in NY it's illegal... they tried that a couple years ago with gas and there was a lot of trouble over it
Posted on 10/06/2013 5:01:28 PM PDT by Borges
I’m a serial retailer. For most of my adult life I’ve owned and operated gas stations, convenience and liquor stores, and now a small group of Burger King restaurants. It’s been a unique perch from which to watch the “plasticizing” of America and how credit card companies and the nation’s biggest banks are allowed to operate like a cartel and, as a result, drive up the price of goods and services.
When I opened my first store in 1994, cash was king and “charge cards,” as they then were called, were status symbols held by a tiny number of affluent customers. When I served my first burger just 10 years ago, the fast food business was cash only. No more.
Today, almost everyone carries at least one credit or debit card that they routinely use for purchases of every size, and many people, about a third of my customers, freely use them instead of cash. But cards aren’t free.
Every time a credit or debit card is swiped, the big banks that own the big payment card companies like Visa and Mastercard charge the business taking the card a fee — usually 2 to 3 percent of the total sale. The bigger the sale, the bigger the banks’ windfall since it doesn’t cost any more to process a big transaction than a little one. Perversely, the banks have even figured out how to make their highest swipe fee margins on the tiniest sales! On small transactions, which are subject to high fixed fees, my customers and I get hit 3 or 4 times harder than usual. A $2 “Dollar Meal” order, for example, puts a 9 percent cut in these companies’ pockets. This isn’t about pennies.
Last year, swipe fees were my biggest expense after meeting payroll, buying food and supplies and paying for utilities. Put another way, in a business where margins for me and my fellow franchisees usually run between 1 and 3 percent, 1 to 2 percent of my total revenues last year went to pay swipe fees.
That’s real money that isn’t going back into my business to hold prices down, up employee hours or hire new people. Multiplied by millions of small businesses like mine, that’s at least $50 billion every year that’s lining the pockets of big banks instead of boosting America’s economic recovery.
In fact, a recent economic study conducted by Robert Shapiro of Sonecon LLC, an economic analysis firm, found that reducing debit and credit swipe fees to 12 cents and 24 cents respectively per transaction would put $34 billion back into the hands of consumers and create more than 154,000 new jobs annually.
Worse yet, since together Visa and Mastercard control 80 percent of the payment processing market, swipe fees will keep going up and up unless the people who make and enforce our competition laws do more to end their stranglehold on the market. They’ve got more than enough grounds to act.
In 2010, Congress told the Federal Reserve to look into debit card swipe fees and make sure fees were reasonable compared to what a sale actually costs the card companies. Somehow, after finding that the real per-transaction cost was only about 4 cents, the Fed decided to let card companies charge up to 6 times that much! Fortunately, a federal court this summer found that the Fed had ignored Congress’ clear instructions and ordered the agency to recalculate maximum debit fees based on banks’ actual costs.
Meanwhile, European authorities also looked into the true cost of processing debit and credit card sales. They recommended that swipe fees in the EU should be just 0.2 to 0.3 percent of the sale. Banks in the U.S. get away with charging up to 10 times that much. In retail, there’s a word for that. It’s called gouging.
As a businessman, I’m certainly not saying that “paying with plastic” provides no benefits to business, or that Visa and Mastercard shouldn’t make a fair profit themselves. That’s not the way the economy and free markets are supposed to work. I am saying that with two behemoths controlling 80 percent of it and keeping fees hidden, the payment card market isn’t free and isn’t working.
Once regulators restore it to balance and increase transparency, they and consumers can expect fierce competition in virtually all spheres of retail to convert illegitimately high swipe fees into consumer savings, job growth and employee benefits. With more and more of my customers — and every other American small business’ customers — using more and more kinds of payment cards every day, there’s no time to lose.
Maruti Seth owns and operates nine Burger King franchises in East Central Illinois.
Its good to have a monopoly
He’s running on 1-3% margins?
He should give cash discounts. I remember when retail clerks used to ask “Cash or charge?” There are some retail oil companies that give a discount if you use their card. They don’t have to pay a fee to themselves.
Too bad. When I eat at Burger King (every year or two) I pay cash. If he doesn’t like it, he should tell Burger King to issue their own credit card. I always pay $40-50 cash at my local gas / convenience store because it is not a chain and I don’t want them losing 2% when their gas margin is only a few percent. The main reason is they are 3 miles away and the next nearest is 7 miles.
Our local store charges extra if you use a credit card on small purchases. And several of the restaurants we go to in town do the same thing.
I use a credit card because it’s a lot more convenient than carrying a lot of cash around. But that may change, as the banks charge more and more for the privilege.
High net worth customers like to use Amex, though, so refusing to take it is not a good option.
So pay cash.
At some gas stations' pumps I get the cash price when using a debit card.
When I was in retail back in the 70's we used to play banks off against each other to get lower rates. Our McVisa rate at one time was only 0.79 percent. A regional bank in Florida gave us a merchant account at that rate even though we were a Houston retail company.
Some merchants do that. But technically it’s a violation of their merchant agreement. The bank could terminate the merchant’s account for it.
The credit card companies need to make money too and they provide a valuable service by making it unnecessary for consumers to carry around cash.
I think the government regulated those recently. That should have been left alone just like credit cards. Once the fees are high enough the market will create cheaper alternatives especially in the age of the internet.
Bit of an over statement. I’ve had a charge card since the early 1980s and was most certainly not a member of an any small club of “affluent customers.” then. I am not today, as well. That said, I’ve never used a credit card at a fast food joint.
“When I opened my first store in 1994, cash was king and “charge cards,” as they then were called, were status symbols held by a tiny number of affluent customers.”
in NY it's illegal... they tried that a couple years ago with gas and there was a lot of trouble over it
Our business did NOT accept Amex.
For one, it was too easy for the customer to dispute the charges (which some do to try and scam you) and it was hell trying to get paid after a claim like that.
Plus the fees. We gave it up a dozen years ago. Visa, MC, and Paypal, check, money order, or cash (which we offered a 10% discount for) were our offerings. Take it or leave it, or find another contractor. We also did our financing through our own credit union / bank for big jobs. Too much risk for us to do the financing.
I think debit cards ave smaller fees. “
If you are a merchant that accepts credit cards there are all kinds of fees that are charged, depending on the means you use to process the card. The new Square charges a flat fee regardless. On-line terminal input of recurring charges charges less for debit cards but way more if a card has a special program linked to it - like the airline mileage accumulator. Just depends and there is no way to tell what the percentage will be until you check your monthly statement.
Convenience matters more to customers than what the merchant is being charged - unless you happen to be one of those merchants.
He should give cash discounts. I remember when retail clerks used to ask “Cash or charge?” There are some retail oil companies that give a discount if you use their card. They don’t have to pay a fee to themselves.
I agree,,,,but some states now have laws to prevent this, and, the credit card companies will not allow you to do this in their contracts w stores.
Some of the immigrant stores still charge less for cash...but most are prevented from laws and credit card/bank contracts
This is all part of crony capitalism, and what happens when governments sticks its nose into the markets.
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