How Does The Credit Card Machine Work? Regarding the monetary system. Who gets the money and at what rate %?
Nov 18, 2009
in
Credit Card Machines
I am just wondering how does the credit card machine work? For example, for a restraurant- When they charge a bill, doesn’t the credit card machine company get a percentage? Why do businesses insist of costumers on paying cash all the time rather than credit cards? (Who gets the money and how does the system work?)
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One comment
Dan B on November 18, 2009 at 2:12 pm
The company that owns the machine gets about 2.5% of the transaction - called an interchange fee. The bank gets a cut of that 2.5% also. And you, the customer pay that fee in higher prices. It’s exactly like a 2.5% hidden sales tax on every credit card or debit card purchase on top of the interest you pay on your credit card balance on top of the 8% sales tax you pay to the state. The banks are claiming that they are losing money on credit cards. Yes, but they are making BILLIONS on these transaction fees. They treat them separately so they can garner sympathy from the regulators.
Businesses like cash because they get to keep that 2.5% fee.