I play the credit card "game" because I hate feeling like I'm leaving money on the table, but I really wish I didn't have to. Some degrees of fees make sense, to run the network, and handle fraud, but it's ridiculous that people have this sense that shopping should somehow fund your vacation.
Where I am it's increasingly common to see credit card fees when checking out. I get it, because merchants are being charged 3-5% of their total revenue. I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.
It boggles my mind that the government has privatized currency to these people.
Crazy-person-but-actually-really practical-idea:
Nationalize one if these networks. Maybe Discover.
The US government should provide us digital currency. The simplest way is to force the current systems to do that. All that rent they collect in terms of transactions fees shouldn't be profit for a private business but fees of the government.
There is, it's called debit cards, but Stripe et al. "simplified" pricing by charging a percentage regardless of card type instead of the traditional interchange-plus pricing. Merchant banks "used to" make money by tacking on fixed fees, i.e. a set-up fee, terminal fee, monthly fee, etc, but then Stripe came along and provided (1) a better dev experience, (2) better onboarding, and (3) simplified pricing.
Also debit cards run by smaller credit unions charge credit-card like fees (and then are used by fintechs to earn fees while making it harder to pass those fees on to end users).
You have to wait for the investigation to complete to receive compensation if you’re hit by fraud on a debit card. Credit cards don’t share that issue. If you’re poor or living paycheck-to-paycheck, debit cards are potentially a risk to your livelihood.
As someone who has been hit with fraud on a debit card and a credit card, the process to recover money from fraud on a credit card is so much easier and more hassle-free than a debit card.
The big difference is that with a debit card, it's your money that is hit by fraud. The debit card is basically just a proxy. You have to go file a police report. You have to hope the bank will give you the money back.
When the credit card gets hit, it's the credit card company's money and they will seemingly chase the fraud to the ends of the earth to recover it.
Another thing to consider is your credit card rewards cash back etc are really trading your privacy for a little rounding error worth of discount in comparison to using cash.
You may also save far more money going cash only. E.g. some local restaurants near me give you like 5% off paying in cash. Gas is generally cheaper cash price vs card price or debit fee. You have a big job with a contractor, tell them you might be interested in paying cash and they might offer you a substantial discount.
> Another thing to consider is your credit card rewards cash back etc are really trading your privacy for a little rounding error worth of discount in comparison to using cash.
How much privacy really? If I get mostly $20s from the ATM, and the merchant does daily deposits of most of the $20s they get, why wouldn't banks start scanning and tracking serial numbers (if they don't already), if my purchasing habits are actually valuable?
The life of most currency notes is bank to customer to merchant to bank, and the bank could just track serial numbers to figure out your spending habits.
Practically, it would make little sense. The actual life of most currency notes is bank1 to customer to merchant to bank2, and there is a large probability that bank1 and bank2 are different entities. And then, so many more people use the credit card system, and it is so much easier to track people there, that the ROI on tracking people using cash would be low.
I would be very surprised if any bank tried to scan currency note serial numbers.
Contractors, but also cosmetic health work. Invisalign, veneers, plastic surgery, etc. Probably most big-ticket items or services that you're not buying from a megacorp.
Sometimes they'll give even more than 5% because they can keep it off their books completely, but in those cases, they want physical cash--not just a check to avoid credit card fees.
I used to think "I should be nice to merchants" and pay everything in cash.
That was 15 years ago. Now, living costs have gone up, I'm getting taxed to death by not just governments but increasingly more by businesses themselves ("benefits fees", "installation fee", "convenience fee", guilt-tip screens, sneaky price increases, etc.) so now I feel no guilt in playing the system to get at least some of my money back. Now I just churn 1-2 credit cards a year to pay my taxes and get some of it back in the massive sign up bonuses, which more than cover the transaction costs, fees, and then get me another few thousand back.
If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
Deal? No? Okay, you continue paying your merchant fees and I'll continue reaping the credit card bonuses to the maximum possible.
