Curbs sought on fees stores pay credit card companies
Chicago
Sun-Times
May 8, 2010
By: Abdon M. Pallasch
Every time you pay by credit card instead of cash, that costs the store owner 1 percent to 3 percent and sometimes more, Sen. Dick Durbin said Friday.
As part of the Wall Street reform bill Congress is debating, Durbin plans to bring up an amendment next week that would regulate how much credit card companies could charge businesses for so-called "interchange fees."
Sinisa Rasberger, who owns a health food store downtown, was just notified his rate was going up from 2 percent to 3.5 percent. There is no negotiation or appeal. Rasberger can accept 96.5 cents on the dollar for credit card purchases in his store or he can stop accepting credit cards.
Merchants cannot even post signs offering customers a discount for cash purchases, or Visa and Mastercard will cut them off, Durbin said at the Potash Bros. Supermarket.
"Historically, supermarkets operate on very small margins -- 1 to 2 percent," Art Potash said. "We pay about $20,000 a month in interchange fees."
Even as consumers have switched over from credit cards to debit cards -- which cost the banks less money to service -- the banks that issue credit cards have kept raising their interchange rates for pure profit, Durbin said. The credit card reform bill empowered regulators to make sure the banks did not overcharge consumers, but it did not restrict how much the banks could charge businesses. Durbin's amendment would change that. "We're in for a fight on this one," he said.
Every time you pay by credit card instead of cash, that costs the store owner 1 percent to 3 percent and sometimes more, Sen. Dick Durbin said Friday.
As part of the Wall Street reform bill Congress is debating, Durbin plans to bring up an amendment next week that would regulate how much credit card companies could charge businesses for so-called "interchange fees."
Sinisa Rasberger, who owns a health food store downtown, was just notified his rate was going up from 2 percent to 3.5 percent. There is no negotiation or appeal. Rasberger can accept 96.5 cents on the dollar for credit card purchases in his store or he can stop accepting credit cards.
Merchants cannot even post signs offering customers a discount for cash purchases, or Visa and Mastercard will cut them off, Durbin said at the Potash Bros. Supermarket.
"Historically, supermarkets operate on very small margins -- 1 to 2 percent," Art Potash said. "We pay about $20,000 a month in interchange fees."
Even as consumers have switched over from credit cards to debit cards -- which cost the banks less money to service -- the banks that issue credit cards have kept raising their interchange rates for pure profit, Durbin said. The credit card reform bill empowered regulators to make sure the banks did not overcharge consumers, but it did not restrict how much the banks could charge businesses. Durbin's amendment would change that. "We're in for a fight on this one," he said.