> Sure, but merchants are raising prices overall together with all their competitors, or charging more when using a card. Credit cards aren't taking away 12% of merchants' profits that they'd keep otherwise.
That depends on the market. Suppose you're selling something which has a substitute available for the same price, so the customer will buy whichever one costs less by any amount, but the substitute is in a different market where the payment is in the form of a bank transfer or it's a tax deduction etc., or the substitute is paid for in time rather than money.
Then none of the sellers accepting credit cards can raise the price because otherwise the buyer would go to the substitute.
And all markets are like that to some extent. For some the seller can't raise the price by a cent without losing 100% of their sales. For others, raising the price would "only" cost them 5% of their sales... but that's still 5% of their sales gone, and all the same fixed costs to cover. And, of course, in the cases where the price goes up, now it's the customer eating the fees, which is fairly nefarious when it's being subtly hidden from them.
> Also, credit card fees are not 4%, they're 1.5-3.5% with an average of around 2.3%.
Stripe is 2.9% + $0.30. For a $10 transaction, that's 5.9%. For a $3 transaction it's 12.9% -- of revenue, not profit.
> But what's missing here is fraud protection.
"Fraud protection" is is independent of the fees. You're making the case for that yourself -- if 86% of the fees go to rewards programs then they could be reduced by 86% without affecting "fraud protection", and the rewards programs are a wretched thicket of dark patterns and unpaid interest scams taking advantage of people who are bad at math or too short on time to configure them efficiently, on top of a tax on lower income people who don't qualify for them.
It's also not clear why "fraud protection" should cost anything. The bank has no meaningful way to investigate a low dollar amount he-said she-said and the high dollar amount ones should be going to the actual court system, so why should they have anything more than a set of rules (e.g. which transactions are eligible, how long you have to file a dispute) under which you can make a request to have them flip the bits back in their computer for free?
Not really, and it doesn't at all if you get charged a markup for paying with a credit card. Places selling similar items tend to accept the similar common payment methods.
> "Fraud protection" is is independent of the fees... It's also not clear why "fraud protection" should cost anything. The bank has no meaningful way to investigate a low dollar amount...
All of that is completely wrong. Fraud protection costs real money. Investigations do happen, and cost the card issuer money. I've had values of $20, $250, $2,000, and $6,000 all eventually reversed. The courts are not set up for disputing chargebacks, and if they were then we'd all be paying more taxes to hire a lot more investigators and judges.
> Not really ... Places selling similar items tend to accept the similar common payment methods.
The point is that sometimes the alternative isn't a similar item.
Suppose you're a restaurant. The customer can either pay you to make food or buy it from the grocery store for 1/5th as much money and then spend the time to make it themselves. If both you and the grocery store were to raise prices by the same percentage, your price increases by five times as much as the grocery store price, because the time cost of preparing the food themselves wasn't taxed by the credit card companies. So if you raised the price, more people would stay home instead of coming to your restaurant, and then you have to do the math on whether the reduced sales volume or the reduced margins will hit you harder, and sometimes it will be the first one and you have to eat the second one.
> and it doesn't at all if you get charged a markup for paying with a credit card.
Also not true, because if you do raise the price then demand goes down, so instead of making lower margins you make lower sales.
Moreover, customers have a finite amount of income. If some amount of that is going to the credit card companies then it isn't going to the seller of whatever they would have bought if they still had the money in their pocket. Which sellers are getting screwed by that the most is a complicated question, but it's definitely somebody.
> Investigations do happen, and cost the card issuer money.
But how is the investigation worth anything? The bank doesn't have the capacity to do a real investigation.
Suppose you order some electronics, pay $5000, and then tell the bank that the seller sent you a brick instead of the electronics you ordered. How is the bank supposed to know who is lying? It could be a fraud by the seller (they actually sent you a brick) or by the buyer (you're trying to get refunded for goods actually delivered) and the bank has no way to know.
Whereas the police could do things like place other orders with the seller and investigate whether any of them come in as bricks, investigate the delivery driver to see if it was them rather than the seller who swapped it out and then see if they can recover the merchandise, etc.
> and if they were then we'd all be paying more taxes to hire a lot more investigators and judges.
The premise of the criminal justice system is deterrence. If the government is willing to spend $50,000 investigating a $5000 fraud, and as a result the fraud doesn't happen because the fraudster expects to be caught and go to jail, the government doesn't actually have to spend the $50,000 in the large majority of cases.
Whereas if all that happens to a fraudster is that the transaction is reversed by the bank 90% of the time, they're turning a profit because they get to keep the money the other 10% of the time and no one puts them in jail, and then you get tons of fraud.
So why are we trying to get the banks to do this at all? They have no real investigative powers and essentially no meaningful information about who did the wrong.
That depends on the market. Suppose you're selling something which has a substitute available for the same price, so the customer will buy whichever one costs less by any amount, but the substitute is in a different market where the payment is in the form of a bank transfer or it's a tax deduction etc., or the substitute is paid for in time rather than money.
Then none of the sellers accepting credit cards can raise the price because otherwise the buyer would go to the substitute.
And all markets are like that to some extent. For some the seller can't raise the price by a cent without losing 100% of their sales. For others, raising the price would "only" cost them 5% of their sales... but that's still 5% of their sales gone, and all the same fixed costs to cover. And, of course, in the cases where the price goes up, now it's the customer eating the fees, which is fairly nefarious when it's being subtly hidden from them.
> Also, credit card fees are not 4%, they're 1.5-3.5% with an average of around 2.3%.
Stripe is 2.9% + $0.30. For a $10 transaction, that's 5.9%. For a $3 transaction it's 12.9% -- of revenue, not profit.
> But what's missing here is fraud protection.
"Fraud protection" is is independent of the fees. You're making the case for that yourself -- if 86% of the fees go to rewards programs then they could be reduced by 86% without affecting "fraud protection", and the rewards programs are a wretched thicket of dark patterns and unpaid interest scams taking advantage of people who are bad at math or too short on time to configure them efficiently, on top of a tax on lower income people who don't qualify for them.
It's also not clear why "fraud protection" should cost anything. The bank has no meaningful way to investigate a low dollar amount he-said she-said and the high dollar amount ones should be going to the actual court system, so why should they have anything more than a set of rules (e.g. which transactions are eligible, how long you have to file a dispute) under which you can make a request to have them flip the bits back in their computer for free?