December 07, 2010
For small-business owners, particularly merchants like me, every dollar matters, whether it's a dollar taken in or a dollar paid out. As I make plans now for my 2011 season, I find myself once again focused on how little control I have over one of my biggest expenses, one most consumers have never heard of — credit and debit card-swipe fees.
I recently read that on the day after Thanksgiving, known to retailers as Black Friday, consumers spent roughly $11.4 billion in stores around the country. I bet most of those people shopping that day had no idea that for every purchase they made using a credit or debit card, 1 percent to 3 percent of that purchase total was diverted to whatever bank issued that card. Those fees add up to more than $48 billion every year for big card-issuing banks, most of it in the form of pure profit.
Last year my business paid $24,000 in swipe fees. That may not seem like a lot compared with $48 billion collected nationwide, but compared with other costs I face, it's remarkable. These fees have been on the rise for years, more than tripling in the past decade. I am committed to serving my customers as best and most cost-effectively as I can, but these fees have forced me to increase prices and have prevented me from further expanding my business.
Earlier this year, Congress passed reforms to make swipe fees on debit transactions more fair and transparent. Specifically, Congress demanded that debit swipe fees be "reasonable and proportional" to the cost of actual debit transactions. That's great for my business and my customers because prices paid at my registers are a reflection of my costs.
But we're not in the clear yet. The swipe-fee-reform law left a number of technical issues to the Federal Reserve to settle. The Federal Reserve website shows that banks have its ear, and, not surprisingly, the banks are working hard to reduce the law's intended effect. Despite what the new law says, the devil is in the details, and the banks are trying to keep swipe fees unfair and largely under cover.
I don't mind banks and card networks making a profit; after all, they're in business for a reason, just like I am. What I have a problem with is their gouging honest businesses that are trying to survive in an unsteady economy.
Congress agrees and took action accordingly. Now, the Federal Reserve has the obligation to fix the broken market that the credit-card networks have created for themselves — a marketplace that works for credit-card networks and their big-bank customers, but works against everyone else.
Jim Lashley is president of Landscape Supply Co. in Orlando.
The original article appeared in the Orlando Sentinel on December 7, 2010.
See it on their website here:
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