> If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
Where are you not getting this? You mean taxes on top of the retail price? You would pay cash, if the merchants colluded with you in evading taxes?
> If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
This seems to still be pretty reliable for most things in brick-and-mortar stores, FWIW.
What's really fun is when you're reselling something like Microsoft 365 and both the credit card companies and the state (through sales tax) make more than you do on each sale.
I don't get this. Use cash like me and a bunch of us if you don't want to play the game. Or a debit card. Otherwise it's just an extra game. Extra games are choice. Choice is good.
I would only use cash in situations where I'm able to obtain a discount compared to using a credit card.
Even then, you have to think twice. If you get scammed of cash, it's gone. If you get scammed in a credit card transaction, there is a fighting chance you can dispute the charge and have it reversed in their face.
You know that credit card feature of providing some insurance coverage on things like vehicle rentals? It may look like small print, but I actually used that. By some amazing fluke, I damaged the bumper of a rental car; the credit card coverage took care of it. I filled out minor paperwork and never heard about the issue.
Speaking of rentals, in many rental situations (even simple power tools at your Home Depot or whatever) you get charged a deposit on the card which comes back when you return the thing. It's just a number in database. With cash, you'd have to fork that up over the counter; very unappealing.
Agreed. The pool hall nearby has a game of pool for $2. But if you use a credit card the minimum purchase is $6 (three games) due to fees. It works, but I thought it was a gimmick to trap people into playing more pool until I saw your comment here and realized it was from fees.
>I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.
This is called "Regulate the max fees" like Europe did, where they still have functioning credit card networks, including good fraud coverage, but you aren't expected to dance for the credit card company for peanuts of kickback.
I don't play the points game, I use a cashback card.
I use a cashback card, because most merchants will charge me the same regardless of payment method, and getting a 4% discount (+ time value of money) is the lowest cost to me. If I use some other payment method, the merchant may keep more of the transaction amount, and that's great for them, but it doesn't improve my customer experience. If interchange fees are strictly capped and cashback cards disappear, I wouldn't be upset; but while they're here, I'm incentivized to use them... following economic incentives while doing economic transactions seems like the right thing to do?
I remember reading a comment here a while back about merchants being offered a discount on the processing fee if they also transmitted detailed data about the purchase (essentially the data that would be on the receipt). That data could then be resold on to advertisers. Does anyone remember this or have links to more data? (Not having much luck with search, maybe I'm hallucinating the whole thing.)
the main purpose of that data is for fraud detection, anything downstream (i.e. selling it to advertisers) is just the cherry on top. Merchants are always financially incentivized both implicitly and explicitly to do anything that would reduce fraud and increase the rate of successful authorizations.
I would love if it was transmitted to the bank for my own use so I can easily remember what I purchased or run budgeting software against it! Obviously wouldn't be excited about it being resold tho.
It's crazy it is resold but we don't even get it for our own use. Budgeting with credit card statements would instantly become so much more useful with less effort.
They primarily don’t deal with cash because cash is a pain. It needs to be physically taken to a bank and protected from theft by both staff and random robbers with guns, it needs to be counted all the time, and you need to maintain the right denominations to make change.
I have reservations about businesses getting rid of cash, especially if they’re turning away people who don’t have alternative ways to pay, but I certainly understand why they do it.
It’s also always awkward when a coffee shop is like 95% credit, and you try to hand them cash and they look at you like you’re Rip Van Winkle.
Merchants aren't going cash only to sell your data, they're doing it because it's expensive to handle cash and makes their taxes a whole lot more troublesome too.
> Huh, I thought accepting legal tender was a federal rule, I guess not.
I think the key federal phrase is "for all debts, public and private."
At the time that you're buying a coffee, you are not in debt to the coffee shop, they're setting a precondition on an exchange. [0] Now, maybe if they let you run up a tab...
[0] Yes, there are a positive number of milliseconds where somebody owes somebody something, but pedantic software intuitions don't always apply to law, and overall that's a good thing.
