>For its doughnuts, the shop takes only green cotton notes from the Federal Reserve.
>The proximate reason is obvious. If it were to accept credit cards, Carlson’s would have to pay an interchange fee to a network, for the privilege of selling doughnuts. These fees run roughly between one and two per cent, sometimes higher, particularly for smaller retailers like Carlson’s.
I feel like I'm taking crazy pills. We all know this is to avoid tax, right? Why are we pretending otherwise?
They take card for everything else. This is just some tax-free pocket money for the owner.
Retail card processors often charge a flat fee per swipe/tap/whatever in addition to the 1-2% percentage mentioned above. E.g., a five cent flat fee doesn't matter on a $20 lunch, but it's over 3% of a sale for a single $1.60 donut.
Perhaps more importantly, consider the following design document for donut transaction software a la Mitch Hedberg:
"I'll just give you the money. You give me the donut. End of transaction."[1]
Cash achieves this out of the box. You could have John Carmack and a billion dollars seed money and your cc terminal would still need to be rebooted in the middle of a transaction on at least a bi-weekly basis.
I don't know why you would swap in your own interpretation over the article's. Credit merchants in the US charge a lot per transaction. Many businesses find that is not worth it to allow credit payment for low-cost items (like donuts). Many businesses have a credit card minimum of $20.
What about that leads you to the conclusions is to evade taxes?
You're both massively underestimating the interchange fees and overestimating their need to dodge taxes. If you had any idea how much money they made you'd know that they can offset all of that via writeoffs without having to even do any "clever" accounting.
They would need to be doing an insane amount of business to get fees that low. In reality it's anywhere between 7-15%, especially for small tx. When you combine this with the penalty system for chargebacks (which quickly escalates to not being allowed as merchants) and people trying small tx with stolen cards, this is why coffee shops, corner stores, etc charge a flat +% for any cc purchase and especially leverage an additional fee for small ones if they even accept them at all.
Perhaps you prefer tax, er, "minimisation", to only be available to corporations and individuals (eg politicians) that have enough power to have law makers and tax authorities (legally) decrease their tax for them?
See, I thought it was because cash only businesses are a great way to launder money, ie actually pay taxes on illegal money so you can spend it freely in the banking system.
"I bought a donut and they gave me a receipt for the donut; I don't need a receipt for the doughnut. I'll just give you the money, and you give me the doughnut, end of transaction. We don't need to bring ink and paper into this. I just can't imagine a scenario where I would have to prove that I bought a doughnut."
Yes for small purchase and "usual day to day" item maybe its worthless to keep track for that
but for big purchase like car payment,house mortgage etc. its good to have it immutable track record so if any problem occurs its easy to show why I own the thing
As a former resident of Maryland, it's sort of funny seeing Carlson's Donuts & Thai Kitchen mentioned in the Financial Times and thereby Hacker News. A little disappointing it was not really about their donuts though...
Are they the same owners of Carlson's Donuts in Severn? They are also cash only.
These hot takes always ignore the actual reason for fees on credit card transactions. It’s not because of the complexity or avarice of the payment system providers, it’s because the card networks offer insurance and repudiation of false payments. Each layer of the payment network carries loss liability for different types of fraud in the system.
Stablecoins like cash or other cash transfer schemes don’t offer any form of reputation of transactions for any reason. If you lose your money to theft, to a fraudulent merchant, whatever, the money is gone.
This being said, the interchange structure -is- inefficient as there’s been a lot of middle men accumulated over the years. A simpler interchange could be achieved with much lower fees for the merchant and higher rewards for the consumer. Only a major processor like stripe to accomplish this but they are too absorbed with stable coin malarkey
> the card networks offer insurance and repudiation of false payments.
*They force the participating banks to offer...
You think MasterCard or Visa hand over a single dime to you? When you issue a chargeback, the money comes from the merchant bank, not from the network. Quite the opposite: the payment network penalizes the merchant bank with an additional chargeback fee.
> It’s not because of the complexity or avarice of the payment system providers,
This boarders on self-promotion but I'd like to say, "Bitcoin fixes this".
