50p charge for using Debit cards to be banned in January

[wesimmo]

Did you actually read my post? I ask because you're arguing against something I'm not talking about. Could you please explain what "hiding the charges untill it's essentially to late" has got to do with what I'm saying, please?

Regardless, I believe your argument to be false because corner shops don't quote you £6.50 but secretly charge you £7. The amount you pay should be clearly displayed on the card machine, therefore I hope you can understand why I believe your claim that anything is "hidden" is a fallacy.

What I said was, the card processors are making more from interchange fees than corner shops are making from having a 50p charge. I made this point because people seem to be selectively ignorant here and only whinging about the 50p charge and shopkeepers making profit, while completely forgetting that interchange fees exist, and that it generates FAR more.

I have calculated a figure using figures available on Wikipedia and barclays website, although the temporal range is vague, it still amounts to $108,000,000,000. If you can find some published figures which show how much corner shops have generated from 50p card charges, and it amounts to more than 108 billion dollars, then, and only then have you have successfully refuted my claim. I hope I have made it clear why I believe you non-sequitur argument doesn't actually refute my claim.

Perhaps you should read the associated Wikipedia article. Here is the link, and I invite you to look specifically at the section entitled "Controversy", you won't miss it, the section is rather large
https://en.wikipedia.org/wiki/Interchange_fee

You might want to read the rest of the article, not just the Controversy section, you clearly still have no idea how this all works despite having a reference article and people who have worked in the industry trying to help you.

One last time, Interchange is PAID BY the card processor TO the card issuer.

This is why credit card companies are perfectly happy to have customers who pay off their balance every month, they make money from every transaction anyway, yes annual fees and interest are great too, but not the sole source of income.

 

[asim18]

You might want to read the rest of the article, not just the Controversy section, you clearly still have no idea how this all works despite having a reference article and people who have worked in the industry trying to help you.

One last time, Interchange is PAID BY the card processor TO the card issuer.

This is why credit card companies are perfectly happy to have customers who pay off their balance every month, they make money from every transaction anyway, yes annual fees and interest are great too, but not the sole source of income.

Are you reading the same article as me? There is no "rest of the article", Controversy is the final section and it's 80% of the entire article.

Also, simply saying "you clearly still have no idea how this all works", doesn't prove nor refute anything whatsoever.
Also, "people who have worked in the industry trying to help you" doesn't prove not refute anything either.

One last time, Interchange is PAID BY the card processor TO the card issuer.

Wrong. Good thing it's the last time you're going to say that, It's DEDUCTED from the amount it pays (payment and deduction are two astronomically different things, but you're not an economist so i guess it doesn't matter). But more importantly, in what way does your statement contradict the fact that interchange fees are being used for profiteering?

In a credit card or debit card transaction, the card-issuing bank in a payment transaction deducts the interchange fee from the amount it pays the acquiring bank that handles a credit or debit card transaction for a merchant.

https://en.wikipedia.org/wiki/Interchange_fee

Allow me to explain this quotation, and how it renders your statement as false....

The "card-issuing bank" is the shopper's bank, the "acquiring bank" is the shopkeeper's bank. When the shopper inserts his debit card and enters his pin to send £100 to the shop-keeper, the shopper's bank will DEDUCT/keep £2, and only send £98 of the money to the shop keeper's bank.

Therefore your statement is incorrect, because your statement suggests that the shopper's bank sends the full £100 to the shopkeeper's bank, and then the shopkeeper's willingly "pays" £2 back to the shopper's bank for some unknown reason, why on earth they would do that once the money is in their kitty is anyone's guess.

So I have proven your statement "Interchange is PAID BY the card processor TO the card issuer." is false. I'm going to also say it's a strawman fallacy because it doesn't refute anything whatsoever. In fact it's definitively a strawman argument:

"A straw man is a common form of argument and is an informal fallacy based on giving the impression of refuting an opponent's argument, while refuting an argument that was not presented by that opponent."

 

[Saffy]

I welcome this news and any news that makes shopping friendlier for the consumer. After all, it encourages spending. So why should one have to pay to spend? It's ironic. But I like this move.

 

[wesimmo]

Are you reading the same article as me? There is no "rest of the article", Controversy is the final section and it's 80% of the entire article.

Also, simply saying "you clearly still have no idea how this all works", doesn't prove nor refute anything whatsoever.
Also, "people who have worked in the industry trying to help you" doesn't prove not refute anything either.




Wrong. Good thing it's the last time you're going to say that, It's DEDUCTED from the amount it pays (payment and deduction are two astronomically different things, but you're not an economist so i guess it doesn't matter). But more importantly, in what way does your statement contradict the fact that interchange fees are being used for profiteering?



Allow me to explain this quotation, and how it renders your statement as false....

The "card-issuing bank" is the shopper's bank, the "acquiring bank" is the shopkeeper's bank. When the shopper inserts his debit card and enters his pin to send £100 to the shop-keeper, the shopper's bank will DEDUCT/keep £2, and only send £98 of the money to the shop keeper's bank.

Therefore your statement is incorrect, because your statement suggests that the shopper's bank sends the full £100 to the shopkeeper's bank, and then the shopkeeper's willingly "pays" £2 back to the shopper's bank for some unknown reason, why on earth they would do that once the money is in their kitty is anyone's guess.

