An Ethical Dilemma in Using Credit Cards? Is There Such a Thing?

What could be wrong about credit cards?
After all, they allow credit, which has expanded the economy. They allow me to postpone paying for something. If I pay in full every month and don’t overdo it, they seemingly are just passive instruments, right?

Well, let’s look at what happens behind the scenes.

Let’s say I go into a store, and buy an item for, say, $10.00. Assume no sales tax for the sake of this example.

If I pay cash, the store owner gets $10.00, and uses the $10.00 to pay his employees, suppliers, pay his taxes, etc.

If I use a credit card, the store owner seemingly gets $10.00, but first needs to pays fees to the credit card company as well as all sorts of other companies in the processing chain. Other companies in the chain usually include: Merchant Gateways, Credit Card Processors, Merchant Account Providers, Credit Card Associations, Credit Card Issuing Banks. They all take a cut in one way or another.

Common percentages quoted for most customer transactions is between 1.5% plus 0.10 per transaction to 2.1% plus 0.10 per transaction. Sometimes it is even more.

However in addition to the quoted percentage plus fee per transaction, the merchant is obligated to have a contract that covers many other costs associated with accepting credit cards beyond per-transaction fees, such as having credit card terminals (leased or purchased), contracts with the companies that process transactions; those companies have annual and/or monthly minimum fees, credit card network fees, etc.

Where are we?
The point is that by using credit cards, the merchant will receive less that the $10.00 I paid before he can start paying his employees, suppliers, and taxes. While the twenty-five to thirty cents or so deducted for that specific transaction is not much, that of course does not end the merchant’s obligation. There is the overhead of obtaining and servicing the credit card terminals, and all the other processing fees as mentioned. So the merchant keeps much less than $9.70.

What option does the merchant have?
There is only one option. The merchant must raise prices overall in order to actually cover the additional costs.

The one line summary
By using credit cards, I am helping raise prices.

Reality, however
The convenience and safety of credit cards means it is not feasible to switch back to cash in most cases. I cannot see bringing several thousand dollars in cash to Home Depot if I need supplies for a major home remodel. (I suppose some might.) And I would surmise that companies like Home Depot would never want to prohibit credit cards; their business would suffer greatly if they tried to, despite the costs. We all know of some individual businesses that do not accept cards, but these are in a small minority.

In perspective
Speaking of Home Depot, some time back I read that the cost of Home Depot accepting credit card payments exceeded the company’s entire healthcare costs.

So, despite the costs to consumers (higher prices) and to the companies that accept cards, the cards are here to stay.

And other methods
The same situation exists for other methods of payment, such as ApplePay, PayPal, and all others. Every company in the chain of processing takes its cut.

So what is the dilemma?
For something to be an ethical dilemma, it must satisfy three conditions. One, there must be a decision to be made. Two, there must be different possible courses of actions. Three, no choice is the perfect solution, something is compromised whichever choice is taken.

The dilemma is that every time I pay with a credit card, I am helping to raise (or sustain) prices on everything. I don’t want to be responsible for raising prices. I want prices to reflect the cost of the item, not all the middlemen in between.

Is there nothing I can do? I don’t see myself reverting to cash for everything. That ideal is likely as unrealistic as me expecting to make all the clothes I wear, down even to weaving all the cloth I need to make the clothes I wear. Not realistic. No perfect path.

Sometimes there is no alternative
People point to a power outage and say that at a time like that, cash is king. It’s true, when power is out and credit card transactions are unavailable, then cash rules. However, once one’s cash runs out, one must wait for power to return to obtain further cash.

Sometimes it is the best alternative
Consider this discomfortable situation. You get a phone call that a parent has died. You need to get an airplane ticket, a rental card, and a hotel room quickly, because you want to attend the funeral. With a credit card, it is easily doable. Without a credit card, it would seem a very difficult task.

Live with it then?
Using a credit card means that I need to accept the consequences of my actions upon the world by the use of cards. And with it, accept my role in the world. It includes the actions that cause prices to be where they are. I can hear the cynic in the back of my head saying “Well, it’s about time to see your role in the world; there are plenty of other things you are responsible for that you need to recognize.”

My reply.
It’s not a cynic in my head. It’s reality. As a human, I tend to see what I want and not acknowledge what I don’t want to see. As if not seeing would make the effects disappear.

For example, that I, as part of the people that use cards… I need to accept that prices are what they are at least in part because of the use of cards. That I, as part of the aggregate population, is responsible for the results of what it takes to do everything that surrounds me. Like clothe me, feed me, entertain me, protect me, and that includes everything, including the pollution cause by those actions; that the technology I use, even with its conveniences, has taken a terrible toll upon those that design it, produce it, those that use it, those that process its effluent, as well as all humans on the planet and on the earth itself. It is not only everyone else’s pollution in the air, it is mine. It is not only everyone else’s garbage plastic in the oceans, it is mine as well.

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