Will You Pay More to Use Your Credit Card at Checkout?
Soon, you may be seeing signs up at checkouts notifying shoppers that a surcharge of 1 to 4% will be levied if paying with a credit card.
As of today, merchants now have the freedom, legally, to impose this charge if they so desire.
But, will they? If you gathered your items that you want to purchase and head to the checkout counter and were told there would be an "additional" fee if you pay with a credit card, would you proceed with the purchase? While merchants have always argued that credit card processing fees were too high, they still accepted them rather than lose the business.
So, how likely is it that that they will pass on this fee to their customers and risk losing that sale but, more importantly, losing the customer to future business? I suppose only time will tell as we go forward from here.
You see, previously, merchants had been prohibited from imposing a surcharge when customers paid with plastic.
This practice of passing on any kind of surcharge to customers has always been banned, in the fine print, in credit card processing contracts.
In fact, the posting of signs that say things like "$5.
00 minimum purchase required to pay with credit card"has also always been prohibited but yet, you still see merchants doing it.
But now this, is a little different story as you can see.
How likely is it that merchants, even though they can legally do it, are going to pass on these costs, so blatantly (with a sign at checkout) at the risk of losing customers? Okay, here's a bit of information on how this came about.
A ways back, there was an antitrust class action case brought against Visa, MasterCard and a number of big banks by retailers who complained they were being overcharged in processing fees.
In November of last year, there was a tentative settlement agreed to and this eliminating the ban on surcharges is part of that settlement.
Here's a bit more education for the consumer to get a little better understanding of what all of this means to merchants.
You see, every time you use plastic to pay for a purchase, the merchant pays a Discount Rate of somewhere from 2 to 4% to a credit card processing company.
The fees are a bit different, and less, if paying with a debit card, especially is you input your pin number.
The greatest majority of the Discount Rate the merchant pays is what is referred to as the Interchange Rate.
This fee gets paid directly back to the entity that issued you the credit card.
For example, in April 2012, the Interchange Rate on a Visa card swiped through a POS device was 1.
51% + $.
10.
So, let's say that the merchant is paying a 2.
01% + $.
20 Discount Rate.
You make a $50.
00 purchase and they are taking a hit, immediately, to the tune of $1.
21 to their bottom line.
On the other hand, let's say your card is worn out or you make that same $50.
00 purchase over the phone or on the merchants website, the Interchange Rate is.
29% higher or an extra $.
15 to the merchant.
These charges may seem small to you but, to the merchant, the costs add up over time.
In fact, most merchants will tell you that their three largest monthly expenses to running their business is rent, wages and credit card processing fees.
Now, let's take a look at this from another perspective for a moment.
If you were asked to pay a surcharge for your purchase, would that cause you to rethink the "need" for the goods you purchase? Afterall, one of the contributing factors to US consumer debt is attributed to credit card debt.
We buy things to satisfy our "wants" right now even though we don't have the cash right now.
We, as individuals, would be much better off if we disciplined ourselves to wait to make many of our purchases when we can pay cash.
Wouldn't you agree? I'm sure you would...
unless, as a consumer, you also happen to be a merchant selling goods or services.
So to you I say, aren't you glad plastic exists and increases your overall sales due to our need for immediate satisfaction...
even if it does cost you a few percentage points.
Okay, let me wrap up by simply saying this.
To merchants, you'll have to decide if charging a "surcharge" is going to be beneficial or harmful to your bottom line.
To consumers, you'll have to decide, when and if confronted with a surcharge on your purchase, to either pay the fee, shop elsewhere or not make the purchase at all until you have cash in hand.
Thanks for reading and as always, don't hesitate to post your comments or questions.
As of today, merchants now have the freedom, legally, to impose this charge if they so desire.
But, will they? If you gathered your items that you want to purchase and head to the checkout counter and were told there would be an "additional" fee if you pay with a credit card, would you proceed with the purchase? While merchants have always argued that credit card processing fees were too high, they still accepted them rather than lose the business.
So, how likely is it that that they will pass on this fee to their customers and risk losing that sale but, more importantly, losing the customer to future business? I suppose only time will tell as we go forward from here.
You see, previously, merchants had been prohibited from imposing a surcharge when customers paid with plastic.
This practice of passing on any kind of surcharge to customers has always been banned, in the fine print, in credit card processing contracts.
In fact, the posting of signs that say things like "$5.
00 minimum purchase required to pay with credit card"has also always been prohibited but yet, you still see merchants doing it.
But now this, is a little different story as you can see.
How likely is it that merchants, even though they can legally do it, are going to pass on these costs, so blatantly (with a sign at checkout) at the risk of losing customers? Okay, here's a bit of information on how this came about.
A ways back, there was an antitrust class action case brought against Visa, MasterCard and a number of big banks by retailers who complained they were being overcharged in processing fees.
In November of last year, there was a tentative settlement agreed to and this eliminating the ban on surcharges is part of that settlement.
Here's a bit more education for the consumer to get a little better understanding of what all of this means to merchants.
You see, every time you use plastic to pay for a purchase, the merchant pays a Discount Rate of somewhere from 2 to 4% to a credit card processing company.
The fees are a bit different, and less, if paying with a debit card, especially is you input your pin number.
The greatest majority of the Discount Rate the merchant pays is what is referred to as the Interchange Rate.
This fee gets paid directly back to the entity that issued you the credit card.
For example, in April 2012, the Interchange Rate on a Visa card swiped through a POS device was 1.
51% + $.
10.
So, let's say that the merchant is paying a 2.
01% + $.
20 Discount Rate.
You make a $50.
00 purchase and they are taking a hit, immediately, to the tune of $1.
21 to their bottom line.
On the other hand, let's say your card is worn out or you make that same $50.
00 purchase over the phone or on the merchants website, the Interchange Rate is.
29% higher or an extra $.
15 to the merchant.
These charges may seem small to you but, to the merchant, the costs add up over time.
In fact, most merchants will tell you that their three largest monthly expenses to running their business is rent, wages and credit card processing fees.
Now, let's take a look at this from another perspective for a moment.
If you were asked to pay a surcharge for your purchase, would that cause you to rethink the "need" for the goods you purchase? Afterall, one of the contributing factors to US consumer debt is attributed to credit card debt.
We buy things to satisfy our "wants" right now even though we don't have the cash right now.
We, as individuals, would be much better off if we disciplined ourselves to wait to make many of our purchases when we can pay cash.
Wouldn't you agree? I'm sure you would...
unless, as a consumer, you also happen to be a merchant selling goods or services.
So to you I say, aren't you glad plastic exists and increases your overall sales due to our need for immediate satisfaction...
even if it does cost you a few percentage points.
Okay, let me wrap up by simply saying this.
To merchants, you'll have to decide if charging a "surcharge" is going to be beneficial or harmful to your bottom line.
To consumers, you'll have to decide, when and if confronted with a surcharge on your purchase, to either pay the fee, shop elsewhere or not make the purchase at all until you have cash in hand.
Thanks for reading and as always, don't hesitate to post your comments or questions.
Source...