Thursday, July 19, 2012

What To Do About Swipe Fees?

Merchants to survive are always looking for ways to cut costs.  Some costs like healthcare rise exponentially and you need more business to make your monthly nut. When freight rates went from a fixed cost to freight plus surcharge, most tried to eliminate the impact without raising prices.  Many passed the direct cost on to their customers, but gave a bigger discount on merchandise.

The Wall Street Journal has an article about another cost that really hurts retailers who take credit or debit cards.  Banks charge an interest rate that is figured on the sale price and those fees have doubled  since 1991.

So, for example, in 1991 if you had $500,000 in retail sales and 90% were on a card, the banks would charge $5,625 at 1.125%. Eighteen years later, you are doing $1,000,000 the banks might charge 2.25% or even 3.25%. Your bank fees may be $20,250 to $29,250. That's a big chunk of money that could have gone to pay the lights or rent or healthcare or another employee.

What's a retailer to do? Some retailers experiment with adding a surcharge for cards or like some gasoline stations, giving a discount for cash. Some wish banks would charge a flat fee for running a card, but you know how that will go over with banks. Whatever you do, experts advise being open about your card policy.

"Financial reform legislation passed in 2010 offered some relief to merchants who have been struggling with rising swipe fees. That legislation allowed merchants to set a $10 minimum on credit-card purchases. It also reduced swipe fees on debit card transactions but it didn't address swipe fees for credit cards."

Hat tip to Home Furnishings Business.
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