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Hidden credit card fees boost cost of consumer goods

WEST PALM BEACH — Hidden credit card fees called "interchange fees" cost consumers as much as $2 for every $100 they spend.

The credit card companies and their banks charge merchants the fees, sometimes called "swipe fees," every time a credit or debit card is used. Like every other cost of doing business, the fees, averaging about 2 percent, are reflected in the price of goods and services.

While Congress considers reform of merchant fees with House Resolution 2382, the Credit Card Interchange Fees Act of 2009, introduced in May, merchants are doing what they can to fight back.

Jean Ehrbar, owner of Wholesale Verticals in West Palm Beach for 29 years, wanted to do something to lower the fees that cost her several hundred dollars a month. But as a busy business owner, she didn't have the time to tackle it, couldn't decipher the complex processing agreements and didn't know where to begin.

Then she heard about Robert Livingstone, 24, president of West Palm Beach's Palm Beach Merchant Services, which he founded in January and which deals directly with credit card processors on behalf of businesses.

"Processing fees are one of the most painful things for a business. Home Depot called it one of their five largest expenses, and 7-Eleven has said it is paying more in processing fees than it's making in profit," Livingstone said.

With more than 150 rates of interchange and terms that are unfamiliar to most people, making sense of merchant account bills isn't easy. Rates vary by type of business and its volume, type of card and more.

Livingstone monitors his 200 or so clients' statements each month to make sure adjustments he negotiates are continuing and sends them a monthly executive summary of each statement that is easier to read.

"We see which types of cards are used the most. We look for patterns and find where the merchants are being overcharged," Livingstone said.

"We are constantly renegotiating. It's a process. The merchant does not have to worry about what they are going to see. We see their statements before they do. We don't charge unless we can save them money, then we take 50 percent of the savings," Livingstone said.

Fast facts

Extra credit

The truth about interchange fees:

• The fees are set by credit card networks Visa and MasterCard, but are paid by retailers to card issuers such as Bank of America and Citigroup.

• The reason some businesses prefer customers pay with a debit card and a PIN is that card processors charge merchants more for credit card transactions.

• A credit card with rewards, such as airline miles or cash back, costs a merchant more to process than one without rewards.

• A business, corporate or foreign card carries even higher processing fees.

Sources:, and National Association of Convenience Stores

Hidden credit card fees boost cost of consumer goods 11/23/09 [Last modified: Monday, November 23, 2009 7:36pm]
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