Credit Card Surcharges
The Seattle P-I had an article on credit card surcharges yesterday that is worth reading.
As a business owner who is very familiar with these charges I am able to call out the statement by Visa. I am not unbiased, although I do not fall into the category of merchant who gets slammed by the low ticket item dilema. And I am sure that there a perfectly good reasons why Credit Card companies don't want to move on the various fee structures. But to say that merchant's complaints that fees on low don't wash is either a lie or incompetence. Having worked at a larger merchant that does a lot of low ticket volume like Apple Computers or Starbucks Coffee do, I know these have huge impacts on the bottom line because I've seen the numbers and how aggresively these companies worked to negotiate better deals. Arguing that's not the case is just untrue.
But most merchants don't have the leverage to negotiate better fees. And the market doesn't appear to be helping, since there are several outstanding class action lawsuits accusing the various cc companies of colluding. It is interesting that the rates are all more or less the same.
Given my experience with the credit card world, let me suggest the rule about the surcharge isn't to protect consumers. It's to reduce awareness of the cost of running card so that consumers believe the mark up reflects price gouging at the merchant.
Anyway, here's the email I sent wellspent at the PI:
First I want to thank you for the informative article about processing fees. In general it was well done. I would take exception to Rosetta Jone's assertion that complaints that high fees cut into profits don't "wash in the end, she said, adding that the increased amount of business a merchant receives by accepting Visa or other cards is worth it.. The issue, as Ms. Jone's certainly understands, isn't whether or not being able to accept a credit card increases transaction volume. It does, and in many cases merchants don't really have much choice but to accept them. The issue is whether that increased traffic also leads to increased revenue. I am sure there are many companies that use fees increase their profits and fees as an excuse. But, it's also true that if it costs a merchant, say, .30 cents to authorize a card + 3% of the final sale of .67 cents then it's highly probable that the merchant is losing money on the transaction. My experience (although not scientifically validated) is that most of the merchants who charge these fees general rely on a high volume of sales at a low average ticket price. If Jone's is correctly quoted, then to say that argument does not wash is not very, well let's say forthcoming on Ms. Jone's part.