Paying With A Credit Card Could Cost You, Japans Amazing Convenience Store Scene & A Perfect Weekend In Bucharest

Bucharest looks more interesting than I’d thought.

Credit card surcharges are a great way to ensure I won’t return. I pay a couple of grand a month in credit card fees as the cost of doing business as a business owner. It’s just one of the expenses you have to eat. If the costs get too high, I raise my prices.

You may be surprised to find that Kit-Kats in Japan come in more variety than M&M’s here. It was amazing to see!!

“It seems like a capping of interchange fees is in our future at some point”

Why? The free market will take care of it. What this article is saying is that the fees already are starting to cause some pushback from merchants. When less people are using cards bc fees are passed on to them instead of being absorbed, the response of the networks will likely not be to raise fees even more, forcing even more pushback, and opening the door to alternative payment methods. I think what we are seeing is that we are at or near the peak of interchange fees.

Mark, this will likely mean the end of significant value capture for most (but not necessarily all) in the points game.

One OTA has a 10 percent back rewards program. But, embedded in taxes and fees (but not named) is a 10 percent fee that the OTA charges. In essence, one is paying up to provide one’s own reward. Keep this concept in mind as you read.

What could happen is that any business can establish a baseline price it ultimately wants from an item and then adds (say) three percent to its retail price — which covers the interchange fee. Cash payers are offered a three percent discount — credit payers pay full price. That is the most basic scenario and goes to your point regarding non-bonus category spending.

But, with all the garbage we’ve seen going on with hotel property owners, just wait. Hotel networks have put the nix on owner who have added “convenience” fees when using credit cards. Likely, contracts with owners expressly prohibit such fees but . . . likely, contracts with owners do not expressly prohibit offering discounts to cash payers. One way or another, these hotel property owners will get there. So, as with the retailer above, bump the price and offer the discount. But, wait, there’s more . . . and it ain’t Ginsu knives (for those old enough to remember).

Imagine the hotel property owner setting that base price for cash payers and then (recognizing the bonus category issue) jacks up the offer price by (say) five percent instead of only three percent. If we are talking about a credit card that earns six points per dollar and each point is worth 0.8 cents, then then cash discount (price bump for credit) is about the value of the bonus spend. To implement this, the hotels would only need a one-time price increase of the five percent to cover the discount — after that, prices move with inflation / prevailing rates. The key is that no one would really notice a simple five percent pop in a room rate implemented over the course of a year.

If this “cash discount” becomes a broader practice, some retailers might limit the discount to about the interchange fee. But, knowing hotel property owners in particular, it will be a profit center for them. And, if this does happen, depending on the specifics, certain hotel co-branded cards would be pointless (no pun intended) other than welcome bonuses.

Conceptually, the credit card user is paying up to cover one’s points — sort of like the OTA that imposes unnamed fees that are actually covering the person’s 10 percent award rate.

While this is really an across-the-board issue, I see this as yet another problem for hotel loyalty programs.

I can’t read the full WSJ article since it is behind a pay wall, but don’t the businesses agreements with Visa/MasterCard/American Express expressly prohibit them from charging a credit card surcharge and/or even providing a cash discount?