As a sidenote I hate that sales tax is not shown on the price tags here in the US. I strongly believe that you should be able to walk out of the store paying the price shown on the price tag -- not a cent more. This obviously clashes with the obvious solution of making credit card surcharges a thing and letting consumers deal with it. I genuinely don't know what's the best solution here -- I think the EU did a good job, but I'm skeptical of government intervention generally, so I'm trying to come up with more structural solutions that make it so it's competition that drives the price down, not government price caps.
Edit: Actually I think there's a simple solution: the fee should be assessed on the consumer side, not on the merchant side. Your issuing bank charges you 200bps on your end instead of taking it from the merchant cut. The net effect is the same.
People would hate it, and it would never happen, but it's fun to think about :/
Competition drives prices down in a fair market, but the credit card business is an oligopoly - with huge regulatory and structural barriers to entry. That is, despite Visa and MasterCard’s enormous profits, there is little chance of new players entering the market and increasing competition.
Regulation is warranted in monopoly/oligopoly situations. Either by changing the rules to favour/promote increased competition, or, as the EU has done here, by capping the fees which they can charge.
Here in Asia we have alternatives to Visa and Mastercard popping up.
Merchants are typically happy to take them, because their fees are lower.
> Regulation is warranted in monopoly/oligopoly situations. Either by changing the rules to favour/promote increased competition, or, as the EU has done here, by capping the fees which they can charge.
I suspect you might want to look into lightening regulations, so that upstart competitors have an easier time entering the market. Instead of piling on ever more regulations that only those who are big enough to afford an army of lawyers and accountants and lobbyists can manage.
Right. That’s exactly what I mean by “changing the rules to promote increased competition”.
This is unlikely to happen in the US, however, where market-dominant corporations have huge lobbying power and can ensure the rules are written in their favour, and any potential upstarts drowned in a sea of red tape.
The reason sales taxes are not posted is at least in part because there can be several independent authorities that can and do change the sales tax on a whim. The sales tax you pay is the aggregate of these separate authorities. There is no central sales tax authority that keeps these changes on a sane and sensible cadence, which is one of the reasons sales tax is highly variable and hyper-local in the US.
In this scenario, it is much easier to change the sales tax at the register than to reprice the entire store every time one of the several sales tax authorities decides to change the rates or rules.
I'm in Norway. There is no real way to avoid knowing what the VAT on things are.
I have to pay it if I order from Amazon or Etsy, for example. If I order from the US, I pay later.
Every sales receipt has the VAT right on the receipt. I can see it every single time. If I order from inside the country, I can see it before I pay.
It isn't hidden. It isn't secret.
It wasn't even secret to an immigrant that didn't yet understand enough Norwegian to know.
What I do get is to be reasonably certain what I'm going to pay when I get to the cash register. I don't have to do mental gymnastics with a total if I'm tight on money - like I have many times in the US. It won't change if I'm in a different part of Norway. There simply aren't as many price surprises like that.
I think this comes down to you being Norwegian (ie getting good quality govt services in exchange for your taxes). Now imagine being Greek. If folks realised they're paying 22.5% to the govt on top of everything they purchase... they wouldn't be very happy.
Oh, I'm not Norwegian. I'm American, I just moved here some years ago. Considering everything, I'm probably paying fewer total taxes than I did in the US - if anything, because I'm getting stuff like healthcare for my tax money now.
Greece is in the EU, which means they are paying at least 15% VAT on most stuff, assuming everyone is paying their taxes (which might or might not be). Trust me, even being built into the cost, everyone knows how much they are paying in taxes on goods. Greek folks aren't unintelligent. This sort of tax isn't a secret any more than sales tax was in the US.
Part of the cost of a tax is cognitive. That’s why VAT is a great tax. Build it into the systems.
Instead, private credit cards are built into the system. That makes no sense to me. The US system of credit cards does very little for economic stability or growth. It has clear harms to the vulnerable and it hardly benefits the economically stable. Instead, there should be a system of frictionless debit payment. Governments shouldn’t pick winners and losers, but they should build infrastructure for healthy markets.
Signing credit card slips? What is that? Clearly irrational. Visa and Mastercard are not just normal market players. American capitalism would function better without the excessive role of credit cards in commerce.
Do we all use credit cards? I know people who use credit cards specifically for large purchases. I know very few people who use one regularly for groceries, etc.
Debit cards are 48% of all payments in the UK, and credit cards 8%.
Cash is 15%, the rest are various types of bank transfer. Note this is all transactions, online and in-person, including things like subscription renewals.
(How can a debit card be cloned, anyway? I'm not aware of any case of this, only a possible problem in the USA where data is 'cloned' onto a magstripe card.)
Accordingly to ukfinance.org[0] 13% of card transactions are CC and the rest are debit. I'm surprised it's that high for CC, but still, I think it's reasonable to say a lot of people use them.
Er yes, you're right about debit card cloning I think. I'll retract that one :) However if purchase something that doesn't work your CC company is jointly liable (crazily enough) and if your card details leak you have protection against fake purchases. Neither is the case for debit card use.
Edit: Actually I think there's a simple solution: the fee should be assessed on the consumer side, not on the merchant side. Your issuing bank charges you 200bps on your end instead of taking it from the merchant cut. The net effect is the same.
People would hate it, and it would never happen, but it's fun to think about :/