WASHINGTON, D.C. (BRAIN)—When the Senate imposed price controls on debit transactions, it looked like a big win for retailers on paper.
And while it may help some retailers in how much they have to pay the banks with every swipe of the debit card, the recent amendment to the Senate’s financial legislation didn’t address credit card fees, which are higher and more of a concern to many bicycle dealers.
“I was surprised they didn’t address credit card fees,” said Dmitri Keating, co-owner of Old Town Bicycle in Gig Harbor, Washington. “The bank wants everyone [retailer] to run it as a credit card.”
And with good reason. Fees are typically much higher when it comes to processing credit card transactions. In Keating’s case, a credit card purchase will cost Old Town Bicycle 2-3 percent per transaction, while debit will cost 25 cents.
“There’s a break even point,” Keating said. He tells his staff to run all transactions over $30 as debit, and under $30 as credit, thus minimizing how much money they have to pay the bank per transaction.
Randy McGhie, owner of McGhie’s Ski and Bike in Las Vegas, said his credit card rates per transaction are pretty reasonable at 1.5 – 1.8 percent. This is in large part due to McGhie’s good relationship with his bank and the fact his business moves a high volume of product. Even with these low credit card fees, McGhie tells his staff to “always push the debit.”
National Bicycle Dealers Association executive director Fred Clements said retailers he’s heard from over the years have complained more about the way the overall system operates, rather than the cost associated with processing cards.
Clements cited a “lack of transparency on fees,” which has created a smoke and mirrors effect for retailers.
There are also higher fees associated with rewards cards of various types that are ultimately paid for by the retailer, according to Clements.
“Why should the retailer pay more so a consumer can enjoy perks?” Clements said. “From the consumer perspective, it’s nice to get something for nothing. For the banks, they get to offer perks as a marketing hook. For the retailer, they really get nothing other than the ability to process a transaction. It’s just not right that the retailer has to pay for perks and marketing that benefit others. I hope this legislation will help make this fairer for the retailer.”
For more on how retailers deal with debit/credit card transactions and how they think this new legislation will impact their business, be sure to read the June 15 issue.