If new credit card fees can keep prices low, then bring ‘em on!

Image by Getty Images via Daylife

And once again the controversy over credit card fees, and whether Washington should regulate them,  heats up.  This time, lots of folks are looking to Australia for guidance.   In that country, many fees are capped — but merchants get to tack on any surcharges they like.

One guy, for example, discovered he was paying more than 5% extra on airline tickets, just because he charged them to a card.

The charges were the consequence of changes in credit card rules in Australia that were aimed, in part, at reducing the cost of hidden fees for using plastic. But the law, passed six years ago, also allowed merchants to tack on new charges, and many have done just that, in some cases with fees that exceed the old ones.

Now, as Congress debates how to rein in credit and debit card companies in the United States, Australia’s experience is being pointed to as an example of just how tricky that can be: for one thing, if regulators limit one fee or rate, banks are likely to find another way to keep revenue flowing.

via U.S. Looks to Australia on Curbing Credit Card Fees – Series – NYTimes.com.

So, what’s so terrible here? It has encouraged many consumers to switch to cash or debit cards — another way of saying, encouraged consumers not to buy things they do not already have money to pay for.

And we’ve all been paying extra fees for credit card use anyway, even if we didn’t realize it.  Same as we pay extra for full service. I’ve written about this before:

I remember years ago, when self-service gas first hit the scene. Every gas station claimed it was giving a discount to anyone who would pump for themselves, check their own oil, yada yada. I did a story back then, pointing out that the stations all seemed to be charging the same for self-service that they used to charge for full-service — but they had hiked the prices for those who still insisted on the gas station working for its money.

The same is generally true for discounts for cash — seems to me, the cash price is the real price, and the merchants are charging extra for the convenience of credit. (The card companies allegedly write into their contracts that most merchants can’t do that, but I see it at every gas station…)

And maybe this is as it should be.  I’m against hidden fees on anything (I still hyperventilate when I think of the unfair charges the banks have put on debit card users).  But if the banks and the merchants are forced to be honest about pricing policies and various card-usage fees, I see a net good, not a net harm.

After all, there are far too many people like me out there: I use my credit card for absolutely everything, so that I can rack up the frequent flier miles. I buy my groceries and produce with a credit card.  I pay my phone bill, my auto insurance, my cable access, absolutely everything by credit card.  And, I pay the balance in full each month, so I pay nothing extra whatsoever for this privilege.

The merchants, though, are all paying fees to the card issuers.  And you better believe those fees are passed on in the form of higher prices.  Which means the cash and debit customer are paying more so that Claudia et al can get a free airplane ticket every year.

So, while it would certainly go against me, I’m all for a system where surcharges are tacked on to credit card users.  Maybe claudia will use more cash.  Maybe someone else will think twice about buying things he/she cannot pay for, and will save up money until they can. And maybe, when the economy recovers enough to support higher prices, prices won’t go up as much as they otherwise might.