This is exactly like subsidizing farm, ranch, and oil but then raising taxes to pay for the subsidies indirectly.
A clever application of game theory to leach wealth from the populous.
So the banks fight with each other offering more points/rewards/etc - meanwhile you pick up the tab.
I wish usgov would look deep into this criminal scheme.
>One of the most often cited studies is one conducted by Dun & Bradstreet, where the company found that people spend 12-18% more when using credit cards instead of cash. McDonald’s reports its average ticket is $7 when people use credit cards versus $4.50 for cash.
>Those who were told they would have to pay by credit card were willing to pay more than twice as much on average as those who were told that they would have to pay by cash.
It's well established that paying with plastic over paper makes you spend more.
http://nytimes.com/2014/10/11/your-money/the-slippery-plasti...
>But the most surprising thing about these studies? When I tracked down many of their authors this week, I found that they, too, can’t quite kick the credit card habit. Why doesn’t Joydeep Srivastava, co-author of the Monopoly money study, use a debit card or cash?
>“Mostly because my credit card is giving me lots of miles,” he said
>Once upon a time Mr. Prelec, a professor of economics at the Sloan School of Management at the Massachusetts Institute of Technology, refused to collect frequent-flier miles (or even coffeehouse stamp cards) because he thought they cluttered his decision making... Now, he doesn’t leave home without American Express card. Why not go debit-only? “The rational answer is, it’s the points,” he said, given that few debit cards offer reward points.
If this were true, why would merchants care about merchant fees?
It seems fraud is much worse in the US. That could be a factor too. https://www.google.com/search?q=credit+card+fraud+us+vs+euro...
Actual 2fa would be great. I was wondering about the enourmous amount of work that would enable websites to support contactless ..
I've been down and out... unemployed most of 2002, and saddled with a six figure hospital bill (after insurance max) about 7 years ago... I still have two rewards cards... I put everything day to day on them, and generally pay them off at payday. I try not to carry much of a balance, except for larger outlays that I'll do over time.
The bigger problem is that parents should talk to their kids about bills, the importance of paying them, and actually show them a spreadsheet with how much is coming in, and how much is going out just for bills, and then working with what's left. Parents don't do this, schools should as well, and even then, the stigma prevents parents from showing this to their kids, so they get to be adults with no understanding, prioritization or coping skills.
Online retailers (esp small ones) are paying ~2.5-3% in credit card fees, and compete heavily on price. I run a small online store - if my credit card fees suddenly dropped by 2% the first thing I would do is drop all my prices accordingly.
But your observation gave me an entirely unrelated idea: could a merchant, online or not, use deliberately random "##.74 instead of ##.99" prices to give the impression of really tight margins, even when they are actually wide?
It's not unique, there's a few Cashback checking accounts out there.
Other banks require a certain amount of debt card transactions a month to remain fee free.
I have yet to see a debit card do a 1% cash back, which is really common in credit. Here in Canada, the debit charge (handled via the interbank Interac "sort of coop") are really low, 6 cents per transactions is about par. There's nowhere to tack on even a 10 cents cash back.
Let's say that retailers' financial services costs drop by 1% of revenue, and they choose to raise their prices by 5%, because they're really greedy or mean. Their competitor across the street is also really mean, but only raises their prices by 4%. As a thought experiment, play that scenario through a few more turns.
The effect of lowering their costs for financial transactions is to lower retailers' minimum price for selling their products. They're "allowed" to charge as much as they like, though there are legal restrictions that make it illegal to collude with their competitors. And, even if they do collude there are motivations to defect from those illegal agreements that tend to undermine them.
A higher level view will appreciate that the higher sticker prices from higher transaction costs largely ended up being refunded to consumers through credit card reward programs, but probably distorted the prices for buyers paying with cash.