Category: Credit Cards

How the Visa/MC Settlement Affects You

Credit-cards Lotus Head On Friday, there was a massive settlement in a seven year-old lawsuit between Visa, MasterCard, the banks that do business through them, and retailers. The retailers will get $7.25B in compensation for what was, essentially, a complex price fixing scheme.

But it is not the epic sums due to change hands that is causing the buzz. As part of the settlement, Visa and MC will for the first time allow merchants to add a surcharge to the bill for credit card use. This is a big deal, apparently. The Consumerist led with that facet of the deal. Reuters and AP mentioned it at the top. A clever report at Forbes was entitled $6 Billion Visa Settlement Frees Consumers To Pay More.

The president of the American Bankers Association (a.k.a. the head lobbyist for the banks that are paying serious money to the retailers) was quoted in the Times “Let’s be clear — retailers, not consumers, benefit from today’s resolution.”

I disagree.

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Credit Cards, Debit Cards, and Crazy Americans

As I have written several times in the past (e.g. here and here) there seems to be no subject on which I am more out of step with normal folks than those plastic cards, credit and debit, that we all use to buy stuff.

Credit-cards Lotus Head In the past I have politely implied that this is a failing of mine, that I am just too old or too dense to understand what everybody else does. I hope nobody was fooled by that. I really think I may be the last person in America who can think clearly about plastic.

A few weeks ago, SmartMoney ran a round-up of the best credit card deals. The listing of best offers for the various categories of credit cards was fine, but the introductory gloss managed to encapsulate just about all the craziness (and I do mean craziness) that clouds thinking about cards in America.

… credit cards have lately emerged as the surprise champs, offering fewer fees and better rewards than the typical debit card.

Surprise to who? As far as I know, credit cards, in general, have always had lower fees and better rewards than debit.

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Is Cash SmartMoney?

SmartMoney had an attention grabbing headline yesterday. Why Cash Is the  New Plastic exerted an irresistible gravitational pull on my mouse.New $100

Could it be that cash, that archaic and germ-spreading form of money whose demise I have both lamented and encouraged, was making a comeback after all?

The first paragraph of the article reads:

Consumers are spending again, but gone are the days of swiping and signing for everything from lattes to lawn furniture. Shoppers are reaching for paper money, and as they do, stores and even credit card issuers are increasingly ready to reward them – with more cash.

So I guess slips of paper and metal disks are making a goal-line defense. Just when you thought that they would go the way of fax machines, the old school pulls it out in the end. Suddenly, consumers are coming to realize that swiping and signing is just a little too easy.

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Gift Cards

Am I in danger of becoming obsessed with plastic cards? It’s possible. But there is one type of card I have somehow managed to avoid discussing in 21 months of blogging.

Sarah_Palin_Salvation_Army CropThat type is gift cards, the anonymous chits that are as good as money in one  particular store. In their current form they are a relatively recent innovation. When I was your age (20+ years ago) stores sometimes sold paper gift certificates for specified amounts, but they were a one-use item. If you bought a $50 sweater with a $100 gift certificate you generally got $50 in actual cash as change.

It wasn’t until we entered the digital age that modern gift cards, each a miniature debit account, were born. Spend $50 with a $100 gift card and your “change” is the same old card, only now it is worth just $50.

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High(er) Tech Credit Cards

Last week I wrote about credit card technology, in particular the “chip and PIN” or “smart” cards that Europeans have been using for decades. I said that although the technology used by European (and Canadian, it turns out) cards is unquestionably more sophisticated than the dumb old plastic we simpleDynamics--Citi--Dividend2G--300dpi--Photo--(C)2010 Crop Americans carry, it is not particularly “smart.” The only meaningful advantage is in fighting fraud, but that problem has such a tiny economic impact that it is hard to imagine how upgrading from our current swiping system could possibly make sense.

Indeed, I still do not understand how adopting chip and PIN makes economic sense outside the USA. I can understand it making psychological sense. Everybody seems to have an irrationally exaggerated fear of credit card fraud. And there is no discounting the cool factor: the natural human attraction to new technology.

Speaking of which, two readers pointed me to a New York Times blog entry posted two days later on even higher tech cards now in the pipeline.

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