What Consumers And Merchants Should Know About Credit Cards

Credit cards are practically useful for merchants and consumer alike. They may offer benefits not only to the banks or credit card companies that issue them but also the market holding and accepting the plastic for purchase and payment. Here are three things that consumers and merchants alike still need to know about credit cards:

1) Fees to merchants when consumers make payment via credit card are said to be relatively higher compared to that of Britain or Canada’s interchange fees. This is according to a European-based study of retailers and merchants.

Electronics Payment Coalition spokeswoman Trish Wexler says that in the end, though US has relatively higher interchange fees as opposed to other European countries, the important thing to note is that this did not mean higher prices for products or costs of services in the US. The correlation between higher interchange fee in one country and its direct relationship with increasing prices is something Wexler clarifies as false.

2) Interchange fees to merchants become higher when bank and credit card companies increase the rewards or incentives they give the credit card holders. Wexler affirms that this correlation. The banks or issuers, however, do not fund the rewards in full out of the interchange fees alone. They also have other resources but the point is that interchange fees are one of them.

The fees charged to merchants also become different depending on where the purchases are made. Some stores have lower rates when it comes to how much merchants need to remit to banks and credit-card issuers while most have higher charges. Wexler says that regardless of the rate or amount of charge to retailers, retailers still complain about how it’s hurting their businesses.

3) Not having interchange fees to merchants at all would not automatically be the solution to their complaints. Banks and credit-card issuers have admitted that there will still be other aspects by which they can find increasing rates to be feasible in order to make up for losses if interchange fees were abolished.

Wings Financial Credit Union chief financial officer Tim Keegan says that ensuring an efficiently working credit card system has operating costs that could be funded through interchange fees. Keegan says that if the merchants are happy without interchange fees, there consumers are not. The high rates charged will be transferred to the consumers and Keegan says that this is not a scenario merchants want to happen because this will still have serious repercussions to their businesses.

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