Most people probably assume that when they buy something with a credit card, some of the money goes to the credit-card company.
What they might not realize, though, is that the charge isn’t a simple percentage of the purchase price. It’s a complicated mixture of percentages, monthly fees and per-transaction fees called “swipe fees”.
That last has long been a sticking point for retailers. If a purchase is small — and some people use credit cards to buy $1 candy bars — the fee either wipes out any profit on the sale or even forces the retailer to take a loss.
Now retailers are fighting back.
The association is among a coalition of retail associations, trade groups and small businesses nationwide that have joined forces to fight the fees.
Indianapolis Circle K stores announced Wednesday they are joining the company’s 3,000 stores in asking customers to sign a petition that asks Congress to rein in the fees and change rules on how they are set.
Legislative action is the only feasible way to change the fees, because otherwise it’s a battle between small retailers and giant credit-card companies. The credit-card industry says all the fees are negotiable, but in practice they have no incentive or reason to negotiate with small retailers — it’s a classic case of the retailer being dependent on the credit-card provider, and having next to no bargaining power.
Circle K, for instance, has 3,000 stores nationwide — not exactly tiny — and still hasn’t had any luck negotiating on the fees.
Scott Reed, Circle K’s director of marketing for the Midwest (said) “These (fees) are nonnegotiable, yet they are our third-largest cost in doing business, only past labor and rent.”
Circle K isn’t alone:
For gas stations and convenience stores, what they pay in fees in some cases approach what a store makes in pretax profits.
That adds up to big money: About $48 billion in “swipe fees” each year.
While retailers pursue legislative action, there’s a more immediate way to avoid or reduce credit-card fees: Install an ATM.
ATMs accept all major credit cards, but without any of the fees. So instead of accepting credit cards for small purchases, retailers can direct customers to the ATM. By avoiding fees and charging a surcharge, a merchant turns a transaction expense into a profit center.
This works especially well in the current economy, where people have begun using cash as a budgeting method. They don’t want to get lulled into carrying credit-card debt, so they use cash whenever possible. Stores with ATMs are more attractive to such customers — and cash-based customers are the best kind of customer to have, since they carry no fees and no worry about fraud or bad checks.
This isn’t just theory: ATM Network customers report that their credit-card fees drop an average of 30 percent or so after they install an ATM (it also virtually eliminates bad-check charges).
Yet another way to reduce credit-card fees is to have your processing done by a low-cost company. Card Network Services (CNS) is an ATM Network subsidiary that handles point-of-sale credit-card processing. CNS prides itself on having the lowest fees in the business, along with outstanding customer service. Check them out and compare them to the competition.
That three-pronged approach — legislative relief, ATMs, and low-cost processing — are the best way for retailers to control their credit-card costs.
