The entities giving cash back (banks issuing credit cards) profit more from the interest from people who do not pay their monthly balance more than the loss of giving everyone 2% cash back.
Merchants (generally large merchants) do not offer a discount for paying with debit cards because people spend more money when using credit cards.
There are some notable exceptions that offer cheaper prices for using debit card, such as Target that offers a 5% discount for using a debit card to pay. Hence I pay at Target with a debit card.
Basically, other people’s cash flow problems and/or inability to resist temptations to spend more than what they have results in profit for merchants, banks, and people that pay their credit card balance every month.
> Merchants (generally large merchants) do not offer a discount for paying with debit cards because people spend more money when using credit cards.
Also, I assume that most credit companies (VISA, MC, etc.), have rules, expressly forbidding charging different rates for the use of credit cards. It makes sense, because they don't want to be avoided as a payment option.
I learned this, when I did my first shopping cart, and read the whole freakin' VISA Merchant's Manual.
There was some kind of loophole that gas stations used.
Not as of 2010. Dodd-Frank legislation explicitly made it illegal for payment card networks to prevent merchants from offering discounts for different payment methods:
> A PCN cannot stop you from offering your customers a discount or another incentive for using a certain method of payment, as long as you offer it to all your customers and disclose the offer clearly and conspicuously. For example, you can offer your customers a discount or a coupon if they pay with cash or a debit card rather than a credit card.
In Mar 2017, Supreme Court went further and said state laws banning credit card surcharges were a violation of merchants’ first amendment rights:
What you may be thinking about is rules prohibiting charging different payment card network prices for various credit cards (i.e. different price for Visa vs Amex vs Mastercard vs Discover). This was deemed allowable by the Supreme Court in Jun 2018:
As an aside, this Ohio v AmEx ruling was of great benefit to tech companies that operated market places, because
> This decision was considered to have created a new type of rule that could make it difficult to seek antitrust litigation; with credit cards being a two-sided market serving two distinct sets of customers, a successful antitrust argument would have to show how both sides of the market were harmed.
Merchants (generally large merchants) do not offer a discount for paying with debit cards because people spend more money when using credit cards.
There are some notable exceptions that offer cheaper prices for using debit card, such as Target that offers a 5% discount for using a debit card to pay. Hence I pay at Target with a debit card.
Basically, other people’s cash flow problems and/or inability to resist temptations to spend more than what they have results in profit for merchants, banks, and people that pay their credit card balance every month.