I’ve written here before about debit rewards programs like Visa Extras and Affinity Solutions (e.g. Check Card Rewards, Cash Bonus Rewards). These programs, offered through your bank, pay you for shopping online or in-store at certain merchants — or any merchant, depending on the rewards program — and making a purchase with your debit card and signing for it as if it were a credit card (versus using a PIN).
These programs are great for consumers, who get something back for shopping. They’re great for banks, who receive twice the fees compared to PIN transactions. They’re NOT, however, all that great for the merchants who have to pay the fees.
Today’s Tampa Tribune has an article titled, “Debit Cards Cash In On Rewards Riches,” by Michael Sasso. In it, the author notes, “Retailers warn that they will have to pass along those costs to consumers through higher prices.”
Merchants have to offer credit cards as a payment option these days. They have no choice but to pay the fees when someone uses one. Banks encouraging customers to sign instead of using a PIN is almost like forcing the merchants to be involuntary participants in a rewards program. They have to fork over more of their profit to the bank who, kindly, shares some of the wealth with the customers. But that extra cost on the merchant has to be paid for some way, which is…you guessed it…higher prices.
Remember when, once upon a time, there were two different pricing systems for gasoline, with cash customers getting a discount over credit card customers? I don’t know what happened to that, but I can understand the logic. Cash customers don’t incur credit card processing fees.
Wouldn’t it be amusing if merchants put in place an alternate rewards program, rewarding customers for paying cash? The merchant could offer customers half of whatever they would pay the bank for credit card processing fees, and they’d still come out ahead.
Just a thought.
