or Mastercard, they are all on different payment network. I have no issue with them having different fees because they are different.
The Apple Card is a Mastercard. Does Mastercard have different fees based on the type of card? I would certainly hate Mastercard more if that was the case.
Yeah, but unless I missed it, they didn't even claim the Apple card is a significant fraction of elite purchases. How is this any different from the "so popular they ran out of metal" sapphire card?
> “It’s almost like an arms race of who can offer the most rewards,” says Chris Ligan, vice president for acquisitions at Auric, which has seen use of premium cards climb 7% this year. “The person stuck with the bill is the merchant.”
I've always thought this fee + cashback thing is weird, because the merchants just add it back to the cost of the item. Sure, you may be getting that cost back as cash, but the merchant charges you the same if you don't have the super elite card. So isn't this just a sneaky underhanded way to tax the poor which obviously don't have credit to get the super elite card?
The intent is not to "tax the poor" though that is effectively an outcome. Rather the intent is for credit card issuers to have a profit potential from short term credit (and to make a given line of credit more attractive for use through rewards).
Maybe smaller places that can't absorb the merchant fees as easily, but big retail places don't usually charge more for using certain credit cards. It'd probably cost them a chunk of business if they did.
I think what the parent commenter was trying to say is that merchants raise prices on everything, whether you pay with card or cash, to offset credit card fees. What ends up happening is that customers that pay cash are paying for the rewards I get by using a credit card.
Their prices will be set to absorb the average mix of rewards and non-rewards card that retailer sees. They're certainly not going to consider it a charitable donation to high credit-score folks.
It'd be much fairer if they surcharged rewards cards, or if we went the European approach and capped interchange fees at something reasonable. The current system is basically a regressive tax on people with lower credit scores.
Or their merchant account. I think they disallow charging different prices based on the card type - there was a big blowup a few years back because retailers didn't want to pay the higher fees to accept debit cards, but had to because the debit cards had VISA or MasterCard logos and therefore had to be treated the same way as VISA or MasterCard credit cards.
The whole existence of credit card rewards seems like a failure of the system. Since merchants agree not to charge more to high fee credit card customers, all the other customers end up paying the fees for those rewards. So everyone has to use a credit card with rewards to compensate for that loss and the ultimate losers are the suckers who pay with cash or whatever else.
I refuse to play those games and it surely costs me, but at least I don't have to deal with any of the stupid paperwork and multiple cards in my wallet and keep track of how much pocket money some pointless company is going to give me.
I think you're overestimating the complexity of all this. I pay most things via a 2% cash back card. Just the monthly statement to manage, no need for multiple cards, and no keeping track.
I get $500/year back on health insurance premiums alone from that, let alone all the other spending. Everything except my mortgage can be run through it.
Perhaps it's easy enough in America. Where I am, there are multiple rewards programs separate from credit cards. Some shops have their own special card, and some are part of a bigger scheme with a common card. It's all a mess. I hadn't thought of using it to pay for big things like a house or health insurance!
There are certain credit cards with higher rewards at certain companies - if you buy a lot at Amazon, for example, it makes sense to get their 5% cash back card. Target has one as well.
In addition to merchants, the group which really ends up losing are customers paying with cash/debit, as they don't harvest any CC rewards from their groceries but still pay the inflated price that merchants have to charge to keep up with swipe fees. I'd argue these high fees are a "tax" on those with poor creditworthiness/financial knowhow
I'm incredibly naive but I don't understand why card networks would ever WANT to raise their percentage rates... Hear me out:
- It is perfect rent collecting: minimal costs, benefits hugely from scale, high barrier for competitor entry. You're an "invisible" profit center, if done right.
- It is percentage of transaction: So increases naturally with inflation and your client's success. Loses little on your client's failures.
But instead of just sitting on their hands and raking in their 6% basically forever, they're inflating the percentage which is causing disgruntled clients to look elsewhere and to give a gap where competition can enter.
This is one industry where "boring is king." But it seems like greed may result in legislative or competitive market correction if they keep engaging in these practices.
