People always cite the first-order benefits of this regulation but don't look into anything else. To be clear, I haven't either but what I would look for is: - are real prices cheaper for consumers? - is economic activity higher or lower (i.e. maybe credit cards encourage purchases?) - does making credit cards a less lucrative business lower credit card penetration? - is lowering credit card penetration, particularly for people bad at doing interest math a good thing? - is making cash or debit cards relatively more appealing good?

My vague impression is that the studies on these questions are mixed (am I wrong? A quick Google found several EC funded ones which I'm a little suspicious of). Note that the US has 4 credible payment processing networks but the fees have remained constant. My suspicion is that 3ish% is the optimal value or a very large anti-trust investigation (not a price cap) is in order.

They're set at whatever the payment networks can get away with. There's nothing that says that's good for anyone else, although it is very good for Mastercard and Visa.

> They're set at whatever the payment networks can get away with. There's nothing that says that's good for anyone else, although it is very good for Mastercard and Visa.

MasterCard and Visa are more like clearinghouses. The decision makers are their members having "access to the rails", issuers and processors, which are either banks, subsidiaries owned by banks, or companies sponsored by the aforementioned two (which very often includes one or more banks getting an ownership percentage).

There are several ways to reduce costs underlying payments. One is better IT. Notice that IT infrastructure has improved and dropped in cost by immeasurable amounts since those 3% fees were first instituted. Another way is to reduce card fraud. Notice that we’ve had excellent solutions to many types of fraud for decades now, but online shopping still requires us to enter 16-digit easily-stolen numbers into websites, and so fraud is enormously higher than it needs to be. With biometrics and modern smartphones, in person fraud should be very low.

A better way to look at these networks is to understand two things: the first is that at one level, they’re an insurance business that makes a profit from insuring against fraud, and reducing fraud would reduce the profit margins they can make from that business. And a second way to understand them is as guardians of a hugely profitable network portal that’s very hard to compete with, and they’re charging as much as the market can bear for that service.

> online shopping still requires us to enter 16-digit easily-stolen numbers into websites, and so fraud is enormously higher than it needs to be

EU partially solved this with PSD2 enforcing two factor authentication for online card purchases.

https://finance.ec.europa.eu/publications/strong-customer-au...

I've noticed that I'm getting fewer and fewer 2FA requests with my 3DSEcure enabled VISA card of late. Places I frequently order from no longer trigger 3DS. Sometimes new shops don't either. From what I understand, whether or not the second factor triggers depends on a variety of factors including amount and retailer reputation.

They added a "frictionless" flow in 3-D Secure v2, so probably for situations like "we recognize this combination of device and payment card and the transaction is pretty small" it can slide you through without a direct interaction.

I think some interpretations of the PSD regulations call for specific "after X euros of spend/Y transactions you have to explicitly challenge" but it may vary by country.

I wish my bank had a setting I could toggle so 3DS would always trigger. I've had my card blocked twice because someone asshat made a bunch of online payments with it, some of which failed, but some succeeded. Presumably some shitty website leaked my details, but ideally 3DS should ensure that those details are unusable. Alas that wasn't the case.

and along the same lines, how good is the fraud prevention, detection, and recovery?

US banks lose about 3x more to fraud than average and about 10x more than some countries with sane regulators. Those are direct losses, not accounting for "prevention, detection, and recovery" costs.

I think that there's very little reason to suspect that a rent-seeking middle man getting a bigger piece of the pie is in any way good for the efficiency of the value transfer system, first order or not. You're kind of crab-walking around making a point here.

If credit card networks disappeared today, would we want them back? If the answer is yes, then they deserve a fee. Unclear to me why a certain % is morally correct.

The correct % is the minimum amount required to sustain the service.we know what that amount is from countries with sane regulation.

Oh come on. You are going to debate whether a 3% parasitic tax is good or bad. Interchange is paid on debit card transactions too, it's not credit card specific.

Parasitic takes for granted that credit card companies do nothing. Anyone who works in finance could tell you that's very false.

(I'm open to the idea that this is a market inefficiency that needs government correction - but you need more than just saying "3%" to prove that)

And that is why we’ve continued to pay about 2.5-3% since the 1980s, despite the fact that every element of the card networks’ technical infrastructure and hence cost structure has radically changed since that time.