I mean, cash is also expensive in its own way. It has to be handled and insured, coins may need to be rolled before being taken to the bank, a register is a mechanical device to power and maintain, petty theft by employees is a concern.
It's not really that hard to see why a business charging $5-20 per transaction from people who all have phones and credit cards anyway might choose not to accept cash.
Well I don't really know what they do, but what I know is that Visa transactions costs are 0,22 € out of a payment of 1 €, Mastercard's is 0,23 €, and the French CB network is 0,17 €.
All of them do the same : ensure I get the money from the customer. Of course it's a larger project to run this in the whole world, but shouldn't it scale to less along with the number of billions of customers instead of the other way round ?
This is an insane amount of money. They killed micro-transactions, they killed the business model of the Web in favor of ads, the only popular way to do microtransactions right now.
The best way to pay for poor services already rendered and move on with life is to simply pay via card. Didn't like that haircut? Terrible food at the restaurant? Hold onto your cash and slip them the card.
Jokes on you. Merchants prefer credit cards because there is less loss than cash. 2.5% is nothing compared to 5-10% loss at the register. Plus easier and more accurate accounting.
Clankers found me one study [1] that suggests total handling costs may actually be this bad, but are highly business dependent e.g. restaurants are worse than grocery stores
I'm just seeing what looks like an attempt to sell me a PDF.
What actually is the source of such costs? The cashier still has to be paid even if the customer is using a card. Presumably there isn't anywhere near that much theft from registers, or people messing up giving change?
Are you saying servers keep 90% of what you pay? Tip and otherwise? What country? How do you know? How could a business possibly operate in this reality?
While cc banks are in these times starting to side more with vendors on charge disputes, its still far more recourse than bank drafts offer you in a transactional dispute
Aside from the technical aspect I strongly encourage everyone to also read about VISA’s founder Dee Hock, still a very underrated figure in leadership and finance.
In my opinion, the only solution is everyone (individuals as well as corporations) gets a direct account with the federal reserve as long as you can associate a taxpayer identification with the account. Using it is voluntary but it is free of cost, paid for by taxes, and moving money to and from accounts is free of cost. Depositors would get the same overnight interest rate that banks do, and this interest is added every day. I think if we could make this happen, the chokehold of Mastercard and Visa can be greatly diminished. The disintermediation of commercial banks, the loss of credit card perks, and the added cost of customer service should be an acceptable cost of removing the parasites visa and master card from our economy.
most importantly, this opens up a lot of money that the federal reserve can hold directly, something that will become more and more important as bond yields go sky high.
So the article shows how visa and mastercard are, by far, not the ones taking the largest fee, and the solution is to get rid of them?
Where are you going to do the transactions in your scheme? Because credit card transactions are not the same as sending money from one bank account to another. There are settlements, disputes, chargebacks, etc.
How is the central bank going to offer the same variety of products described in the article? I.e..
> Interchange fees vary dramatically based on the kind of card, category of spend, and even the metadata attached to a transaction. The network’s goal is to set fees that incentivize desired behaviors on their network, including using more secure payment methods (lowering interchange fees for merchants), or for companies to do more business spending (higher interchange fees on commercial credit cards).
Your scheme sounds like all these crypto guys who think they can replace credit cards with bitcoin transactions, as if they were the same thing
Walmart is currently trialing it to save $3B-$7B a year in interchange fees. No crypto, just XML messages through a mainframe at the Federal Reserve with a 20 second SLA.
> “It surprised me,” Henry said of adoption of Walmart’s first iteration of pay-by-bank, which is available online but hasn’t been marketed to customers. “It’s certainly surpassed our expectations of the amount of customers that have registered and actually use the payment type.”
> Walmart’s upgraded pay-by-bank offering will be rolled out in 2025. The transactions will occur over bank technology provider Fiserv’s NOW Network, which integrates with The Clearing House’s Real Time Payments network and the Federal Reserve’s FedNow. Until now, large retailers hesitated to launch real time payment options because many banks were not connected to an instant settlement system, meaning their customers would not be able to use the product. NOW Network aims to connect to as many banks as possible to reach 100% of deposit accounts by combining its own network with RTP and FedNow.
