Defining Merchant Charges and Why They Matter to You

Information verified correct on October 25th, 2016

How do Rewards Programs Play Into the Picture?

Interest rates and annual fees round out the three main methods that these companies use to make money. This is how rewards programs can to be. In order to encourage people to sign for purchases so that the companies could collect fees from merchant charges, credit card companies began offering incentives to shoppers for pulling out charge cards for purchases rather than paying cash or going through banks.

The more you use your card as payment for purchases, the more often the companies can charge fees to the merchants you are purchasing from. These fees vary from one to two percent and they actually help consumers by keeping interest rates lower than they would be without the collection of these fees. They also enable credit companies to offer rewards programs that so many companies are beginning to offer.

Unintended Consequences of Merchant Fees

Merchant fees for credit cards have been beneficial to consumers in many ways. However, some merchants have stopped accepting credit cards in order to avoid these fees that can add up quickly. Most companies understand that accepting credit cards allows them to gain access to a broader base of customers and are all too willing to accept the cards despite the fees, there are some who now demand payment in cash or other forms instead.

Another downside for consumers is that merchant fees aren’t earned for balance transfers or cash advances. This matters to you because credit card companies need to make up for that money somehow. That is why there are often additional interest fees for things like cash advances and balance transfers (beyond the usual introductory offers for balance transfers, of course).

What Does This Mean For You?

As a consumer, you will receive quite a few benefits to keep in mind when it comes to merchant fees. As long as you learn to avoid the potential downside of higher interest rates for cash advances and balance transfers, you can enjoy a long relationship with your credit cards without the trouble of making a single payment for something that will cost you more than you plan to pay.

Rewards are tempting to consumers and can be hugely beneficial when you spend responsibly and avoid any possible interest payments you can manage by making a payment for the total (or at the very least majority) of expenditures each month. This means that merchant fees will bear the brunt of the cost for your total credit card experience, your rates will remain low, you’ll get plenty of rewards from the companies, and you’ll have established a solid credit history. It’s hard to beat that when it comes to good credit spending habits.

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Credit Cards Comparison

Rates last updated October 25th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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