A simple way to determine whether “look, the burden of proof is on you to prove this is abusive” is the correct standard is this: try to get precise details on how much the underlying service costs, how much the various types of revenue are shared between card processors, Visa, and issuing banks. You’ll find that it’s almost impossible to get a clear picture of those details without signing an NDA. But if I’m wrong about this, come back to me with it and we’ll discuss how to use it to evaluate whether the fees are reasonable.

> My suspicion is that 3ish% is the optimal value or a very large anti-trust investigation (not a price cap) is in order.

Why do you have this particular suspicion when you claim you haven't actually looked into ~any of the questions you raised?

> does making credit cards a less lucrative business lower credit card penetration?

It doesn't, EU uses card payments much more than the US. So end of discussion there, it got cheaper with no negatives, just positives.

That's false. It's 66.7% in the US. Only Iceland, Luxembourg, Switzerland, and Norway are higher.

https://genderdata.worldbank.org/en/indicator/fin7-t-a?gende...

(also, you answered - incorrectly - only one of the questions that I brought up)

That doesn't include debit cards, most people don't want nor need credit cards. I can count on one hand the amount of times I have seen people use cash the past year, basically everyone uses cards.

We have VISA and Mastercard with debit, not credit, so it works everywhere.

Sure, but the question was specifically regarding credit cards, not debit cards. In which case, they would be correct in that penetration is appears lower for credit cards in the EU no?

Note, I am not suggesting that is a bad thing, I fail to see largely how its a bad think but perhaps I lack enough understanding to see why people not loading up on credit cards is a negative.

> Sure, but the question was specifically regarding credit cards, not debit cards. In which case, they would be correct in that penetration is appears lower for credit cards in the EU no?

Yes, but that's because credit cards aren't needed in the EU (you don't need to build credit, and you get the same protections on both). So it's useless to try to focus on credit cards in particular, it only makes sense to consider debit+credit.

Ah fair enough. Thank you, makes sense. It’s much the same in my country honestly.

0.2% should be about the correct rate. WeChat in China has zero transaction fee in the system and a 0.1% fee on withdrawals. Visa/MasterCard amounts to a private tax on the economy. Unfortunately I don't see this changing anytime soon, since the US allows rent-seeking middlemen like Visa/MC, TurboTax, and PBMs (pharmacy drugs), to continue their operation as long as they keep funding the right politicians.

As far as I understand with WeChat you can't disputes purchases and do things like chargebacks. If your phone is somehow stolen and account drained (they'd need to know your pin..) then you're probably be screwed?

So there isn't the concept of insurance as far as I understand.

Not to defend the credit card companies in the slightest.. but its a bit apples to oranges

EDIT: Arguably "insurance" is actually an artificial problem creates to justify the cards' fees. The intentionally didn't implement CC chips for the longest time, insisted on signatures, and now support insecure things like contactless payment - thereby ensuring theft/fraud still exists and necessitating insurance (for a very marginal increase in user convenience)

The only plus side I can see is that you can buy stuff from shady ass websites and sleep comfortably knowing you can do a chargeback later.

What are UnionPay's fees? That's the correct comparison, not WeChat.

PayPal/CashApp have zero transaction fee as well for person-to-person transfers.

that's only a very recent change, and not universally rolled out. for decades shops charged ~£3 "connection fee" for paying by credit card, no matter the purchase amount, and many still (probably illegally) enforce a minimum spend if paying by credit or debit card. like when paying or withdrawing money abroad, it's just a lottery as to the "fees" you'll be charged not because there are such fees, but because someone in the '70s created super advanced tech to detect usage outside the country of issuance, and everyone got used to that

Visa and Mastercard have a net profit margin in the order of 50%. Do you think that's justified for the service they're providing, and is indicative of a healthy market/competition?

It's indicative of a healthy bankroll to fund superPACs and that's what matters!

As I remember it credit card minimums were only a thing at smaller shops but usually didn’t apply to debit cards.

Credit card chargebacks are very expensive for a vendor, you don't want credit card purchases for 1$ items.

