Notice to Consumers: Merchandise Prices are Going Up
You’re going to be paying more for merchandise.
Last week, two key developments occurred that are going to affect the prices consumers pay for merchandise purchases. I haven’t heard a lot of talk in the news about them – so here’s the info.
Saturday’s (July 15th) Wall Street Journal (“Card Giants to Pay $6 Billion”) linked at reported that Mastercard & Visa came to a settlement in a class action lawsuit brought by merchants against the card companies. The issue was interchange fees.
Interchange fees are the fees merchants pay to Mastercard & Visa for accepting credit cards. Merchants pay 1% - 3% of the transaction amount charged by customers to the credit card companies as a fee for letting customers pay with plastic. These fees were absorbed completely by the merchants: they were not allowed to pass the fees onto the consumer by charging a premium for customers paying with credit rather than cash or debit card.
Well, numerous merchants took Mastecard & Visa to court, claiming this was “price fixing;” and they won. So, as part of the $6 billion settlement they’re getting, one of the conditions is they are now free to adjust prices based on how people choose to pay. So, it’s entirely possible that you may start seeing “Cash Price” versus “Credit Price” on merchandise. Merchants will need to declare when they require a “surcharge” for using credit cards, and they are limited to the 3% - 5% amount of the interchange fees they pay. It should be noted: none of this applies to American Express or Discover – it’s a Mastercard and Visa only issue.
Now, this isn’t an “automatic” price hike. There are still market forces at work – so merchants are going to have to decide if they want to visibly raise prices on customers. Early predictions are most merchants probably won’t charge customers a surcharge for using credit cards, but if they deal in low-priced or specialty merchandise – there’s a better chance.
The next development is likely to have a much greater effect. You may have heard over the years that one issue brick & mortar retail stores have had with online merchants is the online merchants have been able to avoid collecting sales taxes because they didn’t have a “physical presence” in states. Brick & mortar merchants, however, did collect sales taxes; so the price of the same good could be up to 10% cheaper online versus buying it from a store, depending on the sales tax of the state you lived in. If an online merchant (namely Amazon.com) were pressured by a state to collect sales tax; they would threaten to pull-out of the state.
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