6 Reasons Not To Worry About The New Credit Card Settlement

- Credit Card Settlement - Why Worry?

Source: web

After recent credit card reform and an updated look at how credit card companies charge fees, there is much speculation regarding exactly what will happen next. Fortunately, there are several reasons why no one needs to worry about the present negotiations.

When rumors of the $7 billion credit card surcharge proposal began circulating, many people became concerned about how it would affect the state of their credit. The good news, though, is that the credit card industry is still based on profitable business and this means that they have to follow specific laws and regulations and that if they want to remain in business they have to ultimately do what is best for the customer. Thus, here are six reasons you shouldn’t worry about the new credit card settlement deal.

Reason 1. First of all, you should know that credit card surcharges are actually illegal in many states. Indeed, California, Texas, Maine, Colorado, Oklahoma, Florida, Massachusetts, Kansas, and Oklahoma have all enacted laws that prohibit credit card surcharges. To put things in perspective, the total population of these states equals 113 million people, which is more than one-third of the U.S. population.

Reason 2. Secondly, imposing a surcharge will discourage credit card use. Obviously, this is bad for business, especially in a time when more and more consumers are relying on credit and debit and retailers incur very little risk and penalty.

Reason 3. Similarly, credit card surcharges will discourage sales as consumers will feel less likely to spend at such an establishment. In fact, the Wall Street Journal reports that the new settlement will require that stores “post notices at their store entrances and at their cash registers that they apply surcharges, and the dollar amount of the surcharge must appear on the customer’s receipt.” As you can imagine, these constant reminders will not appear inviting to consumers.

Reason 4. In light of this, though, you might be surprised to learn that retailers are already used to absorbing processing costs of credit cards. While the proposed settlement would allow retailers to add an additional surcharge to their transactions in order to justify the 1.5 – 3 percent expense they incur for every credit card charge, it is nothing new to retailers. For many years now, retailers have been factoring in this expense so adding another surcharge to the end of the transaction will appear less like an attempt of running a better business and more like trying to ensure maximum profitability. Again, this is something that is not appealing to consumers.

Reason 5. Aside from what already exists and what this proposed settlement may or may not do, what many people do not realize is that the people of the United States still have the ability to take advantage of the freedom and power of assembly. If retailers start imposing these sanctions, adding charges, or finding other ways to circumvent the projected “losses,” citizens may begin to aggressively search for a solution, which means more mandates and legality. If you really think about this objectively, it is pretty easy to see how this could, and most likely would, happen.

Reason 6. Finally, and perhaps most importantly, the proposed settlement will impose a lawsuit on several individual parties. Not all of the parties involved have agreed with the terms of the lawsuit and it is pretty unlikely that a unanimous decision will be reached any time soon. The Wall Street Journal, for example, has reported that the National Association of Convenience Stores was quite quick to reject the settlement, and they are probably not going to change their minds anytime soon.

Amidst all of this chaos, then, the bottom line is that most retailers will probably determine that even though Visa and MasterCard allow retailers to add these charges, it will probably prove to be outside their vested interests if they do.


About Author

Casey is a seasoned writer in personal finance. He has written a number of articles that have been published in magazines and blogs around the country. His advice has helped millions make better choices about how they save their money.

Few Credit Card offers from our Partners

READYdebit Visa Mint Control Prepaid Card
READYdebit® Visa® Mint Control Prepaid Card

$0 Monthly Fee Pay As You Go Plan (See Cardholder Agreement on site); F...

More Info
UNITY Visa - The Comeback Card
UNITY® Visa - The Comeback Card™

Reports to the major credit bureaus; Provides How to Rebuild Credit Pro...

More Info