Wednesday, July 25, 2007

Paper or Plastic?

For me, bookstore transactions is limited to cash, mainly because I don't have a credit card (this also prevents me from buying books online). Some people, however, find it easier to manage their book expenses with credit cards--after all, you're paying all your bills from one source (your credit card company). Still, have you ever wondered why when bookstores (or any other establishment for that matter) go on sale, you get less discounts for paying with a credit card?

The answer is simple. Consumers aren't necessarily aware of this but for each credit card transaction, the credit card company charges the retailer. This is called the Interchange Fee and ranges anywhere from 2% to 3% usually. That's why bookstores, when on sale, give varying discounts depending on whether you're paying cash or via credit card. A typical scenario is that they're giving you 10% discount when you're paying with the former and 5% discount for the latter.

Some consumers might complain that retailers should already factor that charging fee in their retail price and they do--that's why this extra expense only applies to sales and discounts. The store is already giving you discounts, they shouldn't lose more money. Better an option to pay via cash and get more discounts rather than make it a flat-out 5% discount fee irregardless of whether you're paying via cash or credit card. It might seem retailers are the villains when pricing such discounts but they're not.

On a side note, how do you pay for your book purchases?

1 comment:

Unknown said...

I use plastic... but not credit :D

I use BPI's EPS system - have them autodebit the amount straight from your bank account. :D

I dunno if they charge any additional fees to the merchant for that though.