broken_legs
07-27-2010, 02:05 AM
Fight the man, man.
I posted another article a while back on how VISA and MC are trying to come into Canada and "compete" with their own versions of debit cards and why we shouldn't let them.
This is a big deal since we pay far less in transaction fees with interact than they do in the US. And this new "competition" forces retailers to charge more.
Back to CCs
All transaction fees (ie 4% fo AMEX< 2$ visa/MC etc..) are paid by the merchant so they can accept the card. Thats how VISA/MC/AMEX make money etc... (not on the interest, the bank extends the credit to you, VISA and MC only provide the "platform")
What this does is take 2-3-4% off the bottom line of the retailer, forcing them to raise prices for EVERYONE, as they can't single out credit card users (as part of the agreement with VISA and MC etc..)
So all those CC rewards you think you are earning? Well you're actually paying 3-4% more on EVERYTHING so you can earn a maximum of 1.5-2% back in rewards.
Article below. I'm fine moving to a system where the consumer pays the fees if they use a MC and the merchant pays nothing.
There is no added value here, it's just companies leeching money from us all.
Apparently the FED thinks so too:
Credit card fees transfer wealth to rich: Fed
Kristina Cooke
12:49 EST Monday, Jul 26, 2010
New York — Credit card fees and rewards programs exacerbate income inequality by acting as a transfer of wealth from poor to rich, according to a Federal Reserve Bank of Boston study released Monday.
The researchers argue that reducing card rewards and merchant fees “would likely increase consumer welfare.”
Merchants usually don’t charge different prices for card users to recover the costs of fees and rewards, but instead, mark up the prices for all consumers.
As a result, people who pay cash – and who are more likely to be lower income – end up subsidizing those who pay by credit card.
U.S. consumer finance data show that people on a low income are less likely to have a credit card, and those who do spend less a month on average than higher earners. High-income consumers are also 20 percentage points more likely to receive credit card rewards – be they frequent flier miles, cash back or other enticements.
“What most consumers do not know is that their decision to pay by credit card involves merchant fees, retail price increases, a nontrivial transfer of income from cash to card payers, and consequently a transfer from low-income to high-income consumers,” Scott Schuh, Oz Shy and Joanna Stavins wrote.
They found that about 83 per cent of banks’ revenue from credit card fees is obtained from cash payers “and disproportionately from low-income cash payers.”
Globe videos on debt and how to deal with it:
After accounting for rewards paid by banks, households that earn more than $150,000 (U.S.) annually receive a subsidy of $756 on average every year, while the households earning $20,000 or less pay $23.
Financial regulatory reform signed into law last week gives the Federal Reserve responsibility for regulating fees associated with debit, but not credit, cards.
The researchers said that the transfer of wealth highlighted by thei
They suggest that if merchants and banks don’t take steps to reduce the wealth transfers, policy-makers could mull ways to push different pricing depending on the payment method, more transparency on fees, or regulating fees and rewards.
r study “may be a concern that U.S. individuals, businesses or public policy-makers wish to address.”
I posted another article a while back on how VISA and MC are trying to come into Canada and "compete" with their own versions of debit cards and why we shouldn't let them.
This is a big deal since we pay far less in transaction fees with interact than they do in the US. And this new "competition" forces retailers to charge more.
Back to CCs
All transaction fees (ie 4% fo AMEX< 2$ visa/MC etc..) are paid by the merchant so they can accept the card. Thats how VISA/MC/AMEX make money etc... (not on the interest, the bank extends the credit to you, VISA and MC only provide the "platform")
What this does is take 2-3-4% off the bottom line of the retailer, forcing them to raise prices for EVERYONE, as they can't single out credit card users (as part of the agreement with VISA and MC etc..)
So all those CC rewards you think you are earning? Well you're actually paying 3-4% more on EVERYTHING so you can earn a maximum of 1.5-2% back in rewards.
Article below. I'm fine moving to a system where the consumer pays the fees if they use a MC and the merchant pays nothing.
There is no added value here, it's just companies leeching money from us all.
Apparently the FED thinks so too:
Credit card fees transfer wealth to rich: Fed
Kristina Cooke
12:49 EST Monday, Jul 26, 2010
New York — Credit card fees and rewards programs exacerbate income inequality by acting as a transfer of wealth from poor to rich, according to a Federal Reserve Bank of Boston study released Monday.
The researchers argue that reducing card rewards and merchant fees “would likely increase consumer welfare.”
Merchants usually don’t charge different prices for card users to recover the costs of fees and rewards, but instead, mark up the prices for all consumers.
As a result, people who pay cash – and who are more likely to be lower income – end up subsidizing those who pay by credit card.
U.S. consumer finance data show that people on a low income are less likely to have a credit card, and those who do spend less a month on average than higher earners. High-income consumers are also 20 percentage points more likely to receive credit card rewards – be they frequent flier miles, cash back or other enticements.
“What most consumers do not know is that their decision to pay by credit card involves merchant fees, retail price increases, a nontrivial transfer of income from cash to card payers, and consequently a transfer from low-income to high-income consumers,” Scott Schuh, Oz Shy and Joanna Stavins wrote.
They found that about 83 per cent of banks’ revenue from credit card fees is obtained from cash payers “and disproportionately from low-income cash payers.”
Globe videos on debt and how to deal with it:
After accounting for rewards paid by banks, households that earn more than $150,000 (U.S.) annually receive a subsidy of $756 on average every year, while the households earning $20,000 or less pay $23.
Financial regulatory reform signed into law last week gives the Federal Reserve responsibility for regulating fees associated with debit, but not credit, cards.
The researchers said that the transfer of wealth highlighted by thei
They suggest that if merchants and banks don’t take steps to reduce the wealth transfers, policy-makers could mull ways to push different pricing depending on the payment method, more transparency on fees, or regulating fees and rewards.
r study “may be a concern that U.S. individuals, businesses or public policy-makers wish to address.”