Retailers Don’t Like Paying the Fees for Apple Card

https://www.bloomberg.com/news/articles/2019-12-10/retailers-pay-the-fees-for-your-apple-card

by hourislate • 7 years ago

39 98 7 years ago

All credit card 'rewards' seem to work like this.

Note that back in November, @DHH from Basecamp had strong words about the Apple Card with regards to sexism. I know there's active investigations going on with it, but I know of no results. Then again, it's just been 1 month, which is pretty much 'yesterday' in bank time.

https://twitter.com/dhh/status/1192540900393705474

kstrauser3• 7 years ago

I have no opinions about DHH in general, but he's just wrong here. He tweets:

Hilarious how much mansplaining is flowing in this thread. Every single poster questioning my wife’s credit score, a man. Every single defense of Apple blaming GS, a man. Almost like men are over represented in the defense/justification of discrimination that doesn’t affect them?

which immediately costs him all credibility in this specific case. Factually, it is GS making the decision. It's Apple's problem to address because they're contracting to GS, but it was GS's algorithms (oh no, he calls that out too!) that rendered the credit decision. And he glosses over that credit score pretty issue quickly, which is kind of sexist and bullshitty in itself. Without saying whether her score is decent, he says she should get the same credit he does because she's married to him, as though her creditworthiness derives from their relationship. What the...? Does the have income of her own? A credit history of her own? If DHH isn't co-signing, his existence even involved in the decision.

There are plenty of things to protest in the credit score game. You can fairly criticize it in many, many ways. But I saw nothing in his complaint that was unique to Apple or GS, and DHH's complaint seems to come down a non sequitur complaint against Apple and GS for their use of industry-standard credit ratings.

Edit: he does say her credit score was higher than his. My bad. He still doesn't mention their relative income.

ceejayoz9• 7 years ago

He still doesn't mention their relative income.

Because it doesn't matter. As of 2013, you enter combined household income on a credit application, and your income isn't part of your credit score either.

jellicle• 7 years ago

The allegations (made by quite a few people, not just one) were that Apple was turning down/giving worse terms to women that had better income/credit scores than their husbands.

pkaye4• 7 years ago

A 2013 federal law allows one to include any income to which they have a reasonable expectation of access including income from spouse, partner or other member of household.

I seem to recall that he mentioned his wife doesn't work so she stated her income at $0 instead of the household income.

freehunter3• 7 years ago

This seems pretty off-topic considering it's just rumors and hearsay at this point and the topic isn't about who can get an Apple Card.

tedunangst3• 7 years ago

So do retailers like paying the fees for other cards, or is the headline just apple bait?

oswamano• 7 years ago

Honestly the headline feels like bait. Seems like it explicitly uses the apple card since that card is new and trendy.

wavefunction• 7 years ago

Time to check out the article and find out if you were right!

slg• 7 years ago

The article states that the fees are higher because it is designated an "elite" card. American Express cards also have a higher fee than the standard Visa or Mastercard and plenty of retailers complain about that or refuse to accept Amex.

tedunangst3• 7 years ago

Yeah, but unless I missed it, they didn't even claim the Apple card is a significant fraction of elite purchases. How is this any different from the "so popular they ran out of metal" sapphire card?

dwild• 7 years ago

American Express cards also have a higher fee than the standard Visa or Mastercard and plenty of retailers complain about that or refuse to accept Amex.

American Express isn't Visa or Mastercard, they are all on different payment network. I have no issue with them having different fees because they are different.