(as of this comment, there are 100+ instant payment systems live across the world; we should assume that all countries will eventually have an instant payment system, or integrate with someone else's)
This is an important question- most of the costs of a credit card providers come from dealing with fraud and chargebacks. That's partially because, under US law, credit card companies have to eat fraudulent charges if they can't get the person or company that did the fraud to do so. (Funnily enough, this is one of two places where protections for average people in the US are significantly better than protections for average people in Europe).
But credit card companies can keep their costs low by making a business decision not to renew the accounts of frequent chargeback-ers or chargeback-ees (even if they never officially found those individuals at fault). If the government had to make a payment system for everyone and take on all responsibility for all fraud, that would create an incentive with massive second-order effects.
You resolve it the same way you handle in-store cash purchases of products that turn out to be faulty.
There is no reason why fraud and contract violation must be handled by unelected and unaccountable payment processor, when the government has already set up a consumer protection system for disputes related to cash payments. The payment processor is best left as a dumb pipe that does what parties and (in case of disputes) courts tell it to do.
Customers can pay the credit card fee to get their chargeback insurance, if they choose, while others who can pay with cheaper instant payment rails can opt out. This is trivial with merchants able to surcharge credit card payments, as many merchants are starting to do (US mobile phone companies, US internet providers, Meta ad purchases, restaurants, etc).
A few years ago congress had a nice solution via a market mechanisms, have sufficiently large banks be required to have their cards support at least 2 card networks, via which the merchant may at at swipe time decide which network to run against. Unfortunately like any good idea, it died in congress.
> The answer to that is to "donate" to about 270 congress critters.
Not too far off. You gotta ask why such a lucrative business has a near monopoly, and the answer is not that potential competitors don't notice their profit margin.
Don’t forget arbitrage, which is the withholding of transferred funds for 7 days while the capital remains in visa’s accounts for “investing” / speculation.
It’s like if you gave your buddy $100 to give to his room mate, and he decides to wait a week and gamble it on Kalshi
>It’s like if you gave your buddy $100 to give to his room mate, and he decides to wait a week and gamble it on Kalshi
Or treasuries.
Its actually a minor part of rheir business.
And frankly who cares given that its a sustainable system. I pay on credit and then someone else pays. I dont give a shit of they are betting on how many times Al Roker says Trump on New Years Eve.
They tax our entire economy at X rate, while maintaining their infrastructure only requires Y cost ... and X is significantly higher than Y.
From the actual article:
> The payment processor keeps 0.35% ($0.35), then pays 2% ($2.00) to the cardholder’s issuing bank and 0.15% ($0.15) to Visa. The 2% is the interchange fee, commonly known as interchange. The 0.15% is the network assessment fee. 8
In other words, they get 0.35% of every transaction ... and it does not require anything close to that to maintain their network.
That 0.35% feels more reasonable in 1976 or even maybe 2001 than it does today because technology changed so much. But maybe I'm wrong about that
If you're an American that 2% is a much bigger problem for your society. That's a direct funnel from the poor to the wealthy, it's not as a obvious a problem as "Trump gave the ultra-rich a tax cut" but it might structurally be more significant.
Credit card companies are mostly parasitic middle men but I have a credit card that I use for most payments and pay off the balance every month and effectively get 2% cashback with no interest costs.
The actual rates charged to merchants are variable, and typically higher for rewards/cashback cards. Basically, other people are subsidizing cards with higher benefits/cash back (of course as people shift, the merchant raises prices to compensate for the higher average fee, or just charge an additional Z% higher than your cash back)
> and it does not require anything close to that to maintain their network.
If it's so easy to disrupt visa/mastercard payment network, they wouldn't be able to charge this much. Payment is a highly competitive business. We witnessed so many payment companies went under or were bought out, but these two stay for years and are still profitable.
The truth is their moat is considered very durable and hard to build. A global n banks to n banks payment network is not as simple as how people thought.
