Another Reason to Cut Up Your Credit Card

As though we needed a new reason not to use credit cards, this week a recent settlement between retailers and banks may end up costing consumers at the checkout counter. That’s because as of last Sunday, January 27^th, merchants are allowed to charge up to an additional 4% on purchases when consumers use a credit card at the time of purchase.

This should not come as a surprise to anyone that is familiar with the industry. For years, credit card issuers have charged merchants for the convenience of allowing customers to make purchases using credit cards. Most merchants didn’t mind the expense given that retail consumers have a tendency to buy more when paying with plastic, but most merchants just absorbed the expense. Now, merchants will have the opportunity to pass that expense on to consumers. If they do, they will be required to post notifications conspicuously throughout the store. Online retailers will be required to post a notification on the same page it advertises acceptance of a credit card for purchase. With so much competition for your business, you’d think most retailers would just continue to absorb the cost, but that doesn’t mean you won’t feel it.

Chances are you’re already paying for the convenience of credit cards, even when you don’t use them. Remember when gas stations offered a cash or credit price for gas? Some even still do, but I suspect most have gone with the “same price, cash or credit” model, which basically increases the cost of buying gas with cash rather than lowering the price of credit. Even my mechanic does this. He offers me a 3% discount when I pay with check or cash.

If merchants were wise, they would take advantage of this opportunity to LOWER their prices — at least on the price tag — and welcome the cash payments that would likely increase.  Obviously there’s a risk, as some customers would rather pay with plastic, but as the world gets savvier with their spending, it may not be as much of a risk as it has been in the past.  Also, this new ruling does not apply to debt cards, so consumers could avoid the additional fees by using a different form of plastic.

Here are some ways to avoid this surcharge:

Use your debit card

As I just mentioned above, this fee only applies to the use of a credit card, so you can avoid it simply by choosing to use your debit card.  Most retailers where I shop gladly accept a debit card for purchase, so that should not be much of a change for those of you that have been using your credit card for the reward points.

Use cash

It seems old fashioned, but cash is king, especially when it comes to getting deals. I’m much more likely to get discounts on items when I’m paying with cash. Plus, it helps keep me within my budget.  Once the cash is gone, I can’t spend any more until my next paycheck. Consider using cash to purchase variable expenses such as groceries, gas for your vehicle, dining out, and entertainment. The envelope system is great for helping you to keep track of everything.

Shop somewhere else

It will become clear which retailers are charging the fee, and which ones are not. Just remember, even if the surcharge is not passed on to you, it may still show up in the cost of your purchases, so be a comparison shopper. If you have a smartphone, it’s easier than ever to comparison shop. Check out these shopping apps that can help you get the most for your money.

In this world of convenience, everything has its price. Now the only question that remains is will the IRS charge this fee for taxpayers that pay their taxes with a credit card?