“Credit Card Transaction Fees” will not be the end of shopping as we know it

I have a tendency to stick with pretty broad topics on the political section of this blog.  I don’t deal with “the news of the moment” too often due to the 24 hour news cycle and all the noise that already exists to debate the day’s happenings.  However, I’ve noticed a keen interest in this topic from my friends, many of whom work in retail, or have in the past.  This week, where allowed by law, businesses which accept credit cards are now permitted to pass along the credit card surcharges to the customer, currently ranging from 1.5% to 4.0%.

First, the specifics:  Ten states legally prohibit this fee.  The stores must also post conspicuous signs notifying the consumer if the charges will be added.  The fees do not apply to debit card purchases.  No business is required to collect the fee but, with the exception of the ten states in the link above, all merchants are permitted to do so.  Above all, most large corporations and trade groups representing retail and foodservice have stated that they will not be charging this fee in any form.

Who will be charging this fee, then?

I’ve seen the occasional mom and pop shop in small towns with a handwritten sign at the register that informs the customer of a minimum purchase amount for credit card transactions, or a fee (usually fifty cents or a dollar) associated with a swipe, both technically in violation of the vendor agreement with the major credit card providers.  These fees exist because margins are slim in low volume, low traffic stores; they survive because no billion dollar credit card company is going to pay visit to Uncle Jack’s Sub Shop in the middle of nowhere.  The fact is that these shops struggle to get by and it’s in everyone’s best interest for the auditors to turn the other cheek when this happens.

With this change, small shops with thin margins can combat the cost of doing business on plastic without risking fines or revoked swiping privileges.  In a world where paper money, ubiquitous for small charges fifteen years ago, becomes less and less prevalent, this is an important step to help keep local business alive.  Most of us who shop local are completely comfortable with paying a little more to buy from our neighbor, and this policy change won’t affect that loyalty in any way.

In the end, this change doesn’t affect retailers, doesn’t affect the credit card companies or issuing banks, doesn’t affect the vast majority of consumers, and helps keep small business afloat.  In that respect, I support this change.  The sky, in fact, is still not falling.

Was this the ideal solution?  This is America, son.  We never get the ideal solution down here in the working class.  The real answer would have been to cap swipe fees at a reasonable amount to fully cover cost and deliver marginal profit so the investment would continue to make sense.  With the ubiquity of AmEx, Discover, MasterCard and Visa as the primary forms of payment, it’s in the interest of the people to guarantee that the corporations behind these products don’t take advantage of their power over consumer payment options and collude to extract ever-higher rates from merchants for simply accepting their payment type.

However, reality quickly sets in:  The Libertarians would decry the government “interference” in commerce.  The banks would claim overreach.  The politicians, who’ve been bequeathed bank lobbyist largesse of untold millions, would never allow it to begin with.  When it comes down to it, consumers probably got the best deal they could out of this situation.

Of course, if you’d like to avoid the fees altogether, you could just pay in cash.  Based on that last point, though, you might want to stamp all those dollar bills before you spend them.  The more of those we have in circulation, the less the banks can influence our elected representatives.

As for me, the credit card companies and issuing banks are paying me in points, so I’ll stick with the plastic.