Most of us don’t know the true cost of credit, we simply pay attention to what we’re paying in fees and finance charges.

But the cost of goods and services increases as a result of credit card use, as merchants need to pay fees to banks, credit card issuers, and other companies for the infrastructure, equipment, and convenience.

These merchant and interchange fees vary based on the type of transaction, merchant, and card issuer involved.

Visa charges an average of about 1.80% per transaction, while American Express charges around 2.50%, though smaller retailers typically pay between 3.25% – 3.75%.

This is why you’ll often find that not all small merchants accept American Express, as they don’t want to pay the extra fees (Amex also tends to side with the consumer, another drawback for merchants).

If the merchant has a special deal in place with a card issuer, perhaps based on a volume or exclusivity agreement, they’ll be able to secure lower pricing.

Take a look at these figures below, provided by TrueCostofCredit.com to get a better understanding of what credit really costs:

But even if you elect to pay with cash, more often than not the price already reflects the option to pay with plastic, unless you work out a deal specifically with the merchant.

The use of credit is already priced in, so it’s wise to get your hands on a rewards credit card, like the American Express Blue Cash, which offers cash rebates of up to 1.25%  – 5% on all purchases.

Tip: Watch out for merchants that try to pass the “transaction fee” onto you directly.

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