With the changes in the use of credit cards in the economy over the last decade the portion of credit card transactions in my business has risen dramatically. Right along with them the CC processing costs have gone up too.
Accepting credit cards is no longer optional for a small business. The combined power of Visa, Amex and MC represent a monopoly power as they collude to charge fees rather than compete and the costs to small business have become a burden.
It is ridiculous that these companies, among the most profitable on the planet, take what is in effect a 3% tax on all transactions. At least my city plows the streets and offers me police and fire protection for the tax they take on every sale! \
Please take action to force these companies to be truly competitive with each other or treat them like the monopoly they are and regulate the fees they charge. I am not talking about the small fee (Processor fees are only about 5% of my CC related costs) the processor takes which is a competitive market… I am talking about the lion’s share the card company takes and the processor simply passes through.
Yes, there are CC fraud issues to be solved, but they are not coming from me even though the card companies want me to pay for them. In any case these costs are not preventing these card companies from making record profits to date. Take the burden off small business please!
Thanks Steve! Copied and sent to all my representatives!
Yeah, what Steve says is right, regardless of whether they are monopolies or oligopolies, they are not responding to competitive forces that are needed to control prices (credit card rates in this case) and should be controlled by government regulation of their fees. When we get quotes from card processing companies, they say things like “you will pay PASS THROUGH, plus __%”. Sure, we can shop for the add on fee that processors quote (the “plus”) … that part of the total amount we pay is very competitive, but the "pass through fees are those imposed by Visa, MC and Amex … and those fees are so not exposed to the competitive pressures of most business providers. Moreover, those 3 companies go to large organizations (like Universities, sports teams, etc.) and solicit their inclusion in something called “affinity” cards that pay kickbacks to those organizations when their members get and use those affinity cards … the Big 3 then simply adjust the “pass through” rate upward for merchants accepting those affinity cards to cover the cost that the big 3 would otherwise have had to absorb … WE PAY THE COST. I endorse Steve’s position and encourage all to make your concerns known … his letter would be a good model.
Thanks! i also copied and sent it to everyone i could! we have to keep on top of this!
I’m split on this. Yes the fees suck, it is a huge chunk off my bottom line, But!
I am not aware where there has been many things where the consumer benefitted from increased government control.
If I am wrong, please make your point
Technically speaking GotRocks, WE are the consumer in the case. We have no choice but to accept the costs.
It’s not like we can go to another CC company and get a different rate, or heaven forbid, refuse to accept CC. I do not like government getting involved unless there is a absolute need. But the CC company’s have become basically a public utility in a sense.
You can not exist as a consumer or a business today without having or accepting a CC. At the very least they need to be reigned in. Or be brought under the banking industry laws to prevent the extreme amount of money they suck out of the economy for no other reason then because they can.
In Canada the most frustrating part about accepting credit cards is not knowing what the charge for the transaction is until you check your merchant statement. With all the rewards cards out there you are subsidizing your customers vacations.
[SIZE=5]Here is a link to what we pay as a merchant for the various cards. http://www.cfib-fcei.ca/cfib-documents/CCRS_lettersize_EN.pdf[/SIZE]
At this point I view credit cards as a financial utility. It is an essential service for our society as it currently functions. Just as the electric company rates are set and they can not raise them when you have no choice but to buy from them, the credit card “utility” company should not be able to pass through whatever incentives they are offering to the end consumer just because it helps THEIR business… it certainly does nothing for mine!
We can choose not to accept cards… just as we can choose to live off the grid with only solar power, but the reality is that for the overwhelming majority of us, we can not make that choice…
At this point the credit card companies are competing with each other for the consumer by adding “benefits” mostly in the form of “points” or “miles” and they simple force all of us to pay for those incentives with higher pass-through costs. It sucks and should not be allowed… This is a case of big business forcing small businesses to eat the cost and it is wrong. We should be able to choose WHICH visa cards to accept at the very least.
