Re: Merchants may be allowed to charge extra for credit cards
07-09-2012 10:14 PM
It basically equates to a tax that the card processors can (and will) levy on the public. They'll use the money to offer more generous rewards, which we end up paying for with higher prices. More people sign up for more cards, and viola! Cash is further reduced from the equation, further pressuring merchants to accept cards.
The end result is that cash users come out the worst, since they pay the same elevated prices merchants charge to cover the credit card costs; but ultimately all consumers lose. Oligopolies suck sometimes.
Actually it is basically a tax that the merchants can and will levy on the public if they get the chance. Card processors are fighting it.
A cash discount and a surcharge while they may seem like simple semantics they are actually very different. Yes the merchant builds the cost of accepting credit cards into the price of the goods, the same way they build the cost of the electricity to run the building, the labor cost to pay the employees, the rent on the building, etc into the price.
Merchants are allowed to offer a cash discount but by and large they don't do it except for a handful of gas stations. They want that extra swipe fee money for themselves. A surcharge just punishes people who use a credit card, not reward cash paying customers.
Lets say a bag of chips cost 4 dollars. With a cash discount the advertised price can be 4 dollars, but if you pay in cash you can buy it for 3.80 lets say. A merchant is allowed to do that now by the durbin amendment. It rewards cash paying customers.
However with a surcharge the cash paying customer pays 4 dollars for the bag of chips, the same price they are paying now, while the credit card customer will pay 4.10 for it. Nobody wins but the merchant. Cash paying customers stay the same, and credit card users are punished.
The merchants basically want to accept electronic payments for free, or at a very little cost. They will not lower their prices from where they are now. They will merely make the customer pay the processing costs.