Here is another strike against credit cards. Not only do they often cause us to spend more, but they make merchants charge more to cover the credit card processing fees are usually 2-3%. The best cash back credit card that I use can end up costing merchants even more because credit companies pass an extra fees to cover the rewards which then gets passed right back on to the consumer. Americans spend an estimated $50,000,000,000(500 billion) in processing fees, almost the cost of one stimulus or bailout package.
Here is the scoop from True Cost of Credit :
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%.
The True Cost of Credit site combines information from several sources to provide you the estimated fees that were paid by merchants to your given credit card company. Just click through to the site and put in the first six digits(Issuers Identification Number) of a credit card and the site will give you a report on the fees merchants pay when using that card. Here is the report for the Chase Freedom Card, if you are interested. The report also offers examples of fees for different types of purchases that is also quite eye opening.
A pack of gum at a convenience store: $1.50
Credit Card Fees: $0.38 (25.1%)
So next time you swipe your card think twice about how much it might be costing you. What do the readers think about all of this?