> But then don't you get that back as cashback and such?
Huh? You mean in the example scenario if I charge $500 for a car rental and get 2% cashback from my CC. I find out the car rental is charging me an extra $100 for gas that I never used. I'd complain because I'd lose out on the 2% * $100 difference for the $100 that my CC company gave me back as a result of the dispute charge?
> You're paying an extra ~3% to credit card companies in exchange for the ability to dispute a charge.
I was responding to this.
I also don't understand after re-reading where the "extra ~3%" comes from. If I go to the store and spend $100 on my CC, I'll get $2 cashback. I can pay the $100 off immediately with no interest for a savings of 2%. How are they getting 3% extra from me?
I know I get at least 2% back on all purchases and sometimes more depending on the card and category.
This is also why I brought up that usually I hear people who pay in cash get overcharged - they pay the full $100.
(leaving out how credit card fees require merchants to increase prices leading to even more expenses for cash buyers)
The "~" is important. Most merchants are incurring anywhere from 3~6% on charges made via CC. Likewise, your actual cashback varies (for example the highest I'm aware of is BoA's 2.65% cashback) and the average consumer is likely only getting about 1.5% cashback. So there is your delta.
FYI - For people who work in payments, they know it's not as simple as this, but the point is that there is a delta between the two, and it does help pay for both of the convenience AND the ability to dispute.
I thought your original post made it seem like only CC users get the extra 3~6% for the ability to dispute. My point in the thread was everyone pays it and it ends up being cheaper for the CC holder due to cashback.
"pays it" is relative. The merchant is generally charging 3~6% more than they would otherwise if they didn't use a CC. Said differently, assuming all other things equal, buying the same good for the same price from two identical stores, one who only accepts CCs and one who accepts cash, the one who accepts cash will profit more. Therefore they can, in theory, charge less for their good.
> being cheaper for the CC holder due to cashback
"cheaper" how? The spread is effectively paid for by the merchant (their processing fee is 99% of the time higher than the cashback bonus a consumer earns) which in turn goes to vendors (like credit card providers, payment processors, etc) who then allocate costs against things like customer service for charge disputes.
EDIT: The spread is the original ~3% I'm referring to, which would be an average 1.5% cashback against a 4.5% payment processing charge for a delta of 3%. In many cases this is lower (or null) but you get the point.
If both customers are shopping at the same store, and one pays in card and one pays in cash, the card holder pays less due to cashback. I agree the prices will be higher than at a store that does not accept credit cards due to not having to pay the fees.
The only way I see the extra 3% for cardholders is because they are "forced" to shop in card-accepting establishments which will have higher costs to cover fees while the cash user can choose the cheaper cash vendor.
> The only way I see the extra 3% for cardholders is because they are "forced" to shop in card-accepting establishments which will have higher costs to cover fees while the cash user can choose the cheaper cash vendor.
Correct. And my point is that this 3% tax gives you the feature to dispute the charge.
Most complaints are people who don't pay with CC are paying a premium.