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I think it's silly that stores don't offer a discount for paying with a debit card. The stores pay a relatively small fixed commission for each debit card transaction. Unless the purchase is really small, it ends up being a lot less than the 3-5% credit card companies charge them as commission.
So people who pay off their credit cards every month and don't carry a debt balance are still handing over 3-5% of their major non-housing-related expenditures to credit card companies (and then getting ~1-2% back in the form of various reward programs.)
This credit card commission ends up baked into the price of everything we buy, making all goods more expensive.
Why not cut a deal directly with the retailers wherein if you buy something with a debit card instead of a credit card, you get a discount of 2-3% ? Consumers win. Retailers win.
I'm guessing that in the long run, the presence of credit cards *decreases* consumer purchasing power since consumer income is diverted to pay the credit card companies interest on previously purchased items instead of purchasing more items. Thus, retailers as a whole would do better if credit cards were not used in purchases. However, there's a tragedy-of-the-commons situation in that if one retailer manages to lure a consumer into an expensive purchase which they can only handle with a credit card, they greatly benefit even if retailing as a whole loses out. (The only exceptions I can think of are if the purchase of the item allows the consumer to go generate more income which is in turn used to repay the purchase faster (eg being able to afford a car for commuting to a job vs not being able to afford a car), or if the purchase would be more expensive if not made right away (eg dental work))
I know some of you know a lot more economics that I do, so let me know if there are any big holes here.
So people who pay off their credit cards every month and don't carry a debt balance are still handing over 3-5% of their major non-housing-related expenditures to credit card companies (and then getting ~1-2% back in the form of various reward programs.)
This credit card commission ends up baked into the price of everything we buy, making all goods more expensive.
Why not cut a deal directly with the retailers wherein if you buy something with a debit card instead of a credit card, you get a discount of 2-3% ? Consumers win. Retailers win.
I'm guessing that in the long run, the presence of credit cards *decreases* consumer purchasing power since consumer income is diverted to pay the credit card companies interest on previously purchased items instead of purchasing more items. Thus, retailers as a whole would do better if credit cards were not used in purchases. However, there's a tragedy-of-the-commons situation in that if one retailer manages to lure a consumer into an expensive purchase which they can only handle with a credit card, they greatly benefit even if retailing as a whole loses out. (The only exceptions I can think of are if the purchase of the item allows the consumer to go generate more income which is in turn used to repay the purchase faster (eg being able to afford a car for commuting to a job vs not being able to afford a car), or if the purchase would be more expensive if not made right away (eg dental work))
I know some of you know a lot more economics that I do, so let me know if there are any big holes here.
