A recent antitrust settlement between a group of merchants and financial institutions may create changes in the way that companies can process credit cards. Aside from the financial part of the settlement, one of the most interesting new aspects is that merchants may be able to add an additional charge for customers who use credit cards. This would effectively allow merchants to make their cardholding customers pay a higher price than people who use cash.
For many years, credit card companies had prohibited merchants from charging more to cardholders. This meant that every $100 paid in cash would be $2 to $5 (or more) more profitable than the same total paid with credit cards. Because credit cards are so universal, and many consumers prefer them as a payment option, merchants typically need to raise prices in order to account for the difference. While it is legal in many states to offer a discount for using cash, adding a fee for credit card use was prohibited by the merchant’s contract with credit card associations and merchant banks.
As a merchant, would you charge customers for card use if you had the option? Many merchants may do so as a way of recouping transaction fees. However, this could cause a great amount of customer dissatisfaction. Credit card use has become so habitual that customers may decide to frequent stores where no additional fees are charged, especially for big-ticket purchases. The future of credit card processing, which includes mobile wallets and payments tied to phone numbers, also indicates that cash is going to become less commonplace.
Merchants may decide whether to charge card swipe fees on the basis of their industry type. While retail stores might not have an easy time hitting customers with a fee, car rental companies might have an easier time imposing a surcharge since it is very difficult to rent a car with no card. Furthermore, companies like hotels could bury the fee in the list of charges related to room fees and assorted local taxes. Major corporations are sure to spend a great deal of time debating whether or not to charge a swipe fee, because even a 1% increase in revenue might represent millions of dollars.
For years, Capital Processing Network has offered low-risk clients a way to save on credit card transactions without the need for surcharges. We offer highly competitive credit card processing rates for qualified customers, and provide access to brand-name credit card terminals and systems. If, in the future, you have the option to charge extra for credit card use, you will still want to pay the lowest possible fees to accept cards. Therefore, whether or not you charge a swipe fee, you can still save by joining Capital Processing Network’s low-risk portfolio.