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July 05, 2010

  • News:  Small Bus Surviving Swipe Fee Burden

    Small merchants and restaurant owners continue to be burdened by high the high cost of processing credit card payments. According to the Wisconsin Restaurant Association (WRA), debit and credit card swipe fees cost small business owners 2 to 3 percent of each transaction and have increased by 300 percent over the past decade. Furthermore, the National Retail Federation (NRF) reports that swipe fees cost small businesses over $20 billion in debit card swipe fees alone last year, not to mention another $20 plus billion in credit card fees. Under the wake of the recent recession and new legislation, banks have restructured fees and interest rate plans where consumers have become very disillusioned with cards in general. Many Americans have drastically cut spending and remains committed to cash, check, or debit card.

    A new bill passed by the House will help to lighten the burden on small business owners and merchants by limiting lenders freedom to raise swipe fees and allow merchants to offer discounts to consumer for not using their credit card payment. Included in the bill is an amendment sponsored by Senate Majority Whip Richard Durbin (D-IL) that requires the Federal Reserve to set regulations resulting in "reasonable and proportional" debit card swipe fees. Under the amendment, the Fed would consider the banks cost of processing debit card transactions and the fact that regular paper checks are processed at the same bank at face value without charge. The amendment would also allow merchants to offer a discount or other benefit to customers who pay by cash, check or debit card rather than credit cards.

    Additionally, if the bill is signed into law, it would allow merchants to set minimum purchase amounts of up to $10 for credit card transactions. Something that has been strictly prohibited by the major card networks, Visa and MasterCard. Although the financial reform bill relieves some of the merchants burden. there still remains the question of credit card swipe fees. The new bill only addresses the issue of debit card swipe fees and with purpose does not pertain to credit. That issue remains to be resolved.

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