In my experience in the US, it is extremely rare to find transit systems (especially buses) that take credit card payments on board. For example, you cannot simply walk onto a bus holding a credit card and pay your fare. Instead (unless you pay with cash), you generally have to load some sort of fare card or app with money, or pay your fare at a ticket machine at a major station. Why do transit vehicles generally not accept credit/debit card payments on board?

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    many people rarely or never carry cash anymore — citation needed. There are other businesses that are cash-only ,and the US is a country of tipping, which is often in cash. – gerrit Feb 7 at 9:15
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    Do you have any evidence US transit systems are less likely to accept debit/credit card payments than other countries? I've taken buses in Spain, England, Germany, Sweden, Canada, Russia where the situation was similar to the US, except that they do give change. I suggest you remove the "in the US" part unless you have evidence this is worse in the US than elsewhere. – gerrit Feb 7 at 9:17
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    @gerrit I would say the vast majority of US credit cards are not contactless. – Alan Munn Feb 7 at 13:26
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    @gerrit The USA. Out of the five American Visa/MC cards I have, only two have contactless. Neither was issued by a traditional bank. South Korea has rejected EMV contactless entirely; no one there has it. – Michael Hampton Feb 7 at 15:20
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    I'm voting to close this question as off-topic because unrelated to the site – Fattie Feb 8 at 19:03

Some bus agencies have done as you propose, including, at one point in the past, Valley Metro Three in Phoenix (see page 33-34 for an explanation). Those readers have since been removed. A few points:

First, fare collection equipment is expensive, and money spent outfitting buses with credit card readers is money not spent on transportation services. It's not clear that there's a business case that adding credit card readers to buses increases ridership by enough to pay for the equipment. The lifespan of fare collection systems is measured in decades, with many years required for planning, procurement, and rollout, so even if it makes perfect sense now, it may not have made sense in the 2000s, when many modern fare systems were rolled out.

As you noted, credit card fees add up if you're charging once per ride and would constitute a non-trivial proportion of typical transit fares. This is mitigated if most riders charge a larger amount at once, as with stored value cards and daily/weekly/monthly passes. Modern contactless systems use batched transactions and lower negotiated rates to reduce this expense; this was harder to do in the past. Vending machines are not really a good comparison because snacks and soda are high-margin items, while transit agencies seek to be responsible with public funds.

Until recently, most buses were offline. Smart card-based fare collection systems were designed to mitigate this: funds were loaded onto a (supposedly) secure card so that the actual transaction on the bus could be processed offline. The card readers on buses would wirelessly send/receive batch data when the buses were in the yard. While it's been done, credit card acceptance without online verification involves a high risk of fraud: anyone that can obtain a magnetic stripe that looks plausible (cancelled card, $0 balance prepaid card, fake card, etc...) can travel for free, and it won't be detected until much later, at which point the cheat is long gone. While any system has the potential for fare evasion, I can imagine transit agencies weren't that interested in one so inherently insecure. With the widespread availability of cellular modems, many buses now carry internet connections for tracking and telemetry (though those systems may be incompatible with fare collection), and fast online transactions are possible.

Consider that many taxis did not accept credit cards when many modern transit smartcards were being rolled out, and those that did had quite slow transaction processing times.

Finally, transit agencies have not always been particularly customer-centric organizations. Thinking like "we should make it as easy as possible for people to pay us money so they'll ride more and pay us more" has not always really been how many agencies operated. Many systems are built for regular daily users, especially commuters and transit-dependent riders, and those people will jump through hoops to pay their fares. That's started to change a little, with some transit agencies appointing Chief Customer Offices or similar positions and a growing awareness of the need to prioritize the needs of riders. That's led to initiatives to make transit easier to ride, including easier-to-use fare payment systems, like contactless and fare payment apps.

The modern version of what you propose is contactless payments, which are becoming increasingly common (London, New York, Singapore) along with app-based mobile payments (Berlin, San Francisco, many other cities). This offers much faster speeds than chip readers, works with smart phones and watches, and the equipment is widespread and fairly low cost at this point.

