The Answer to High Credit Card Charges; Use Cash!
Each time a merchant swipes your credit card the credit card company charges the seller a percentage of the sale, usually 1-3%. Every time you, the consumer, use your credit card (and don’t pay the monthly balance off in full) you also pay the credit card a percentage, and not just a few percentage points. Finance charges on major credit cards have no legal ceiling, with some cards charging 25% or more (!) for those with poor credit ratings.
Merchants across the country and the card industry are vying for public support on the issue. Many merchants feel that the credit card fees are unwarranted and eat into their ever-dwindling profit margins, compelling them to pass the cost to consumers. The card issuers say they are providing a vital service to merchants as increasing numbers of Americans choose plastic to pay for their purchases.
Large national chains such as 7-Eleven have embarked on petition drives, using newspaper ads and even YouTube videos to prove their points. Merchants in many European countries, Canada and New Zealand pay somewhat lower interchange fees than their American counterparts and that if U.S. merchants paid comparable fees the net savings would total $125 billion. According to a senior vice president with the Alexandria-based National Association of Convenience Stores, in a Washington Post article, “as more… people are using plastic for payment, it's getting increasingly problematic for our industry."
Congress is presently considering bills that would regulate these merchant interchange fees, which totaled $48 billion in 2008. The Government Accountability Office is also currently studying these fees as required by a law signed by President Barack Obama that bans unfair credit card industry practices. One bill would allow merchants to enter into collective bargaining agreements with banks when setting fees, which many say they currently cannot do. Another proposed bill would make it easier for merchants to steer customers to other forms of payments and let them set minimum and maximum amounts for credit card purchases.
Contrary to many merchants’ statements, the credit card companies state that retailers can negotiate their rates but that the vast majority does not want to bother and accepts the default nonnegotiable figures. Most merchants agree that credit cards offer valuable services such as providing almost instant payment on purchases and providing protection from consumer fraud. Many feel, however, that the charges are too high and that they have to either “eat the cost” or pass the cost onto an already fragile customer base.
What to do??? As the consumer, YOU have the final say as to what you are willing to pay for an item as well as how you will pay. Credit cards are often a major contributing factor to personal bankruptcy, especially when cards are charging upwards of 25% on unpaid monthly balances. Consider, instead, joining a credit union and using a debit card or cash (gasp) when making your everyday purchases. Keep a credit card for emergencies or large ticket purchases when using cash just isn’t practical. Offer your friendly local merchant or even large national retailer cash in exchange for a 1-2% lower price—it would be mutually beneficial and might just work!
If you have questions concerning filing for Chapter 7 or 13 bankruptcy protection in the United States, call the pros at Legal Helpers; 1-800-260-1402, toll-free.
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