The Apple Card is a Mastercard. Does Mastercard have different fees based on the type of card? I would certainly hate Mastercard more if that was the case.

kstrauser3• 7 years ago

I don't like retailers storing my credit card info in dodgy databases that end up on the dark web. I understand that stores don't want to lose all their profit to interchange fees. That's reasonable. At the same time, I personally wouldn't be so dogmatic about using Apple Pay or an Apple Card if I hadn't had my debit card ganked five times in the last seven years. In other words, they've brought this on themselves, and any store that supports chipless transactions is part of the problem. (I can't wait until Apple Pay or an equivalent is widely accepted online, and then I'll be preferential about that, too.)

tinus_hn2• 7 years ago

Ultimately the problem is with the banks/issuers who refuse to support and require more secure solutions like chip cards, instead of clinging on to the hopelessly outdated standard of authenticating payments with knowledge of a number printed on a card.

TylerE2• 7 years ago

Chip cards aren't without their problems, also. I've yet to have one last more than 9-10 months before the chip stops working reliably.

snypox2• 7 years ago

When I was in the US (Nevada and Cali) I was so surprised how many places don’t accept contactless payment. Here in Hungary, even the smallest convenience stores accept it.

grecy• 7 years ago

I used contactless and Chip n Pin in remote Botswana 2 years ago, and this summer in America I was still repeatedly asked to sign for stuff.

The future. It's not in America.

Cd00d• 7 years ago

I was in a bookstore in Brooklyn that didn't have contactless when I asked, and the cashier said, "we're a bookstore, we don't have that sort of thing".

I replied, "I paid for a bottle of water in a vending machine with this 10 minutes ago."

moftz• 7 years ago

I remember commercials like 15 years ago advertising the contactless cards but never have actually seen anyone use them in the US except for things like Apple/Android Pay. Lots of CC terminals have the symbol but it's never used. I remember a waiter in Europe trying to tap my card on the CC terminal multiple times before I mentioned that it's just a chip.

ksec2• 7 years ago

Which is what irritates me most when Apple brags about how Apple Pay has made way into Contactless payment in US and how many Contact less payment terminals has been added due to Apple Pay.

When the rest of the world had the whole system in place waiting or crying for Apple Pay. In the early days they couldn't be bothered.

Apple Pay was introduced 5 years ago, yet in 2019 they somehow managed to sign up ( or make it work ) with more regions and banks than all of the 2017 and 2018 combined.

They were so fixated on certain market like Germany and Australia as if they were blocking procedures.

I hope most of the world dont have to wait 5 years for Apple Card.

brenden2• 7 years ago

This isn't really about Apple Card, it's just about high reward cards in general. The heading is clickbaity to generate more traffic.

The tl;dr is: high reward cards (like Apple Card, or any other "premium" card) incur a high transaction fee for the credit card processor, thus they eat into the retailer's profits.

distances• 7 years ago

That's why, say, Diners Club is accepted in so few places (on Europe). Germany even goes further and often doesn't accept cards to begin with.

ceejayoz9• 7 years ago

“It’s almost like an arms race of who can offer the most rewards,” says Chris Ligan, vice president for acquisitions at Auric, which has seen use of premium cards climb 7% this year. “The person stuck with the bill is the merchant.”

And they pass it on to us.

Dirlewanger• 7 years ago

Maybe smaller places that can't absorb the merchant fees as easily, but big retail places don't usually charge more for using certain credit cards. It'd probably cost them a chunk of business if they did.

OatMilkLatte• 7 years ago

Or their merchant account. I think they disallow charging different prices based on the card type - there was a big blowup a few years back because retailers didn't want to pay the higher fees to accept debit cards, but had to because the debit cards had VISA or MasterCard logos and therefore had to be treated the same way as VISA or MasterCard credit cards.

ceejayoz9• 7 years ago

Their prices will be set to absorb the average mix of rewards and non-rewards card that retailer sees. They're certainly not going to consider it a charitable donation to high credit-score folks.

