Comments on: The debit-card interchange scam http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: KidDynamite http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/comment-page-1/#comment-10968 Fri, 08 Jan 2010 13:30:05 +0000 http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/#comment-10968 @KidA: merchants can absolutely offer different prices for cash and credit – they just have to phrase it in a specific way. also, i don’t think they can offer different prices for credit and debit.

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By: nicfulton http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/comment-page-1/#comment-10966 Fri, 08 Jan 2010 12:37:24 +0000 http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/#comment-10966 Maybe I’m a twit, but I only use debit cards. I generally forget to pay my credit card bill once a year. When this happens my finance charges comfortably cover the ‘loss’ I make using a debit card. I’m almost certainly a twit, but I am a twit that knows I forget to pay sometimes, and when I do, it hurts.

Also, isn’t there subtle privacy difference involved here? E.g. your purchase history is “fair game” for a credit card, but not so for a debit card? Since in the latter case the actual details of the item purchased are irrelevant – it’s a cash transaction? Or am I missing something?

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By: KidA http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/comment-page-1/#comment-10956 Fri, 08 Jan 2010 03:23:57 +0000 http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/#comment-10956 Kosta0101 said:
“A convenience store I frequent offers a 2% discount on certain items purchased with cash or debit. If debit interchange fees continue to rise, I imagine this store will offer the discount for cash purchases only.”

Actually, in their agreement with the merchant bank they agree to never offer such discounts, otherwise they can have their account revoked. It is a breach of their contract. I live in Delaware and people are really sensitive about it here (as it is our cottage industry to rent seek on the national payments processing platforms via regulatory capture and oligopolies). They do it, but at risk of being cut off and/or sued.

KidDynamite touches on a larger point – the impacts of the interchange fees are paid by all and I think a good arguemnt could be made that they disproportionately impact those with less money to spend. The fees are absorbed by everyone. On ‘Signature’ and ‘World Points’ cards the interchange is even higher, and based on the amount of spend in a year a ‘upgrade’ may occur that allows even higher rates to be charged (to pay for richer rewards).

Merchants have no way to know who is who and have to accept all the transactions (literally not knowing what the interchange rate they will be charged is). We all pay for this. The people who spend the most generate additional interchange fees not only because of the volume but a higher interchange rate – this expnse get spread across all

Also, businesses that have smaller average ‘ticket’ pay a higher percentage of interchange once the per transaction charges get baked in. If you are paying a flat fee of $.05 per transaction and 2.15% in interchange fees and someone buys a coffee with a chip card at 7-11 for $1.00 then you have effectively increased the interchange rate to 7.15%. This is a rough example, but it illustrates the motivation behind 7-11 having petitions on their counters last year asking for support for regulation on the industry – but then again, if there were ever a business that would prefer not to amass large amounts of cash overnight it would be a convenience store. What is not being as much of a target worth?

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By: KidDynamite http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/comment-page-1/#comment-10955 Fri, 08 Jan 2010 02:16:07 +0000 http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/#comment-10955 felix – all i hear in this post are reasons for consumers to avoid debit cards. if Visa wants to charge a 10% interchange fee on debit cards – so what? no one needs to use debit cards – they are not a human right. neither are credit cards, for that matter. if you don’t like the fee, don’t use the product.

ahhh – but what is interesting about this case is that these fees are essentially spread amongst ALL consumers, not just the ones using the products – because the consumer doesn’t pay an explicit interchange fee – the merchant does… so we all get hosed for the actions of a few…

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By: Kosta0101 http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/comment-page-1/#comment-10953 Fri, 08 Jan 2010 01:41:51 +0000 http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/#comment-10953 Retailers do have an option here, they can offer discounts for purchases with a preferred method of payment. A convenience store I frequent offers a 2% discount on certain items purchased with cash or debit. If debit interchange fees continue to rise, I imagine this store will offer the discount for cash purchases only.

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By: JamesBShearer http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/comment-page-1/#comment-10951 Fri, 08 Jan 2010 00:09:45 +0000 http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/#comment-10951 I used debit cards because they were sent to me in connection with checking accounts without my applying and they were sometimes easier to use than checks. But now that I have a credit card I never use them.

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By: maynardGkeynes http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/comment-page-1/#comment-10950 Thu, 07 Jan 2010 23:50:08 +0000 http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/#comment-10950 Can someone explain why people use debit cards at all, when credit cards offer a no-cost 10 to 30 day float (debit cards debit your bank account instantly), free miles, 3% cash rebates on Amazon, or an extra discount on a General Motors car without a clunker to trade. Maybe it’s the cash withdrawal feature (but, why not use an ATM card)? Or maybe you don’t qualify for a credit card? (But until recently, who did that apply to?) Or maybe you don’t trust yourself with credit? Or is it simply that Visa pushes them so hard?

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By: mushr00m http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/comment-page-1/#comment-10949 Thu, 07 Jan 2010 23:33:02 +0000 http://blogs.reuters.com/felix-salmon/2010/01/07/the-debit-card-interchange-scam/#comment-10949 How else are banks supposed to make money? If you don’t allow them to tax everything they have no purpose.

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