Goods (and services) are priced at what the customer is willing to pay. In this case, the alternative is cash or cheques, both have much higher loss rates. That’s why vendors are eager to take visa over cash.
No, the alternatives are any number of other solutions that are not given a look-in to the very lucrative duopoly. The network effects are prohibitive for upstarts.
Europeans really need to stop handing their money over to Trump-Visa and Trump-Card here. Canadians learned that lesson already. Why do european politicians not learn anything? Leyen even signed a surrender treaty where european taxpayers lose money that goes into the USA. I say stop it with the proxy-control from Washington.
As someone from an EU country: the only place where I use visa/MasterCard is at Amazon. Everything else I use my country's payment system, which is now joining with Italy's own and probably more in the coming years.
VisaNet & friends make the modern consumer world go round. The fees they extract are a drop in the bucket compared to the economic activity that they enable with their networks. Many businesses simply couldn't exist without something approximating this.
It seems Visa revenue is $40B/year. You shouldn't compare that to the amount of economic activity they enable - you should compare it to how much it could cost to run a system like theirs.
You are literally linking to a page published by Visa's Investors Relations Department.
The problem is that like all cartels, they hold progress back. Things could be even more efficient than the current state of affairs. For example we could have open standards with thousands of local players, much faster settlement times etc...
There are also aspects such as the fact that due to this concentration of power, the whole world is subject to US sanctions, such that a EU citizen sanctioned by the US is effectively cut off from civilization.
I like how providing an incredibly efficient payment network is framed as holding progress back.
I'd frame it as making the standards for competition very high.
I don't see people getting super ideological about their inability to create monocrystaline turbine blades or 2nm semiconductors in their garages. Why payment networks? Because computers? The overall network is way more complicated than a specific technological system or clever open standards document.
These networks would be usurped if someone could actually come up with a better system. The economy insists upon it constantly.
Yes. As a merchant it's pretty cool that the money just shows up and I don't have to chase down as much bad debt. The processing costs easily pay for themselves.
Where I am it's increasingly common to see credit card fees when checking out. I get it, because merchants are being charged 3-5% of their total revenue. I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.
Crazy-person-but-actually-really practical-idea:
Nationalize one if these networks. Maybe Discover.
The US government should provide us digital currency. The simplest way is to force the current systems to do that. All that rent they collect in terms of transactions fees shouldn't be profit for a private business but fees of the government.
The big difference is that with a debit card, it's your money that is hit by fraud. The debit card is basically just a proxy. You have to go file a police report. You have to hope the bank will give you the money back.
When the credit card gets hit, it's the credit card company's money and they will seemingly chase the fraud to the ends of the earth to recover it.
You may also save far more money going cash only. E.g. some local restaurants near me give you like 5% off paying in cash. Gas is generally cheaper cash price vs card price or debit fee. You have a big job with a contractor, tell them you might be interested in paying cash and they might offer you a substantial discount.
How much privacy really? If I get mostly $20s from the ATM, and the merchant does daily deposits of most of the $20s they get, why wouldn't banks start scanning and tracking serial numbers (if they don't already), if my purchasing habits are actually valuable?
The life of most currency notes is bank to customer to merchant to bank, and the bank could just track serial numbers to figure out your spending habits.
Practically, it would make little sense. The actual life of most currency notes is bank1 to customer to merchant to bank2, and there is a large probability that bank1 and bank2 are different entities. And then, so many more people use the credit card system, and it is so much easier to track people there, that the ROI on tracking people using cash would be low.
I would be very surprised if any bank tried to scan currency note serial numbers.
> The site was officially launched on December 23, 1998.
Sometimes they'll give even more than 5% because they can keep it off their books completely, but in those cases, they want physical cash--not just a check to avoid credit card fees.
That was 15 years ago. Now, living costs have gone up, I'm getting taxed to death by not just governments but increasingly more by businesses themselves ("benefits fees", "installation fee", "convenience fee", guilt-tip screens, sneaky price increases, etc.) so now I feel no guilt in playing the system to get at least some of my money back. Now I just churn 1-2 credit cards a year to pay my taxes and get some of it back in the massive sign up bonuses, which more than cover the transaction costs, fees, and then get me another few thousand back.