So I have proven your statement "Interchange is PAID BY the card processor TO the card issuer." is false. I'm going to also say it's a strawman fallacy because it doesn't refute anything whatsoever. In fact it's definitively a strawman argument:

Wow. So much wrong in one post.

I'd stick to photography if I were you, this sort of thing obviously outside your capability.

 

[wesimmo]

OK, one last attempt...

Let's take an illustration using nice round numbers, and no these aren't actual figures but will suffice to explain the flow of money.

Bob has £10.50 in his bank account and Dave has a widget he's selling for £10.

Bob buys the widget off Dave using his card so Dave adds 50p.

The interchange rate is 0.2% and the Merchant Service Fee is 2.4%.

Bob now owes his card company £10.50
The Card Processor now owes Dave £10.50
Dave owes the Card Processor just over 24p
The Card Processor owes the Issuer just over 2p in interchange.
The Card Issuer owes the Processor £10.50

The Card Issuer and Processor net settle, for efficiency one net payment is made rather than 2 back and forth, but irrespective of that, money has flowed from Processor to Issuer as a result of the transaction.

The agreement between the Merchant and Processor will vary as to whether they are net settled or settled in full and then the MSC invoiced later, but again the timing of the movement is largely irrelevant in terms of where it ends up.

At the end Bob has paid £10.50 for the widget worth £10, so Dave has done alright, even after deducting the MSC he's got £10.26 for his £10 widget.

The processor has made 22p, the 24p they charged the Merchant less the 2p they pay the Issuer.

The Issuer has made 2p from Interchange.

So yes the Card Processor makes money, but not as much as Dave does. And it's Dave that's profiteering, he's loading cost onto the transaction over and above what it costs him to provide the service. He probably only has to do a transaction a day at that rate to start making money off his card terminal even when you factor in charges like terminal rental and other fixed costs of taking card payments.

 

[Greebo]

You above analysis is fine but not when independent bodies like Which magazine in their studies have said some small retailers do incur charges up to 50p for transactions up to £10 from their card providers then Dave won't be making any profit and now with the new ruling, unless he increases the price of his goods by 5% he will be losing money on the deal.

Those retailers who only incurred a 20p charge and then profited by charging 50p or I've even seen places which want a quid are indeed profiteering and its those ones which have resulted in this new law.

But unfortunately as a consequence those small retailers who weren't making a profit from the card charges are going to be the biggest losers.

 

[wesimmo]

You above analysis is fine but not when independent bodies like Which magazine in their studies have said some small retailers do incur charges up to 50p for transactions up to £10 from their card providers then Dave won't be making any profit and now with the new ruling, unless he increases the price of his goods by 5% he will be losing money on the deal.

Those retailers who only incurred a 20p charge and then profited by charging 50p or I've even seen places which want a quid are indeed profiteering and its those ones which have resulted in this new law.

But unfortunately as a consequence those small retailers who weren't making a profit from the card charges are going to be the biggest losers.

I agree, but that's not what I was really arguing.

Asim was claiming interchange was profiteering on the part of the processor.

That simply isn't true.

What you've, correctly, described is regulations to stop profiteering by certain merchants being poorly implemented so that there are unintended victims of the regulation.

Oh, and the 50p charge will likely be as a result of being a high risk retailer or wanting low fixed costs and high transaction costs.

I doubt it's a typical rate being paid by established businesses who rent terminals in a fixed location.

 

[Greebo]

If only there were numerous simple card machines offered by legitimate companies for a low cost. If only.

You know what, last time I tried to swap to one of these companies it became a farce and result in us not having a working card machine for 6 months and we couldn't accept card payments. Sometimes you get what you pay for.

I feel sorry for the genuine small retailer who has no choice now but to increase the price of their goods by up to 5% to cover people making small purchases on cards. It also means people like me who pay cash for small purchases will now have to pay more.

 

[wesimmo]

You know what, last time I tried to swap to one of these companies it became a farce and result in us not having a working card machine for 6 months and we couldn't accept card payments. Sometimes you get what you pay for.

I feel sorry for the genuine small retailer who has no choice now but to increase the price of their goods by up to 5% to cover people making small purchases on cards. It also means people like me who pay cash for small purchases will now have to pay more.

This is exactly why MSC fees are what they are.

Card Processing is incredibly complex due to the amount of regulations and scheme rules.

Maintaining and supporting the facility costs a lot and those that try to do it on the cheap largely fail to do so.

That said I do believe costs should fall as tech develops.

Your point about costing more to use cash is true, but not too different to many things like insurance or even MSC.

We all pay, to some degree, as if we're the average person be that on insurance risk or whether as a merchant you're being charged for the risk of other retailers going out of business and costing the processor.

It's really just a matter of how transparent that is, or how aware you are that it's happening.

To the extreme, does every banana you buy in the supermarket costs exactly the same to produce and get to market? No, every point in the supply chain is averaging the costs at some point.

 

[Energize]

Just received this to my door today.

Now we can no longer pay government bodies using credit card, what a victory for the consumer yay.