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July 16th, 2009:

What is more American: Big Gulps or Credit Cards?

The US Capital
Big Gulps and using your credit card for everything are two pillars of the American way of life.  But a story in today’s New York Times reports that the companies that brought you the Big Gulp and promulgated no-fee (to the consumer) credit cards are at loggerheads.

At issue: interchange fees.

If you’re a regular reader of Free Refills & Why I Love America, you’ll know that what makes using a credit card in America such a pleasure is that retailers are not allowed to charge customers fees for using them or impose minimum purchase requirements on consumers who pay with them—although many of the merchants in NYC seem to be a bit casual about the latter.

The fact that credit cards are treated like cash liberates consumers from the burden of carrying cash and from the stealth tax of losing money that falls out of your pocket. What’s more, purchases made by credit cards often come with extended warrantees, insurance and customer satisfaction protections that are not available to those paying cash.

From the merchants prospective, the proliferation of credit card wielding consumers means that many more people can purchase things that perhaps they could not otherwise afford, earning the merchant a grateful customer and a handsome profit. For this benefit, the merchant has to pay an “interchange fee” of about 1-3 percent. That fee is divided up between the merchant’s bank, the card issuer’s bank and the good men and women at VISA, American Express and MasterCard who make the whole thing possible.

For cutesy video about how interchange fees work, check out this clip from the electronic payments coalition. They are the lobbying group for credit card issuers, so they should have a good idea how the whole system works.

Recently, many merchants have been scoffing at paying their fair share to make the whole system work. They have been violating their contracts by instituting minimum purchase requirements, charging customers extra fees and lobbying congress to change the rules on their behalf.

That is where 7-Eleven enters the picture. The people that brought us the Super Big Gulp are circulating petitions at some of their stores that urge congress to regulate interchange fees—in effect shifting the burden of those fees on to banks and consumers (in the form of decreased rewards programs).

Normally figuring out who to support in this case would be pretty easy. Using a credit card anywhere, to buy anything is part of what makes America great.

But on the other hand, the good people at 7-Eleven developed the Slurpee and the Super Big Gulp. How can a company that invented the bucket-sized soft drink and paved the way towards Super Size culture be anti American?

Who is more patriotic, the credit card companies or 7-Eleven?

In this instance, I am going to come down on the side of the credit card companies. Sure Super Big Gulps are great, and we will always be indebted to 7-Eleven for their relentless push towards bigger and bigger soft drink servings, but using a credit card for any purchase, even a Big Gulp, is more important than any one company. The free use of credit cards has become a basic American right—and one that needs defending.

When it comes to the Credit Card Companies V. 7-Eleven, the Credit Card Companies win.

God Bless America!

Previous topics mentioned in this post:

An Open Letter to VISA

#6. Chargebacks and Credit Cards

#10. Super Big Gulp

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