The Biz of Pacelinebiz

Turning things on end to achieve results!

Have Credit Card Companies Gone Too Far?

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Fight back!

Have the credit card companies killed the goose that laid the golden egg?  Credit card fees have crept up and I have seen some as high as 3.5% that pay 30 days after the transaction date!  That is heinous. Credit card fees vary by industry, volume of transactions, average swipe amount and other factors.  I think it is time that some small businesses take radical action.  Stop accepting credit cards.  This will not be possible at every establishment but I think there are some that this could work.  In my personal dining experiences, I have noticed that in the restaurant industry this has become a more frequent practice.  Let’s examine this idea closer.  Maybe it makes sense in certain situations.

As a hypothetical example let’s assume we have a restaurant that has $1.5 million in annual sales with credit cards.  Let also assume that the fee they pay is 1.5%.  That means for the year they will pay fees of $22,500.  If this restaurant is a middle of the road establishment with a mostly middle class customer base, doesn’t it make sense for them to do a little work and convert the credit card (and debit card) customers to a check or cash paying customer?  There would be a small, initial education effort and some administrative work at the outset to create their own a check cashing card program but once it had been rolled out the work would be minimal.  Occasionally, there would be a need to convert a few credit card users.  If the program was done right, the savings would be substantial and the cost would be minimal.  Of course there would be bad checks but even if there were 20 bad checks per month that totaled $1,000 each month or $12,000 per year the restaurant would still be better off by $10,500.  This may seem extreme but as I mentioned earlier, I have seen this happening on an ever more frequent basis and I am sure that the fees have driven business owners to taking this cash or check approach.

An example of how out of hand credit card fees have become can be seen below in the highlighted text or by clicking on this link to read the entire article.  (Credit card fees exceeded the entire profit of the entire convenience store industry for the 5th year in a row.  That is a nice piece of the action!)

Swipe fees are the convenience and fuel retailing industry’s top pain point and second largest expense item — behind only labor costs. Credit and debit card fees at convenience stores jumped a staggering 21.6 percent to hit a record $9.0 billion in 2010, surpassing overall convenience store industry profits for the fifth straight year. As a percentage of overall sales, credit and debit card fees increased from 1.45 percent to 1.56 percent of total industry sales dollars, factoring in all forms of payment, including cash and check. Just looking at motor fuels sales, credit and debit card fees added 4.7 cents to every gallon of gasoline sold at convenience stores in 2010

It is now time to take a stand to keep more of your profits and Turn Things On End To Achieve Results!  In some industries there is no choice but to fight back.  Have a great week.

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Written by pacelinebiz

October 24, 2011 at 7:15 am

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