Keeping it cash only may be a good way to stick to a weekend budget, but using a debit or credit card has its perks too — you can track your expenses, insure your purchases, and earn major reward points. But a settlement reached this week between the US government and Visa and Mastercard may have you calling cash king once again.
Currently when you whip out the plastic, credit card companies charge the merchant a fee based on the total cost of your purchase. This charge ranges between 1 and 3 percent of the transaction, and costs merchants $48 billion a year. If the new settlement clears the courts, however, sellers will be able to change the total that you are charged based on your payment method. Want to know what this means for you? Read more after the break.
The settlement will allow merchants to offer buyers discounts or rebates if they use cash or a lower-fee card. Since the fees the credit card companies charge depend on how likely they are to be repaid or the rewards points offered, debit cards fees usually run the lowest and high-reward credit card fees demand the most. The new law would mean you would be met with a choice once you reach the cash register: should you hand over the bills for a discount, or put it on your card for more reward points? A choice between two incentives doesn't sound bad at all, but it is something we may have to consider soon.
Source: Flickr User The Truth About Credit Cards