What’s at Stake in Illinois
The Illinois legislature just passed a law that would completely upend the way your credit and debit cards works – creating confusion for consumers, higher cost for small businesses and the potential for information about your private purchases to be shared. The new law creates a carveout so the tax and tip portion of an overall purchase is exempt from card processing costs known as interchange.
Businesses pay a small percentage of each purchase – approx. 2% - to process your credit and debit card transactions. That fraction is used to safeguard credit card networks, prevent fraud, and fund reward programs.
So why are politicians trying to change the easy, convenient, hassle-free credit and debit card system we rely on every day? Because the largest convenience store chains and corporate mega-stores are trying to pocket more money. But it means small businesses will have to pay for new card processing systems to save on a small fraction of transactions and consumers could have pay taxes and tips in a separate transaction or with cash or check. Worse yet, to ensure your transaction is accurately processed under the new changes, businesses are going to have to share additional information about each and every purchase you make. For tipped workers, it means previously generous customers would possibly be restricted to tipping based on how much cash they are carrying.
This is why no other state in the country or no other country around the world processes credit and debit card transactions this way. In fact, 29 other states have rejected this idea because of the impact and hurdles it would have on commerce across the state – just so the big guys can make more money.
Reasons It Doesn’t Work
This new change would bring about credit card chaos for both consumers and small businesses, here’s why:
Your Private Purchases Are No Longer Private: Private information about what consumers are purchasing will be required to be shared, eliminating the privacy protections that exist today.
Chaos and Hassle with Every Purchase: Under the new law, consumers could be forced to pay sales tax in cash or check. Purchases will require two transactions – one for the goods or services and another for taxes and tip. As retailers look to eliminate the hassle of multiple transactions or filing for monthly refunds, some may be forced to require that tax be paid in cash. Customers who have grown accustomed to shopping with only their phone or a single card will also need to start carrying cash.
Costly Operational Mandates for Small Businesses: Smaller merchants will bear the cost burden of complying with the new law, whether through new technology to separate or itemize transactions or time spent every month gathering paperwork to request a refund for interchange. This requires time most small businesses don’t have and is prohibitively complex for retailers selling products with varying tax rates.
Easy Online Sales Might No Longer Be Available: Vendors selling online could decide that doing business in the state is not worth the hassle and expense of complying with this radical change to commerce.
Take action
Tell your state’s leaders Illinois cannot afford the credit card chaos this first-of-its-kind law will cause. Small businesses cannot afford the new costs and cardholders will not tolerate the loss of convenience and privacy these new changes will bring – just so corporate mega-stores and nationwide convenience chains can pocket more money. The current credit and debit card processing system works and provides a valuable service by facilitating efficient purchases, universal acceptance and state-of-the-art protections against fraud and personal identity theft.
