Document text
Oregon Road Conditions & Cams Email Story to a Friend November 8, 2005 ‘The cost of doing business’ Credit card companies charge merchants per transaction, which can push up prices By JOHN DARLING for the Mail Tribune Few consumers realize that when they use their debit or credit card, the merchant must pay what amounts to a sizable tax on doing business, say managers of Ashland Food Co-op. That’s why they’re discouraging shoppers from using plastic. The co-op recently posted signs at checkout stands saying it spent $120,000 last year on card fees and that these expenses put pressure on prices. The signs urged people to use cash or checks, which cost the store nothing. But proponents of debit card use argue that even with the fees, debit and credit cards are still cheaper than the financial fraud inherent with check use. And customers are apt to purchase more with cards than with cash. These fees are part of a complex network of payments called "interchange." Merchants and even banks couldn’t nail down the costs exactly, but they mentioned figures of 1 to 2 percent on the dollar spent, with discounts for volume. Advertisement In addition, card companies charge 80 cents a transaction for credit cards and slightly less for debit cards, said AFC Manager Annie Hoy. "It’s going to take a lot of education so shoppers start thinking twice, that when they swipe that plastic, they’re feeding a big credit card monster, a multi-national conglomerate that’s sucking money away from merchants and from them, the consumers," Hoy said. On seeing the Co-op’s sign, shopper Kay Lund of Medford said although she no longer carried a wallet (with checkbook) and was used to the ease of plastic, she would try to bring checks in the future. Another shopper, Rebecca Brunot of Ashland, said she didn’t realize the merchant had to pay any fees on debit cards and thinks the co-op’s request to use paper transactions is reasonable. Use of cash is clearly in decline, and bad checks are a growing problem, so most sales at Renaissance Rose in Ashland are on plastic, said owner Nola Silverman. It’s a phenomena that’s "having a huge impact, costing as much as one, maybe two full-time employees," Silverman said. Although its credit and debit cards bear its logo, Umpqua Bank doesn’t have much to do with these merchant service fees, said Lonnie Hayward, Umpqua marketing and public relations director in Portland. The bank does get a portion of the money but the major credit card corporations — Visa and MasterCard — receive most of it, Hayward said. "Our merchant services fees are outsourced to separate companies and the amount is based on volume and a lot of other variables that I don’t know," said Hayward. "It’s part of the cost of doing business in this day and age, and we don’t control it." Umpqua uses Nova Information Systems to process the merchant services fees. The Nova Web site defines interchange as "the processing fee charged by Visa and MasterCard to charge the cardholders and pay the merchants. The interchange fee is actually paid to the bank that issued the card while the merchant’s bank is charged the interchange fee." Consumers, who get charged little or nothing for using plastic, may think it’s basically a free service. But do these added costs to merchants get passed onto consumers, the same as other overhead costs? Yes, said Hoy. "Our cost of goods is 66.2 cents on the dollar. The rest is personnel, utilities, administration and refund to members of 1.3 percent. Our profit is less than 1 percent. The card fees will be $140,000 this year. That’s more than four times what we pay in state and federal taxes." For Silverman, located in the highly competitive Ashland Plaza, fees must come out of profit, she said. "First they (card companies) squeeze the merchant till they’re not making any money, then the merchant tries to pass it on, but if the competition isn’t charging for it, shoppers will go there or online." Fearing loss of business, few merchants dare ban plastic, but WinCo Foods in Medford and Wiley’s Pasta in Ashland do just that. Wiley’s owner, Julie Wiley, said the practice not only avoids fees but simplifies bookkeeping and is "my way of digging my heels in and saying I want to keep my hands on physical money. It’s real." If diners don’t bring cash or checks, Wiley said, she’ll let them pay her later. "I’ve never been burned and also, this gives everyone the chance to be trustworthy." WinCo manager Kim Jeffords said the plastic-free checkouts are "because of the fees they would charge us and we’d have to set those costs back on the groceries." Steve Olsrud of Food 4 Less in Medford said he knows card fees are costly but they’re "just a cost of doing business." Cards, he added, are vital to shoppers and "in the days before plastic, we’d have customers come to the checkout and, when they found we didn’t take cards, would walk away from a $200 or $300 cart full of groceries. That was upsetting, and it was a big loss of business." Stores aren’t the only ones with added costs from card fees. Banks and credit unions, while they receive some of the disbursement from fees, end up paying to processors and Visa and MasterCard more than they get, said Mary Sutton, accounting manager for Rogue Federal Credit Union in Medford. "It’s a huge amount, I don’t know exactly how much, spread out over a large, complex network. Most, by far, goes to processors," she said. And, just like stores, banks must pass these costs along to consumers. "The amount charged to us has to come out of two places — dividends and the amount of interest we charge on loans," said Sutton. "It’s costing people more, but they’re willing to pay for the convenience and security and not always having to go to the bank for cash." On the other hand, the wide use of plastic as money cuts expenses for banks because they need fewer tellers and ATMs to handle cash and checks for customers, said Mike Moore, RFCU’s business development officer. Joe Danelson, regional president of U.S. Bank — which owns Nova — said that even with the fees, cards are cheaper for merchants than checks because studies show merchants lose more money from check fraud than card fees. "Cards are so ubiquitous now that it increases people’s willingness to spend locally. It increases the range of goods and services available and it increases sales enough to offset fees — and does it in a safer way," said Danelson. In addition, fees have come down, with efficiency and competition among processors, to about 40 percent of earlier rates, Danelson said. John Darling is a freelance writer living in Ashland. E-mail him at [email protected]. Mail Tribune Home | Local News | Sports | Business | Obituaries | Life | Opinion AP News | Archives | Site Map | Community | Classified Copyright © 1997-2005 Mail Tribune, Inc. All rights reserved. Privacy Policy | Terms & Conditions | Website Feedback www.bingo.com Home Security Systems Trunks, Footlocker dvd-r Distance Education Computer Security Ztech Media Hosting Sports Equipment Online Casino Salvia Divinorum Student Loans tcg student loan consolidation Online Pharmacy Online Casino Reviews Myspace Home Equity Loans Windermere Van Vleet Rogue Valley Travel Discount Hotel Reservations Southern Oregon Loans Online Casino News Casino Gambling Sites Budget Website Templates Online Bingo Entertainment Guide Advertisement s