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More Fairness And Choice For Consumers

Posted on 25 Aug 2009

In an age where consumers can purchase items direct from all over the global community, credit cards have become the norm.

And it's not just through the internet; many people use the plastic for every purchase - preferring to put even small day-to-day purchases on their card and paying the bill when it arrives at the end of the month.

But what many people don't realise is that there is an added cost involved, with retailers required to pay a fee for every credit card transaction - a credit card interchange fee - which they are currently prohibited from charging the relevant card-holding consumer. In order to offset this, retailers average out the cost of that fee across every item or service they provide - resulting in higher prices across the board that are then paid by all consumers whether they pay by credit card or not.

The situation is unfair on consumers who choose to pay in cash because they are, in effect, paying more to make up for the costs that retailers incur by selling to credit cardholders.

This is all about to change, however, with news today that the Commerce Commission has today settled the credit card interchange fee issue with Mastercard - just weeks after coming to a similar agreement with Visa. Under the agreements, retailers will be allowed to pass surcharges on to credit cardholders - a move which, in theory, should result in lower prices as cash-paying customers will no longer have to compensate for their plastic-happy counterparts.

Whether prices actually DO come down remains to be seen but, with the fees no longer built into the product or service price, at least cardholders will know the exact price of their transactions. This is a move that has also been hailed in the US, where the Retail Industry Leaders Association has stated: "American retailers and consumers deserve the same fair treatment that Visa now offers in New Zealand."

Transparency and competition are vital to the marketplace and to consumer confidence. Credit providers will now set their interchange fees and publicly disclose them - and retailers will decide which cards they wish to discourage or promote. The more competitive the fee, the higher the proportion of retailers who accepts it, and the more popular it will become with consumers - who it is hoped will benefit most in the form of lower prices, and increased fairness and choice.

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