Back in 2008 the Justice department began to probe both Visa Inc and Mastercard Inc over policies intended to prevent "steering", the act of influencing customers to use cards that have low interchange fees so as to reduce the cost of taking those cards to the business. This could be in the form of incentives or discounts which the Justice Dept argues "impose a competitive straitjacket on merchants, restricting decisions by them to offer discounts, benefits and choices to customers that many merchants would otherwise be free to offer," Currently, this is illegal. In fact, I had a friend send me this picture just the other day.
As you can see, some businesses are pretty aggressive in steering their clients, sometimes to the point of completely disincentiving the use of cards. Most businesses don't realize this, but Visa and Mastercard have put a lot of money into making sure that this is illegal, until the settlement just days ago, which has yet to be approved by a court before going into effect.
Before this settlement, cards were a form of legal tender in the USA. That means you can't reject them for any reason in your business. If someone wants to pay with a card, it's as good as cash. What's the downside? As a consumer, you were well within your legal right to say, "I refuse to pay your fee or meet your minimum credit card limit just to use my card."
With the settlement of this lawsuit, now businesses can disincentivize you from using a credit card. "The settlement this past week means that about 4 million merchants nationwide that accept only Visa and MasterCard are now free to steer customers to different credit cards or forms of payment by offering discounts, rebates or other special treatment, the Justice Department said." That means now it's legal to charge you .25 to use your card, or have a minimum charge before they accept cards. Good or bad? You can weigh in by commenting below.
This lawsuit is just the beginning of a long conversation into how non-cash payments will function in relation to businesses. Many businesses feel oppressed by credit card fees. My heart sinks everytime I hear a business owner say, "I might as well give this pack of gum (or other small ticket item) away if someone wants to buy it with a card, it's cheaper!" If that's the case, they're actually not setup correctly.
Visa and Mastercard have programs specifically for businesses with average tickets of less than $15 just for this reason. If your business is not making money due to accepting credit cards, it's time to find a new merchant processor. Would you stay with your insurance agent if they had the wrong limits on your home or auto? The sad part is, many people don't realize where they stand in relation to these issues. Stay educated, or find someone you trust who can manage it for you. It will improve your bottomline!
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Matt Koren is the President of Priority Payments Northwest, a Merchant Services Provider located in Portland, OR. He runs his company in addition to his management consulting practice as an Associate with Causeit, Inc. You can contact him by filling out the Contact Us page, or by calling 503-493-7332.