The Real Deal: Paying More to Pay with Plastic
Updated: Wednesday, March 20 2013, 01:56 PM EDT
Troy - If you're one of those people who never carries cash but always has a credit or debit card handy, you better be ready to pay more. Visa and Mastercard are ready to settle a lawsuit over how much they charge business who accept credit cards and part of the deal is they have to allow those companies to pass along the fee to customers.
Visa, Mastercard and many other major banks have agreed to pay merchants more than $7 billion in damages after it was alleged they conspired to fix credit-card processing fees. The credit card companies and banks are also offering a temporary reduction in interchange fees for all retailers, right now they normally take between 2-3% and they will eliminate the no-surcharge rule which will basically give retailers the option to charge you extra to use a credit card.
"We don't have a lot of people who come in with cash anymore. Nowadays everyone feels more safe and secure with a credit card," says Jamie Halpin the manager of Pizza Davinci in Troy. Halpin says more than 75% of customers use plastic and each time a card gets swiped, 3% of the purchase price is taken for processing the payment. You might think, he would welcome the right to charge customers more who pay with a credit card but he says his store will not be doing it. "We don't want to draw customers away from our business, we want them to come and not letting them, or charging them more to use a credit card might just keep them away," says Halpin.
Many big businesses agree. Walmart, the world's largest retailer is asking all merchants to reject the settlement. A spokesperson for the company told CNN the settlement doesn't stop credit card networks from "continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year." Last week, Target also issued a statement saying the settlement is "bad for both retailers and consumers." Both retailers main issue is it does not address permanently lowering interchange fees.
"I would absolutely think twice (before paying a fee to use a credit card) because I'm a very bargin-type person and I don't want to pay that extra three percent, I'd rather save it using cash, I guess or not buy something at all," says Dawn Finewood of Troy.
A New York State law prohibits merchant surcharges so one would think, New Yorkers would be unaffected by the settlement but that is not the case. Retailers would still be able to charge more for the use of plastic simply by offering a "cash discount" as opposed to a "credit card surcharge."
A judge is expected to rule on the settlement within the next two months.