Fees That Merchants Pay When You Use Credit Cards

Sometimes you will go in to a restaurant or store and try to make a purchase using a credit card only to be told that the merchant doesn’t accept credit cards at all or doesn’t accept the type of credit card that you are trying to use. Have you ever wondered why it is that some businesses refuse to accept payment from a specific credit card which is so much more convenient than trying to get cash out of the bank to make payments at these store locations? The answer is that the merchant doesn’t want to pay the fees that the merchant is charged by the card issuer for accepting that card for payment in the store.  This is an issue which is causing a lot of contention right now as Congress explores legislation addressing the way that these fees are set.

There is a fee called the interchange fee which is charged to the merchant each time that a credit card transaction occurs. The credit card industry says that the fees are minimal – only about two percent of the amount paid on the transaction. Additionally, the credit card industry says that the fees are important because they help to pay for services which include fraud protection and quick processing of payment. They say that without these fees, the services would decline and everyone including the merchants and their customers would ultimately suffer as a result.

But the merchants say that this isn’t entirely true. They believe that a large portion of the fees is going to fund the rewards program that people have on their credit cards. That’s great for those consumers who do make use of rewards cards on a regular basis and who therefore benefit from the fact that there is funding for these types of programs. But merchants and consumers say that those consumers who use credit cards that don’t have rewards on them shouldn’t have to pay fees that ultimately rewards customers to benefit at their expense.

The merchants and the consumers who are pushing for new legislation regarding this issue are not saying that there should be no interchange fees at all. Most people do seem to understand that there has to be money coming from somewhere to benefit the credit card companies or they simply are not going to be able to stay in operation providing the level of services that they currently provide (with or without those rewards programs). What these people do want, however, is for the merchants to be involved in setting the interchange fee. Right now, this fee is dictated by the credit industry which they say leads to unfair taxing of the businesses and customers that are utilizing credit cards as payment. Whether or not this legislation will pass depends on a number of different factors but it’s definitely an issue that is causing a lot of contention between merchants and credit card issuers today.

This entry was posted on Monday, September 8th, 2008 at 2:53 pm and is filed under Credit Card News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.