Credit Card Swipe Fees Begin Sunday In USA 732
An anonymous reader writes "A speedbump on the road to a cash-free economy will go into effect Sunday in the U.S., as retailers in 40 states will have the option of passing along a surcharge to customers who pay with credit cards. The so-called swipe fees arose from the settlement of a seven-year lawsuit filed by retailers against Visa, Mastercard, and big banks, who collect an electronic processing fee averaging 1.5 to 3 percent on transactions involving credit cards. The banks naturally have opposed the consumer surcharges, preferring that the extra costs to be passed along in the form of higher prices. Consumers in ten states (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas) won't be affected, since laws in those states forbid the practice (it seems that gasoline station owners here in Massachusetts got a different memo, though). Also, the surcharges won't be collected for debit or prepaid cards."
I'm curious to see how many retailers actually use (Score:5, Interesting)
I wouldn't think twice about having the clerk go, "there's a surcharge for credit", to which I'd respond, "OK, thanks anyway." and leave.
Not really a speedbump (Score:1, Interesting)
We already were paying the surcharge, this just shows the customers how much the credit card double dipping is actually costing them.
If anything, I'd say this is the beginning of a removal of a speedbump towards a cash free economy, as enough pressure on the credit card companies and banks might force them to revise their greedy, merchant-punishing policies.
(Double dipping because they charge you both at the purchase, and then they charge their incredible interest rates on anyone who doesn't pay their bills in full each month. Merchant-punishing because of their policies regarding chargebacks for fraud and other such things that hit the merchants, while the banks refuse to accept responsibility)
What's the cost for Cash? (Score:5, Interesting)
Re:I'm curious to see how many retailers actually (Score:4, Interesting)
Well, realistically, I'd probably not have gone in the store in the first place if they implemented it, because I'd have hopefully done my homework.
That said, I think it would be important that store owners have a chance to hear their employees go, "yea, I had to put 3x as much stuff back on the shelf today because people keep saying no thanks when they try and charge items to their credit cards".
Other than groceries, I do very little shopping in-store now anyway -- I do most of my shopping online.
Re:I'm curious to see how many retailers actually (Score:5, Interesting)
Actually, when the store owner has to start paying his employees more money to put shit back on the shelf, he may start rethinking if that money on the credit card fees is more worthwhile.
I use a credit card for two reasons. /everything/ on my credit card. Only thing I don't is my mortgage and that's just because I can't. I pay it off every month. Companies that are going to make this less advantageous for me are going to get less of my business.
A) If someone swipes/steals that information, they're stealing VISA's money, not mine. If I use a debit card and they steal my info, they drain my bank account, my mortgage bounces. That's bad.
B) Rewards programs. I get thousands of dollars a year in rewards. I put
Re:Not really a speedbump (Score:0, Interesting)
But nearly all of those fees are given back to the cardholder in the form of cash back or whatever other rewards program they use. The system is designed to force people to pay with credit, by making merchants charge extra, and then refunding those who used credit cards.
This could go two ways: either the merchants will lower their prices now that they don't have to cover the credit card fees, in which case this is good for debit card and cash users, and neutral for credit card users. Or the merchants will take this as a windfall, thus screwing over credit card users, and not helping anyone. Neither one has much impact on whether or not we reach a cash-free economy, IMO. Only whether that cash free economy is driven by credit or debit cards.
Re:Looks like a cash cow for ten states (Score:5, Interesting)
Very true.
Many, many people in Kansas City, which sits on the border of Kansas and Missouri, buy their gasoline in Missouri and the busiest stations are the ones just on the Missouri side of State Line Road, because the difference in gasoline taxes amounts to about seven cents per gallon.
At current prices in the area, that's about 2%. So it is a fair comparison and a good predictor that people would likely do the same thing for credit card purchases.
I would guess most people, though, could switch from credit purchases to debit card purchases for routine shopping.
Re:What's the cost for Cash? (Score:5, Interesting)
Believe it or not, in addition to the internal handling costs for a retailer to count cash there are bank fees. Most commercial banks actually charge businesses a fee to accept cash deposits. Yes, when I make a deposit of cash to the bank they charge my business a fee to count that cash and put it into their vault. In addition I must pay for change (rolled coin, singles, fives, and tens) and keep a stock of change in my business safe. We really love it when a customer pays by debit and gets cash back at the same time...less cash for us to handle at the end of the day.
