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Comment by Panzer04 | Hacker News Reader

The thing that confuses me about fee-based payment businesses is in theory, a Surcharge for a particular payment method should cover the gap.

Is there a reason surcharges aren't sufficient to drive down interchange and take fees? Do customers just not care about paying a 2% fee? Do merchants judge that it's not worth pissing off a subset of their customer base if they use a high-fee card and just eat the expense?

It seems clear to me that the problem comes down to customers not actually paying the cost of using a particular card or network.

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In the US, merchants spent years actually being forbidden (by the networks' merchant agreements, and even by law in some states) from adding a surcharge onto credit card transactions.

That's mostly gone now (although I think there are still a couple states that forbid them, Visa and MC at least allow a credit card surcharge or cash discount in their merchant agreements), but it's so normalized at this point that customers are unlikely to care that CC and cash transactions are the same price. So, if you're a merchant, you set your pricing to include your merchant fees and just take the extra profit on cash transactions.

Cash logistics cost much more than 2%. The only reason you see substantial cash discounts is when people are trying to avoid taxation.

But merchants are already paying for cash logistics. Now because of credit card fees a person paying cash has to pay 2-5% more per transaction even when not using a credit card?

>It seems clear to me that the problem comes down to customers not actually paying the cost of using a particular card or network.

You absolutely pay it; you just don't see it. Go to small town America and deal with a small business and you'll frequently find businesses that will tell you that you can get a 3% discount paying cash. Go to Walmart or Target or Costco or insert national retailer and the discount or "cash back" will be via their branded card.

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