As a small business, credit card companies add noticable cost to the products we are providing. Credit card companies make much of their money off transaction fees applicable each time a card is swipped – and its no flat fee. They take a % of all revenues collected in this manner, and the smaller a business is the higher the % taken. Credit card fees account for thousands of dollars every year – and, just like everywhere else, that gets built into our prices.
Credit cards also contract out "processing" work to various companies all getting their fingers in the pie. For us, this means paying fees to several extraneous entities claiming to be providing a service to us – as far as we can tell the only function they serve is to send a bill. One of these extraneous companies sends us a bill for a lease on the terminal, while another sends a bill for the administration of the processing. A third company then insures the terminal. Each collect a monthly fee for the service they provide, on top of any transaction fee. These are $33.59/$45.00/$10.50 per month respectively, totalling $1069.08 per year just to offer the ability to accept credit cards. Since they lock you into 5 year contracts, it costs $5345.40 to purchase the ability to accept credit cards over the term of the contract.
But the costs don’t end there, either.
Recently the Canadian Federation of Independent Business brought action to the Competition Tribunal with respect to "alleged" unfair practices surrounding credit card reward programs. Every rewards program is financed by fees attached to the % businesses are charged for each transaction. For a credit card with no rewards program, we pay a 2.6% fee to Visa or Mastercard, but when another card has some type of travel or other reward program, the we pay a (2.6+Y)% fee.
These fees end up getting built into the prices charged by retailers, which means that everyone not collecting these rewards programs are in fact partially paying for the rewards that others are earning. Doesn’t sound fair, does it?
And its not a matter of choice – retailers are contractually obligated to accept any card presented for payment. We are not allowed to opt out of these rewards programs if we want to continue to accept credit cards at all.
The end result for the consumer is that you are paying an inflated price in order for the individuals with rewards on their credit cards to earn them.
In the end, the Competition Tribunal rejected the action citing a lack of jurisdiction to allow businesses to reject cards with an attached processing fee deemed to be too high. It looks like its now up to our federal legislature to take direct action on this issue, or allow credit card companies to continue to force all consumers to pay for some extra bonuses only a portion of us receive.
Can we really blame the bloodsuckers when they refuse to stop sucking? Maybe not – we just need some repellent.