It'd be much fairer if they surcharged rewards cards, or if we went the European approach and capped interchange fees at something reasonable. The current system is basically a regressive tax on people with lower credit scores.

exhilaration• 7 years ago

I think what the parent commenter was trying to say is that merchants raise prices on everything, whether you pay with card or cash, to offset credit card fees. What ends up happening is that customers that pay cash are paying for the rewards I get by using a credit card.

infogulch• 7 years ago

I've always thought this fee + cashback thing is weird, because the merchants just add it back to the cost of the item. Sure, you may be getting that cost back as cash, but the merchant charges you the same if you don't have the super elite card. So isn't this just a sneaky underhanded way to tax the poor which obviously don't have credit to get the super elite card?

vorpalhex2• 7 years ago

The intent is not to "tax the poor" though that is effectively an outcome. Rather the intent is for credit card issuers to have a profit potential from short term credit (and to make a given line of credit more attractive for use through rewards).

supernova87a2• 7 years ago

This system is completely convoluted, with the incentives all over the place between merchant, bank, CC processor, consumer. It's the kind of thing that will never change until you go to a different country or start an alternative payment system that is 10x better, because no one has the power or will to displace the existing infrastructure.

Consumers don't care because they don't (directly) pay the bill for these benefits, and only see the kickback rewards as a positive.

Banks don't care, actually they like it, because rewards help them attract customers who don't care who pays.

Merchants can't put up too big a fight because they can't leave unless they're big enough to stomach the loss in revenue, or can make customers shift payment method (like Costco, say).

CC processors love it because regardless, they get payment traffic and commissions.

Whereas in other countries, this system would be crazy.

ChrisLomont2• 7 years ago

What do other countries do?

toomuchtodo• 7 years ago

Regulate interchange fees (or use regulatory enforcement threats to obtain concessions from natural financial monopolies).

https://ec.europa.eu/commission/presscorner/detail/en/IP_19_...

Control-F "The Commitments"

In the US, debit card fees are regulated (the Fed won it's case in 2015 at the Supreme Court regarding this), but not credit card interchange fees.

tick_tock_tick• 7 years ago

The same stuff

Someone12343• 7 years ago

Cap fees or just have more competition in general (typically tied to smartphones).

Alex39172• 7 years ago

It's insane that credit card rewards are even legal, given that they're basically just a direct transfer of wealth from the poor to the wealthy.

jbapple2• 7 years ago

Can you explain more?

twobat4• 7 years ago

Do the retailers actually pay the fees? I always assumed that this is pushed into the price to the consumer.

xorcist• 7 years ago

They do, in the sense that the consumer is charged the same price independently of which card they paid with.

twobat4• 7 years ago

If they really wanted they could ask what the payment method is and put the additional fees on the client's bill.

lopmotr3• 7 years ago

It's the same thing. Retails also don't pay for their stock, rent, wages, or anything because it's all pushed into the price to the consumer.

toper-centage• 7 years ago

The price is the same for cash, card and elite card customers. They can of course raise the price for all 3, but its a fine balance to do that without hurting sales.

vagab0nd• 7 years ago

I know in some restaurants they give you a discount if you pay cash. Not sure if it's legal or not.

Someone12343• 7 years ago

I'm incredibly naive but I don't understand why card networks would ever WANT to raise their percentage rates... Hear me out:

- It is perfect rent collecting: minimal costs, benefits hugely from scale, high barrier for competitor entry. You're an "invisible" profit center, if done right.

- It is percentage of transaction: So increases naturally with inflation and your client's success. Loses little on your client's failures.

But instead of just sitting on their hands and raking in their 6% basically forever, they're inflating the percentage which is causing disgruntled clients to look elsewhere and to give a gap where competition can enter.

This is one industry where "boring is king." But it seems like greed may result in legislative or competitive market correction if they keep engaging in these practices.

thomascgalvin• 7 years ago

- It is perfect rent collecting: minimal costs, benefits hugely from scale, high barrier for competitor entry.