If merchants across the world make a deal with me to charge exactly the listed/advertised number exactly, no more, no less, then I'll pay in cash again.
Deal? No? Okay, you continue paying your merchant fees and I'll continue reaping the credit card bonuses to the maximum possible.
That is only "nicer" as it allows to evade taxes. (Which some may consider nice)
But cost for cash is comparable to card payment if looked at seriously
* You need working time to count it
* You need working time to bring to bank (or request pickup, which costs)
* The bank will charge the deposit
* The bank will charge for the change you need
* In the shop the cash has to be protected (safe? Protection against robbery)
* This requires procedures for shift change etc (thus training time and prolonging working time)
* There is a risk of fraud (counterfeit, swap tricks etc.)
* Employees might have sticky fingers
Where are you not getting this? You mean taxes on top of the retail price? You would pay cash, if the merchants colluded with you in evading taxes?
This seems to still be pretty reliable for most things in brick-and-mortar stores, FWIW.
Even then, you have to think twice. If you get scammed of cash, it's gone. If you get scammed in a credit card transaction, there is a fighting chance you can dispute the charge and have it reversed in their face.
You know that credit card feature of providing some insurance coverage on things like vehicle rentals? It may look like small print, but I actually used that. By some amazing fluke, I damaged the bumper of a rental car; the credit card coverage took care of it. I filled out minor paperwork and never heard about the issue.
Speaking of rentals, in many rental situations (even simple power tools at your Home Depot or whatever) you get charged a deposit on the card which comes back when you return the thing. It's just a number in database. With cash, you'd have to fork that up over the counter; very unappealing.
This is called "Regulate the max fees" like Europe did, where they still have functioning credit card networks, including good fraud coverage, but you aren't expected to dance for the credit card company for peanuts of kickback.
I felt like if I didnt spend $1 on something that was the equivalent of me spending $50 to get those same credit card points
I use a cashback card, because most merchants will charge me the same regardless of payment method, and getting a 4% discount (+ time value of money) is the lowest cost to me. If I use some other payment method, the merchant may keep more of the transaction amount, and that's great for them, but it doesn't improve my customer experience. If interchange fees are strictly capped and cashback cards disappear, I wouldn't be upset; but while they're here, I'm incentivized to use them... following economic incentives while doing economic transactions seems like the right thing to do?
It's only available in the US, many countries have lower interchange fees and prohibit sending this data.
They primarily don’t deal with cash because cash is a pain. It needs to be physically taken to a bank and protected from theft by both staff and random robbers with guns, it needs to be counted all the time, and you need to maintain the right denominations to make change.
I have reservations about businesses getting rid of cash, especially if they’re turning away people who don’t have alternative ways to pay, but I certainly understand why they do it.
It’s also always awkward when a coffee shop is like 95% credit, and you try to hand them cash and they look at you like you’re Rip Van Winkle.
> This note is legal tender for all debts, public and private.
See also USC §5103:
> United States coins and currency [...] are legal tender for all debts, public charges, taxes, and dues.
Thus a private person is only obligated to accept cash as repayment for a debt, not for purchases.
I think the key federal phrase is "for all debts, public and private."
At the time that you're buying a coffee, you are not in debt to the coffee shop, they're setting a precondition on an exchange. [0] Now, maybe if they let you run up a tab...
[0] Yes, there are a positive number of milliseconds where somebody owes somebody something, but pedantic software intuitions don't always apply to law, and overall that's a good thing.
Companies simply get ahead of that law by refusing to provide the service or good.
Works in retail bc at the till they can just say 'no cash no business deal'
Doesn't work in other ventures so easily.
It is along the lines of 'we reserve the right to refuse business to anyone'
It's not really that hard to see why a business charging $5-20 per transaction from people who all have phones and credit cards anyway might choose not to accept cash.
surely a million times less expensive than a subscription to a POS....this is not a strong argument.
