C-store owners say credit card swipe fees swiping their business

Posted by Zach Hagadone on Thu, Apr 8, 2010 at 2:50 PM

For years, big credit card companies have been charging an ever-increasing set of fees on credit and debit card purchases. Now a group of Idaho convenience store owners say their patience with the practice has been overdrawn.

Charley Jones, co-owner of the state’s chain of Stinker Stores, and Pat Lewis, owner of Oasis Stop 'N Go in Twin Falls, gathered this morning with John Eichberger of the National Association of Convenience Stores to present U.S. Sen. Mike Crapo’s office with a petition signed by more than 24,000 Idahoans urging reform of the nation’s interchange fee system—commonly referred to as “swipe fees.”

Jones and Lewis contend that the fees, which are a fixed fee plus a percentage of the purchase price appended to every credit or debit card sale, are in a seemingly endless upswing and severely cutting into their revenues.

“Much to our chagrin, we’re paying more in swipe fees than we are making in profit,” Lewis said.

“It’s a wild animal that’s broken loose,” Jones added.

According to Eichberger, who serves as the VP of government relations for the NACS, swipe fees at the nation’s 145,000 or so convenience stores range from 2 percent to 2.5 percent. That means the average family spends about $400 a year in fees, raking in a total of $48 billion for big companies like Visa, MasterCard and American Express.

The fees are set by a cabal of big banks working in concert with the card companies, and the store owners want to have a say.

“For years we’ve asked Congress to reform this system … yet nothing has happened yet,” Eichberger said.

Jones said the swipe fees his Stinker stations pay have tripled since 2004. Today card fees are the second largest expense for many convenience stores, topped only by paying their employees.

“It’s not often as an Idaho businessman that I look to the federal government,” Jones said. But when faced with a “gorilla” like the card companies, he added, there’s no choice but to go to “the bigger guy”—Congress—for help.

In an interview following the press conference, Lewis told citydesk that customers—even those paying cash—should be angry, too. Because it’s against the rules to charge different prices for items based on the method of payment, the card fees are passed onto all customers regardless of how they pay.

“We’re not allowed to steer customers’ purchases toward a method of payment that’s cheaper for us to process,” Lewis said, though card companies can market all they want to push consumers toward higher-fee methods—especially credit cards.

When retailers tried to push back by installing easy-to-use debit card kiosks, the card companies just raised debit swipe fees, he said.

“To me, now, it costs basically the same thing to process credit as it does debit,” Lewis said.

At the end of the day, he added, convenience store owners don’t want to abolish the fees, they just want a say in how they’re set.

“Just the ability sit down at the table and negotiate would help,” Lewis said. “Then maybe we could get the card companies—Visa, MasterCard, American Express—to compete against each other. We’re all for free markets and all for capitalism, but as it is now, the current system isn’t reflective of either of those systems.”

Comments (3)

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Not true, the retailers want the beneficial aspects of the credit card system without having to pay for it, in Australia and other countries, the merchants KEPT THE PROFITS to themselves without lowering prices. Competition may lower prices BUT who is to say that amex or discover will lower their rates if visa and mastercard don't (visa and mastercard don't set rates).

Retailers ARE ALLOWED to have a cash discount, if they follow certain rules such as clear advertising of it, so that there are no hanky pankies.

Ever see restaurants where they have an ATM machine and you have to pay a fee to use it but they won't take cards?

I do agree, debit cards should be somewhat regulated, but regulation may or may not be free market politics, unlike credit cards debit cards do not have the same default risk of the customer not paying, although most debit card issuers do have unauthorized liability coverage.

If a unauthorized credit card transaction is posted, THE MERCHANT STILL GETS PAID.

Its not about the "BIG BANKS" "SMALL CREDIT UNION AND COMMUNITY BANKS BENEFIT FROM INTERCHANGE",

The giant retailers know that but are not going to present that side of the story, the purpose is to benefit and to keep profits as they can. The national retail foundation is the same group that doesn't like minimum wage and other regulations.

I could somewhat sympathize with minimum charges, given that a candy bar might cost a lot to process, but that may be a function of credit card companies wanting more uniform contracts across different merchants, contrary to what retailers say thay want.

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Posted by Factscanning on 04/11/2010 at 10:52 PM

FYI - you know those minimum charge requirements ... that's what it has to be for the merchant to break even on a credit/debit transaction considering the fees they pay. As for the ATMs, those are privately owned machines. The businesses don't own them, but rent the space to a vendor who makes his/her money from those fees you pay. And, of course the merchant still gets paid from an unauthorized card purchase-that's the law and very clearly lined out in the credit card agreement, as is the fact that if it's proven it's unauthorized, the consumer doesn't pay, but the credit company does. Should a merchant really take a hit because someone comes to steal from them? Should they continue to lose increasing amounts of money because the credit card companies are finding new and exciting ways of creating new and exciting fees for both the consumer and the merchant?

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Posted by Deanna Darr, Features Editor on 04/12/2010 at 5:13 PM

I am not sure how the minimum charges are outlined in an agreement, usually the fee is a fee plus a percentage, I am sure if visa and mastercard wanted more business they would want to just charge a percentage but some retailers and shops may be against that.

Business and many owners have freely admitted they will keep the extra cash to themselves, they are already allowed to give a cash discount if displayed in a clear and public matters.

The consumer does benefit from credit card interchange fees, the ability to carry a credit card with no annual fee, pay later, have rewards which may or may not be cash based (it could include extended warranties, disaster assitance,etc), furthermore credit unions beneft from interchange fees.

Perhaps maybe a negotiation about minimum charge fees and debit card surcharges can be in the works, but that is not the retailers want, they really want to keep profits for themselves, and why not? Every special interest banks included has a goal and that is to make profits, however presenting it as "sympatheic" as consumer and small business vs. big bank when it is really big business vs. big bank and consumer looking to washington is misleading.

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Posted by Factchecker on 04/13/2010 at 9:05 PM
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