You probably know that when you use a credit card to buy something the merchant pays a fee based on a percentage of the item’s cost. This gets passed on to you in higher prices. Ever wander how much higher? This calculator/mashup will tell you. I tried one of my cards (enter the first six digits of the account number which identifies the issuer and type of card) which is from Amazon where I get a $25 certificate for each $2500 I charge. Turns out reward cards like that cost businesses even more. Might want to think about that when buying from a small merchant.
Rewards cards cost businesses more than non-rewards cards because the credit card issuers pass the cost of the rewards onto the businesses by charging them higher Interchange rates. Rewards interchange rates are typically around 0.30% higher than the rate for a regular card. However, many smaller businesses actually get charged more than 0.30% additional for such transactions because it triggers a downgrade, which allows their credit card processor to charge them as much as an additional 1.50%.
It appears people are using credit cards less in this recession. But some are worried the credit card debt poses a bigger problem than the mortgage crisis.
So if I use my credit card to get 1% – 5% cashback and pay my balance every month, how exactly is this costing ME more? Everywhere I shop the total is the same regardless how I choose to pay.
I want a discount for using cash. Thats all I use.
The great thing about cash is the ability to use it as a budgeting tool. When you go out shopping with cash you have a finite supply of spending power in pocket. This cuts way back on impulse spending on items you don’t really need. Easier to say “no” to that DVD in the bargain bin or that new greatest hits CD that you already have most of the songs on previous releases. Take THAT RIAA and MPAA!