We're launching Bitcoin payments available to every Square point of sale with 0% transaction fees for next year. 1% after that. Available Nov 10th. [https://squareup.com/us/en/releases#bitcoin]
My sincere hope is it catches on and helps out small business. The difference in fees can really add up, and with near instant settlement to dollars on the backend, the merchant doesn't even need to hold or think about Bitcoin unless they want to.
The fine article talks about stablecoins, but in my biased opinion those are much more complicated than Bitcoin to deal with right now.
Readit News
>The proximate reason is obvious. If it were to accept credit cards, Carlson’s would have to pay an interchange fee to a network, for the privilege of selling doughnuts. These fees run roughly between one and two per cent, sometimes higher, particularly for smaller retailers like Carlson’s.
I feel like I'm taking crazy pills. We all know this is to avoid tax, right? Why are we pretending otherwise?
They take card for everything else. This is just some tax-free pocket money for the owner.
Perhaps more importantly, consider the following design document for donut transaction software a la Mitch Hedberg:
"I'll just give you the money. You give me the donut. End of transaction."[1]
Cash achieves this out of the box. You could have John Carmack and a billion dollars seed money and your cc terminal would still need to be rebooted in the middle of a transaction on at least a bi-weekly basis.
1: https://www.youtube.com/watch?v=xPq0-8dyl8I
> a five cent flat fee doesn't matter on a $20 lunch, but it's over 3% of a sale for a single $1.60 donut.
Now do the math for profit instead of revenue
What about that leads you to the conclusions is to evade taxes?
If the CC firms take 3% in fees, and give 1-2% back to the customer, why would anyone pay in cash? It’s free money.
it’s pretty easy to see this is rent seeking behavior and you can’t blame small shops for not playing that game.
It’s not enough to take interest from the consumer, they have to squeeze the businesses too.
They would need to be doing an insane amount of business to get fees that low. In reality it's anywhere between 7-15%, especially for small tx. When you combine this with the penalty system for chargebacks (which quickly escalates to not being allowed as merchants) and people trying small tx with stolen cards, this is why coffee shops, corner stores, etc charge a flat +% for any cc purchase and especially leverage an additional fee for small ones if they even accept them at all.
Perhaps you prefer tax, er, "minimisation", to only be available to corporations and individuals (eg politicians) that have enough power to have law makers and tax authorities (legally) decrease their tax for them?
A 5% fee on an item marked up 100% is a 10% drop in income to a family-shop.
Food profits run much tighter than other goods, so it can be even worse.
Of course. More correctly, to evade tax.
"I bought a donut and they gave me a receipt for the donut; I don't need a receipt for the doughnut. I'll just give you the money, and you give me the doughnut, end of transaction. We don't need to bring ink and paper into this. I just can't imagine a scenario where I would have to prove that I bought a doughnut."
but for big purchase like car payment,house mortgage etc. its good to have it immutable track record so if any problem occurs its easy to show why I own the thing
Are they the same owners of Carlson's Donuts in Severn? They are also cash only.
Stablecoins like cash or other cash transfer schemes don’t offer any form of reputation of transactions for any reason. If you lose your money to theft, to a fraudulent merchant, whatever, the money is gone.
This being said, the interchange structure -is- inefficient as there’s been a lot of middle men accumulated over the years. A simpler interchange could be achieved with much lower fees for the merchant and higher rewards for the consumer. Only a major processor like stripe to accomplish this but they are too absorbed with stable coin malarkey
*They force the participating banks to offer...
You think MasterCard or Visa hand over a single dime to you? When you issue a chargeback, the money comes from the merchant bank, not from the network. Quite the opposite: the payment network penalizes the merchant bank with an additional chargeback fee.
> It’s not because of the complexity or avarice of the payment system providers,
https://www.youtube.com/watch?v=ks3wP1nlg6U
50% profit margin
This is not a competitive market.
Deleted Comment
Kind of ironic this particular article is behind a paywall.
We're launching Bitcoin payments available to every Square point of sale with 0% transaction fees for next year. 1% after that. Available Nov 10th. [https://squareup.com/us/en/releases#bitcoin]
My sincere hope is it catches on and helps out small business. The difference in fees can really add up, and with near instant settlement to dollars on the backend, the merchant doesn't even need to hold or think about Bitcoin unless they want to.
The fine article talks about stablecoins, but in my biased opinion those are much more complicated than Bitcoin to deal with right now.
Deleted Comment