Comments on: Surcharge for Credit Cards http://tylerhannan.com/2009/10/surcharge-for-credit-cards/ living at the intersection of technology and payments Tue, 29 Dec 2009 09:47:16 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: tylerhannan http://tylerhannan.com/2009/10/surcharge-for-credit-cards/comment-page-1/#comment-56 tylerhannan Thu, 15 Oct 2009 06:18:40 +0000 http://tylerhannan.com/?p=159#comment-56 I completely agree that cash discounts are, in fact, disguised surcharges...at least frequently. At some point it is really a semantics issue of "advertised price" vs. "discounted price."<br><br>The key element you identify is that the decision of accepting plastic is based on benefits of accepting that particular tender. It is, as many things, a bit of a cost/benefit analysis. I will revert this week with some interesting statistics I've found regarding the benefits of acceptance in the SMB sector. I completely agree that cash discounts are, in fact, disguised surcharges…at least frequently. At some point it is really a semantics issue of “advertised price” vs. “discounted price.”

The key element you identify is that the decision of accepting plastic is based on benefits of accepting that particular tender. It is, as many things, a bit of a cost/benefit analysis. I will revert this week with some interesting statistics I've found regarding the benefits of acceptance in the SMB sector.

]]> By: tylerhannan http://tylerhannan.com/2009/10/surcharge-for-credit-cards/comment-page-1/#comment-31 tylerhannan Wed, 14 Oct 2009 23:18:40 +0000 http://tylerhannan.com/?p=159#comment-31 I completely agree that cash discounts are, in fact, disguised surcharges...at least frequently. At some point it is really a semantics issue of "advertised price" vs. "discounted price."<br><br>The key element you identify is that the decision of accepting plastic is based on benefits of accepting that particular tender. It is, as many things, a bit of a cost/benefit analysis. I will revert this week with some interesting statistics I've found regarding the benefits of acceptance in the SMB sector. I completely agree that cash discounts are, in fact, disguised surcharges…at least frequently. At some point it is really a semantics issue of “advertised price” vs. “discounted price.”

The key element you identify is that the decision of accepting plastic is based on benefits of accepting that particular tender. It is, as many things, a bit of a cost/benefit analysis. I will revert this week with some interesting statistics I've found regarding the benefits of acceptance in the SMB sector.

]]> By: creditunionwarrior http://tylerhannan.com/2009/10/surcharge-for-credit-cards/comment-page-1/#comment-30 creditunionwarrior Tue, 13 Oct 2009 18:20:21 +0000 http://tylerhannan.com/?p=159#comment-30 It's a tough issue. Consumers love the convenience of using plastic. Merchants love the convenience (and safety) of using plastic...they just don't want to have to pay for it. Financial institutions love plastics usage because of the interchange income that such usage provides.<br><br>The question is, how can we make sure the costs of plastics usage is fair to consumers and merchants, while compensating the card issuers for their associated risk and expense?<br><br>Cash discounts, as you have described, are one way to address this issue. That is, only if the discounts are actually discounts. My guess is that they will merely become disguised surcharges.<br><br>In a free market, merchants are free to decide whether or not they want to accept plastics. They choose to because it benefits them, and it is worth the price. If they believe otherwise, they are always able to become a "cash only" merchant. It's a tough issue. Consumers love the convenience of using plastic. Merchants love the convenience (and safety) of using plastic…they just don't want to have to pay for it. Financial institutions love plastics usage because of the interchange income that such usage provides.

The question is, how can we make sure the costs of plastics usage is fair to consumers and merchants, while compensating the card issuers for their associated risk and expense?

Cash discounts, as you have described, are one way to address this issue. That is, only if the discounts are actually discounts. My guess is that they will merely become disguised surcharges.

In a free market, merchants are free to decide whether or not they want to accept plastics. They choose to because it benefits them, and it is worth the price. If they believe otherwise, they are always able to become a “cash only” merchant.

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