New Proposal to Raise Credit Card Holder Awareness

As legislatures continue to discuss and roll out new regulations, many Americans are wondering what the future of credit will look like.  If the justice department ends up having a say in it, it looks like the future of credit will look a lot more honest and at least a little more “fair” to consumers.

A report was released this week that mentioned that the Justice Department has proposed a settlement with both Visa and MasterCard.  If the court rules the proposal to be justified, those who use cash instead of credit cards as a regular means of payment for purchases may end up with a little something extra to smile about. 

Why would the Justice Department come up with this proposal?  Merchants have been at odds with some of the high swipe fees they must pay to credit card companies to accept their cards from customers.  MasterCard, Visa, and American Express have rules that “explicitly prohibited merchants from rewarding consumers with a discount or other incentives when they paid by cash or check, or when they used credit cards that cost merchants less to accept.”  This practice, the Justice Department is arguing, has violated antitrust laws by restraining competition among credit card networks.  In America’s free market system, this type of restriction of competition is viewed as unfair to consumers.   

 Accepting credit cards always costs merchants money, but some cost merchants more than others and no extra fees are charged to merchants when customers pay in cash.  Last year merchants paid about $35 billion to credit card companies in fees for accepting their cards as forms of payment.  Merchants pass these costs along to all of their customers by raising the prices of all products regardless of what form of payment a customer uses.  In other words, we all pay. 

If the proposal passes, merchants will be able to charge less for a product to customers who pay in cash and with credit cards that charge merchants a lesser fee to accept.  While this proposal sounds great for merchants and consumers, it comes as no surprise that credit card companies are fighting back.  Although the nuances of the credit industry are ever changing these days, certain facts remain the same.  A great credit score remains a necessity no matter how many new regulations come into play.