You Can Now Tell Me What Credit Card To Use?

On Monday, the Justice Department sued Visa, MasterCard, and American Express for anticompetitive practices. At the same time, it reached a proposed settlement with Visa and MasterCard. The ruling aims to end anticompetitive practices and allow customers to save money, but it is likely to also have unintended consequences for consumers, says LowCards.com. (source: www.ctwatchdog.com)

Interchange Fee is Confusing

Interchange fees, or swipe fees, are difficult to understand, and credit card processors like Visa, MasterCard and American Express have provided very little information about these fees, protecting their control and this significant revenue source. (source: www.ctwatchdog.com)

Interchange fees began in the 1960s to help banks to cover the cost of processing credit card transactions. The fee is divided between the merchant’s bank, the consumer’s bank and the credit card company. The fee covers processing fees, billing statements, fraud protection, innovations, and other expenses. (source: www.ctwatchdog.com)

Interchange fees typically range between 1.0% and 3.5% of every purchase made with a credit card. Few consumers realize how much the merchant pays for the convenience of credit cards. There is no mention about the fee in the credit card terms and conditions, and merchants have been prohibited from mentioning swipe fees to customers. Merchants argue that these fees have inflated the cost of goods, especially for the consumer that pays with cash instead of a credit card. (source: www.ctwatchdog.com)

It is unclear to me yet about how this will ultimately trickle down to consumers, but you better believe that corner stores and department stores alike will figure out how to encourage consumers to use the lower cost form of payment although they are “contractually” barred from steering consumers.

Put your thinking cap on now as a business owner.  If it costs you 1.75% to make a rewards card transaction and you can now make a transaction that only costs you 1.25%, you essentially save .5% on all of the purchases made in your store.   For every $1,000,000 of sales that means an extra $5,000 to the bottom line.   With every business owners needs to watch their profit and loss statements closely in today’s economy, you can be sure that merchants will have their pom-poms cheering you on to use certain forms of payment.

When this is all said and done, I think you’ll see larger reward programs from the credit card companies to consumers who use their credit cards more underneath this new regulation.    And all this time I thought our goal was to get ourselves out of debt—go figure!

oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.

Top Year End Tax MovesBiggest Small Business Owner Mistakes - Learn More5 Money Disasters To Avoid

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
Request a FREE financial consultation – Click Here

Related Articles – Do You Spend Too Much? , 10 Year End Tax Management Tips for 2010 , Creative Tax Deductions , Pay Off Credit Cards Or Save For Retirement? , Top 10 Credit Card Comparison Resource Sites

Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), Member FINRA/SIPC. Oxygen Financial is not affiliated with NFPAS. NFPAS does not provide tax or legal advice.   This site is published for residents of the United States only. Registered Representatives and Investment Advisor Representatives of NFP Advisor Services, LLC (NFPAS) may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact NFPAS Compliance Department at 512-697-6000.   PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. NFP Advisor Services, LLC makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is NFP Advisor Services, LLC liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

Hey!

My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

Read More About Ted Here

Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

Background and qualification information is available at FINRA's BrokerCheck website.

2 Comments

  • October 28, 2010

    Spec’s Wines Spirits and Finer Foods stores that are based out of Houston offer a discount if you pay cash. Wouldn’t that be a good strategy for a lot of retailers? They don’t mention any fees associated with CC’s. They just tell you when you arrive at the register that there will be a discount for cash transactions.

  • October 29, 2010

    In today’s world, cash is king, queen, rook, and pawn! Great comment!

    -Ted Jenkin

Leave a Comment