With cash (or cheque), the shop keeper receives the entire $5, but with a credit card payment, they pay a transaction fee. With cash, the shop keeper can pay the butcher on the way home, and the butcher can pay his delivery boy, and on down the line. When all use credit cards, the purchasing power is reduced at each transaction and fees accumulate at the credit card issuer. Often the credit card issuer charges fees to the holder as well.
Yes, you're absolutely right that in the real world, the (debit or credit) card issuer doesn't transfer as much RNW to the shop as it receives from the buyer. I think it's reasonable to see this difference as a fee for the payment service provided by the issuer to the shop (imagine a white arrow from the bank to the shop), which then doesn't have to bag up the money in the till, and take it to the local bank branch (with the potential for being robbed on the way).
Before, I think, the 1990s, shops in the UK weren't allowed to charge a different price depending on how the customer pays. Since then, you may be able to get a discount on a big purchase if you pay by cash - you'll never find out if you don't ask!
As long as cash is an alternative, card issuers can't collude to ratchet up transaction fees, because shops/customers can avoid them by using cash instead. We should be *very* wary of recent moves to phase out cash.
With cash (or cheque), the shop keeper receives the entire $5, but with a credit card payment, they pay a transaction fee. With cash, the shop keeper can pay the butcher on the way home, and the butcher can pay his delivery boy, and on down the line. When all use credit cards, the purchasing power is reduced at each transaction and fees accumulate at the credit card issuer. Often the credit card issuer charges fees to the holder as well.
Yes, you're absolutely right that in the real world, the (debit or credit) card issuer doesn't transfer as much RNW to the shop as it receives from the buyer. I think it's reasonable to see this difference as a fee for the payment service provided by the issuer to the shop (imagine a white arrow from the bank to the shop), which then doesn't have to bag up the money in the till, and take it to the local bank branch (with the potential for being robbed on the way).
Before, I think, the 1990s, shops in the UK weren't allowed to charge a different price depending on how the customer pays. Since then, you may be able to get a discount on a big purchase if you pay by cash - you'll never find out if you don't ask!
As long as cash is an alternative, card issuers can't collude to ratchet up transaction fees, because shops/customers can avoid them by using cash instead. We should be *very* wary of recent moves to phase out cash.