The Unseen Credit Card Fee

Did you know that merchants pay a fee to process credit card purchases when you shop in their stores? These are called interchange fees. They are represented by a percentage of all of the sales that are charged onto credit cards which is only several points. But it adds up quickly for merchants. There are a few things you need to know about interchange fees and how they affect you as a credit card user.

Higher prices

Interchange fees are one of the highest expenses of a merchant right behind payroll. In fact, they are more than rent most of the time. That creates a situation where merchants are forced to raise prices as an off-set to these fees. They will say otherwise, but it has been all too often proven otherwise. Take away: merchants that do not accept credit cards might have lower prices.

Convenience to you

Merchants do not have much of a choice in accepting credit cards if they want to remain competitive in today’s retail market. Not doing so puts them at a disadvantage to their competition. Take away: it is easy for you to walk in and pay for your purchases with credit or debit cards because of this system.

Pending legislation

There is a law pending that will likely create a higher fee for interchange rates for merchants. This law will allow merchants to charge higher prices specifically when you use credit cards for your purchases. Take away: higher interchange fees means higher prices for you at the register.

There are different interchange fees for different merchants from card issuers. For example, MasterCard has over 120 different rates for the various kinds of retailers. Supermarkets have the lowest rates, while Internet based retailers pay the highest.

Knowing the above information can help you be a wise shopper and user of credit cards.