Credit card fees worry merchants
Missoulian November 27, 2009 | Dennison, Mike HELENA – When convenience store owner Dave Sutey looks at his bottom line, the second-largest expense is one you might not guess: fees paid to credit card companies and banks, to process credit card purchases in his stores. website dillards credit card
“That’s ahead of rent, lease and payroll taxes,” says Sutey, whose 14 Thriftway Super Stop stores in southwest Montana have paid $312,000 in such fees the first 10 months of this year. “The profit of our entire industry is one-half of what the credit card fees are.” Sutey and his allies in the retail industry, from gas stations to department stores, say they don’t mind paying something in so-called “swipe” or “interchange” fees for the convenience of credit card purchases.
But they believe these unregulated fees have become too costly, and are asking Congress to intervene.
“They can charge whatever they want to charge,” says Bob McCullough, manager of a Tire-Rama tire store in Great Falls. “It’s just a channel for them to get money. We’ve got to reel these banks in.” Montana merchants concerned about credit card fees have been talking to Sen. Jon Tester, D-Mont., who sits on the Senate Banking Committee.
Several proposals have been floated, such as legislating the fees or exempting merchants from antitrust laws, so they can better negotiate the fees with the credit-card issuers.
Tester says he’s interested in the issue, and that it should be studied further. The Banking Committee, which has no bill before it to regulate the fees, will likely hold hearings next year, he says.
Tester also has been talking to the credit card companies and the banks, which say the push for regulation of the fees is nothing more than an attempt by one industry to fix prices to its advantage – at the detriment to consumers.
If Congress sets a ceiling on the swipe fees paid by merchants, credit card companies and banks probably would increase the fees they charge consumers for the cards, says Trish Wexler, spokeswoman for the Electronic Payments Coalition, which represents banks, credit unions, credit card companies and card issuers.
She also notes that while merchants may complain about credit card fees, the rise of credit card use has helped them expand their sales.
“They make more money when their customers pay with plastic,” she says. “(Customers) are no longer restricted to just the cash they have on hand.” While interchange fees may vary from card to card, merchants say VISA and MasterCard, the two most widely used cards, generally charge merchants 2 percent of the purchase price, plus a flat fee of 10 cents per transaction. dillardscreditcardnow.com dillards credit card
So on a $2 bottle of pop, the fee is 14 cents: 10 cents plus 2 percent of the price. On $50 worth of gasoline, the fee is $1.10.
Debit cards can be a point of irritation for merchants, too.
McCullough, the tire store manager, says debit cards are supposed to be like an electronic check, taking money directly out of someone’s bank account. If run with the customer’s PIN, it’s usually a small flat fee, perhaps 60 cents, he says.
But if the debit card is run like a credit card, the banks charge a percentage that can range up to 4 percent, he says.
“Our transaction fees have gotten out of hand, and we just can’t afford it,” says McCullough, who estimates that the average tire store pays $25,000 a year in card fees. “We try not to pass it on to the consumer, but when it gets that big, we have to pass it on to the consumer.” Revenue from the fees often is split among local banks, national banks and the credit card company.
When a credit card transaction occurs, the merchant receives money from its local bank for the purchase, usually the next day minus the fee. The local bank keeps about 15 percent of the fee and sends the rest to the card-issuing bank, which then pays a portion to the credit card company.
Steve Turkiewicz, president of the Montana Bankers Association, says he doesn’t know how much revenue Montana banks receive from credit card fees.
But he does say that credit cards have benefited Montana merchants, making it easier for them to accept payment from people all over the country and the world. The merchant gets paid the next day, and if there’s any fraud or nonpayment, the banks are on the hook.
As the economy has slowed the past two years, outstanding debts on credit cards have increased 10 percent he says.
If merchants are successful in getting Congress to reduce the interchange fees, there’s no guarantee that merchants will pass those savings along to customers, Turkiewicz added.
Sutey disagrees, and says all merchants want is a level playing field, giving them more power to negotiate or determine fees they see as excessive.
“We either accept their fees and accept their cards, or we don’t,” he says. “They say if they reduce the fees, we’ll just put the money in our pocket. I think they forget how competitive America is.” Dennison, Mike
