To be able to offer credit cards as a payment option, businesses have to pay an average 2% fee which has started to put a toll on their expenses. Premium cards which offer travel insurance, financial rewards (air miles), have small businesses in a tough situation. The interchange fees for regulars like Visa and MasterCard range from 1.6-1.9% but premium cards require a high fee of 2.3-2.5%. Mr. Simmonds, one business owner, says "It has increased our average monthly cost of credit card processing for Visa by 10%, and for MasterCard by 18%." It is a big cost but recently the Senate and Commons committee has started to investigate the issue, due to companies across Canada suffering through the recession.
There are individuals who are willing to buy(demand) and lend money(supply). At times, the consumer also has to pay a service fee when they decide to bring out the plastic. If the government decides to put a limit on intercharge fees, consumers may be more willing to borrow the money and businesses aren't sweating to provide the payment option. This increases the amount of money circulation in Canada which influence the levels of unemployment and economic growth. (If people spend more, jobs are created, and more money is put into consumers hands.)
I think that credit or debit cards are a great option when trying to get consumers to buy more. Using the card almost doesn't hurt as much as using money because no actual money is being exchanged. It is almost like paying with someone else's money, although you are paying at the end of the month. Credit cards allow companies to create money by creating deposits through loans. If more money is loaned out, more money can be created. I think limiting the intercharge fees will help both consumers and businesses in the recession because it allows them to keep more money.
http://www.vancouversun.com/business/fp/story.html?id=1393636
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You said that "using the credit card almost doesn't hurt as much because no actual money is being exchanged" which is true, but for the over spenders out there, it will definitely hurt later on. In accordance with my blog post, consumers seem to be using credit cards less now because of the recession. I believe that before, credit cards made shopaholics feel good because they thought they could buy as much as they wanted, even if they didn't have the money to pay for it now. However, those people are now opening up their eyes to the fact that with credit cards, it's easy to spend way over their budget and then be in serious debt, which is why many are now going back to plain old cash.
A. Chow
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