Swipe fees hurt businesses

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These days, small businesses struggle more than ever to stay open, with a rocky economy and faltering consumer confidence. Exorbitant debit-card "swipe fees" that big Wall Street banks place on every single transaction we have stresses our business even more, and is putting us on a path toward having to close shop.

Big banks justify their "swipe fees" as necessary to cover costs, yet research has shown that the actual cost of processing these transactions scarcely exceeds one cent -- but the fees exacted by big banks and credit card giants amount to a $14 billion loss for merchants.

These "swipe fees" serve no other purpose but to allow gigantic banks to continue lining their pockets on the backs of hard working middle-class Georgians.

That $14 billion is an exceptional cost on small businesses. With that amount of money saved we could expand inventory, lower prices and hire additional employees to serve customers. These swipe fees are covering far more than the costs of facilitating the transactions -- which has even been admitted by card issuers while they lobby to increase their strangle hold on small businesses.

AS IF THE NEGATIVE impacts on small businesses weren't enough, big banks now are threatening our state government that they will stop issuing free debit cards for welfare recipients if swipe fee reform is upheld. The banks and state government are expecting small businesses to subsidize free debit cards for welfare recipients, despite that we already pay more than our fair share through property taxes, income taxes, sales taxes, payroll taxes, etc.

We shouldn't be saddled with ridiculous swipe fees under the excuse that they keep free debit cards available to our state government. This not only hurts governments, it hurts consumers who are forced to shell out more money with each transaction to satisfy the appetite of the Wall Street banks. Swipe fees don't bankroll state programs -- they pad the banks' bottom line.

Big banks wish to delay swipe fee reform for as long as possible to continue receiving their egregious profits. One Wall Street bailout was enough. Is the government really going to drive us into the ground by placing this burden on Main Street's back?

U.S. Sens. Johnny Isakson and Saxby Chambliss recognized the stifling effect these excessive fees have on small businesses when they voted for swipe fee reform. Both have their priorities straight.

JUMP-STARTING OUR economy by removing unnecessary obstacles to small-business success is clearly high on their agenda than securing hand-outs for Wall Street fat cats. Chambliss and Isakson deserve thanks and praise for sending a clear message that the interests of Wall Street must not trump Main Street.

As a small-business owner, I know firsthand how detrimental it is to raise prices to cover swipe fee costs. It harms me and it harms my customers. The more I can lower my costs, the more competitive I can be and the more goods and services consumers can afford.

If we continue to be constrained by swipe fees, the notions of growing, adding jobs and even maintaining the positions we currently have all get called into question.

(The writer is president of Pacer Fuels and past-president of the Georgia Association of Convenience Stores.)

Comments (5) Add comment
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Riverman1
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Riverman1 04/29/11 - 07:08 am
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It is a perplexing dilemma.

It is a perplexing dilemma. Credit cards have become a form of currency that banks are taking a cut of everytime one is used. That's a problem. Cash is going the way of bartering with salt. If we guarantee banks and bank deposits, it seems like we should be making the rules.

soldout
1280
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soldout 04/29/11 - 08:20 am
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If places would give a

If places would give a discount for cash more would use it. I think we all should use more cash to reduce tracking of all you do. Using cash causes the average individual to spend at least 5-10% less over a month's time. Cash makes you think when you buy and cards do not. The more I use cash the better I like it in all respects.

WW1949
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WW1949 04/29/11 - 09:19 am
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As a small business owner who

As a small business owner who takes credit cards, It is against the law to add the swipe fee to the posted price but it is not against the law to give a discount for cash. My fee is approximately 3-to 3.5% and most of my sales are in the 3000.00 to 6000.00 range. I do not take cards for that high a sale and put in my contract no credit card use unless you pay the fee. All our work is on a check or cash basis and the customer knows that up front. Most will then pay by check. Recently I was helping my mother purchase a new car and wanted to put it on my credit card and the dealer said no. I only wanted to use it because of the 1% cash back.

CabisKhan
164
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CabisKhan 04/29/11 - 09:36 am
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Because of Gov't's new

Because of Gov't's new regulations on "big banks" concerning elimination of penalties for bad checks,overdrawm accounts, purchases beyond the credit limit,foreclosure restrictions, etc. they have had to shift their profit sources unto the backs of respondsible people to maintain their profits; profits that are necessary to keep them in business. The former system was not broke but the gov't decided to fix it anyway with subsequent results.

follower
59
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follower 04/29/11 - 09:52 am
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soldout, if you give a

soldout, if you give a discount for cash, are you not realizing the same net effect? And if more people DO use cash, won't that make the banks adjust their fees even higher to cover the loss in revenue?

Credit cards are a cost of business. I don't like the fee as a business owner, but realize that my prices must reflect the fees as an expense.

But I do agree with using cash to keep the "spies" from tracking you.

CabisKhan, you are correct. By removing penalties for the irresponsible, the banks are making up the shortfall on the backs of the creditworthy.

Of course, that's pretty much what government does.

Little Lamb
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Little Lamb 04/29/11 - 12:52 pm
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The premise of Mr.

The premise of Mr. Tomaszewski's column is absurd. He wants us to believe that the federal government should substitute its own "swipe fee" formula for whatever formula is in place now. Having the government set prices doesn't usually work out for the average guy.

Mr. Tomaszewski would have us believe that elimination of the swipe fee would allow his business to compete against other businesses. Poppycock. They're all playing on a level field now. If the swipe fees go down, then everybody gets to lower prices.

I like WW's idea up above. Give discounts to people who pay cash.

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