I'd say employee theft is the only reason a coffee shop would be "no-cash", and fear of robbery in a few places.
All of them do the same : ensure I get the money from the customer. Of course it's a larger project to run this in the whole world, but shouldn't it scale to less along with the number of billions of customers instead of the other way round ?
This is an insane amount of money. They killed micro-transactions, they killed the business model of the Web in favor of ads, the only popular way to do microtransactions right now.
I thought in the EU the maximum interchange fee for consumer credit cards is capped at 0.3% of the transaction value.
I don't want to put responsability on anyone, I don't know who takes what in the chain, but I see the fees in practice.
I took the cheapest PSP I could find in Europe... Stripe is way more expensive, taking 25 cents of fixed fee !
The best way to pay for poor services already rendered and move on with life is to simply pay via card. Didn't like that haircut? Terrible food at the restaurant? Hold onto your cash and slip them the card.
Where did you get this number from?
[1] https://www.ihlservices.com/product/the-cost-of-cash-handlin...
What actually is the source of such costs? The cashier still has to be paid even if the customer is using a card. Presumably there isn't anywhere near that much theft from registers, or people messing up giving change?
Bad service = card always.
https://gocardless.com/
You can apply to a fund to implement this system.
https://nlnet.nl/taler/
most importantly, this opens up a lot of money that the federal reserve can hold directly, something that will become more and more important as bond yields go sky high.
Where are you going to do the transactions in your scheme? Because credit card transactions are not the same as sending money from one bank account to another. There are settlements, disputes, chargebacks, etc.
How is the central bank going to offer the same variety of products described in the article? I.e..
> Interchange fees vary dramatically based on the kind of card, category of spend, and even the metadata attached to a transaction. The network’s goal is to set fees that incentivize desired behaviors on their network, including using more secure payment methods (lowering interchange fees for merchants), or for companies to do more business spending (higher interchange fees on commercial credit cards).
Your scheme sounds like all these crypto guys who think they can replace credit cards with bitcoin transactions, as if they were the same thing
Brazil's Pix costs ~$10M/year to run: https://whatispix.com/
This is much cheaper than the entire credit card ecosystem skimming ~3% off of the economy. Efficiency!
FedNow Is Live - https://news.ycombinator.com/item?id=36801491 - July 2023 (1022 comments)
Walmart is currently trialing it to save $3B-$7B a year in interchange fees. No crypto, just XML messages through a mainframe at the Federal Reserve with a 20 second SLA.
> “It surprised me,” Henry said of adoption of Walmart’s first iteration of pay-by-bank, which is available online but hasn’t been marketed to customers. “It’s certainly surpassed our expectations of the amount of customers that have registered and actually use the payment type.”
> Walmart’s upgraded pay-by-bank offering will be rolled out in 2025. The transactions will occur over bank technology provider Fiserv’s NOW Network, which integrates with The Clearing House’s Real Time Payments network and the Federal Reserve’s FedNow. Until now, large retailers hesitated to launch real time payment options because many banks were not connected to an instant settlement system, meaning their customers would not be able to use the product. NOW Network aims to connect to as many banks as possible to reach 100% of deposit accounts by combining its own network with RTP and FedNow.
Walmart Plans Instant Bank Payments, Cutting Out Card Networks - https://news.ycombinator.com/item?id=41593450 - September 2024 (3 comments)
https://news.ycombinator.com/item?id=49433164 (citations)
(as of this comment, there are 100+ instant payment systems live across the world; we should assume that all countries will eventually have an instant payment system, or integrate with someone else's)
https://www.pymnts.com/wp-content/uploads/2026/09/PYMNTS-Int... [pdf] (September 2026 revision)
This is an important question- most of the costs of a credit card providers come from dealing with fraud and chargebacks. That's partially because, under US law, credit card companies have to eat fraudulent charges if they can't get the person or company that did the fraud to do so. (Funnily enough, this is one of two places where protections for average people in the US are significantly better than protections for average people in Europe).
