Editorial: The hidden cost of plastic money

Our passion for putting it on the plastic is in for a shake-up. Retailers will be allowed from next April to pass on the transaction costs of credit-card use - known in the business as the interchange fee - to the card users.

It is a sensible solution to what has always been a retail anomaly. Making use of the credit-card system can cost retailers as much as 3 per cent of a sale and, because they are banned from recovering that from the cardholder, it becomes a business cost passed on to all shoppers - including those who paid, by cash or EFTPOS, with their own money - in higher prices.

Canny shoppers who have realised the implications, ask for, and routinely receive, discounts for cash. But the introduction of a third party into the retail relationship - the company that finances the transaction and invoices the cardholder later - has always muddied the water.

Retailers have benefited, of course, because the availability of instant and easy (if potentially very expensive) credit, has resulted in sales that might not otherwise have occurred. But it has also encouraged a mentality of living beyond our means that has caused many financial difficulties for individuals and, arguably, contributed to the global economic mess in which we now find ourselves.

If being confronted at the point of sale with the cost of credit causes shoppers to pause, it may be no bad thing. If it promotes competition between card companies that will be good for everyone - except banks. And they may be surprised to find how little public sympathy they command.