surcharge for using credit cards

[lulumay]

it is absolutely outrages that small and medium size retailers prefers cash than credit card. 2% is a very small fee to pay consider the amount of counterfeit money we receive. factor in theft and casher's counting error, we would prefer credit card every day and night. what drives me nuts is that all cashers in HK only checks the stupid signature on the back and never the ID card.

[mumto2]

Today at Fortress I bought a laptop and he asked if I was paying by credit card and I said yes, he then asked if i was paying in full and i said yes. he then said well then you're entitled to 3% discount on the price... I've never heard of such a thing as getting a discount for using a credit card...

[kombuchakid]

I've never heard of such a thing as getting a discount for using a credit card...

You obviously have never been to a cinema in HK. Or paid for tickets with your credit card.
If you had, you would have been suitably impressed, with the 10% discount, given with a smile.

[PDLM]

Today at Fortress I bought a laptop and he asked if I was paying by credit card and I said yes, he then asked if i was paying in full and i said yes. he then said well then you're entitled to 3% discount on the price... I've never heard of such a thing as getting a discount for using a credit card...

If you had said yes in full and by cash then you would probably have got a 5% discount. Fortress quite bizarrely volunteers discounts for no good reason without the customer asking. This is an incredibly stupid business practice - they are just giving money away to people who are quite happy to pay the higher price.

[mumto2]

lol stupid or not, i was rather pleased...i don't often walk around with that much cash on me, it was a (researched) but impulse buy.

[MrMoo]

it is absolutely outrages that small and medium size retailers prefers cash than credit card.

Yeah, how dare they offer you discounts on products for paying cash. Let's go to Europe and pay 20-30% more for the same items with a credit card.

Sometimes you cannot get cash discount at Broadway or Fortress but they have a lot of toys and accessories to give you instead. For Broadway you can get a better deal at their main branch in Tai Koo Shing too.

[lulumay]

Mr Moo, how you got ripped off in Europe has nothing to do with credit card.

[KnowItAll]

By the way, David Webb has a great article about this.

Last week, Hong Kong's Consumer Council issued a press release urging credit cardholders to say "no" to merchants imposing a surcharge on purchases. They pointed out that Visa, MasterCard and American Express all prohibit merchants from adding a surcharge on purchases made with their cards (the no-surcharge rule). If a retailer wishes to accept those cards, then it is contractually bound to play by those rules.

The Consumer Council has fallen into a trap and completely missed the core problem - which is that the rule is anti-competitive. They appear to be unaware that in other places the rule has been outlawed. In fact, the Council's call serves to boost credit card-issuers' profits and maintain higher sticker-prices for consumers. It's the first time we can recall the Consumer Council supporting an anti-competitive scheme. The no-surcharge rule also results in a cross-subsidy from those who pay by cash or bank debit cards (such as EPS) to those who pay by credit or charge cards, distorting the payments market in favour of the card systems.

and

For the majority of merchants, who comply with it, the no-surcharge rule means that consumers do not normally get a lower price if they are willing to pay cash, or use a lower-cost payment system, such as bank debit cards, which usually have a flat fee rather than a percentage fee. Therefore the rule tilts the market for payment systems in favour of credit and charge cards, and give the card systems a greater share of consumer purchases than would otherwise be the case. The processing cost of a cash payment for the retailer is no more than the cost of taking it securely to the bank, and they get instantly available funds rather than having to wait for the bank or charge-card companies to credit their account a few days later.

Retailers have to make their profit somewhere, so if they make less profit from card purchases, they have to make more profit from cash and debit-card purchases. As a result, sticker prices are higher than they would otherwise be.

The no-surcharge rule also reduces competition for the level of interchange fees, because consumers don't get a lower price if they use a different card network, whereas the card-issuing banks will sign up with the payment network which offers them the highest interchange fee. So payment networks compete to pay the banks the highest fees, driving up the merchant discounts charged to retailers. Only in the extreme will you find that some retailers simply refuse to sign up with payment networks (in particular, American Express) because of the high merchant discount. However, most retailers cannot afford to ignore the two major credit card networks Visa and MasterCard, as there will always be people who want to buy on credit.

More on Consumer Council's Own-goal