Item — HN Reader

> To pay in cash, yes. To pay digitally? You're paying high credit card fees. So, no, not really.

I wonder what high credit card fees you are talking about. As a consumer, I pay none of them. In fact, I get money back every time I purchase something with my credit card (in addition to getting a bunch of other benefits, like purchase protection, extended insurance/warranty, ability to charge back, etc).

As far as I know, none of this is available in the cryptocurrency world, and more importantly, all of the cryptocurrencies that I know of do charge a transaction fee, which cannot compete with $0 flat (not to mention cash back).

Crypto currencies have interesting features, but low transaction fees vs CC isn't one of them.

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> I wonder what high credit card fees you are talking about. As a consumer, I pay none of them.

That's not how economics works. You are still paying.

Do you though? Except for gas, everything I buy costs the same whether I pay cash or credit. If a store started accepting bitcoins, I doubt they're going to recalculate the price to be lower than the cash price because you don't have a credit card transaction fee.

We collectively pay, as a society. Credit card fees are a tax on commerce.

Cash transactions aren't free either. The merchant has to pay for security, transport, and typically suffers some "leakage". Depending on the type of business and location those can end up being even more expensive than payment card fees.

Yep, absolutely true. No free lunch.

Except that the bulk of the fees to the merchant are paid back out to cardholders in the form of rewards and cashback. So it's closer to a wash.

Someone seems to have computed the cash vs CC money flow: https://www.bostonfed.org/publications/public-policy-discuss...

"On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year."

Visa still managed to make $15 billion in gross profit last year. Seems pretty significant to me.

On $7.4 trillion in volume. So about 0.2%.

I'd call that a lot.

You do. The store just gets higher margin on cash-paying customers.

He is the consumer, so he doesn't, because as you pointed out, it's the store that is on the hook for CC "transaction fees", not the consumer.

Many small businesses raise their prices to offset credit card processing fees. Because of that, the consumer is paying the fee regardless of whether they pay in cash or with a card.

Apparently not: https://www.bostonfed.org/publications/public-policy-discuss...

"Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or "cash" ) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $149 to card-using households and each card-using household receives $1,133 from cash users every year."

This is interesting.

I was going off of the information I've received from small business owners in the Seattle area who I've formed personal relationships with, and who have told me how they increased their prices specifically to offset the cost of credit card fees.

That's a mysterious response. Can you elaborate on how I'm paying?

The TL;DR is that the point where some kind of tax or fee is collected (in this case it is charged to businesses) does not have that much influence on who ends up really "paying" for it.

That's going to depend on market dynamics between buyers and sellers.

The long version is, read: https://en.wikipedia.org/wiki/Tax_incidence and replace "government" and "tax" with "VISA" and "transaction fees".

To be honest I don't know who "really" pays but I'm certain that "I don't see any fees on my bill and I paid the cash price" is not the right way to read the situation.

Well, as a business owner, I do have some idea of who "really pays" as you put it. When I charge my customers with Credit Card, I get charged a CC fee (around 2.9%). It's not that there is a free lunch anywhere: the merchants pay for it, as well as some consumers who pay interest on their balances, and some consumers who want special features from their CC.

But as a consumer myself, leaving debt part of the equation aside (since it is irrelevant to the transaction itself), I pay zero transaction fees with my CC, whereas I'd have to pay a significant fee with a cryptocurrency.

More annoying is that the cryptocurrency fee would be charged every time I make a payment. Looking at my CC statement, I can see I & wife made about 50 CC transactions last month, which would result in a significant "monthly fee" if we had used Bitcoin for example (to pick the most "widely adopted" cryptocurrency).

Like I mentioned above, cryptocurrency has very specific key positive aspects, but low transaction fees aren't one of them.

Sorry, my response was just addressing credit card payments, I hadn't really thought about the crypto aspects of this before.

Totally agree that on a practical basis it would be crazy to try and justify the utility of crypto to the average person based on "lower fees" since they are exorbitant for all but very large transactions.

My point with CC fees was, merchants "pay" but the open question is: are prices in a given market perhaps a bit (even just 1 or 2%) higher than they would be if card transactions were free? If so, exactly how much? Does this differ across different markets / product categories and how much? This is the kind of thing one would need to figure out to know who is "really" eating the fees.

My intuition is that whether the charges can be passed through to the consumer via higher prices is going to depend on the market (say supermarkets vs luxury goods) but I'm not aware of any research on this.

Yet no one is making that a surcharge. So if I pay with crypto, I'm paying twice, as the credit card cost are presumably baked in for all.

That's because up until recently credit card companies required merchants to charge the same prices. They had the power to do this because they are basically a cartel.

But yes, you're right. You would be paying twice, just like you're still paying once even if you pay with cash. This is a real problem, but it's not an inherent flaw in cryptocurrencies, IMO. Just a practical consequence of our existing financial system. That doesn't make it any less real, but it's "not Bitcoin's fault" so to speak.

And if I pay in cash I'm also paying the baked in credit card cost.

Rationally one would think that if some cryptocoin did see large scale adoption then it would have the same effect as credit cards where the consumer doesn't actually see the transaction costs.

Lol what. There’s a gas station near my house that has a sign on the pump “cash $2.30/g, credit card: $2.45/g”. Consumers always are passed the cost because it’s they are the ones holding the purse.

A decent amount of cash-only and cash-preferred is tax avoidance.

Cash pricing at gas stations is pretty rare in my experience and somewhat violates the merchant's credit card processing agreement.

Most credit card company contracts explicitly say stores can't do that. I'll bet if a visa rep drove by and took a photo, that gas station wouldn't be taking credit cards at all a week later.

> credit card fees

Credit cards are the highest transaction fees and almost entirely due to the need to keep paying users to use them (ie all the rewards points and cash back).

Debit card transactions are much less (due to legislation).

And bank transfers are a dime.

Companies like Starbucks have brought the costs even lower by bundling up transactions.

The CC fee gets baked into the price, so you don't notice it - if a store takes card payments then all its products are ~2% higher than they would be otherwise.