Is the Department of Justice Trying to Save You Money?

Here’s the real skinny… Most shoppers know that stores pay fees to Visa and MasterCard every time you pay for something using a credit or debit card. These interchange fees usually are between 1 to 3 percent of your total bill each time you use the card. The justice department has sued American Express over allegations of anti-competitive policies, after reaching a settlement offer about the same issues with Visa and MasterCard. The card industry as a whole collects $35 billion a year from these fees, which are passed on to you in the form of higher prices. Of all three companies, American Express charges the highest fees.

One of the biggest problems seem to be that the credit card companies mentioned above prohibit merchants from encouraging shoppers to use lower-cost payment methods when making purchases – aka cash and debit cards.

The retailers are not allowed to offer discounts or other incentives to encourage you to pay in ways that cost the merchant less to process. The settlement with Visa and MasterCard, which still requires court approval, will allow merchants to offer you discounts or rebates for using less expensive forms of payment, including credit cards without reward programs, debit cards and cash. Merchants may also disclose the cost they incur by accepting one card over another, and can promote a particular credit-card network.

This settlement allows merchants to…

• Let you know what form of payment they prefer.
• Offer a discount or rebate when checking out if you use a particular credit card or other form of payment – meaning you get to buy the item for less!
• Promote a particular credit card or other form of payment through posted information or other communications.

The settlement allows retailers who only accept Visa and MasterCard to take advantage of the above actions immediately, but if the merchant also offers American Express they cannot offer the rebates, cash discounts, or other benefits of the settlement.

American Express is only used by a fraction of Americans as compared to Visa and MasterCard; they are crying foul because retailers may dissuade customers from using their card.

What are your thoughts?

Are you a die-hard Amex fan and have concerns that the terms of the settlement will hurt you because you won’t get the discounts and special offers? Do you think retailers should be allowed to offer discounts for using a certain credit card, debit card or CASH (which is what I recommend using!)?

Let me know your take on this situation.