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MMD > Archives > April 2001 > 2001.04.04 > 04Prev  Next

Credit Card Fees Paid To Merchant Banks
By John A. Tuttle

Hi All,  For those who might have missed my retraction [010311 MMD],
I did clarify that there is no Federal Law which prohibits charging
more to a customer who pays for goods using a credit card.  That honor
belongs to the Merchant Bankers.

While I don't disagree with Fox Morrey about the advantages of accepting
credit cards, I think he might have (to a degree) missed the point of
my comments.

The fact is that retailers pay a fee to the merchant bank every time
a credit card transaction occurs.  No retailer in his right mind can
simply ignore the costs, especially when they account for at least one
percent of the value of the sale.  So, he figures the cost into the
sale price of the product.

Now my point!  The people who suffer are the people who pay by cash or
check.  They are going to pay that extra percent or two overtime they
open their wallet (or handbag) and pull out cash or write a check.

In a perfect world, no one should have to pay more for a product simply
to account for the losses created by those who use credit cards.  So,
either the person paying cash should get a small discount, or the
person paying by credit card should pay for the transaction fee.  That
way everybody pays the same exact price for the product.  That seems
fair to me.

Personally, I think such a system would discourage people from using
credit cards so freely.  It might even have the effect of reducing the
tremendous amount of credit card debt in our country, which is not good
for the economy.

By the way, I know of one piano manufacturer who does charge more
if you pay them by credit card.  It's totally logical.  While the
transaction fee for a $10-$500 item might not seem like much money,
it's a totally different story when you're talking about an $8,000+

I just got off the phone with the second largest piano dealer in
New Jersey.  While he was somewhat reluctant to admit it, he finally
broke down and told me that the costs involved with credit cards are
figured into the prices of the items he sells.  And his final words
on the matter were, "How could it possibly be any other way, John?
I'm flexible, not easy!"  By the way, what he does to encourage cash
transactions is to give the customer a "Discount for Cash".  (But
there might be other reasons for that... ;-)

So, for those who don't do so already, be sure to ask the retailer if
they offer a discount for cash.  If they don't, pay the bill by credit
card and leave your money in the bank where it will accrue a little
more interest.  Might as well.  You're paying an artificially inflated
price for the product anyhow.  (But be sure to pay the credit card bill
in full every month to avoid the high credit card interest rate.)


John A. Tuttle

(Message sent Wed 4 Apr 2001, 17:44:47 GMT, from time zone GMT-0400.)

Key Words in Subject:  Banks, Card, Credit, Fees, Merchant, Paid

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