Say goodbye to rewards!

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DoingHomework
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Say goodbye to rewards!

Postby DoingHomework » Mon Nov 23, 2009 10:53 am

Word has it there is a bill pending in Congress to prevent credit card companies from charging merchants higher fees when buyers use rewards cards. If so this is going to eliminate the way credit card companies pay for the rewards programs. That will undoubtedly cause them to cut back significantly if not eliminate most rewards entirely.

As someone who also accepts cards as a merchant I have mixed feelings about this.


jeffysdad
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I have mixed feelings, too

Postby jeffysdad » Mon Nov 23, 2009 11:53 am

I use cards for puchases/bills almost exclusively to get rewards. I would hate to see them go away. However, I think transaction processing needs to be streamlined; i.e., fees should be standardized to simplify life for merchants. Considering that the number and dollar volume of card transactions has grown so much, it would seem cards could benefit enough from economies of scale to offer at least modest rewards. Consumers are conditioned now to expect rewards. If you offer 1% and your competitors don't, you'll have a huge advantage.
American Express: Blue Cash Preferred (groceries, 6%; gas, department store, 3%); Gold Delta SkyMiles (Delta Air Lines, 2 miles/dollar, free checked bag).
US Bank: Cash+ (utilities, phone, internet, restaurant, 5%; drugstores, 2%).
FIA Card Services: Fidelity Amex (everything, 2%); Fidelity Visa (everything, 1.5%).
Chase: Freedom (rotating, 5%); Amazon (Amazon.com, 3%); PriorityClub (IHG hotels, 5 points/dollar); Sapphire (not in use).

*All cards are registered with PriorityClub IDine program for 8 points/dollar at participating restaurants.

DoingHomework
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Postby DoingHomework » Mon Nov 23, 2009 1:20 pm

Yeah. And the card companies can just raise the fees on all cards to what they charge for rewards cards. I use my card for convenince AND to get rewards. I have gotten some pretty good rewards through the years and don't mind paying an annual fee if I get benefits to make it worthwhile. But if rewards went away I'd go for the cheapest card I could find as I'm sure most people would.

And I can tell you from a small merchant's perspective, card fees are about as high as they can reasonably be. The peopel with businesses like mine that I talk to are alreaady debating whether the cost of accepting cards is worth the extra business and convenience they get. I think if fees go up much you will see a lot of businesses stop accepting cards again.

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Mogul of Pineapples
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Postby Mogul of Pineapples » Mon Nov 23, 2009 11:47 pm

I don't think this is fair either. If they can't increase the tier for rewards credit cards what they will do is simply increase the average fees across the board.

What I think they need to change are the fees on small transactions, say anything under $30. I understand why these are such a problem since structure consists for a flat fee plus a percentage - i.e. 30 cents + 2.4%, because the skews it so smaller transactions end up being a higher percentage. For larger percentages I feel the fees are usually (but not always) reasonable. It's a cost of doing business. The customer gets to spend more because they're on credit; making purchases they might not normal. The store also does save some operating expenses involved with the hassle and risk of handling cash.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
American Express: Blue Cash, Simply Cash Bank of America: WorldPoints Platinum Plus Chase: Amazon, British Airways, Cash Plus Rewards, Freedom, Ink Cash Citi: Thank You Premier, Dividend Platinum Select Discover: More
Primary Everyday Card: American Express Blue Cash
Primary Travel Card: Chase Sapphire Preferred

DoingHomework
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Postby DoingHomework » Tue Nov 24, 2009 10:21 am

Most of my transactions (as a merchant, people paying me money on cards) is for $1000 or more so I am not concerned about the $0.25 I pay per transaction. It is the percentage that is the issue and that is fairly high. It has been anywhere from 2.25% to over 4% and I never know until I get my statement at the end of the month to see what I was charged. I don't have a major issue with it actually. It is a cost of doing business. But I get no benefit from someone using a Super Platinum Business Signature Elite Rewards card over say a secured beginner's card. Yet I have to pay quite a bit more for the former.

If my risk were lower, i. e., if the rewards card people were less likely to try a chargeback then I might understand. But from what I hear they are the ones who are most likely to do that just because of buyer's remorse. I have never actually had a chargeback because I keep my customers happy. But I understand there is a class of people out there that sometimes decide they don't like the color of something they bought or found a lower sale price later so they want to get their money back. And people have said they are much more likely to be people with premium cards. So, to the merchant there is no benefit to accepting these cards and paying more. But you are not allowed to refuse any card.

Floppster
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Postby Floppster » Tue Nov 24, 2009 9:48 pm

I think it would be a great change (even though I don't think that it will pass). Why should the merchant always be responsible for your credit card benefits. Either the issuing bank or yourself should be responsible for it. If you do a lot of mail/phone orders American Express is often cheaper than MasterCard, Visa or Discover card so it will be interesting how it will affect them however stores where cards are typically swiped will prefer Master & Visa. Discover would be laying around in between. Lets see what happens.
Intellectuals solve problems. Geniuses prevent them.
- Albert Einstein 1879-1955

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alsteig
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Postby alsteig » Tue Jun 01, 2010 12:56 am

Its called the cost of doing business. Same with charge backs they protect the consumer. Again what makes this all so great if you don't like it just take cash, I am sure that it is more profitable to accept cards for you and that is why you do it. i am generally more willing to make a purchase knowing that If I get screwed I can charge back. As far as rewards go I don't have any statistics to back it up but I would guess that consumers are more willing to spend when they know they are getting some type of reward. What business are you in?

DoingHomework
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Postby DoingHomework » Tue Jun 01, 2010 5:27 pm

Like I said, I do see it as a cost of doing business and don't have an issue with it.



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