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Why the different fees for credit and debit card payments?

up vote 14 down vote favorite

Could somebody explain why the merchants are charged different fees when the customers use credit and debit cards?

2 Answers

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A debit card takes the funds right from your account. There's no 'credit' issued along the way.

The credit card facilitates a short term loan. If you are a pay-in-full customer, as I am, there's a cost to lend the money, but we're not paying it. It's part of the fee charged to the merchant. Thus the higher transaction cost.

up vote 3 down vote

In Addition to @JoeTaxpayer's answer, in the UK credit cards offer additional protection than if you were to pay by debit card. This includes (but is not limited to) getting your money back if the company you've bought something from goes bust before your order is complete.


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Why the different fees for credit and debit card payments?

up vote 14 down vote

Could somebody explain why the merchants are charged different fees when the customers use credit and debit cards?


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up vote 9 down vote

A debit card takes the funds right from your account. There's no 'credit' issued along the way.

The credit card facilitates a short term loan. If you are a pay-in-full customer, as I am, there's a cost to lend the money, but we're not paying it. It's part of the fee charged to the merchant. Thus the higher transaction cost.

edit

This additional fee also covers the benefits of cashback/miles/rewards, $0 annual fee cards, and fraud protection, etc. - Noah yesterday

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