Chapter 14- Credit Card Surcharge Opposed by Consumer Group

http://www.cbc.ca/consumer/story/2010/12/20/con-credit-card-surcharge.html

 

Summary

The Consumers Association of Canada (CAC) opposes to surcharges for paying by credit card. In order for them to decide, they took a survey from 916 credit card holders.  The ones that were surveyed were asked to pay a fee for using credit cards; eighty percent were opposed to paying 3.5% for the convenience of paying by credit card.  Bruce Cran, the CAC president proves their point by stating, “The results speak for themselves. Canadians are overwhelmingly opposed to the suggestion that they should have to pay merchants for the privilege of paying them.”  Many merchants are very upset with fees for credit cards as high as 3.5% of the purchase price. Last week, Melanie Aitken, Canada’s competition commissioner, announced she is taking Visa and MasterCard to court in an effort to alter how the companies are paid for the use of their cards. On December 16, the Canadian Federation of Independent Business (CFIB) announced to the public that it will launch a campaign that will encourage consumers to pay for their purchases with cash or debit cards. In a statement from CBC News, MasterCard said merchants are free to offer discounts or other inducements to customers who pay cash or with debit card but they can not just add a surcharge now. In addition, the CAC comments about Australia, where surcharging on credit cards is allowed, many businesses there have changed the practice into a way they can earn revenue.

Connections

In society, instead of using cash, many people now use bank credit cards from either Visa or MasterCard as their method of payment for their purchases. Currently, without a surcharge on credit cards the accounting entry would have been to debit Credit Card Discount Expense and credit Bank. If the surcharge were to be applied, new accounts would need to be added. For instance, two new accounts would be a Credit Card Recoverable in which we would debit and a Credit Card Payable account that will be credited. In addition, there was always a hidden cost that consumers do not really know about because it has already been included in the prices that the business listed when we are making our purchases. Businesses would have already taken in consideration of all their expenses before deciding on the price of the item they are selling which includes the fee businesses have for accepting credit cards as a form of payment.

Reflections

Consumers, such as myself, would definitely oppose to paying a surcharge for the convenience of paying by credit card. We would be paying a lot more money because we would not only be paying for them merchandise but for the company’s expense even more than before. On the other hand, if I were to view the surcharge from a business’ standpoint, the surcharge would benefit a business. Businesses would be able to charge it the same price and not lower it. For instance before the HST was finalized, many people assumed that when the HST becomes established many businesses would lower their prices because they can now recover all their taxes. Unfortunately, that was not what happened because the prices stayed the same. Although a business may lose customers because of the surcharge, a business can still convince a consumer to continue to purchase at their company by having excellent service and quality on their merchandises. Therefore, a company would be able to gain revenue while having a surcharge.