> - It is perfect rent collecting: minimal costs, benefits hugely from scale, high barrier for competitor entry.
This basically describes the Planet Fitness model. They sign up thousands of people around New Year's, none of them ever show up, and a handful of them can't be bothered to go into their location and cancel, so they just end up paying $10 / month forever.
Sound reasoning but then you’re thinking in the long term interest of the company. Visa went public so the individuals who jacked up the prices will probably make a big bonus on their quarter numbers and be gone, rich, or promoted before the backlash hits them.
If it attracts enough people who'll carry an interest-bearing balance, the math works out fine. Many of the higher-end rewards cards have annual fees, too - Chase's Sapphire Reserve card is $450/year. Amex's Platinum is $550.
The price is the same for cash, card and elite card customers. They can of course raise the price for all 3, but its a fine balance to do that without hurting sales.
I would immediately stop doing business with a retailer who dared to do this. What’s next? Charging a customer N% more because he drove to your store and parking spaces are expensive? At some point you need to accept certain costs of doing business and not always be looking to segment your customers to selectively pass expenses to them.
This is both true and false. In 2013, MC and Visa agreed in a settlement that they could not prohibit merchants from imposing a surcharge on credit card customers.
However, 10 states prohibit such surcharges, including CA, NY, FL, MA, and TX...i.e., the states with most CC transactions.
> Research shows that cash-handling costs range from 4.7 to 15.3 percent of revenues for businesses that accept cash. The majority of those costs are associated with starting and closing drawers at the start and end of the day.
> Said another way, for every $100 a business makes in cash, it’s spending $4.70–$15.30 to handle all the costs associated with managing the drawer, preparing deposits, making change orders, dealing with possible theft or fraud, and auditing. Fewer cash transactions means less time counting money, less time making change, and a lower likelihood of mistakes or theft.
A lot of the additional fee goes to Visa/Mastercard instead of the issuer. Issuers want to focus on their own benefits, so they skip card network's premium tier cards and instead try to sell their own benefits (with or without a yearly fee).
This isn't really about Apple Card, it's just about high reward cards in general. The heading is clickbaity to generate more traffic.
The tl;dr is: high reward cards (like Apple Card, or any other "premium" card) incur a high transaction fee for the credit card processor, thus they eat into the retailer's profits.
Note that back in November, @DHH from Basecamp had strong words about the Apple Card with regards to sexism. I know there's active investigations going on with it, but I know of no results. Then again, it's just been 1 month, which is pretty much 'yesterday' in bank time.
I have no opinions about DHH in general, but he's just wrong here. He tweets:
> Hilarious how much mansplaining is flowing in this thread. Every single poster questioning my wife’s credit score, a man. Every single defense of Apple blaming GS, a man. Almost like men are over represented in the defense/justification of discrimination that doesn’t affect them?
which immediately costs him all credibility in this specific case. Factually, it is GS making the decision. It's Apple's problem to address because they're contracting to GS, but it was GS's algorithms (oh no, he calls that out too!) that rendered the credit decision. And he glosses over that credit score pretty issue quickly, which is kind of sexist and bullshitty in itself. Without saying whether her score is decent, he says she should get the same credit he does because she's married to him, as though her creditworthiness derives from their relationship. What the...? Does the have income of her own? A credit history of her own? If DHH isn't co-signing, his existence even involved in the decision.
There are plenty of things to protest in the credit score game. You can fairly criticize it in many, many ways. But I saw nothing in his complaint that was unique to Apple or GS, and DHH's complaint seems to come down a non sequitur complaint against Apple and GS for their use of industry-standard credit ratings.
Edit: he does say her credit score was higher than his. My bad. He still doesn't mention their relative income.
The allegations (made by quite a few people, not just one) were that Apple was turning down/giving worse terms to women that had better income/credit scores than their husbands.
A 2013 federal law allows one to include any income to which they have a reasonable expectation of access including income from spouse, partner or other member of household.
I seem to recall that he mentioned his wife doesn't work so she stated her income at $0 instead of the household income.
Because it doesn't matter. As of 2013, you enter combined household income on a credit application, and your income isn't part of your credit score either.
