All consumers shoulder cost of credit card rebates

Credit card rebate programs and interchange fees pass higher costs on to consumers for nearly all goods and services. It’s a not-so-hidden cost that we experience as retail markup. The Los Angeles Times notes that even those who pay with cash are not immune and follows up with a modest proposal: All retailers should display cash price versus credit/debit price. In the long run, the difference is staggering.

Credit card rewards are tempting, as is credit

Earning $1 for every $100 spent seems like free money. Swipe away for groceries, entertainment or anything else. Yet the cost burden for such credit card rebates hits everyone hard. Consumers with credit cards are encouraged to utilize credit more than they responsibly should, while all consumers pay more to keep retailers from closing their doors and sending the economy into a fiery pit. Considering that the cash only crowd is often that way because they don’t have good credit and need to spend responsibly, the punishment interchange fees and credit card rebates bring are particularly discouraging.

Credit card companies win again

Even with a watchdog like the Consumer Financial Protection Bureau on the case, credit card companies will come out ahead. Profit from interest rates and a host of fees – even fees checked by the CFPB and made more “reasonable and proportionate” – will bring in billions for card companies.

Merchants are caught in the middle, writes the Times. Whenever a customer pays via credit or debit card, the retailer pays a portion to the card issuer. While merchants do get their money quickly when customers use cards, the fees charged are significant. Retailers pass them on to consumers because they have little or no choice.

What consumers hope the CFPB can do

Separate pricing standards for cash only purchases versus card purchases would be useful. It may take work on the part of retailers to relabel price tags, but it could also create a sales push when consumers see that things are cheaper when they pay cash. Or perhaps retailers could simply tag items with cash prices, then assess a credit card rebate/interchange fee “tax” at the register.

According to the Los Angeles Times, California and nine other states currently regulate pricing standards. However, the regulation works so that merchants cannot post a price then add a surcharge for credit card/debit card usage. Prices are simply higher, and the cause is kept quiet. Consumers are paying enough already – better pricing information is needed.

Swipe fees are huge

Sources

Bankrate

Interchange fee Wiki

Los Angeles Times