This basically describes the Planet Fitness model. They sign up thousands of people around New Year's, none of them ever show up, and a handful of them can't be bothered to go into their location and cancel, so they just end up paying $10 / month forever.

tedunangst3• 7 years ago

Taking in 6% and returning 7% rewards doesn't seem profitable, even in volume.

ceejayoz9• 7 years ago

If it attracts enough people who'll carry an interest-bearing balance, the math works out fine. Many of the higher-end rewards cards have annual fees, too - Chase's Sapphire Reserve card is $450/year. Amex's Platinum is $550.

porknubbins• 7 years ago

Sound reasoning but then you’re thinking in the long term interest of the company. Visa went public so the individuals who jacked up the prices will probably make a big bonus on their quarter numbers and be gone, rich, or promoted before the backlash hits them.

wmf• 7 years ago

If the card issuer can decide the fee, why don't all cards charge the max fee?

heavyset_go• 7 years ago

American Express charges a higher fee, and as a result, it is accepted less at businesses than VISA.

Someone12343• 7 years ago

A lot of the additional fee goes to Visa/Mastercard instead of the issuer. Issuers want to focus on their own benefits, so they skip card network's premium tier cards and instead try to sell their own benefits (with or without a yearly fee).

lopmotr3• 7 years ago

The whole existence of credit card rewards seems like a failure of the system. Since merchants agree not to charge more to high fee credit card customers, all the other customers end up paying the fees for those rewards. So everyone has to use a credit card with rewards to compensate for that loss and the ultimate losers are the suckers who pay with cash or whatever else.

I refuse to play those games and it surely costs me, but at least I don't have to deal with any of the stupid paperwork and multiple cards in my wallet and keep track of how much pocket money some pointless company is going to give me.

ceejayoz9• 7 years ago

I think you're overestimating the complexity of all this. I pay most things via a 2% cash back card. Just the monthly statement to manage, no need for multiple cards, and no keeping track.

I get $500/year back on health insurance premiums alone from that, let alone all the other spending. Everything except my mortgage can be run through it.

lopmotr3• 7 years ago

Perhaps it's easy enough in America. Where I am, there are multiple rewards programs separate from credit cards. Some shops have their own special card, and some are part of a bigger scheme with a common card. It's all a mess. I hadn't thought of using it to pay for big things like a house or health insurance!

r00fus• 7 years ago

This was news to me - I thought all cards had similar processing fees for vendors.

Do any banks or CUs offer rewards programs for debit cards?

copperx• 7 years ago

Do any banks or CUs offer rewards programs for debit cards?

Yes, Discover, for one. But percentage is lower, because I assume the fees are lower for debit.

brahweh• 7 years ago

In addition to merchants, the group which really ends up losing are customers paying with cash/debit, as they don't harvest any CC rewards from their groceries but still pay the inflated price that merchants have to charge to keep up with swipe fees. I'd argue these high fees are a "tax" on those with poor creditworthiness/financial knowhow

ksec2• 7 years ago

Despite the limit on processing fee in EU, Australia and China, Visa is a 400B Company while Master is 300B.

Collecting ~1.5% on Global average spending turns out to be very lucrative business. ( Or they have other means of revenue I am not aware of )

nojvek• 7 years ago

I love what ARCO does. Pay with cash it’s cheaper. That’s what most businesses should do. Cash is 5% cheaper for businesses than card.

Give that 5% discount. Customers love discounts.

ceejayoz9• 7 years ago

Cash is 5% cheaper for businesses than card.

Do you have a source for this?

https://squareup.com/us/en/townsquare/myths-about-cash (full disclosure: clearly a potentially biased source)

Research shows that cash-handling costs range from 4.7 to 15.3 percent of revenues for businesses that accept cash. The majority of those costs are associated with starting and closing drawers at the start and end of the day.
Said another way, for every $100 a business makes in cash, it’s spending $4.70–$15.30 to handle all the costs associated with managing the drawer, preparing deposits, making change orders, dealing with possible theft or fraud, and auditing. Fewer cash transactions means less time counting money, less time making change, and a lower likelihood of mistakes or theft.

Retailers Don’t Like Paying the Fees for Apple Card

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