In the next few months, congressional legislation is set to reduce debit and credit card interchange fees to 12 cents per transaction. A few legislators have submitted new legislation that would remove this new requirement. The legislation cites these fee limits as a reason companies could be “less competitive”. For small business owners, this legislation would not improve competitiveness. Instead, these fee limits are what could keep smaller businesses competitive. Post resource – A small business perspective on payment systems by MoneyBlogNewz.
Charge card fees just to have it
Card interchange fees are, in short, fees paid for the privilege of allowing consumers to use a credit or debit card. These are called “swipe fees,” as well. They cost between 12 and 75 cents every time someone utilizes the card. This “interchange fee” is in addition to a certain percentage of the transaction amount that is charged for use of the card. All of the percentage fees and interchange fees are taken to pay for the process. The card processor, the banks and the card machine all are paid for this way. Last year, the fees added up to $50 billion. There are very high interchange fees in the United States though. They are twice as high as Europe's are. To be able to help U.S. businesses become less competitive, congress members are trying to push some legislation. This would make interchange fees go down.
Less people willing to pay an interchange fee
For a small business, the decision of whether to accept cards is tough. Accepting credit cards means paying a fee and a percentage on every charge card transaction, plus most charge card processors charge a monthly fee, so the costs are high. It is worse than that for smaller businesses that do not have a lot of additional money. Even with accessible alternatives that reduce cost, any small business could have to eventually pass on the cost to consumers through minimum purchases, higher prices or additional charges on card payments. There are benefits; accepting cards means customers are more likely to make bigger purchases, and more customers are willing and able to pay for your product or service.
I have a small business
My husband and I own a small business that offers a variety of products and services. Whether we should accept credit cards were never really a question — it was a necessity. It did not make sense to pay the $20 to $100 monthly credit card terminal fee when we didn't have a physical location and don't make too much money with it. We chose start-up Square to run our credit cards, which charges a flat percentage of every transaction and processes credit cards through smartphones. Our small business only has to pay about $8 in credit card fees since we only make about $300 a month. The profit goes down quite a bit after adding on $30 in small business taxes and $26 in sales tax. The suppliers have to be paid as well. The reduction in charge card interchange fees would allow us to cut back the amount we charge customers or be able to actually hire employees. Companies can go from "surviving" to "competitive" with a decrease in the small percentage points of! interchange fees.
Articles cited
Market Watch
marketwatch.com/story/visa-mastercard-rise-on-swipe-fee-regulation-pact-2010-06-21
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