But credit card companies can keep their costs low by making a business decision not to renew the accounts of frequent chargeback-ers or chargeback-ees (even if they never officially found those individuals at fault). If the government had to make a payment system for everyone and take on all responsibility for all fraud, that would create an incentive with massive second-order effects.
There is no reason why fraud and contract violation must be handled by unelected and unaccountable payment processor, when the government has already set up a consumer protection system for disputes related to cash payments. The payment processor is best left as a dumb pipe that does what parties and (in case of disputes) courts tell it to do.
Is this why the best cash back credit cards give 2%?
2% seems to be a local maximum of cashback cards. There's a lot of 2% cards, and only a handful above that.
Makes sense?
Not too far off. You gotta ask why such a lucrative business has a near monopoly, and the answer is not that potential competitors don't notice their profit margin.
It’s like if you gave your buddy $100 to give to his room mate, and he decides to wait a week and gamble it on Kalshi
Or treasuries.
Its actually a minor part of rheir business.
And frankly who cares given that its a sustainable system. I pay on credit and then someone else pays. I dont give a shit of they are betting on how many times Al Roker says Trump on New Years Eve.
From the actual article:
> The payment processor keeps 0.35% ($0.35), then pays 2% ($2.00) to the cardholder’s issuing bank and 0.15% ($0.15) to Visa. The 2% is the interchange fee, commonly known as interchange. The 0.15% is the network assessment fee. 8
In other words, they get 0.35% of every transaction ... and it does not require anything close to that to maintain their network.
If you're an American that 2% is a much bigger problem for your society. That's a direct funnel from the poor to the wealthy, it's not as a obvious a problem as "Trump gave the ultra-rich a tax cut" but it might structurally be more significant.
If it's so easy to disrupt visa/mastercard payment network, they wouldn't be able to charge this much. Payment is a highly competitive business. We witnessed so many payment companies went under or were bought out, but these two stay for years and are still profitable.
The truth is their moat is considered very durable and hard to build. A global n banks to n banks payment network is not as simple as how people thought.
If they have the US government behind them its much easier
https://thepaypers.com/payments/expert-views/pix-hits-a-wall...
which is also why crypto bros get confused.
They are actively being unified into a cross-border payment network.
Of all the things to complain, this is the one where they are actually doing something…
European Parliament committee backs digital euro - https://news.ycombinator.com/item?id=48645468 - June 2026 (2 comments)
Gov.uk has replaced Stripe with Dutch provider Adyen - https://news.ycombinator.com/item?id=48415217 - June 2026 (235 comments)
Goodbye Visa and Mastercard: 130M Europeans switching to sovereign payment - https://news.ycombinator.com/item?id=48207004 - May 2026 (777 comments)
Wero – Digital payment wallet, made in Europe - https://news.ycombinator.com/item?id=47038965 - February 2026 (132 comments)
Europe's Banks Launch Wero Payments to Dislodge Visa, Mastercard - https://news.ycombinator.com/item?id=41666833 - September 2024 (88 comments)
Unofficial Wero Adoption Tracker - https://www.werotracker.eu/
https://en.wikipedia.org/wiki/Wero
https://en.wikipedia.org/wiki/Single_Euro_Payments_Area
https://investor.visa.com/news/news-details/2016/Visa-Commis...
The problem is that like all cartels, they hold progress back. Things could be even more efficient than the current state of affairs. For example we could have open standards with thousands of local players, much faster settlement times etc...
There are also aspects such as the fact that due to this concentration of power, the whole world is subject to US sanctions, such that a EU citizen sanctioned by the US is effectively cut off from civilization.
I'd frame it as making the standards for competition very high.
I don't see people getting super ideological about their inability to create monocrystaline turbine blades or 2nm semiconductors in their garages. Why payment networks? Because computers? The overall network is way more complicated than a specific technological system or clever open standards document.
These networks would be usurped if someone could actually come up with a better system. The economy insists upon it constantly.