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Credit card surcharges could lead more to use cash

New rules on credit card "swipe fees" could allow some merchants to charge more for their products when customers use credit, leading more consumers to pay with cash or checks and avoid the extra charge as a result. This could force retailers that implement the charge to update their cash management system to be better prepared for the influx of cash- or check-paying consumers they may see. 

What is the fee and how does it impact merchants? 
Credit card companies have long charged retailers a small fee each time a consumer swipes a card to pay for a purchase. Businesses were previously prohibited from passing this cost along to customers, but a new rule that took effect January 27 reverses that regulation. Merchants are now able to add a charge to cover the cost of using plastic instead of cash or a debit card. 

Companies in some states will be prohibited from forcing consumers to pay the fee. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas currently forbid retailers from taking part in the practice, and more may join the list. CNBC reported lawmakers in 11 other states are considering implementing rules that would prevent businesses from charging credit card checkout fees. 

Many large businesses have gone on the record claiming they won't implement the fee and force credit card users to pay an additional cost. However, it's easier for big box stores or nationwide chains to absorb this additional expense than it is for small businesses, which operate under tighter budgets and often see much more limited profits.

Will this change consumer behavior? 
Firms in states that currently do permit merchants to pass the swipe fee along to consumers may implement the extra charge to cover costs. Those that do so could see more people using cash or checks to avoid the extra cost, which could in turn force business owners to adjust their cash handling strategies. Having an updated cash counter machine will allow entrepreneurs to efficiently balance at the end of each day and handle the increased physical currency in their facilities. Companies dealing with large volumes of cash transactions can also benefit from using a currency sorter, which can allow businesses to sort bills and more quickly process cash for maximum efficiency and accuracy. 

March 14, 2013