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    I'm not so sure about your point about taxis. I've been using credit cards to pay taxis for at least a decade. – Barmar Feb 7 at 13:42
  • "Modern contactless systems use batched transactions" do you mean batched transactions as in the bus cc system would wait til the end of the day to send all the transactions in one batch? If so, that's a staple of how even non-contactless systems have worked for decades as well. Most of what you say about contactless payment methods is actually true for non-contactless as well. The only benefit of contactless payment methods is that you don't have to pull out or carry a credit card, but can use a smart watch or phone. They're only modestly quicker (maybe up to a second, tops) – TylerH Feb 7 at 14:41
  • That TCRP report is a fantastic resource. I was unaware that negotiating transaction fees down was already something that was possible, and way to go phoenix! I'm hopeful, so long as cc companies can make contactless more available, and transaction times shorter – Bunji Feb 7 at 15:07
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    @Bunji gas stations will run often run two charges, a pre-auth when and then the final amount based on how much you rang up at the pump. As far as I know, the method POS terminals use to check whether a card is accepted or declined is the exact same regardless of how the card's payer data is transmitted. It's much faster because most people are just slow with inserting (or especially with swiping) a card vs tapping because less care and precision are needed. There's nothing special about contactless cards' implementation of tech that is inherently faster once it reaches the POS terminal. – TylerH Feb 7 at 15:21
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    "transit agencies seek to be responsible with public funds." Only partially sarcastic, citation needed. – Michael Richardson Feb 7 at 21:24

There is demand for the service (obviously).
Merchant fees are actually kind of an issue.
Speed is the big factor.
Having people do it while the bus is enroute is unsafe.

It's about dwell time, mostly

You know that a credit card transaction anywhere else can take a little bit of time. Now try it with cellular data (often flaky), and a line of people waiting to get on the bus. You get 4-5 people at a stop all pulling out credit cards, and that bus is now at the stop 2-3 minutes.

It may be holding up traffic if it doesn't have a special pad to pull over into. But the main issue is that all the passengers are being delayed while you switch cards to one that doesn't say "Declined".

You say "Well, why not do it on the road?" The answer is it's not legal to have passengers queued up in the front of the bus while moving, and the driver can't be distracted by fare-paying complications.

The merchant fees can be prohibitive for small transactions. It's well and good to pay away 3% for overhead, but when it becomes 30-40% of a senior or student fare, that really becomes hard to sell to the board.

It's also about approval time

The other factor is it is very slow to get payment systems approved and installed on buses. The speed at which the payment industry is evolving is putting transit agencies in a difficult position. It may well be that if they were making a cold start today, they could implement all sorts of innovative stuff, but there is a lengthy process to get things designed, approved, FUNDED, and rolled out. And after having done so, they want to sit with that system for awhile and not immediately turn around and do it again because of a bunch of innovations that missed their approval cycle.

The bus systems have rolled out their own electronic pass systems, and they were custom architected to satisfy transit needs, including time of processing, ability to work with no network, and fraud management. Quite often the passes are free (net of purchased value), e.g. pay $10 for the card at a drugstore and it's preloaded with $10. So it is as simple as "if you know you'll be using that system, go get one".

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    Are cards really much slower than cash? Cash is also pretty slow. – user253751 Feb 7 at 12:30
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    Debit/Credit card payment on public transport in London, UK, is done using 'contactless' (AKA wave-and-pay). This doesn't require remote authorisation, so the experience is faster than paying by cash (touch the card to reader, about 1 second, beep and green-light for confirmation, customer moves off). TFL (Transport for London) also is smart with billing - it will basically store-up all of your transactions for a day and process all of these in a single transaction (i.e. one payment of 4.50, not three of 1.50), thus reducing fees. Cash hasn't been accepted on London buses since 2014. – Neil Tarrant Feb 7 at 13:51
  • @user253751 In my experience in the US, most bus systems take cash OR fare cards. Some examples are: MUNI in SF, Metro Transit in the Twin Cities (MN), GoTriangle in the NC Triangle, MBTA in Boston, and King County Metro in Seattle. Cash isn't as slow as you might think, but certainly not as fast as the Clipper, GoTo, GoPass, CharlieCard, and Orca systems on those routes! – Bunji Feb 7 at 15:32
  • @user253751: you are right. I had to check but my memories were not that accurate. It is true in Argentina that you cannot pay at the bus, but my memory was wrong about a couple more places I checked. I'll delete my comment. – Martin Argerami Feb 7 at 15:42
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    @user253751 cash is slow on US buses because of the practical nonexistence of $1 and $2 coins, and fares in the $3 range, hence you are stuffing 3 bills into a slot. (Thank God it simply shows the bill to the driver and doesn't have an automatic dollar bill scanner like a soda machine). But yes, for that very reason, cash is being abolished on many systems, and you either join the club, or walk. That, plus fare inspectors on PoP systems, is doing everything possible to make sure first time riders NEVER return. – Harper - Reinstate Monica Feb 7 at 20:35

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