Citation? It seems pretty crazy to me that every merchant would have to pay the difference when a customer decides to use a 5% cash back card. They can't even know the full list of cards out in circulation, and I doubt their contract says "the fee is whatever portion of the card's cash back we can't pay for" or something like that. It could work for a closed subset of cards they know about and might want to negotate separately, but I don't see how it can work for every card out there.
They do not pay the whole cash back, but they do pay more for "premium" cards (that they cannot refuse, also). See for instance this https://www.cfib-fcei.ca/sites/default/files/pdf/5513.pdf (in Canada, but the same thing applies to the US)
Right, these are just Visa/MC/etc. card classes, which don't determine the cash back on them. And so if that doesn't make up the difference, then the card companies paying the rest, right? My point is that for high-cash-back cards there are easily customers who consistently make more in cash back than whatever fees these folks get and who don't rack up interest, meaning they're costing money, so why should they still be kept as customers?
Debit cards with PINs are lower risk than credit cards, so they typically have a lower interchange rate. And rewards cards (travel, triple points, etc.) and business cards typically have have higher interchange rates."
I used to do this in the UK brought my monthly season ticket using a 3% cashback used to make just under £20 a month.
Of course the badly implemented EU changes which in theory should have benefited the consumer did not - the merchants just took the reduction in interchange fees and didn't cut prices at all for the end consumers
The amount they need to pay can sometimes be deduced from the card itself. For MasterCard for example they will pay more if it is marked World Elite than if it is marked World. And for VISA, they pay more for Infinite than for Signature.
