20 C
Wednesday, May 29, 2024
HomeFinance NewsBusiness Owners' Disapproval of Credit Card Usage: Insights from NPR

Business Owners’ Disapproval of Credit Card Usage: Insights from NPR


Related stories


The owner of SolDias ice cream shops in Texas, Victor Garcia, is urging customers to pay with cash instead of credit cards in an effort to combat high credit card processing fees. Last year, Garcia’s shops lost over $25,000 to credit card fees. He has placed signs at his shops advising customers to think twice before swiping their cards, and many are surprised to learn about the fees and express a desire to pay with cash. Retailers in the US have long been unhappy with the “swipe fees” they must pay for credit card transactions, particularly compared to Europe where fees are regulated. The pandemic has exacerbated the issue as more customers switch from cash to cards. US retailers currently pay around $160 billion a year in swipe fees, prompting some lawmakers to propose reforms to increase competition in credit card processing and reduce fees. However, the proposed bill has ignited a battle between retailers and the financial sector, while consumers remain stuck in the middle.

Swipe fees, which retailers pay for credit card transactions, can total around 2.25%, with a portion going to the card-issuing bank and the credit card network such as Visa or Mastercard. Some businesses add surcharges for credit card customers to offset the fees, while others simply raise their prices, resulting in cash-paying customers subsidizing the rewards received by credit card users. The system has been referred to as “Robin Hood in reverse,” with lower-income customers covering the costs of rewards enjoyed by wealthier customers. The higher fees associated with rewards cards make this imbalance even more pronounced. Consumers generally remain unaware of the fees and their impact on prices. The Visa and Mastercard networks dominate the credit card processing market, setting high fees that are significantly higher than those in Europe. While larger retailers can negotiate lower fees, smaller businesses have little choice but to pay whatever is demanded. Lawmakers are now pushing a bill that would introduce competition in credit card processing, but banks and credit card networks are opposing the measure, arguing that it could compromise security and rewards programs.

Victor Garcia, the owner of SolDias ice cream shops, has attempted various strategies to alleviate the burden of swipe fees, including offering cash discounts and setting prices in round numbers to avoid change. However, these efforts have had little impact on reducing his bill. As the debate over credit card processing fees continues, Garcia acknowledges that it is difficult to change consumer habits and has opted to incorporate the fees into his prices. The battle between retailers and the financial sector intensifies, with the fate of the proposed bill and the potential reduction in swipe fees hanging in the balance.

Source link


- Never miss a story with notifications

- Gain full access to our premium content

- Browse free from up to 5 devices at once

Latest stories


Please enter your comment!
Please enter your name here