Cash also attracts thieves, hence the traditional targets for holdups are convenience stores and smaller businesses that don't do much (if any) credit card business. Years ago liquor stores didn't accept credit cards (might have been a law prohibiting it in NY, not sure) and they were always targets for late night armed robberies.
Opposite effect - see Iran (Score:5, Interesting)
So we kicked Iran out of the SWIFT international monetary system, and what did they do? Trade everything in gold to Turkey and China. We've lost the ability to track what they're buying.
The government wants to track everything you buy - hell, Target wants to track everything you buy - and what this will do is make everyone use good old cash. After a while that 3% surcharge will feel like chump change to people who've lost their entire demographic database of purchasers.
Re:I'm curious to see how many retailers actually (Score:2, Interesting)
If I, a cash customer, can stop paying your fees, I'll happily shop at the retailer you boycott.
I wholeheartedly agree. Putting the cost on the card users is the right way.
Oh, really? Perhaps you guys are conveniently forgetting how you keep one of the nations biggest crimes intact: armed robberies. Without cash paying customers, stores would not need to have cash at hand. No cash means no risk for armed robberies. Which means less cost for insurances etc, etc, etc.
So tell me, who is putting the cost on whom? Not to mention the fact that I simply despise people who keep up the lines trying to find exactly $7.62. "There must be a penny buried in there somewhere".
Two Reasons Larger Chains Can't Surcharge (Score:4, Interesting)
Consumers in ten states (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas) won't be affected, since laws in those states forbid the practice (it seems that gasoline station owners here in Massachusetts got a different memo, though).
Visa/MC contracts still state that merchants have to have the same policy across their business. For larger chains that have a retail presence in these ten states, the prohibition on surcharging there means no surcharging anywhere else either.
From NBCNews [nbcnews.com]:
Visa and MasterCard have rules that require retailers to handle credit cards the same way in all of their stores across the country. That means a chain with stores in any of the 10 states where a surcharge is banned would not be able to have a surcharge at any of its stores.
The settlement also states that merchants have to apply the same policy equally to their other cards that they accept, such as AMEX or Discover. Since AMEX still prohibits surcharging, if a merchant accepts AMEX they cannot surcharge for credit cards.
From NBCNews [nbcnews.com]:
The National Retail Federation points out that under terms of the settlement, a merchant who adds a surcharge to purchases on a Visa or MasterCard would have to do the same with American Express cards. But AMEX prohibits surcharge fees. So a merchant who accepts American Express as well as Visa/MasterCard would not be able to surcharge any of those cards.
Re:I'm curious to see how many retailers actually (Score:5, Interesting)
Is it really a cost, though? According to Mastercard's income statement [yahoo.com], they earned $6.71B on revenue of $7.22B. That is, Mastercard is making plenty of money. Visa has similar margins. It sounds like their expenses aren't all that high, even with users like the grandparent post (and me) turning a profit on them by never paying any interest.
With that much cash on the line, in a simple scenario, retailers should be able to push back and play them off one another for a better deal. They could keep the profits themselves, or pass it on to their customers.
The retailers have good reason to want to encourage their customers to use credit cards. Handling cash is time-consuming and error-prone. The credit card companies are doing work for their share of the money (maintaining computers, accepting payments, sending bills, collecting, taking risks on default and fraud) but it sounds as if there's still a lot of room for retailers to push on them to get a service they want at a lower price than the one they're already getting, rather than having to pass a higher price on to the consumer.
It smells like a monopoly power: cheaper competitors should arise, but aren't, due to ... what? High barriers to entry? Collusion?
Re:I'm curious to see how many retailers actually (Score:4, Interesting)
Re:I'm curious to see how many retailers actually (Score:3, Interesting)
I'm curious. Where do you have to be that you can't spend 3-5 seconds while a clerk gives you change? What is so important that an extra couple of seconds would make a big difference? Even if you had 10 cash transactions per day, which is very unlikely, we're talking about half a minute over the course of 24 hours.
Are you on your way to diffuse a bomb attached to a timer or something?
As Idomeneus of Lampsacus said, back in the third century B.C., "Slow down, cowboy."
