Wednesday, October 13, 2010

Cash is King

Well merchants certainly think so. Have you ever heard of something called a interchange fee. It the hidden fee that's paid by a merchant's bank to the customer's bank during a credit card transaction. It typically runs about 2% or $2 for every $100 that is spent. These fees are additional monies collected by credit card companies and in 2008 over $48 billion was collected in interchange fees.


How does this affect you? Well it could drive overall cost of good as retailers look to cover these lost costs in a very competitive, slim profit industry. The Department of Justice has filed a lawsuit that charged Visa, MasterCard and American Express with engaging in anti-competitive practices. At issue are rules that prohibit retailers from offering consumers discounts or rewards for using less-expensive forms of payment, like cash or debit cards. Visa and MasterCard agreed to a proposed settlement, American Express declined to settle. This could be good news for consumers, and eventually lower prices. I always thought that credit cards charged a flat fee per transaction, not a percentage. Let's hope that this change is for the better and doesn't just turn into a another reason to increase interest rates.

Where you aware of the interchange fee? When you shop do you prefer cash or credit?

6 comments:

  1. I know about the transaction fee, but I use my credit card anyway. I figure businesses adjust their pricing to deal with it and I get the 2% back in rewards.

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  2. I know that many people have a problem with this fee because business offset it by raising the prices of all goods across all payment methods. Even though gas stations get away with this all the time!

    I'm sure that the credit card companies will find a way to make up this fee!

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  3. Cash please! I've known about these fees for a few years now. It hasn't stopped me from using my credit card yet because... well I've been stuck paying it off. It's only now that I am becoming more financially stable and LESS reliant on plastic that I can make the conscious decision to pay cash.. and save my favourite shopping places those fees + stop contributing to these companies profits.

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  4. It's too bad these fees are so high and raise prices for all. It would be great to see a cash price on items in a retail store.

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  5. I'm getting shades for my condo and was able to get 3% discount when I paid with a check.
    When you make a large purchase, it doesn't hurt to ask for credit card fee deduction.

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