A bit pedantic, but especially relevant in a conversation about government-permitted monopoly power: while requiring minimum spend might be in breach of the payment networks' contracts, and may give rise to _civil_ liability (and punitive measures towards the merchants), we shouldn't use language like "illegal" that implies that government would have any interest in, or capacity for, proactive enforcement.

When we use language that evokes the mechanisms of state and implies they'd be used to enforce a monopoly power, we imbue that power with the gravity of those mechanisms, and further entrench it as a "way of life." We should be especially careful of that when said monopoly/duopoly essentially creates and enables a private taxation of the primary source of credit to many in the world!

Better words is: against terms of visa/Mastercard rather than illegal. Businesses have valid reason for minimum payment. There is minimum fee in visa or master card like 30cents or so. If shop selling candy bar for $0.5 they are loosing money if someone pay with card.

Is there information on EU vs US credit limits?

How do the account fees compare between EU and US?

Most credit cards in the UK at least (same cap) have no standard account fee. Those that do come with other perks / beyond the 'world elite' etc side Mastercard/visa aren't seeing that money - its going to the issuing bank. Bank accounts also generaly have no standard fees (and a lot of other things we take forgranted - faster payments (if I send money to a friend/business I can do it instantly for free without needing a third party solution), standing orders, direct debit etc. - that make banking far easier than in the US).

There is also regulation in place that restricts predatory fee practices, getting customers into revolving debt and protection that makes card issuers liable for purchases (Section 75 - e.g. if I order something paying with my credit card and the merchant doesn't pay, the card issuer is legally liable / I can claim from them and its on them to get it from the merchant)

Other than Amex for airline points I don’t spend a penny on banking, all the standard services (eg transfers, bill payments, cash withdrawals, deposits) are free (in the U.K.) with no monthly fee.

I pay 3€ per month to "Nordea" for "unlimited" accounts and one VISA debit card.

My banks pays me more than that per month to use their debit cards.

So are you the product at your bank or why would they pay you to use their services?

Fractional reserve banking. Banks would even pay interest on money you had in your account in times past.

And then the fact that banks and card companies are charging merchants a fee for transactions and have margin to give back some of those fees to the customers.

I still get interest, it's really bad though. And the transaction fees are very low here (someone said 0.2% but I don't know) which should cover a lot of infrastructure, fraud and such.

Transaction fees have a great variation depending on which contract the business has with banks or payment providers. It's not a set percentage for a country. For example a large retailer with a huge number of transactions per day will have a deal for the lowest fees possible, and then those fees differ if the card is credit or debit, national or foreign, and between standard or premium cards, and private or business cards.

If you have a job, your bank should give you a premium card and then you will get cash back instead of having to pay your bank. If your bank doesn't offer this, it's just a matter of switching to any European bank of your preference.

I don't know, my bank gives me good exchange rates, their online banking is well integrated into Swedish society, they issue my online ID even. I'm not spending enough on my card to go through the hoops, I just have a peasant VISA debit and a free MasterCard CC and I'm happy with the setup.

>Is there information on EU vs US credit limits?

I would be very interested in this as well.

My understanding is that cashback cards of the type we have everywhere in the US (e.g. Amazon Amex = 5% back on Amazon purchases, Wells Fargo Active Cash = 2% back on everything) don't exist elsewhere.

Another example: I just earned $1000 from Chase Sapphire as a new customer bonus for diverting $5K of the spending I would do elsewhere on that card over three months.

That's a card with a $800 annual fee... And the Amazon Amex requires a Prime membership, so you are paying at least $140/year for that card.

Credit card companies aren't stupid, they offer a few loss leaders but they make it annoying and time-consuming to come out ahead. And most of the big perks are one-time only, they have gotten much better at banning "churners".

> That's a card with a $800 annual fee

Not my Sapphire. $95. Undecided on whether to keep it or change to another type (I'm not a churner, so 5/24 is not relevant). Also undecided on whether to keep the 100,000 points sitting in the rewards balance for the time being, or cash it out to the aforementioned $1000 now.

they can (and do) change the value of points vhenever they want, so better to cash out asap

That's just your bank giving back some (but not all) of those 2+% interchange fees.

