Credit Card Processing Reform Desired: How Swipe Fees Are Hurting Businesses
Part of the package of services offered to businesses when they engage in credit card processing agreements involves accepting debit cards. The problem lays in the fact that the interchange rates charged for each such transaction are prohibitively high and small businesses feel the pain. It is not uncommon for a small business owner to be charged 28 cents per swipe, and for some purchases, that is just too much to bear.
Convenience stores are particularly hard hit by these excessive fees. When a customer comes in and makes a small purchase, such as a newspaper or a cup of coffee, the swipe fees, gateway fees, monthly charges and so forth actually result in the business selling at a loss. Of course, if the business turns away such customers, they probably won't return for bigger purchases either. For the small business owner this is a real "catch 22."
Congressional hearings related to swipe-fee reform have been extensive and not particularly productive. The current session is the eighth thus far, and no conclusions have been reached. In 2010 the Federal Reserve proposed a rule to restrict swipe-fees so they will be more reasonable and in proportion to the total purchase amount, but nothing has moved forward to date.
How much could the proposed changes help out small businesses? The total is estimated to be about $12 billion a year. To top it off, there is no logic to the high charges. It costs the banks much less to have customers use their debit cards for transactions instead of checks, and there are no exchange fees at all on checks.
Not surprisingly, the credit card companies are in a tizzy over the prospect of decreased fees or any regulation at all. What is particularly odd about their objections is the fact that they voluntarily dropped swipe fees to 0.2% in Europe last year during which time they increased U.S. merchant network fees by 30%. The math just doesn't add up.
Whether anything will change is highly questionable ad uncertain. After eight rounds of hearings nothing has been agreed to, and there are few signs that the parties actually wish to reach a reasonable agreement. In the meanwhile, small business owners will continue to struggle with the dilemma; convenience
or profitability.
Part of the package of services offered to businesses when they engage in credit card processing agreements involves accepting debit cards. The problem lays in the fact that the interchange rates charged for each such transaction are prohibitively high. It isnt uncommon for a small business owner to be charged 28 cents per swipe, and for some purchases, that is just too much to bear.
Convenience stores are particularly hard hit by these excessive fees. When a customer comes in and makes a small purchase, such as a newspaper or a cup of coffee, the swipe fees, gateway fees, monthly charges and so forth actually result in the business selling at a loss. Of course, if the business turns away such customers, they probably wont return for bigger purchases either. For the small business owner this is a real catch 22.
Congressional hearings related to swipe-fee reform have been extensive and not particularly productive. The current session is the eighth thus far, and no conclusions have been reached. In 2010 the Federal Reserve proposed a rule to restrict swipe-fees so they will be more reasonable and in proportion to the total purchase amount, but nothing has moved forward to date.
How much could the proposed changes help out small businesses? The total is estimated to be about $12 billion a year. To top it off, there is no logic to the high charges. It costs the banks much less to have customers use their debit cards for transactions instead of checks, and there are no exchange fees at all on checks.
Not surprisingly, the credit card companies are in a tizzy over the prospect of decreased fees or any regulation at all. What is particularly odd about their objections is the fact that they voluntarily dropped swipe fees to 0.2% in Europe last year during which time they increased U.S. merchant network fees by 30%. The math just doesnt add up.
Whether anything will change is highly questionable. After eight rounds of hearings nothing has been agreed to, and there are few signs that the parties actually wish to reach a reasonable agreement. In the meanwhile, small business owners will continue to struggle with the dilemma; convenience or profitability.
Convenience stores are particularly hard hit by these excessive fees. When a customer comes in and makes a small purchase, such as a newspaper or a cup of coffee, the swipe fees, gateway fees, monthly charges and so forth actually result in the business selling at a loss. Of course, if the business turns away such customers, they probably won't return for bigger purchases either. For the small business owner this is a real "catch 22."
Congressional hearings related to swipe-fee reform have been extensive and not particularly productive. The current session is the eighth thus far, and no conclusions have been reached. In 2010 the Federal Reserve proposed a rule to restrict swipe-fees so they will be more reasonable and in proportion to the total purchase amount, but nothing has moved forward to date.
How much could the proposed changes help out small businesses? The total is estimated to be about $12 billion a year. To top it off, there is no logic to the high charges. It costs the banks much less to have customers use their debit cards for transactions instead of checks, and there are no exchange fees at all on checks.
Not surprisingly, the credit card companies are in a tizzy over the prospect of decreased fees or any regulation at all. What is particularly odd about their objections is the fact that they voluntarily dropped swipe fees to 0.2% in Europe last year during which time they increased U.S. merchant network fees by 30%. The math just doesn't add up.
Whether anything will change is highly questionable ad uncertain. After eight rounds of hearings nothing has been agreed to, and there are few signs that the parties actually wish to reach a reasonable agreement. In the meanwhile, small business owners will continue to struggle with the dilemma; convenience
or profitability.
Part of the package of services offered to businesses when they engage in credit card processing agreements involves accepting debit cards. The problem lays in the fact that the interchange rates charged for each such transaction are prohibitively high. It isnt uncommon for a small business owner to be charged 28 cents per swipe, and for some purchases, that is just too much to bear.
Convenience stores are particularly hard hit by these excessive fees. When a customer comes in and makes a small purchase, such as a newspaper or a cup of coffee, the swipe fees, gateway fees, monthly charges and so forth actually result in the business selling at a loss. Of course, if the business turns away such customers, they probably wont return for bigger purchases either. For the small business owner this is a real catch 22.
Congressional hearings related to swipe-fee reform have been extensive and not particularly productive. The current session is the eighth thus far, and no conclusions have been reached. In 2010 the Federal Reserve proposed a rule to restrict swipe-fees so they will be more reasonable and in proportion to the total purchase amount, but nothing has moved forward to date.
How much could the proposed changes help out small businesses? The total is estimated to be about $12 billion a year. To top it off, there is no logic to the high charges. It costs the banks much less to have customers use their debit cards for transactions instead of checks, and there are no exchange fees at all on checks.
Not surprisingly, the credit card companies are in a tizzy over the prospect of decreased fees or any regulation at all. What is particularly odd about their objections is the fact that they voluntarily dropped swipe fees to 0.2% in Europe last year during which time they increased U.S. merchant network fees by 30%. The math just doesnt add up.
Whether anything will change is highly questionable. After eight rounds of hearings nothing has been agreed to, and there are few signs that the parties actually wish to reach a reasonable agreement. In the meanwhile, small business owners will continue to struggle with the dilemma; convenience or profitability.
