there’s a reason companies reward you for using credit cards. In America, credit cards are banks’ most profitable lending business. This is the aspect of credit cards that consumer advocates usually criticize: banks charge interest rates of 15% to 20% on $700 billion in outstanding credit card loans.
The results can be absurd: banks and credit card issuers making more from a restaurant’s burgers, a bookstores books, or a corner store’s groceries than the store owners and employees.
There average American credit card fee is 2%, but government in Europe has capped transaction fees at 0.2% for debit cards and 0.3% for credit cards.
There’s no reason Americans should be paying such high fees, which are among the highest in the world. Credit cards were an amazing invention—in the 1950s. But today they are an outdated technology that cost us serious money.
The Transaction Fees are too Damn High
Banks, Visa, MasterCard, American Express, and other companies that profit from credit card transactions say that the fees reflect the cost of a valuable service. Store owners and merchants, however, say they simply can’t risk not accepting a major brand of credit card, which keeps fees outrageously high.
This point—that the entire American payment system, not just the credit card networks—have not developed significantly for decades is key to understanding credit card’s continued existence.
The credit card networks are slow, expensive, and outdated. It’s time for something new.
Source: How Credit Cards Tax America, by Alex Mayyasi