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Credit Cards and Retailers

Monday, October 29, 2007

Present days, credit card deals are almost a must for consumers and for retailers as well. Customers love their plastics, as it's very fast and convenient to use them. And merchants keep pace with new technologies and try to meet the demands of their clients. It must be said that not all retailers benefit from this form of payment. Some small businesses like convenience stores and gas stations lose their profits rapidly because of credit card acceptance costs. Are there any ways to avoid them?

It's not news that credit card processing fees have become a heavy burden for retailers. National Association of Convenience Stores (NACS) reported about credit card acceptance fees of $6.6 billion dollars - an increase of more than $1 billion dollars in comparison with the previous year. It must be mentioned that credit-card fees are the second largest expenses after labor costs. Anyway, retailers and experts believe that solutions can be found.

The main problem is so-called "interchange fees". And they're significantly higher in the U.S. than in other countries. For example, in Europe and Australia these rates have been decreased by 0.4%. In fact, this interchange is the largest component of credit-card fees. Over the past years, interchange fees have increased greatly. And it had certain consequences.

"Although gas prices have jumped, we are not in the black because of high credit-card fees," says Joseph Thomson, an owner of the filing station. "Out of dime on gas and fuel, 6 cents go to credit card companies and only 4 cents will go for gross profit. There's no point in such deals!"

While credit consumers take advantage of gasoline credit cards, retailers keep on losing their profits. NACS gives a helping hand to retailers. It is working on various programs that will help to solve this problem. For example, the "interchange plus" program allows to choose a card processor. And your choice does matter!

There are two types of card processors and the difference lies in the way they charge. Your card processor may charge either percents or cents. And if you use the second type, the card acceptance fees will remain the same. In other words, you won't face higher credit-card fees if the prices grow.

Along with associations and experts, individual chains also try to find the possible solutions. In what way? Their response to credit card companies is the development of proprietary credit cards. First of all, it's a good motivation for current and new customers. And the benefits for merchants are obvious. It appears to be cheaper to issue the cards and run all card services than to pay transaction fees. Such programs save merchants thousands of dollars every year.

In general, credit card processing fees seem to be quite manageable in some situations. But still this problem remains very urgent for a great number of retailers nationwide. Experts share the opinion that only drastic measures will allow to achieve some positive results. Maybe someday, retailers and credit card companies will reach an agreement, and credit card deals of store customers won't be a problem for business owners.