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0 pointslukeschlather6y ago0 comments

I have a credit card that gives me 1.5% cash back on every transaction. I'm reading that Visa typically charges 2.3% to merchants, and Stripe charges 2.9%, ignoring per-transaction fees. So Stripe itself probably gets around 0.6% of each transaction, and at least on average 1% of each transaction goes to cardholder bonuses, and the card issuer gets around 1.3%. Of course both Stripe and the issuer have some fraud prevention built-in, I don't know how much that amounts to (and how much more effective China is at combating fraud, though it's possible WeChat simply doesn't accept as much liability as American payment processors do.)

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AdieuToLogic6y ago

Your conflating fees charged to Merchants (by processors) and rewards offered to Card Holders (by issuers).

While often the same bank performs, or is a partial owner involved in, both processing and issuing, the percentages you quote are largely disjoint.

> I'm reading that Visa typically charges 2.3% to merchants ...

The Discount Rate[0] a Merchant pays varies significantly based on the line-of-business, charge-backs, processing contract, and a bunch of other things.

> ... at least on average 1% of each transaction goes to cardholder bonuses ...

Again, issuer costs have no bearing on Merchant fees nor the profitability of processors.

0 - https://www.creditcards.com/credit-card-news/glossary/term-d...

nitrogen6y ago

Again, issuer costs have no bearing on Merchant fees nor the profitability of processors.

If this is true, then where does the cash back come from if not as a cut of the merchant fees?

AdieuToLogic6y ago

> > Again, issuer costs have no bearing on Merchant fees nor the profitability of processors.

> If this is true, then where does the cash back come from if not as a cut of the merchant fees?

Interest rates + membership fees charged by issuers to Card Holders.

1 more reply

ceejayoz6y ago

Interchange fees are higher on premium (rewards) cards. The merchant may contractually pay a fixed percentage that accounts for the expected mix of cards, but those rewards absolutely come from merchant fees.

rwmurrayVT6y ago

There are entire organized crime rings and many, many individuals that specialize in merchant account fraud. In the early 2010's people were creating stripe accounts and processing up to $100,000 fraudulently. I'm not sure who ate that, but it surely had an impact on their bottom line. I had screenshots from Alphabay of over $5,000,000 in fraudulent charges on merchant accounts. If Stripe only makes 1% of transaction cost and has to eat the fraud then they'd have to charge $500,000,000 to just make up what was posted in a single "mastermind group". That is crazy...

aeternum6y ago

Card not present transactions (the type primarily used by Stripe) are charged at a significantly higher rate due to the higher likelihood of fraud.

To use square as an example, card present is 2.6% whereas card not present is 3.5%.

dehrmann6y ago

> I have a credit card that gives me 1.5% cash back on every transaction

Some of this is paid for by people carrying balances. The bet is that cash back will attract enough people to get and use the card that, in aggregate, interest will make up for cash back.

MuffinFlavored6y ago

From a quick Google, I think the difference is that WeChat is bank-to-bank, therefore the rates are 0.1%

j / k navigate · click thread line to collapse

0 comments

AdieuToLogic6y ago

Your conflating fees charged to Merchants (by processors) and rewards offered to Card Holders (by issuers).

While often the same bank performs, or is a partial owner involved in, both processing and issuing, the percentages you quote are largely disjoint.

> I'm reading that Visa typically charges 2.3% to merchants ...

The Discount Rate[0] a Merchant pays varies significantly based on the line-of-business, charge-backs, processing contract, and a bunch of other things.

> ... at least on average 1% of each transaction goes to cardholder bonuses ...

Again, issuer costs have no bearing on Merchant fees nor the profitability of processors.

0 - https://www.creditcards.com/credit-card-news/glossary/term-d...

nitrogen6y ago

Again, issuer costs have no bearing on Merchant fees nor the profitability of processors.

If this is true, then where does the cash back come from if not as a cut of the merchant fees?

AdieuToLogic6y ago

> > Again, issuer costs have no bearing on Merchant fees nor the profitability of processors.

> If this is true, then where does the cash back come from if not as a cut of the merchant fees?

Interest rates + membership fees charged by issuers to Card Holders.

1 more reply

ceejayoz6y ago

rwmurrayVT6y ago

aeternum6y ago

Card not present transactions (the type primarily used by Stripe) are charged at a significantly higher rate due to the higher likelihood of fraud.

To use square as an example, card present is 2.6% whereas card not present is 3.5%.

dehrmann6y ago

> I have a credit card that gives me 1.5% cash back on every transaction

Some of this is paid for by people carrying balances. The bet is that cash back will attract enough people to get and use the card that, in aggregate, interest will make up for cash back.

MuffinFlavored6y ago

From a quick Google, I think the difference is that WeChat is bank-to-bank, therefore the rates are 0.1%

j / k navigate · click thread line to collapse