We’ve written before about interchange fees – the fees charged to merchants by Visa, MasterCard, and other credit card issuers. Some merchants, especially gas station owners, have been up in arms about the fees for quite some time, saying they are being driven out of business by exorbitant “swipe fees” – as interchange fees are also called.
The latest development is a lawsuit brought against Visa and MasterCard by retail giants Kroger, Safeway, and Payless ShoeSource. They say that Visa and MasterCard conspired to set high interchange fees – usually about two percent of the purchase price – and strangle merchants with fees.
MasterCard and Visa have been in settlement talks with the merchants suing them, and Bloomberg reports that a settlement is in the works this week – a settlement that would allow merchants to pass those interchange fees on to the customer.
Interchange fees are one of the big reasons that many small retailers don’t take credit cards at all – that swipe fee can make a difference to a small merchant or restaurant, leading some to have a “cash only” policy that sends customers with plastic running for the nearest ATM when the check arrives.
However, the convenience of paying with a credit card can’t be overstated – many people in this day and age just don’t carry cash at all anymore, relying on that fantastic plastic for everything from a candy bar to a tank of gas. Accepting credit cards – or not – can make a huge difference to a merchant’s bottom line.
Michael Germanovsky, Editor-in-chief of Credit-Land.com, says that businesses who don’t take credit cards “are doing themselves a big disservice. Even plastic cards are going the way of the dinosaur, as Google Wallet, Isis, and other mobile payment systems are becoming more viable. If a business doesn’t even take a credit card, how will they keep up when payments go completely mobile? Cash is on the way out.”
Matt Schultz, who writes a personal finance blog on InvestingAnswers.com, says that this lawsuit could be a “game-changer” and that he will start paying cash instead of using credit cards for all his purchases if merchant impose a surcharge on customers paying with credit cards. “If I have to pay extra for everything I buy with a credit card, there’s no point in collecting all of those frequent flier miles to try to earn big trips,” writes Schultz.
At Credit-Land.com, we advise people not to panic. In the end, this settlement could be a good thing for consumers. For one thing, merchants may give a discount to cash buyers, rather than imposing a fee on credit card users – leveling the playing field for buyers and leaving them the option of taking the discount or the credit card reward points.
For another thing, the result may be a temporary reduction in fees, which would give both merchants and customers time to adjust to the new rules and decide the best course of action. Chris Morran, of The Consumerist, writes of the impending settlement, “it would compel credit card providers to slash their swipe fees and actually compete against each other. [If] the swipe fees were dropped to a more acceptable level for merchants, they wouldn’t then have to add a surcharge for credit card customers.”