As a small merchant I can tell you: cash sucks to deal with and it costs money too. I went to cashless years ago. The 2.x% I eat in processing is more than made up for in not having to deal with shrinkage (either due to theft or inaccuracy or counterfiet bills), security, having to count money and go to the bank regularly, etc.

It's probably different when you're at a much larger scale than I am, but even Wal-Mart (who I was employed by in my late teens) has all sorts of cash-handling procedures to mitigate the risk of money just walking away. Even a their scale, they spend 1% on CC processing, but by the time they added up all of the labor and expenses of cash handling,it might be comparable. And for a small business it's likely more.

And then there's the data collection which has value too.

People act like accepting cash is free, it is not.

Humorously, there are laws against credit card surcharges but not against cash discounts.

Realistically, the price difference is probably not worth the hassle of needing two prices and card sales are probably affordable enough and common enough to not bother.

https://www.ca5.uscourts.gov/opinions/pub/15/15-50168-CV0.pd...

Several restaurants around me offer a cash 'discount'.

you could just as well say that the mortgage interest payments the bank takes in are subsidizing credit card points, or HELOC origination fees, or account maintenance fees are subsidizing points. you could also say the bank's profits from trading securities, or their lucrative wealth managements services are subsidizing points. but none of that would be accurate. The banks have a range of services and some are big wins and some are marginal and some may even be losses, and of course the wins help balance out the losses, but unless you can show that points disappear if poor folks manage their credit better and pay more reasonable interest rates, it's not reasonable to frame points as being subsidized by the poor.

High-end rewards cards are quite profitable on their own, thanks to the annual fee, high volume of interchange fees, and the high probability of successful collection.

Low end cards aren’t expensive because they are subsidizing high-end cards; they are expensive because they need to cover the collection costs

The networks have a massive incentive to minimize fraud. That's not to say that they are wildly successful or anything, but I do know from first hand professional experience that card networks spend a lot of time, money, and research into detecting and preventing fraud.

- Payment networks drop accounts with a too-high fraud rate.

- They and similar businesses (e.g. Stripe) offer automated tools to deal with fraud… for a price.

Outcome: the incentive to minimize fraud, which is often a result of crap security from the payment network, is on merchants, who also get charged extra protection money to get payment networks to do stuff they ought to be doing in the first place.

Ultimately, that incentive is the legal system, which can legislate against allowing fraud and forcefully impose penalties for it. (And operating it is a socialized cost, such that your first sentence is still correct.)

... Until the terms for that card change