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    9 Replies Latest reply on Jun 20, 2009 8:52 AM by phanio

    Who really gives cardhoders rewards?

    lizabels Wayfarer
      Since my processing fee on rewards cards is up to 1% higher than on a plain vanilla credit card, I suggest that the merchants pay for the rewards. If not in total, certainly in large part. Wouldn't it be nice if card issuers were transparent and didn't take credit for the rewards and told cardholders the real truth?
        • Re: Who really gives cardhoders rewards?
          amspcs Ranger
          I'm not 100% positive I'm understanding exactly what your question is because the wording isn't
          clear to me.

          In any event, here's the scoop on rewards cards: Merchants do in fact pay a higher disacount rate on rewards cards because Interchange on such cards is higher. Interchange is pretty transparant as far as I'm concerned for anybody who makes minimal effort to find ou, the info is not hidden by any meanst. You can go to www.visa.com or www.mastercard.com and view current Interchange tables anytime you want.

          If you'd like more information on Interchange and how credit card fees work, please refer to the 'glossary' and 'discount rate' pages on www.merchantservices-help.com

          If you'd like to clarify to question and get the answer, feel free to contact me either in person or via this forum.

          AMSPCS
          amspcs@juno.com
            • Re: Who really gives cardhoders rewards?
              lizabels Wayfarer
              Sorry. My point is that mechants actually pay for all or part of the rewards thru higher fees and not the card issuing bank. The transparency would be that they tell customers that and not that they pay for the rewards.
                • Re: Who really gives cardhoders rewards?
                  dublincpa Scout
                  But then the card users/consumers migh realize that they will pay for the rewards themselves in the end as merchants have to get the money from somewhere. So as the merchants' costs increase, naturally their prices will have to edge up.

                  Gotta love it. It's good to be the bank, issuer or acquirer.

                  Mike
                  1 of 1 people found this helpful
                    • Re: Who really gives cardhoders rewards?
                      lizabels Wayfarer
                      Ahhhh!....Someone finally gets it!....Thx Dublincpa. Cardusers should know the truth!
                      • Re: Who really gives cardhoders rewards?
                        amspcs Ranger
                        Liza,

                        I agree with you completely. Yes, any time ANY fee is increased, that added cost is ultimately borne by the end consumer. Card issuers raise fees on Rewards cards and pass them onto the merchant. And the merchant ultimately passes that increased overhead expense onto the customer.

                        Now, there may be justifiable debate over whether or not the increase in Interchange for Rewards card was necessary or justified, but that's a subject for another post. But the bottom line is: Rewards cards were created for marketing purposes, and marketing is what makes the world go around. Nothing happens until somebody sells something, and that's what marketing is about.

                        But I don't understand why you feel there is a lack of transparancy here. This is just common sense. After all, isn't the pass-through cycle described above true for ALL businesses and ALL overhead cost increases regardless of industry? If a business fails to compensate for increased overhead somehow, how does it maintain it's profit margin and ultimately stay in business? Obviously it doesn't. Business 101.

                        So why just pick on the credit card industry? This process is part of business that every consumer
                        should be aware of and understand: There is no such thing as a free lunch. When costs rise, businesses don't 'eat' them, they pass them on in order to stay in business. Any consumer that doesn't realize this truism is a big part of the ecoomic crisis we are experiencing these days. It's called the 'dumbing of American consumers' which makes them vulnerable to all the shysters and con artists and greedy people out there who view naive consumers as easy prey.

                        Make no mistake: I do NOT condone price gouging or dishonesty in any form. But the consumer plays a role in the economic process as well, they can't just sit back fat naive and happy with no concept of how things work and just expect somebody else to look out for them.

                        AMSPCS
                          • Re: Who really gives cardhoders rewards?
                            dublincpa Scout
                            I think it is more a function of most folks not having a clue how the economics of it bear out. I do think that most people get that with everything either the customer pays more or the business earns less. I also think that most would be surprised about where their behaviors and choices have consequences. I would liken this to all the issuing banks that encourage accountholders to choose signature/credit over PIN/debit on debit card purchases to rake in more fees.

                            I don't blame or villify them. I just believe that most people would be surprised at the cost impact on the merchant. That is not to say shoppers would or should care, but I bet the dynamic would change if there was greater understanding.
                          • Re: Who really gives cardhoders rewards?
                            amspcs Ranger
                            Mike, you hit the nail on the head. See my post reply to Liza--if I had read yours first I wouldn't have had
                            to repeat what you just pointed out.

                            I'm in the processing end of the CC business, but have no sympathy for many (not all) of the card issuer. Many greedily put credit cards in the hands of even the most irresponsible consumers, and now they wonder why they're not getting paid???? AFTER they accept billions in TARP $$$ out of my pocket? Please.

                            However, this isn't to say that ALL price increases constitute gouging. After all, what products or services have NOT seen fit to increase costs over the past couple of years? Groceries? Utilities? Clothing?
                            Gasoline (HA !!!)? Certainly at least some of the dynanics that have mandated that other businesses raise their fees also affect the cc industry. But I DO feel certain bank issuers could have done a better job
                            in managing their risks and explaining their cost strategies to the consuming public.

                            Good Memorial Day to everyone!

                            AMSPCS
                      • Re: Who really gives cardhoders rewards?
                        phanio Pioneer

                        Don't be too hasty here - lots of legislation coming down the pipe that will change all of this. I think in the end - all the reward programs will disapear.

                        Business Money Today