New York- It is becoming more and more expensive to pay by credit card.
Smaller businesses, and even some larger ones, are charging buyers a fee for credit card purchases or offering discounts when they pay by debit, cash or check. The measures are intended to offset the various fees companies pay in credit card transactions, costs that have risen along with generous cash refunds and travel rewards, according to The Wall Street Journal.
Hard-to-get cash discount data, and less than 5% of the 8 million small businesses that accept cards in the US charge for credit card payments, estimates by payment consultancy Strawhecker Group show. But this proportion has steadily increased in recent years. Five years ago, approximately 2% of companies charged surcharges for credit card purchases.
The coronavirus accelerated change, putting companies looking for revenue to make up for lost sales in the early months of the pandemic. CardX LLC said more than 6,400 businesses, mostly online businesses, use their surcharge calculation software, compared to 4,130 last year and 2,380 in 2019.
“More businesses have been geared toward making these costs transparent to the consumer,” said John Drechny, executive director of Merchant Advisory Group, which represents U.S. businesses on payment issues.
Karen s Dairy Grove, a refrigerator on the outskirts of Cleveland, Ohio, charges an additional 25 cents when customers use credit cards for purchases under $ 5. Karen Morell, the owner, said she made that decision after cash sales fell and credit card purchases rose during the pandemic.
“My business makes cents in every transaction. If I do everything right, I have a small margin,” he said. “In a $ 5 ice cream, 25 cents is a big part of the margin.”
Card networks such as Visa Inc. and Mastercard Inc. set the exchange rates that companies pay to credit card issuers when consumers use credit cards. Merchants also pay fees to networks and other intermediaries involved in processing payments. The total dollar amount of these commercial Visa and Mastercard credit card fees has more than doubled between 2012 and 2019, to $ 67.6 million, the Nilson Report reported. Credit card use declined during the pandemic, causing a 15% drop in rates to $ 57.3 million.
The payments industry has long argued that consumers spend more when they make credit card purchases than when they use cash. He says credit cards and other digital payment methods also helped small businesses stay in business during the pandemic, when shoppers turned their backs on cash and relocated much of their money. online shopping.
Card payments also benefit small businesses by “eliminating the substantial cost of counting, storing, protecting and transporting cash,” said Jeff Tassey, chairman of the board of Electronic Payments Coalition, which represents card networks and financial institutions.
“Every day we help retailers of all sizes increase their sales by making it easy and safe for consumers to pay at any time, both in-store and online,” a Mastercard spokesman stressed. “Electronic payments became even more valuable over the past year as people looked for ways to continue shopping, while remaining socially distanced.”
A Visa spokeswoman declined to comment.
Visa and Mastercard lifted a multi-year ban on credit card surcharges in 2013 as part of a class action agreement with merchants who had accused networks and large banks of setting rates and avoiding that companies target customers at cheaper payment methods.
The surcharges were not implemented immediately, in part because some of the most populous states in the EU banned the practice. But in recent years, states like California, Florida, New York and Texas have lifted or substantially amended their surcharge bans. Colorado passed a law in July that will allow for surcharges starting next year.
Large retailers generally do not charge surcharges and instead transfer credit card rates to the customer through price increases. They consider surcharges to be a way for card companies to keep rates high. A long-running lawsuit against Visa and Mastercard and several large banks by dozens of large businesses, including Lowe’s Cos., Gap Inc. and Starbucks Corp., alleges that networks and card issuers conspire to avoid competing in matter of exchange rates.
But some larger companies have welcomed the surcharges. Life Time Inc., which operates about 160 health clubs, as well as shared workspaces and income departments in 29 U.S. states, implemented a credit card surcharge last year, citing the increase in credit card rates.
Credit card companies see cash discounts and surcharges as two different things, although for shoppers the result is largely the same.
Bob Garner, of Alabaster, Alabama, prefers to use his USAA cash back credit card on most of his purchases. The 70-year-old often doesn’t shop at places that penalize card use. Recently, he arrived by motorcycle at a gas station that charged a few cents less for cash payments than for credit cards. “It was one of those deals where you stay, ‘what the hell?’ … I got on the bike and I got really upset, ”he said.
Getting shoppers to keep their credit cards in their wallets is tricky for another reason: fewer people carry cash today.
D’s Soul Full Cafe, in Hoboken, New Jersey, has offered customers a 5% discount on cash payments for a number of years and had a minimum purchase requirement of $ 5 for credit cards.
After the pandemic began, fewer customers were able to pay in cash simply because they were carrying nothing, owner Stephen Bailey mentioned. Many customers left the store without buying anything, he indicated, urging him to remove the minimum of $ 5.
“The pandemic has really changed everything,” Bailey stressed.