Credit Cards – User Pay

Back in October Justin Trudeau pronounced high debt levels as one of the biggest risks to our economy. After mortgage, credit card debt is the average Canadians highest debt load. Household debt sits at 96% of GDP, which is far higher than the debt of any other sector in the Canadian economy. The most unfair part about the use of credit cards in Canada is that use them or not to pay for purchases each customer is paying the hidden, non-disclosed merchant fee added on to the retail price of each consumer article.

Near every purchase consumers make contains a hidden charge called a Merchant Fee which benefit only the credit card companies and banks. Retailers are prohibited from disclosing their rates by the credit card companies with the penalty of cancelling their credit privileges.

An even higher consumer gouge is the charges added to premium credit cards, reward cards. The cost of using the credit cards should be borne by those who use them and the charges the credit card companies demand be added to the total not included in the shelf price. Most countries add the charge fee to the credit card total. Canadian processing fees are among the highest in the world and it’s costing both merchants and customers billions of dollars a year. A cost that is being passed on to all consumers.

The Canadian Retailers Association admits that all Canadians are paying more for goods and services because of the high processing fees. Why does this practice continue? Retailers realize that when customers charge purchases to a credit card there is a tendency to spend more. That’s good for business. That’s good for the banks. Governments also know that consumer spending is good for the economy, but only if that spending does not negatively effect Canadians.

Hidden fees negatively effect many Canadians. Credit card services should be user pay.

Those who can least afford higher costs, low income earners, low income families, the unemployed and seniors most often pay cash for their purchases and are also paying these hidden charges even tough they don’t use them. This is totally wrong! Cash customers should not be forced to pay for credit card services or air miles or loyalty points they will never use.

Not paying for these hidden charges would save low income families, the unemployed and seniors, and all who pay cash between 3% and 8% depending on the store or restaurant or service. A 5% overall saving in purchases is a big deal for those on a low income. Also, disclosing the fee for credit card use could deter many people from using their cards. On way to lower Canada’s personal debt load.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s