Yesterday the cashier at Shaw’s was confused and dismayed when I paid for my groceries in cash, and she wasn’t afraid to show it. I’ve been getting more of that recently. But she’s going to need to change her attitude if credit card companies go through with their threats to bring back annual fees, charge interest immediately on purchases, and raise the transaction fees charged to merchants, who will then pass them on to customers. Something tells me cash might be coming back into vogue…
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I don’t think that fees are that likely for those who pay their bills on time every time. The fees that they charge merchants are too high to pass up.
Even if the fees are as low as 2%, you can think about it like a loan for 30 days that earns 2% in that 30 days. That’s an annualized rate of 24%. And that’s from customers who always pay their bills each month (which I’d guess would mean little risk to them of default).
Sure, there’s definitely overhead, but I can’t believe that card companies would want to pass up 2% fees on everything I buy even if they don’t get to charge me interest. In fact, it would be interesting to know the circumstances where they’d earn more money off a “sterling payer” than someone carrying a balance. Let’s say I charge $200 each month and pay off immediately. They’re earning $48 in merchant fees off me that year. If I, on the other hand, charged $200 one month and just let the interest accumulate they’d earn what off me in that year? $20 at 10%, $40 at 20%? Now, clearly there are people that just bury themselves further into debt that are going to be really profitable (assuming they eventually pay the bill), but it just seems like the merchant fees are worth a lot. Maybe I’m missing something.
Some of it was probably just posturing, but some of it was real outrage. Like the RIAA and other organizations that face a changing business landscape, the credit card companies want to cling to a business model that gives them massive profits. You and I might think that a 2% processing fee is a pretty good take, and that the prospect of making money on the other end from interest makes it even more attractive. But then why all of the additional card fees and “gotchas?” Why the lack of leniency, the penchant for jacking up interest rates at the slightest provocation? Because they could, and they made out like bandits, and they’re not satisfied with just making “great” profits when they could be making “amazing” profits. And if the big card issuers/networks work in relative unison, consumers won’t have anywhere to go. Except, let us hope, out of the business of paying with plastic.