Re:I'm curious to see how many retailers actually (Score:5, Interesting)
Yes, yes, how very cynical of you. As an actual business owner that deals the vast majority of the time in cash and checks, and cringes when someone yanks out a credit card, I can tell you that we do NOT bake credit card processing fees into every purchase, because the margins required to compete are thin. This is an excellent change, because customers can actually see one of the costs.
And the next time it comes time to raise prices on that dozen eggs, perhaps it's 2% instead of 4%, because the CC processing fee won't be baked in, and it will be business as usual.
Bottom line, the fact that it's ILLEGAL for businesses to even inform customers of this, but to keep everyone IGNORANT of the true cost baked in is UTTERLY STUPID AND WRONG. Who the hell paid for the original legislation? The only ones it benefits are the credit card companies.
Re:I'm curious to see how many retailers actually (Score:2, Interesting)
Interesting analysis. So basically for a small retailer cash is king. For any transaction more than a few dollars debit cards are the next best. Credit cards suck for any large purchase and Amex sucks the most.
I have an Amex cc. Not the charge card, but an actual credit card which is currently maxed out. What I like about the card is it offers the best extended warranty protection I've heard of. Great for purchasing hard drives. And they are known for siding with the customer in disputes. Maybe not as much as Paypal, but a lot. Yet another reason for you to not accept them I guess. Now I get why Amex is not accepted as much as Visa/MC.
Re:I'm curious to see how many retailers actually (Score:2, Interesting)
I wholeheartedly agree. Putting the cost on the card users is the right way.
Then we should put the extra labor cost of manipulating and accounting all the cash money onto only the cash customers. And we should put the cost of those electric scooters on the fat/crippled people, and the cost of automatic doors on people with no arms. I never use the bathroom at the supermarket, so maybe it should just cost $1 per use. And there are certain aisles that I never shop from, so maybe the cost of stocking those items can be put on only the people who buy them -- it costs $1 to access any given aisle. I never shop at the deli or fish counters, so we should just charge $1 to access those also...
Re:I'm curious to see how many retailers actually (Score:4, Interesting)
That depends... to the typical person who is poor, they're going to use cash and checks (and maybe debit) anyway. Why? Because most will have cashed their paychecks at the grocery store, Wal-Mart, and suchlike. The advertised discount is a bonus to 'em.
We have something similar here in Oregon; the "am/pm" (Arco) gas stations. You pay a surcharge if you use plastic (debit or credit) to buy your gas. The stations are usually packed to the rafters - they're often sited in the less prosperous areas of town. The average price per tankful (say, 15 gallons) works out to around 10 cents less per gallon if you pay cash.
Not defending it or suchlike, but take it as you will.
Re:I'm curious to see how many retailers actually (Score:5, Interesting)
The logic is (almost) sound. I see a few points of failure here...
* A typical register will have something like $50 in change sitting in there, with maybe $50 as backup for every two registers or so. A typical large local grocery store with 20 registers would barely need $1500 in change money sitting around, with maybe $500 more for the customer service desk. Way short of your $10k figure, and the excess gets deposited nightly at the nearest bank anyway as income, where it gets put to use for the business. Even on a macro scale (say, Wal-Mart), $10k would easily cover change for 3 or 4 supercenters, or what you'd find in a typical city. Compared to the hundreds of thousands of bucks that those 3-4 supercenters suck in each day, $10k is chump change.
* If you have a bank branch for your business' bank close by and it's during most of the business' open hours, you just go get more change - takes a few minutes, tops (you notice it's running low, you go get more...)
* CC transactions often take just as long, if not longer than cash. The transaction has to be authorized before you're done, grocery purchases can be half-and-half (say, half debit, half EBT), etc.
* What if the buyer doesn't have enough to pay for the complete purchase? Any time the cashier turns and says "I'm sorry, your card was declined", everyone in line waits while a guessing game is played: how much does the declined shopper have in his/her account, as transactions are re-run multiple times to find out? With cash, both parties know on the spot how much the buyer is short, and can adjust accordingly.
Re:I'm curious to see how many retailers actually (Score:3, Interesting)
If they ever threaten to eliminate cash it will represent a huge increase in governmental control. Poor people like cash because they can buy "on the sly" avoiding taxation altogether.
A cash free economy essentially means perfect tax collection for the .gov as well as perfect control over the economy. This sounds even worse when you consider that power in the hands of an oppressive regime. Economic freedom is one of the most basic freedoms of all.