Some businesses have decided to stop accepting credit cards due to high processing fees, according to a new report from The Los Angeles Times. In order to avoid pushing the higher fees on to customers by charging more in their stores, merchants have instead chosen to do away with plastic all together.
Credit Card Processing Fees at About 2 Percent
The LA Times article revealed many businesses are against paying processing fees, also known as interchange fees, for credit card transactions that round out to about 2 percent of each transaction amount.
If a person spends $100, the business will have to hand over $2 to the credit card issuer. While this may not seem like a large amount, over time, these fees can add up.
It’s for this reason that companies as large as John Hancock have decided to stop taking credit card payments. The financial services giant recently told its customers in a letter that it will no longer accept payments via card for long-term-care insurance premiums “due to high fees associated with this billing method.”
Lawmakers Have Yet to Cap Credit Card Fees
On Wednesday, the Federal Reserve capped the base fee that can be charged for processing debit cards at an average 21 cents per transaction. Banks say they need the higher fees to maintain the integrity of their computer networks and fund anti-fraud efforts.
However, the Fed determined that 21 cents (plus some extra for fraud protection) is a “reasonable and proportional” price for making transactions in the digital age. The new limit for debit cards will take effect on Oct. 21.
As for credit cards, federal authorities have required that the Government Accountability Office (GAO) look into how the fees affect consumers. A report coming from the GAO concluded that “consumers who do not use credit cards may be paying higher prices for goods and service,” since merchants are passing their interchange fees onto customers.
While authorities are looking into taking actions to address the fees, for now it appears to be up to merchants to make their own decisions on how to handle the high fees. For many, the decision is simply to walk away from plastic.
Merchants should promote a savings for customers for paying with
Cash, a simple solution and a legal one allowed by the networks.
This is not rocket science! Or have the merchants offer their own
Credit system for thier customers, it will cost them more than 2%
but may they will figure out that being able to offer any customer
With a card a quick and simple process within seconds isn’t so bad.
Good suggestion there it’s easy to swipe cards but paying them after is not as easy.The convenience of credit cards can easily become a habit forming problem Indeed. Using magic plastic seems uncomplicated,so easy, but few things are as harmful to your credit rating and financial future as uncontrolled credit card use. Learn how to break out of charge card addiction with time-honored steps. I found this here: How to break your credit card dependency
I will no longer be accepting credit cards at my business. I simply cannot afford it.
Transaction fee, batch fee, monthly fee, and an annual “compliance fee”, which if you don’t pay for and complete results in an annual “non-compliance” fee.
Accepting credit cards has cost me more in fees than it has generated in business.
The fees add up to a lot more tha 2%. The mark up on items isn’t nearly as high at it used to be because of internet high volume sales. In my business, my markup can be as small as 20% and sometimes much less than that. The percent that I am charged when someone uses a card in my store is 3% OF THE ENTIRE SALE INCLUDING THE TAX, NOT INCLUDING THE SWIPE FEE. A rewards card takes 5% of the total sale. (Yes rewards cards are paid my the merchant, not the credit card co. If I only make a $2 profit on a 10.00 item, and most of my sales are that small, they take 21 cents to swipe, 50 cents of the sale including the tax = 71cents. Doesn’t sound like much does it??? But that is nearly 40% of my slim profit. If I lose that much profit from most every sale I make……I’m out of business.