High Interchange Fees Eating Into Business Profits

Manny Mourao, owner of Rose Bud Florists in Pawtucket estimates card payments eat about 2% for every $20 bouquet of flowers purchased. Like most merchants, Mourao reveals that his profit is cut by fees amounting to as high as 4%.

Mourao and other business owners have already spoken to the Providence Business News and US House Committee on Financial Services to air grievances.

Several bills are proposed before Congress to regulate credit card interchange fees.

Mourao says he spends around $100 to $200 every month to cover the charges for credit or debit payments. Like other retailers, he pays about twenty-five cents for every card transaction even if it is declined, and pays a percentage of the sale from 2% to 4%, depending on the credit card. This reaches up to thousands of dollars every year.

According to the National Association of Convenience Stores, retailers and customers spent $48 billion in swipe fees last year, which is three times the amount in 2001.

The US Census Bureau discloses that 1.48 billion credit cards were in use in the country last 2006, which is expected to increase next year. Debit card usage also summed up to 354 million in 2006, and this is expected to grow to 484 million in 2010.

The census bureau also said the number of card transactions continue to rise. Next year, credit and debit dealings will rise to about 43.7 billion, which is a way higher than the 28 billion transactions in 2006, and 9.5 billion last 2000.

Another card user, Betty Adler, says she does not need a study to prove that people do not carry cash and pull out plastic more often than not.

Jeff Lenard, from the National Association of Convenience Stores also said that businesses with small transactions are negatively affected by this. For a card purchase of a 25-cent item, they pay at least 20 cents for card swipe and the processor takes a penny as a percentage. These establishments also have to buy or lease a card-reading machine and pay for customer service.

The Electronic Payments Coalition disagrees with Lenard, saying that cards lead people to spend more often.

In a congressional testimony, Visa defended the rate structure and objected to house resolution 2383, which constricts excessive charges. The company said merchants receive benefits from card payments, which include increased sales, guaranteed payment, convenience, and security. Visa charges 1.62 % of interchange rate per transaction for these benefits.

Visa is one of the largest card processors and most card transactions pass through their servers. Some business owners establish a minimum amount for card purchases. This is not illegal, but those amounts are technically not in accordance with processors and retailers' agreement.