A Desperate Attempt to Cut Credit Card Fees
Small business owners absolutely depend on credit cards. Is this dependence on credit cards a good thing or a crippling thing? Small businesses have had to pay high fees every time a customer swipes a credit or debit card at its terminal.
Small business merchants say enough. These merchants have started lobbying for new legislation to help them out. They are hoping for legislation that would force banks to negotiate lower fee rates with them. The legislation’s sponsors are calling for a “credit card bill of rights for merchants.”
The relationship between merchants and credit card companies has become fiercely bitter. Several merchants are joining together in a class action suit against Visa, MasterCard, and several banks. They claim that these credit card giants have violated sensitive antitrust laws.
The problem is that small businesses no longer have the option of whether or not to accept different cards. Economists are saying that when it comes to credit cards, Americans have been socialized. What they mean is that the ‘norm’ is only pay with plastic these days. The days of paying with cash or a check are long since gone.
Merchants are forced to pay high fees to keep up with credit-’socialist’ times. There are two main parts to the fees they have to pay. The interchange fee includes the average 1.7 percent of the sales price and a per-transaction flat fee. In addition to the interchange fee, merchants have to pay a fee that goes directly to their bank.
Let’s look at a common example. Say a consumer paid $1,000 for a T.V. at a local electronics shop. To buy the T.V., the consumer used a credit card. The credit card company that issued the consumer’s credit card gets paid the interchange fee. This fee is $17.10 (this includes a $0.10 flat fee). The electronics store’s bank gets four-tenths of one percent of the total sale. In this example, the bank gets $4. The electronics shop keeps only $978.90 from the sale of a $1,000 television.
Small business merchants paid over $61.50 billion in electronic payment fees in 2007. It has been estimated that credit card lenders received 82.5 percent of those fees. Merchants don’t plan on giving up easily. They are determined to fight for a more reasonable fee plan. The House Judiciary Committee has already ruled that merchants and banks are supposed to negotiate fees. However, merchants will keep lobbying for a more concrete law.
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