We used to have that for online transactions, it's called surcharging, EU put a stop to that in 2018 with the PSD2 directive because it wasn't working.

It was only when companies themselves were paying the transaction fees that they started optimizing the cost of transaction fees.

I've often seen cash handling costs listed as around 3%, which is likely why CC fees were so high - it was still not a terrible enough deal for stores to start avoiding it.

It depends whether cash handling costs are mostly banking "costs" from banks ripping off customers or actual costs that exist.

EU banks can only dream of the ways US banks get to freely completely rip off their customers (and commit major banking and trading frauds that crash the world economy without anybody going to jail).

> actual costs that exist

Money gets lost. Either really or because you've experienced shrinkage. Tellers are not perfectly accurate. Customers will try to scam you with fake money, if you notice, that's your loss. If you pass enough of it on, you will at least have to answer some questions. If coins are involved in your change you're going to have a bad time.

Retail in the 80s was not particularly fun. Running register tapes to look for missing money was an effective nightmare.

It's probably that credit cards have filled an effective void for so long we haven't developed cash handling and tracking technologies to the same level. We almost got there. Remember for a few years when almost all grocery stores had automated change dispensers?

We optimized for a particular solution and ignored the other.

Also the risks and associated cost of physically delivering cash to the bank.

choose cheaper options like the Discover card? or to find an ATM to withdraw?

My understanding here is that Mastercard/Visa aren't charging customers, they are charging vendors who take that payment. Some vendors build that into the price of items, some eat the cost, some do indeed pass the cost to the consumer. But the latter is rare except for small businesses (which this case seems focused on).

TBH I'm suprised they even bothered with an anti-steer approach. Visa/Mastecard are about as objective a duopoly as we can get in the world of financial transactions. They can control entire industries because removing the vendors' ability to take their cards is a death kneel.

The problem is: vendors are not allowed to set lower price for payments in cash. So you pay 3.5% even if you dont use cards at all.

They are, and it's out there. You just have to phrase it as a ""cash discount " instead of a "credit card fee".

Banks/card issuer want the fee to be high so Visa/Mastercard compete by increasing it, consumer is unaware of what the fee is but ultimately pays it through increased cost of goods sold by vendors.