Feb 15, 2008

Credit card steering in Singapore: why you may never see interchange regulations here

The other day, a jewelry store clerk frowned when I handed her my Visa Platinum card.

“Do you have another Visa card?” she asked. “Like a Visa Gold or Classic? The Platinum card costs us too much.”

I hesitated.

“I’ll have to add 2 percent if you pay with your Platinum card,” she said.

I handed her my MasterCard debit card. No miles on that transaction.

I’ve seen lots of steering and surcharging across Asia, but I’ve never seen anything this sophisticated and targeted. She was obviously a clerk, not the owner, and she had clearly been given detailed instructions on how to steer customers towards lower cost payment methods.

Then, at a Cold Storage supermarket, I believe it was the one at Paragon Centre, the cashier turned my Visa card down again, saying that they only accept debit cards.

“But I always use my credit card at Cold Storage.”

“Maybe you shop at other outlets, which do accept credit cards,” she said.

Indeed, I do.

It is surprising to see such different policies across stores that are part of the same supermarket chain. My guess is that this particular store might have a higher number of expat customers paying with high end cards that earn miles. It’s surely easier to train cashiers to only accept debit cards, as opposed to the more precise steering done by the jewelry store clerk.

I wouldn’t be taking much of a risk by predicting that you will never encounter serious attempts at interchange regulation in Singapore. There is no need for regulation. It is all market driven.

Merchants that have low margins and feel overly squeezed by the high interchange fees on Platinum cards, Premiere cards and American Express cards, have the option to steer the customer away from rewards cards and towards lower cost payment methods that don't earn miles or points. They can do this either by adding a surcharge on the high end cards or simply turning them down.

Most merchants choose to accept all cards, without surcharging or steering. Even in not so obvious places. The salesman at the BMW dealership actually encouraged me to use my American Express card to pay the deposit on my new car, saying that I could get lots of miles on that one transaction. Hospitals and clinics here also happily accept American Express cards. It’s all a commercial decision that each merchant is free to make.

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