Dec 6, 2006

No credit, no problem - businesses find benefits of not accepting credit cards

More and more newspapers seem to be following suggestions from merchant associations, and are now telling people to pay with cash so as to avoid the high cost of plastic. This article was published in a local newspaper in Utica, New York - The Observer-Dispatch. Click here for the full article.

A few quotes:

"Many consumers don't realize that businesses get charged between a quarter of a percent and five percent on each credit card transaction through what is known as an interchange fee."

"Some business owners have found a way to work around the interchange fees by accepting credit cards with the lowest fees and refusing to accept cards with customer incentives, such as cash back."

"Those incentives are paid by the merchants. A merchant can also refuse to take a card that has an incentive on it."

Notice how they are educating customers, encouraging them to drop their rewards and cash back cards, informing them that those cards cost merchants more. Using interchange revenue to finance bank loyalty programs (rather than things that directly benefit merchants) is probably the most fundamentally flawed part of the whole interchange story. It doesn't make sense. You have to give the merchant value in exchange for that money.

1 comment:

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