[ImprovedSilence]

Not to be the debbie downer, as I use rewards cards as well. But there is not such thing as free money. This money you are getting is coming from somewhere. The banks are clearly raking in a$$ loads of cash from the merchant when you use your card. I think it's safe to assume the merchant increases the cost of their goods to offset the fees he pays for transactions. So, the merchant sets his prices 3% higher than he would have to, you pay that extra 3%, get 1% back and think "oh, goodie me, free money", and the merchant breaks even. Sure, you come out 1% above people not using rewards, but it's a net gain of -2%. Credit card companies win.

Like I said, I use rewards cards as well, it's a bit of a tragedy of the commons if you will, everyone just trying to offset their costs for a little, but this just causes the hidden costs to continue to rise.

[majormajor]

This is a very good point, I wasn't entirely clear there. I meant free in the context of someone who's already using a debit (I assume processed-as-credit at most merchants) card, yet missing out on many of the benefits offered by many credit cards.

I disagree about the tragedy of the commons part -- specifically that it's any tragedy. In order to keep the discussion simple I'm not going to go into the potential for abuse (which is a serious problem) and the charge-vs-credit card distinction, but overall I find cards to be enormously beneficial compared to cash: I can buy pricier items without having to travel to the bank to take out cash in advance or mess around with checks (an annoying, less-secure system that rather scares me fraud-wise), I can buy gas without going inside the building, I can buy things online with ease, I can dispute charges in case of fraud or if a merchant trys to pull a fast one or never ships me the item (and I've been able to do this successfully), and I wouldn't really be out any money if someone stole my wallet, I'd just need to make a few phone calls and get some new cards overnighted to me. For free. It's tremendously convenient, and to me, completely worthwhile.

It's amazing how quickly the world can change these days: it's an industry that's about a hundred years old that pretty thoroughly changed the world and has already made it to the "unpopular incumbent" stage.

[ImprovedSilence]

You make good points, I agree with the benefit of cards over cash as well. And who wants to lug around a checkbook when I can just put a small piece of plastic in my wallet? There is definite value in that. Maybe even 3% value. I think CC companies may get the "unpopular incumbent" label because most people are not even aware of how credit cards work, and their costs are often times hidden. I mean hidden in the sense that we don't realize the price increase of goods this convince is costing us. I bet if the apple store started selling mac pros at 3% under retail price for cash, more people would inconvenience themselves to pay in cash. But many people are not properly informed, and therefore do not act as rational players. Many jewelers seem to play in this realm of cutting prices for cash buyers. (I know, there may be other reasons for that, but it's an example of merchants incentiveizing buyers to use cash)

[infinite8s]

Most merchant agreements prohibit offering a discount for cash purchases. Those jewelers who do it are probably betting that they won't get caught and have their CC processing yanked. What this means is that in effect everybody pays slightly higher prices in to cover the fees for accepting credit cards.

[njs12345]

This is not quite true. They can offer a discount when paying in cash, but they can't charge an extra fee when a credit card is used after the agreement to purchase.

Source: http://usa.visa.com/personal/using_visa/checkout_fees/index....

[ImprovedSilence]

Interesting to know, I was not aware of that.

Jewelers are different, they can negotiate price, nobody pays retail at a jewelry store, that gives them flex around these cc agreements you speak of. The other reason jewelers often take cash is they let you off the hook for sales tax, which can be risky for them, yes. The jewelry business is fascinating, and full of "old guard" industry type practices, I didn't get fascinated with it until I started looking into buying a high end watch. But I digress.....