Sunday, November 19, 2017
Business

Retailers try to cash in on new credit card fee transparency

RECOMMENDED READING


LOS ANGELES

Most small-business owners regarded the rising fees they paid to Visa and MasterCard as an unavoidable cost of doing business. Not among them was Irvine, Calif., photo processor Mitch Goldstone.

Contending that a price-fixing cartel was exploiting him and other entrepreneurs, Goldstone went to war in media interviews, blog posts and as a lead plaintiff in a giant class-action lawsuit, comparing the payment processors to drug pushers and to the railroads that profited at the expense of farmers.

What Goldstone calls his "Erin Brockovich moment" arrived with the recent $7.2 billion settlement with Visa, MasterCard and the banks that issue their cards after seven years of antitrust battles in federal court in Brooklyn, N.Y. The agreement will shift power to sellers of goods and services and could transform how — and whether — millions of Americans use their credit cards.

That's because Visa and MasterCard agreed for the first time to bargain with groups of retailers over fees, so small businesses can team up to gain leverage. The agreement also allows merchants for the first time to charge customers extra for using credit cards, so long as the charges reflect the actual cost and are broken out clearly for consumers to see.

That would drag the processing charges — formally known as interchange fees, colloquially called swipe fees — into the light, so consumers can finally see how costly they are to the businesses they patronize.

"If you ask customers what's an interchange fee, they'll say it has something to do with a freeway," Goldstone said. "And millions and millions of merchants just accepted it as a cost of doing business."

The interchange fees are complex as well as arcane. The latest version of MasterCard's online rate summary, current as of April, runs 131 pages.

The Federal Reserve last year cut debit card fees from 44 cents to 21 cents per transaction. But credit card fees run much higher, especially for popular rewards cards, averaging 2 percent of a purchase price and reaching 5 percent for minor purchases from small retailers — a cost most Americans have been blissfully unaware of.

Goldstone says the ability to bargain collectively will gradually bring down card costs for retailers, who in a competitive environment will pass along the savings to customers.

Imposing credit card surcharges is trickier. For one thing, the practice is banned in 10 states, including Florida.

Then there's the question of whether sellers even find it worthwhile to create a two-tier payment system. A previous Visa and MasterCard settlement with the U.S. Justice Department allowed merchants to offer discounts to cash customers, which has the same effect as a surcharge on credit card users. But few consumers appear to find the offer appealing.

Indeed, many retailers say credit cards are king these days, despite efforts by some jewelers, spa owners, movers and even dentists to entice shoppers to pay with cash.

Annie Williams, who runs the Los Angeles restaurant Bulan Thai, said credit cards are among her biggest expenses, with fees so complicated that "we don't know how much it's going to be until we get the bill."

The restaurant tried offering customers a 5 percent cash discount, but gave up in July "because it doesn't work," she said.

"I have to say, 95 percent of customers pay with credit cards," Williams said. "They think about the (reward) points that the credit card companies offer."

Anisha Sekar, vice president for card products at the personal finance site NerdWallet, said that despite such stories, she believes many retailers will at least experiment with charging separately for credit cards. It makes sense that the cost should be separate and transparent, she said, like the airline baggage fee that travelers can avoid by using carry-on luggage.

"If prices are going up because it costs more to transport meat, there's not a lot we can do about it. And it's shared equally by everyone who wants to buy meat," Sekar said. "But if you can break out the cost for using a credit card and can decide not to pay it (by using cash, a check or a debit card), then that's a different matter."

Goldstone thinks few merchants will impose surcharges but says the threat will force the card companies to lower their fees. "The balance of power is going to shift very fast," he said.

Comments

Stolen car crashes in St. Pete, leaving passenger, 15, with life threatening injuries

Two boys in a stolen car struck a dip in the roadway and crashed into a tree, leaving the 15-year-old passenger with life-threatening injuries, St. Petersburg police said.The crash occurred about 11:25 a.m. Sunday as the car sped west on 11th Avenue ...
Updated: 2 hours ago

Search suspended for missing Cortez boater who left from Egmont Key

The U.S. Coast Guard suspended its search for a missing 63-year-old boater on Sunday evening, two days after he and his dog were reported missing 5 miles northwest of Mead Point, just inland from Anna Maria Island.On Friday, Fraser Horne of Cortez le...
Updated: 3 hours ago
Parents, children welcome downsized MOSI in Tampa

Parents, children welcome downsized MOSI in Tampa

TAMPA — Avery, 6, slid his sneakers up the side of 200-pound rubber tire from the space shuttle Columbia and sat on top.His father, Ilder Jeannot, called for him to get off of it — usually climbing on museum displays is frowned upon. But in the new M...
Updated: 8 hours ago
Sunday Conversation: Tona Bell invites customers to enjoy a ‘digital detox’

Sunday Conversation: Tona Bell invites customers to enjoy a ‘digital detox’

Like so many small businesses, Saturday will represent a special day for Paper Seahorse owner Tona Bell. Bell’s cozy bungalow business at 211 S Howard features paper and stationery, specialty pens, vintage typewriters and crafts classes. It will offe...
Published: 11/17/17
Updated: 11/19/17
Florida jobs recover from Irma, unemployment rate drops

Florida jobs recover from Irma, unemployment rate drops

As economists predicted, the tough hit that Florida jobs took from Hurricane Irma was not long-lived. The state added 125,300 jobs in October, almost breaking even from the 127,400 jobs it lost in September. According to state figures released Friday...
Published: 11/17/17
Apple will postpone release of  HomePod

Apple will postpone release of HomePod

The Washington PostApple said Friday that it’s pushing back its plans for a Siri-powered smart speaker until sometime early next year.The HomePod speaker was announced in June, with an initial launch date set for December. Apple said that its smart s...
Published: 11/17/17
HSN, Good Housekeeping pick five contest finalists

HSN, Good Housekeeping pick five contest finalists

ST. PETERSBURG — Good Housekeeping and St. Petersburg-based HSN have chosen five finalists for their entrepreneur competition. The partners are searching for a novel item to promote as endorsed by the Good Housekeeping Seal, denoting reliability and ...
Published: 11/17/17
Trigaux: State of Tampa Bay startups? Disconnected we falter but there’s a plan to fix that

Trigaux: State of Tampa Bay startups? Disconnected we falter but there’s a plan to fix that

How are we doing?That was the Big Question posed more than once this past week in Tampa Bay. First, the Tampa Bay Partnership and USF debuted in-depth and new ways to measure Tampa Bay across a wide range of indicators to gauge whether we are gaining...
Published: 11/17/17
Tesla’s latest creation: An electric big rig that can travel 500 miles on a single charge

Tesla’s latest creation: An electric big rig that can travel 500 miles on a single charge

The main course was expected: a pair of sleek silver Tesla semi-trucks that get 500 miles per charge, go from zero to 60 mph in five seconds and — if the hype is to be believed — promise to single-handedly transform the commercial trucking industry.B...
Published: 11/17/17
We ask Tampa Bay startup leaders how best to advance entrepreneurial ecosystem

We ask Tampa Bay startup leaders how best to advance entrepreneurial ecosystem

What one thing could be added to the Tampa Bay startup community to help it grow and prosper?The Tampa Bay Times reached out to these leading area entrepreneurs and startup experts for answers.RELATED COVERAGE: Trigaux: State of Tampa Bay startups? D...
Published: 11/17/17