On Sun, 16 Jul 2006 02:49:59 +0100, Dik T. Winter wrote:

In article "Virgils Ghost" writes:
However, given the growth in credit and debit card transactions, which have
overtaken cash payments in the UK, is there much point? Banks dislike cash,
there are security risks, reserve issues and the FRB system leaves them
exposed to theoretical runs and credit crunches.

The reason banks do not like cash is that there is no revenue for them.
With each debit card transaction the bank will receive money. With each
credit card transaction the bank will receive money. In the Netherlands
a common debit card transaction requires a fee of about 30 cents from the
seller. A credit card transaction requires a fee of 3 or 4 % of the amount.

AFAIK in the UK debit card transactions are free. Credit cards (Visa and Mastercard) are 2.5%. American Express is higher, something like 4%.

The banks love the ability
to generate liquidity for credit card transactions and all the associated
merchant fees.

Yes, of course, the merchant fee is their income (in addition to the fee the
credit card holder already pays).

All credit cards in the UK are free. You only pay money in interest if you don't pay the full amount back each month. They started introducing a £10 a year charge a while back, but people voted with their feet.

But how will the merchant react if the
number of credit card and debit card payments increases? Right, he will
increase the price. Why are banks not willing that merchants charge
the cost of the transaction to the client?
In the Netherlands the banks just announced that they wanted statements at
a till like "for amounts under EUR 30 you pay an additional 30 cents" to
be removed. That is not going to happen, not when the markup for the
merchants on some articles can be as low as 25 cents (and the transaction
cost for debit card payment is 30 cents).

Only small shops seem to charge for using cards here. Large shops realise that most people use cards, so they just shove the fee inside the cost of the goods.

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