Basically, in EU you have low fees, so credit cards are boring, they offer almost zero perks (because there's no money to finance those). No one really cares about what brand of card they get, only about their credit limit. In the US you are charged high fees on every purchase, and then the bank uses your own money to bribe you, or encourage particular types of (excessive) spending, or just make you addicted to credit card debt.

>That's just your bank giving back some (but not all) of those 2% interchange fees.

On the contrary, for someone like me who pays off my balances each month, if I get 2% back for every transaction, I am breaking even on those fees if assuming that I pay 100% of the fees, which of course isn't true; the merchant pays some of that. So really, I come out slightly ahead.

For something like the Amex I mentioned with its 5% back on Amazon, I am coming out well ahead.

> and then the bank uses your own money to bribe you, or encourage particular types of (excessive) spending, or just make you addicted to credit card debt.

Oh, good grief. So EU credit card companies don't do this? I had no idea they offered cards purely as a charitable venture.

I love how you stacked up all those sins just on the US side. Keep this sort of /r/AmericaBad nonsense out of HN.

For standard credit cards in EU it’s mandatory to pay the full balance every month. And it doesn’t cost anything, there are no interest rates. Not sure how much banks profit on it, if there’s even a profit.

I think most banks only offer if because customers needed credit cards to order stuff on the internet. Before that they were very rare here.

Edit: I meant the credit is free but I pay like € 2 / month to have my card. So maybe that’s their profit.

When the 'merchant pays those fees' how do you suppose they are paying them? I will give you a hint for free: it's not a special bank account that says 'definitely not paid for by my customers' on it.

Of course. But that is the case for all fees, taxes, surcharges, etc. Money is fungible. There is always some amount of give and take in terms of whether "they" or "me" is the one paying the tax bill/tariff bill/etc in terms of the bottom line.

Given that, and given the necessity of there being some amount of fees to support the credit-card infrastructure, the question for a consumer like me is whether I come out ahead on balance. I can pretty clearly say that I do for the Amazon Amex, and believe that I do for the Wells Fargo.

> So EU credit card companies don't do this?

No, as I said, they don't because of the interchange fees limit: they simply don't have money to finance any perks. Sometimes you get travel insurance, with the card that charges 200 EUR annual fee, sometimes you get some rewards program, where you collect the points, but those points are typically valued at 0.0001 cent, so no one really bothers earning them. Credit cards in Europe are really boring, commodity products, not status symbols or coupon books.

> assuming that I pay 100% of the fees, which of course isn't true; the merchant pays some of that.

You are paying that one way or the other: merchant will pass their fees on you by raising prices.

> Sometimes you get travel insurance, with the card that charges 200 EUR annual fee

Why would someone pay EUR200 each year for that credit card, then? Why does it exist at all? The only US credit cards I know of that have fees have fees because of their (huge) benefits.

You, of course, pretended to not see my pointing out your laughable math regarding fees versus cashback even though I said up front that I get 2-5% back.

The math must to check out from the bank perspective, there's no way around that, no bank will accept losing money.

If your credit card gives you 2% cash back on everything then obviously interchange fees charged must be just a tiny bit higher. [1]

As for 5% cashback on Amazon purchases (or similar promos) that's a completely different business model: the card is co-branded by Amazon, so it is Amazon that eats the cost of cashback, hoping that they will make up for that from your increased spending. That's why cashbacks higher than 2% are always on specific categories, or even specific stores/product brands - because bank needs a partner to eat the cost.

[1] https://www.wellsfargo.com/biz/merchant/payment-processing-p...

It could be amortized by the amount of people they expect to be delinquent. CC interest have super nasty rates.

Varies by country, but yeah, in general Credit Card options in Europe are pretty bad, here's my research on options in Spain:

Sabadell: No fees no perks for CC

Bankinter: No fees no perks for CC

Ing: No Fees no perks for CC

BBVA/Santander: Offer an Iberia cobranded card, 9k avios on 2k EUR spent on first 4 months, Iberia Silver Status, 1 point per 3 euros spent, 90 EUR annual fees

Caixa: Vueling card, slightly better avios earnings than Iberia card, some minor vueling perks, fast track at airports 90 EUR annual fee, also a Lufthansa card that offers 7k bonus miles, 95 euros annual fee, no info on miles per euro spent

Amex: Only worthy option, 1 mile per euro, 80k welcome bonus, unlimited lounge access, 400-500 euro credit welcome bonus, 250 travel bonus(used to be flights/hotels, now just hotels), fast track at airports, 780 euro annual fee, network in Europe is growing but I'd say still not accepted at places 50% of the time in Spain.

