{"id":10993,"date":"2010-01-13T20:00:50","date_gmt":"2010-01-14T00:00:50","guid":{"rendered":"\/\/www.askmrcreditcard.com\/news\/?p=10993"},"modified":"2010-01-13T20:00:50","modified_gmt":"2010-01-14T00:00:50","slug":"making-sense-of-credit-cards-and-merchant-fees","status":"publish","type":"post","link":"https:\/\/www.askmrcreditcard.com\/news\/making-sense-of-credit-cards-and-merchant-fees\/","title":{"rendered":"Making Sense Of Credit Cards And Merchant Fees"},"content":{"rendered":"

Ron Lieber\u00a0 at the New York Times is getting to be one of my favorite columnists on the subject of credit cards and personal finance.\u00a0\u00a0 His most recent article<\/a> sheds some light on the costs to merchants that credit cards impose.\u00a0\u00a0\u00a0 It is a must read.<\/p>\n

Are Reward Card Users Selfish?<\/strong><\/p>\n

To me, the question is absurd.\u00a0\u00a0 Are people who use coupons selfish?\u00a0 Am I selfish by taking tax deductions?\u00a0\u00a0 Capitalism is inherently selfish, as we each try to maximize our earnings while minimizing our expenditures.\u00a0\u00a0 Lieber brings up the old canard that reward card holders are subsidized by people who don’t use them.\u00a0\u00a0 This idea even has a cool name, the “Reverse-Robin-Hood-Cross-Subsidy Hypothesis!”\u00a0 Coming soon to theater near you!<\/p>\n

I am convinced that cannot possibly be the case, as there is no reason credit card companies would offer reward cards if they only exist because they are subsidized by other products.\u00a0\u00a0\u00a0 If I am a bank and I am offering two cards, with one subsidizing the other, why not just eliminate the unprofitable card?<\/p>\n

What About Merchant Fees?<\/strong><\/p>\n

I have every sympathy for merchants who pay these fees.\u00a0\u00a0 I am sure it is just the mirror image of the fees we consumers pay for using the credit cards, and the merchants are treated no better by the card processors than consumers are treated by their banks.\u00a0\u00a0\u00a0 I would even be in favor of some sort of regulation that makes card processors more competitive.\u00a0\u00a0\u00a0 That said, credit cards are optional for merchants in the same way that they are optional for consumers.\u00a0\u00a0\u00a0\u00a0 My favorite bagel store in Denver does not take credit cards.\u00a0\u00a0\u00a0 Their bagels are good enough that I will pay cash or use a check.\u00a0\u00a0\u00a0 I guess that they decided that that the costs of handling cash and checks was less than accepting credit cards.<\/p>\n

To Lieber’s credit, he does a good job of explaining the benefits to merchants of accepting credit cards:<\/p>\n

People can use credit to spend more than they have in the bank at the moment, and some may spend more on a card than they would if they had to lay out a pile of money. Merchants who handle less cash, meanwhile, bear fewer costs for counting it, calling the armored car, and theft by employees or armed bandits.<\/p><\/blockquote>\n

It is refreshing to see that someone “gets it” when it comes to merchant fees.\u00a0\u00a0 I have heard one too many business owners whine about merchant fees as if they are forced to pay them and accepting credit cards provides them with no value whatsoever.<\/p>\n

Benefits To Consumers<\/strong><\/p>\n

Lieber also catalogs some, but not all of the non-reward benefits credit cards have to consumers:<\/p>\n

…like ease of budgeting and record keeping, allowing you to avoid checks by paying monthly bills with a card, the ability to dispute charges and the time savings in not having to refill your wallet at an A.T.M. as often (and cost savings in not paying A.T.M. fees).<\/p><\/blockquote>\n

Oddly, he omits chargebacks, rental car insurance, and theft and loss protection.\u00a0\u00a0 If I lose my wallet today, which holds no cash at the moment, my losses will\u00a0 be limited to the cost of a replacement wallet.\u00a0\u00a0 That would not be the case if I carried enough cash around to make regular purchases, although you could argue a debit card is a good compromise.<\/p>\n

Boycott?<\/strong><\/p>\n

Lieber suggests a consumer boycott of credit cards only to illustrate how it would never work.\u00a0\u00a0 He then concludes, “There is no way for consumers to win.”\u00a0\u00a0\u00a0 Here is where I take objection.\u00a0\u00a0\u00a0 Clearly, as someone who, by his own admission, aggressively pursues credit card rewards, Lieber understands that it is very easy to win the reward card game.\u00a0\u00a0\u00a0 Simply find a card with the best rewards, and pay it off in full every month.\u00a0\u00a0\u00a0 If that’s not winning, I don’t know what is.<\/p>\n

Surcharges?\u00a0\u00a0 Oh No!<\/strong><\/p>\n

Lieber discusses all of the various proposals to allow retailers to offer discounts for cash or surcharges for credit card use.\u00a0\u00a0\u00a0 He rightly concludes that the difference between the two is merely semantics.\u00a0\u00a0\u00a0 Personally, I hate surcharges of all kinds.\u00a0\u00a0\u00a0 Post your best price, but don’t play games with surcharges.\u00a0\u00a0 Once you start down that road, you end up like car rental companies or the telecommunications business where the surcharges can be as much or more than the “price”.\u00a0\u00a0 Often cell phone companies can’t even give you the final price of their plan until\u00a0 the very end of the transaction.\u00a0\u00a0 What a nightmare!\u00a0 Count me in as someone who prefers the status quo, where retailers can’t offer different prices depending on the method of payment.<\/p>\n","protected":false},"excerpt":{"rendered":"

Ron Lieber\u00a0 at the New York Times is getting to be one of my favorite columnists on the subject of credit cards and personal finance.\u00a0\u00a0 His most recent article sheds some light on the costs to merchants that credit cards impose.\u00a0\u00a0\u00a0 It is a must read. Are Reward Card Users Selfish? To me, the question […]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[],"yoast_head":"\nMaking Sense Of Credit Cards And Merchant Fees<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.askmrcreditcard.com\/news\/making-sense-of-credit-cards-and-merchant-fees\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Making Sense Of Credit Cards And Merchant Fees\" \/>\n<meta property=\"og:description\" content=\"Ron Lieber\u00a0 at the New York Times is getting to be one of my favorite columnists on the subject of credit cards and personal finance.\u00a0\u00a0 His most recent article sheds some light on the costs to merchants that credit cards impose.\u00a0\u00a0\u00a0 It is a must read. 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