NerdWallet “Swipe Fee” Survey Measures Consumer Reaction to Proposed Credit Card Amendment

by News Guy on June 23, 2010

NEW YORK, NY — (Marketwire – June 22, 2010) –  While banks, merchants and businesses anxiously await news of the Durbin “swipe fee” amendment to the financial reform bill, and worry about how it’s going to affect profits on debit and credit card transactions, one might wonder, what do America’s swipe-happy consumers think about all this?

They won’t react well to potential surcharges, according to a “swipe fee” survey and infographic depicting the impact it will have on consumers and merchants — released today by NerdWallet — a credit card search site that helps consumers find a card that suits their spending habits. According to the respondents of the survey who have incomes of $100K and more, 71% say they are “not likely” to shop at a store that charges a 2% surcharge for credit card purchases, and 79% say that if faced with a $10 minimum on card purchases they would rather leave the store than be forced to meet the minimum.

For consumers making $50K or less, 46% say they rarely pay with cash and a full 80% are unlikely to shop at a place that charges them for card use. 70% of this same group say they use credit cards for most or all small purchases, while 57% say they would leave to find a different store if they were imposed with a $10 minimum.

In addition, the survey indicated:

  • 70% of respondents “always” or “often” pay with a credit card for small transactions
  • 58% carry three or more debit and credit cards
  • 82% carry less than $50 in cash at any given point
  • 67% of respondents who make more than $100K/yr carry less than $50, indicating that while they may have access to cash — they prefer not to use it

“Our ‘swipe fee’ survey was meant to measure consumer reaction to the proposed amendment,” said Tim Chen, co-founder and CEO of NerdWallet, and a former hedge fund analyst specializing in payment processing companies, credit card networks, and technology companies. “Insight gleaned from our survey indicates that small businesses will be hit hard by consumers unwilling to pay surcharges, and the amendment that is designed to help businesses will have a very different effect.”

Contrary to the amendment having a positive impact on small businesses, they will still have to pay 3-4% in interchange fees for credit card use and 1-2% for debit cards, while larger companies (such as Walmart, Costco, CVS, etc.) will have the power to negotiate lower swipe fees and pricing flexibility that will not translate into passing the fees onto customers, thus gaining market share from the card users.

“The types of businesses affected by the regulations already face slim margins and will not likely lower prices, but instead raise prices on cardholders,” Chen elaborates. “The best case scenario is that merchants will lower prices for cash purchases and consumers will adapt by using cards less, but they will pay higher annual fees and get lower rewards for the cards they use when cash purchases are impossible (i.e. online). The worst and likely case is that higher prices plus higher credit card fees and lower credit card rewards will translate into a triple whammy for credit card users.”

About NerdWallet

NerdWallet.com is a credit card search site started with the intention of taking the headache out of finding a credit card online, and saving users money in the process. NerdWallet currently indexes more than 600 of the cards in the Fed’s database, and condenses the pertinent information into a dead-simple interface. Users just need to answer a few questions about their needs i.e. How much do you spend on gas? Are you transferring a balance? And they’re presented with a straightforward ranking of the best cards for their situation. For more information, visit www.nerdwallet.com, the company’s blog (http://www.nerdwallet.com/blog/) or follow them on Twitter (http://twitter.com/nerdwallet).

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