Revolut: Ultra could be the only comparable option to Amex that it offers unlimited lounge access and 1 point per euro at 660 euros annual fee

So yeah, the only option that actually gives you something is Amex, as the Iberia/Vueling options are laughable and the only reason why you'd have the free CC from other banks is because they are free.

I have been using US credit cards for years, all over Europe, taking advantage of points/rewards/car rental insurance/money back on challenged purchases, and I pay no more than the Europeans with their debit cards, be it services or products. And I pay the entire balance once a month, from a HYSA US account, thus making a little interest on that part, also, rather than debiting at the time of each purchase, from my non interest bearing European account

I was really surprised that it was normal to have account fees in the US. In the UK banking is free, at least until you hit an overdraft charge. They even made Bank ATMs fee free whatever bank you are with around 2000 (non bank ATMs still have a charge.)

If you pick the right bank, you can get the same deal in the US.

Actually, you can get no fees at any ATM

schwab has no fees at any atm globally :)

That money goes to buying off politicians though. So it’s a good investment to make the American people pay for their own robbery.

Unfortunately this only applies for physical transactions. For online payments this is still around 3% - reason why stripe cannot be cheaper. Wish we had something like transferwise is a wrapper around those QRCide payments so can pay cheap internationally as well

The EU (the ECB) is actively working towards a system similar to SEPA (Single Euro Payments Area) but for cards [0]. This would enable card transfers to also become faster (SEPA is instantaneous even cross-border within the EU) also allow for operations not depending on Visa or Mastercard.

There is a major EU effort to develop an alternative 'instant payment' system that doesn't depend on Visa or Mastercard called Wero [1].

[0] https://www.ecb.europa.eu/press/pubbydate/2019/html/ecb.card...

[1] https://wero-wallet.eu

wero is a private company, from Belgium, not an EU initiative.

In the same vibe you have Lydia in France that is successful.

I think the EU calls for a decentralised approach with multiple cross border providers.

Wero is technically from Benelux as there are origins in Belgium, Netherlands and Luxembourg. There are also other initiatives in Estonia, Finland, Sweden, Denmark, … to create alternative card payment system that is also resilient to internet failure.

There is also the Digital Euro project. Though no timeline exists yet.

https://www.ecb.europa.eu/euro/digital_euro/html/index.en.ht...

I had never heard of wero, despite living in Belgium and having been actively involved in fintech. Android also tells me that the app is not available in my country.

Sounds like it's supposed to replace Payconiq (which is currently the biggest mobile payment service in Belgium).

The fragmentation of payment services is starting to annoy me. I can use cash or cards everywhere in the eurozone with 100% compatibility. But every handful of banks in every country has decided to create their own payment "solution". Typically using Android & iOS apps that require an insane number of permissions (including location and wifi connections!?).

Looks like wero is just more of the same. Another non-standard that's only supported by a handful banks in a handful of countries. And I'll bet it won't work on rooted android devices, and that there won't be a web version.

At least it's built on top of SEPA Instant Payments, which is a step forward...

I believe Wero is just a service (doesn't have an app or anything like that). You'd activate it from your existing bank's app. For example, the KBC app has a Wero icon you can use to enable payments via the system.

But generally I agree it's not an ideal situation and I fully blame Apple for the current state of things - all QR-code based systems (payconiq, Bancontact, etc.) could've been avoided if apps could provide payments and access NFC from the start but here we are.

It's a great example of how quiet, unsexy regulation can have a massive impact

> The credit card duopoly is another instance where the EU has done a good job with regulation, [...] In the EU, card payment fees are capped at 0.2% for debit cards

No it hasn't. The right cap is 0, like in Brazil. It doesn't make any sense to have 0% payment fees on cash and 0.2% on cards. Cash is easier to fake.

It also doesn't make any sense to be a percentage. It takes the same number of bits to transport the number 10000 as it does to transport the number 10.

Even 0.2% is essentially just a privatized tax.