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Comment by throwaheyy | Hacker News Reader

No.

The entire idea behind credit cards is to reduce friction in commerce resulting from handling cash. This attracts more customers to businesses through increased convenience.

Taking cards is voluntary, there's no "forcing processing fees" involved. Plenty of businesses opt not to take credit cards.

In fact, interchange fees (which in the US now top out around 2.7%, not 3.5%) are at an all-time low because of technology improvements. The first credit cards had a processing fee of 7% (https://www.businessinsider.com.au/history-of-credit-cards-2...).

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> Taking cards is voluntary, there's no "forcing processing fees" involved.

Lol, sure. That's why they make stores promise to never, ever, under any circumstances make interchange fees visible to customers.

Hiding in the shadows is not the sign of voluntary mutual-benefit value creation, it's the sign of a good hustle that someone is hoping to milk just a little bit more before the Sauron's Eye of public attention turns their way.

I usually see it, but inverted: "we offer a 4% discount for cash payments" signs

But usually only in small individual shops

If that's allowed under the credit card processing merchant agreements it's a new development.

If I had to guess, it's still forbidden, but small shops don't know/care until the CC company actually asks them to stop.

If people could get a 5% discount everywhere with their debit card, the gig would be up, and the CC companies know it.

Not sure why raised public attention would reduce credit card usage. People like the convenience, and I don’t see why they would care that it shaves a few basis points off of merchants’ margins. You’ll notice that in transactions with razor thin margins, credit cards aren’t accepted, restaurants being the major exception.

If people could get "5% off" (really: not paying CC fees) by using a debit card and also use it for rent and government payments, CCs would be gone in a few years. If merchant margins are razor thin, reductions in cost go to the customer, not to the merchant's margins.

I’ll draw an analogy. Most tech firms will make you sign an NDA as a condition of employment. That doesn’t mean that you are forced to work there.

Uh-huh. Much freedom. Very liberty.

Credit card companies would get bowled over in a second if we didn't let them leverage their size into anticompetitive contract terms, but this is America! We love oligopolies, low-competition markets, anticompetitive behavior, and rent-seeking. Freedom, baby!

If it was about reducing friction, why would credit card companies make it mostly against the terms of their contracts to charge different rates for credit card using customers?

Who knows, maybe their argument is that works against the image of convenience for customers? You’d have to go ask them, but it might be proprietary information.

Card processing companies provide a convenience, for which they charge a fee. If it was such a big deal, businesses would not sign on, and many don’t because it doesn’t work for them.

Enough businesses decide that the extra set of customers they can draw by accepting credit cards is worth the 2.5% processing fee, which is why credit cards still exist. It’s not some kind of extortion racket.

Do you think we don't know how Nash equilibrium works? The fact that the rules of a game can be adjusted to drive it away from optimum -- far away, sometimes even to the opposite extrema -- is a pretty basic economic concept and this is a pretty basic example of that concept. Market inefficiency 101 type stuff. That's why everyone else here is focusing on the metagame.

And no, 2.5% is not typical. Maybe Walmart gets 2.5%. I've seen between 4% and 15% in those few instances when the man behind the curtain has been distracted and true rates have snuck past his veil of secrecy.

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