The Impact of Credit Card Fee Changes on Consumer Behavior

Credit Card Fee Settlement and Its Ripple Effect

Or  will they? As a follow-up to last week’s post about the late-in-the-year settlement changes on credit card fee changes, and how those might affect both merchants and consumers, comes this additional item in the American banker Post.

Community Banks, Credit Unions, and the Fee Repercussions

The Post reports that community banks and credit unions are reporting lower fees for debit card use, as a result of all those changes in recent finance reform laws.

Consequences for Smaller Financial Institutions

Initially, smaller financial institutions were anticipated to be exempt from the losses associated with card fee reductions, which were mainly aimed at larger banks. However, the reality unfolded differently. Many credit card processors, facing reduced fee revenues, have started transferring these losses to the smaller banks and credit unions.

The Potential Shift in Consumer-Friendly Banking

This means that these same institutions, usually considered much more consumer-friendly than the larger ones, may consider charging fees for formerly “free”‘ services for their customers.

The Uncertainty of Additional Charges

Although these changes haven’t been implemented yet, this doesn’t automatically mean fees will be applied to debit card swipes. Instead, institutions might compensate by adjusting services like formerly free checking accounts and more.

Merchants and the Changing Landscape of Fees

But it does bring up the idea that merchants need to stay abreast of potential changes that could affect their customers’ “swipe” habits.

Decision Time for Merchants: To Absorb or Pass on Fees

Do merchants want to pass along any rise in fees given  to them, which might have the affect of disuading last-minute, or “impulse” purchases from customers, or is it worth absorbing those fees should the need arise?

Loyalty and Reward Programs to Maintain Customer Spending

To maintain customer engagement and spending, businesses should actively explore creating loyalty or reward programs tailored to their goods and services.

Looking Towards Future Payment Trends

Keep in mind, as these issues evolve over the next few years, the solutions we’re seeing now may become irrelevant. This is especially true as the trend shifts from traditional card-based transactions to mobile and tablet-based cashless payments.

Preparing for the Future with AVPS

If you need to strategize for this new year, or the ones to come, contact your AVPS Rep today. While we can’t guarantee we have a crystal ball, we can always help provide some pretty good road maps.