Paper Versus Plastic

According to the National Retail Federation, in 2012 Americans spent $50 billion on retail via credit/debit, which equates to $427 in transaction fees per household. If shoppers were fully aware of the hidden fees bank/credit card companies imposed upon retailers; 2% of each credit card transaction, would we see a shift in shopping behaviors? If retailers were required to post the fee amount, would people stop shopping at stores with high fees or use a different form of payment?

A number of small businesses, boutique retailers and restaurants around the country have shifted to cash only or set minimums for credit card transaction. For example, the famous steakhouse Peter Luger in Brooklyn, NY only accepts cash and if you don’t have the cash you can use their debit card machine. The large club store retailer Costco only accepts cash, checks, debit cards, or American Express. Per Costco’s website,
they don’t accept other major credit cards because their “exclusive arrangement with American Express helps to assure the lowest transaction fees available, which in turn helps keep prices low.” Costco shoppers are okay with this policy because they value receiving low prices over paying with plastic and earning rewards points and Peter Luger customers prefer to receive quality food.

For some companies curtailing transaction fees may lead to higher revenues and/or lower product prices, however traditional grocery retailers may want to consider a hybrid approach. Given the economic condition of our country and the fact that a number of households depend upon their credit cards for survival, this practice would alienate a large portion of customers. As an alternative, these retailers could specify day(s) of the week featuring cash, checks, or debit cards only and offer storewide savings. The savings the retailer generates from not having transaction fees could compensate for the storewide sale, generate more traffic and/or new customers. Times are changing and who knows when a shift in shopping behavior will occur.