Credit card dilemma..

April 3, 2011

Living in New York City, I typically keep $50 to $100 dollars in cash on me because there are many places where cash is the best form of payment.  Even though some of the smaller stores accept credit cards, if I’m buying something that is $5 or less, I feel like it is easier to pay with cash…. unless of course it’s $3.06 or $4.02 because then I don’t want the loose change in my pocket all day.

At some point I thought about the fact that retailers have to pay a fee in order to accept electronic payments and at some places, especially McDonald’s, I now pay only with my debit card just in spite of not liking the retailer or if I think I’m being overcharged to begin with.  On the other hand, I feel bad charging $6 or $7 on my card at La Grolla Pizza because it is a smaller restaurant where I deal with the owner when I go in.  I’d prefer to see him prosper and hang on to that 1% or 2% that would otherwise go to the credit processing company.

And thinking about the 1% or 2% fee that is charged made me interested in finding out more information.  The fee that a merchant pays in order to accept electronic payments is called the interchange fee.  The interchange fee is typically around 2% in the United States and the “issuing bank” collects the largest portion of the 2%.  VISA and Mastercard, for their role in the transaction, collect 0.11% and 0.095% respectively.
So putting even more thought into my ill-conceived logic of paying with my credit for small purchases at places I feel like saying a big f-you, the clincher is that I’m also not too fond of Bank of America, which in my case is my “issuing bank”.  So essentially, what I’m doing by charging these small purchases is I’m moving money from one merchant that I’m not fond of into the coffers of Bank of America who is another corporate conglomerate which is no more deserving of those pennies.
So now I’m not sure how I should approach this situation.  For now, I’ve decided that McDonald’s in particular is less entitled to the pennies than Bank of America so for my $1.08 sweet teas I still charge it even if I have the exact change on me (do I ever have .08 on me though?).