In July, new legislation is designed to reduce the interchange fees charged for card transactions to 12 cents. A few legislators have submitted new legislation that would remove this new requirement. The legislation cites these fee limits as a reason companies can be “less competitive”. These limits, however, are precisely what could save smaller businesses. Article source – A small business perspective on payment systems by MoneyBlogNewz.
Interchange fee primer
Card interchange fees are, in short, fees paid for the privilege of allowing customers to use a credit or debit card. The fees cost between 12 and 75 cents every time they’re used and are called “swipe fees.". This “interchange fee” is in addition to a certain percentage of the transaction amount that is charged for use of the card. All of the percentage fees and interchange fees are taken to pay for the process. The card processor, the banks and the card machine all are paid for this way. In 2010, the fees added up to $50 billion. The U.S. interchange fees are twice and much as Europe's interchanges fees. In order to help United States companies become less competitive, congress members are attempting to push some legislation. This would make interchange fees go down.
Less individuals willing to pay an interchange fee
It is hard to determine if business enterprise should take a charge card. It costs a lot of money for an organization to pay for the credit card. This is because businesses have to pay for the credit card transactions, a percentage of the transaction and a monthly fee also. Some companies do not have lots of extra money. It is worse for these companies. Smaller businesses then have to add extra costs that are passed on to consumers. High costs, extra charges and even minimum needs are sometimes added. Consumers are likely to make bigger purchases when there are credit cards while more people are willing to use your shop.
What my experience is
My husband and I own a small business that offers a variety of products and services. It was necessary to take credit cards. We never even considered otherwise. It didn't make sense to pay the $20 to $100 monthly charge card terminal fee when we didn't have a physical location and do not make too much money with it. Start-up Square was used for our credit cards processing credit cards through smartphones and charging a flat percentage of every transaction. On an average month with $300 in sales, our company pays more than $8 in credit card fees. Added on to $30 in business taxes and $26 in sales tax we collect, the amount accessible to pay our suppliers and make a profit gets thinner. The reduction in credit card interchange fees would allow us to cut back the amount we charge consumers or be able to really hire employees. Either way, card fees may not sound like much to a consumer, however those few percentage points are what can take a small business from “su! rviving” to “competitive.”
Information from
Market Watch
marketwatch.com/story/visa-mastercard-rise-on-swipe-fee-regulation-pact-2010-06-21
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