Steering lawsuits could change the way Americans shop

Most of us only worried about "steering" at the grocery store while we were still in the parking lot. Instead of avoiding errant shopping carts, steering can help you avoid higher prices at checkout. Retailers intend to expand the practice of encouraging customers to use forms of payment that cost less to process. However, if steering catches on, it could also rob you of many of the most attractive features of your favorite credit card.

New payment devices make steering a snap

Over the past few years, you may have noticed new payment devices popping up at your favorite retail locations. They allow you to swipe your own card, and if the devices detect a bank card capable of handling both PIN and signature transactions, they'll prompt you for your PIN. In most cases, you can only request a signature transaction by pressing a "cancel" button, something many of us are reluctant to do. "Steering" customers into a PIN-based transaction can save a typical retailer thousands of dollars per year.

The recent lawsuits against Visa, MasterCard and American Express could empower retailers to "steer" transactions on a much bigger scale. Imagine swiping your card at checkout, only to have the PIN pad ask you if you'd like to get an instant rebate if you use your debit card or a store credit card instead. Some major retailers, including Ikea, already promote similar schemes, sharing the wealth with customers.

Could steering mean less consumer protection?

Swiping a credit card or running a debit card "as a credit" may cost retailers more, but it often adds more value for consumers. Swiped transactions carry more comprehensive fraud protection than PIN-based transactions at most banks, since many debit card issuers assume that PINs rarely get stolen. Furthermore, the merchant processing industry has yet to fully absorb the implications of the announcement, but some product managers have already floated the idea of charging smaller fees for handling "basic" credit cards compared to platinum or signature cards.

If current trends continue, it won't surprise some analysts to encounter checkout lines where cashiers actively discourage customers from swiping a visible frequent flyer or cash back rebate card. Retailers may have the advantage by flashing an instant reward in front of harried shoppers, using steering techniques that distract cardholders from the potentially larger value of paying with their favorite credit cards.