Essentially this ruling allows retailers to pass on bank card payment fees to customers. Previously these fees were hidden, and the retailer had to swallow the fees, and of course ultimately pass them on to ALL customers equally as a cost.
Now, customers themselves get to pay the fees directly, and thus have a choice, and consequences, in which payment methods to use. And of course this will likely have downward pricing pressure on the payment service providers, so in a reverse of the usual story, consumers in general will benefit at the expense of the banks.
This is the way free markets are supposed to work, as opposed to the current cosy backroom agreements that only benefit the banks.
While they may not have been "free" in the strictest sense in the laws of economy, miles and cash back are a big part of savvy shoppers. I'm still shocked when I find out someone using a traditional credit card with no rewards, or worse, their debit card.
When we got to this point I don't know, perhaps I wasn't young enough, but you would be fiscally foolish not to take "advantage" of them while you can.
Thinking to yourself "sure, I'll spend a few extra bucks - I'll be getting 2% cash back next month/year!" or "hey - I almost have a free flight - sure, buy a bit more!"... encourages spending more than you need.
I know there are people that do extreme gaming of the system, paying utilities and such with every rewards card out there, transferring balances and such to get a free flight. These are the outliers, much like extreme couponers spending days per week figuring out how to get $200 in groceries for -$18. It's not reality for most people.
It's far easier to not spend on frivolous stuff, save up, and buy a plane ticket when you want it vs buying extra crap then trying to figure out which 10% of the days you can use your 'free miles' on. My wife's got 150,000 miles with an airline, and they have no 'air mile' seats available on any flight she needs for the next 12 months - it'll be 2015 at least before she can use all these 'free flight' miles (earned from travel, not from rewards cards).
At the expense of the majority.
But what you're missing is that the guaranteed winners are the ones doing the muddying, and at everyone's expense.
The payment processors used this asymmetry to force merchants to hide their costs from the market at large. The market can't affect something when it isn't allowed to set different prices for using the service or not!
Yes, merchants could stop using the payment processors. But, crucially, consumers can't: if a merchant used a payment processor under the old scheme, even customers paying in cash had to pay a higher price to subsidize this!
Couple this with the fact that the payment processor market is entirely dominated by a bare handful of large companies, and you get something really far from a "free" market.
There was a base fee, and most cards would fall in to that - 2.1% in my case, IIRC. But, if someone used some 'get 2% cash back on all purchases!' card, I'd be charged 4.1% (again, IIRC, might have been a bit more or less). When you don't know what the price is going to be, you end up needing to err on the high side, and factor in higher overall fees to every price, raising the price for everyone along the way. And the banks make more money because the whole 'free air miles!!!!' mentality gets people to use their card more.
The banks get their fees on a per transaction cost (and interest on balances that carry on month to month) - the merchants effectively paid for all your 'free air miles'.
Why shouldn't they be allowed to charge customers different prices depending on which payment method they use, given different methods have different costs to them.
Now they can.
This change will make the price of using a credit card more transparent to the customers and will stop non-customers from subsidizing Visa et al. It's more fair and lets the market react much more efficiently to payment processors.
This change is a net positive for the market and therefore people in general.
You say that as if this new policy of charging extra for the airmilers will result in lower prices for everyone else, including people not using credit card. I don't think so.
Well, no. Interchange fees come out of retailer profits. That's why retailers care about them.
My point is, I think this judge can rule whatever he wants, but as far as I know, there is no way to technically implement these fees.
The last time I dealt with a bank for a merchant account (in the UK), there were only two tariffs: one for debit cards, and another for credit cards. (We accepted only Visa/MC.)
The sentence above suggests that the fee structure differs among credit cards.
Can anyone share their experience of paying different rates for Visa vs. MC and, in particular, different rates for different credit cards from a single network?
Here is a link to the interchange rates for Visa (10 pages of rates):
http://usa.visa.com/download/merchants/visa-usa-interchange-...
Also if you are a millionaire and are having a hard time finding a place to rent, why not just offer to pay 6 to 12 months of rent up front? Even in NYC that tends to work.
If someone was selling a $10 pizza before and paying 60c in payment processing, he's most likely gonna charge $10.60 for the pizza now and call the 60c additional profit. I'd be very surprised if most merchants decided to keep charging customers with cards $10 and give a 60c discount to cash customers.
In an efficient market, competition would force retailers to reduce prices. But efficient markets don't exist, especially not in the short term.
I'm most interested in the long run effect. How would a shift in CC fees play out over the long term and through the whole supply chain.
It will start with credit cards but soon it will be for debit cards and there will eventually be a "cash handling" fee if you insist on paying with cash.
These will never be included in the listed prices and they will be just small enough that its not worth it for you to put the items back.
1. A surcharge for certain kinds of cards.
2. A discount for certain kinds of cards.
In either case, I think this is just a logical step in a progression that makes it so that a merchant can recover a portion of their credit card fees from the consumer. Good or bad? It might create an opportunity for competition among credit card processors to offer their services for the lowest possible fee.
