Originally Posted by paxman
I am not sure about that. Most grocery stores accept card and those are often small purchases. I can't see the cc companies loosing here. Merchants pass it on to their clients. I am no expert, I just begrudgingly pay my fees. I sell higher ticket items and I don't really see how a $2000.- item is any more expensive to process than a $200.- transaction. Debit card fees are a fraction of CC fees, remember.
The reason why so many retailers tried to prevent people from using a card with purchases under a certain amount was because it cost them money. CC companies weren't happy about that, not because they did make money on those small transactions, but because they were afraid that if people got used to not using their card for those small transactions, they might not use them for larger ones as well, where they did make money.
What you are saying about transaction costs is the opposite of what I was saying. I didn't say that transaction costs were higher for more expensive sales. What I said was that the CC companies made more profit from those sales because they get money depending on the percentage. The more the item costs, the more money they get. Transaction cost is what it costs the CC companies for processing the charge. Obviously, if they get $0.15 from a transaction, and it costs them $0.25 to process it, they lose money on that transaction. It costs them the same to process a $10,000 sale as it does a $0.99 sale where they may only get from 2 to 5 cents.
And before you ask, they do well with the very small prices in the iTunes Store, because large retailers like Apple take care of a lot of the back end work first, and sell so much, that CC companies see profits from those sales.