GotRocks, please don’t get sucked into the “too much government regulation” fails to serve the masses political refrain. In this case we have 3.8 million retail stores (and over 90,000 online sellers) generating about $2.6 Trillion, plus another $262 Billion in online sales, in yearly sales to virtually EVERY American. And virtually all retail stores and sellers accept credit cards. When “pass through fee” dollars commanded by the Big 3 get big enough, we (retailers) pass through those credit card “pass throughs” to our customers by increasing our prices … and our customers ARE Americans. All customers (consumers … the American working stiffs) would benefit from CC fee regulation.
In my apparel retail store I just love it when a customer uses his Cabela’s card or some other affinity card in my store so I can help pay for that customer to buy more stuff at Cabela’s instead of from me… I have to take the card because it is a visa, and pay a higher transaction cost because it is a card with benefits… but it produces ZERO extra sales for me. It helps Cabela’s and whatever bank is issuing that visa card, and I get to pay for it. This kind of thing can ONLY be controlled with gov’t regulation.
I am agreeing with you that we are getting hosed by card companies, so don’t get me wrong there!
All I am saying is that when I hear “We are from the government, and we are here to help you”, it usually makes things much worse!
I did not take Cards for my first 18 months, and I was basically forced to do so because so few people actually carry cash these days. What really tweaks my beak is when someone comes in to get a single bottled soft drink, and they whip out the plastic.
Sometimes I wonder if it would be cheaper for me to just give them the drink for free after adding up my cost of CC transaction, printer paper, and ink cartridges.
Here’s the response I got from one of my senators office. Someone there obviously responded to the subject I was forced to choose from a list, instead of the meat of the email I sent:
Dear Mr. Gillespie:
Thank you for contacting me regarding fees charged by financial institutions. I am aware of the high fees that some banks charge consumers. I am hopeful our financial institutions will find alternative ways to serve customers without relying on inflated fees.
The State of Florida does place some restrictions on the amount check cashing businesses may charge for transactions. I encourage you to contact your State senators and representatives to voice your concerns. Please call the Florida State Capitol at (866) 693-6748 to reach your state representative and senator.
This issue is important to me, and I am glad that you took the time to send me your thoughts. Rest assured, I will continue to work toward fair banking practices that protect Florida’s families. Please feel free to contact me in the future.
In the same way that we can decide which cards to accept (Visa, MC, Amex, Diner’s etc) I wish we could distinguish between cards based on fees… For example, only accept cards with fees below a certain level… either that or force the card issuer to limit the fees passed through and pay the cost associated with benefits they offer themselves.
In the end I think regulation is the only answer. Limit the fees like a utility is regulated. If the card issuer wants to offer benefits to attract customers that is up to them but I should not have to pay for it! Especially if the benefit offered is money going to other businesses.
For that matter, how about if Dominos Pizza offered an affinity visa card (don’t laugh, they have more customers than Cabela’s does) and every time your customer used that card in your store they were earning points toward free pizza from Domino’s that YOU are paying for?
The whole thing is WRONG. In today’s world Credit Cards are a utility not a convenience or a luxury and they should not be able to pass costs unrelated to providing the service on to the customer (us) that uses them.
Even if there were more CC companies out there, they would still offer “cash back”, “points accumulation”, kickbacks to sponsors of affinity cards, etc to get more and more card holders. In every case the holder or sponsor of the card would still get something for simply using his card, while merchants would continue to bear the burden of paying for it through the “pass through fees”. At some point the merchant’s bottom lines are severely compromised, so they act logically by increasing prices … it’s a big death-spiral circle, with only the CC companies left smiling. Credit cards are fast replacing cash in our society, and there are indeed benefits to exchanging the value of money electronically, but unmonitored price gouging should not be the price we pay for this system. The CC companies ought to be Federally regulated.
So we are back to “write your congressman” lol… yup.
The only way that I see feasible is if a large percentage of small biz people just outright refuse to take plastic!
Any ideas on how to organize something like that? and a large enough percentage of us to make the card companies take issue with it?
About a year ago, most of the midwest lost internet connectivity for almost a full day do to a main Fiber line being cut during a construction incident, so I could not run cards for the day, magically our customers had cash on them. We put a sign up at the register, and the cashiers told customers the issue before they ordered.
I don’t think it is possible to get there with a boycott. If I had to guess, a class action lawsuit is really the only thing that might work.
I tend to agree, but the only people who typically benefit from those suits are the law firms.