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7-11 gathers signatures to fight credit card fees

By Steven Bryan

High percentage of interchange feesAlong with milk, chewing gum and its trademark Slurpees, 7-Eleven stores across the country are offering their customers the opportunity to sign a petition. According to The Dallas Morning News, the convenience store chain hopes to collect at least 1 million signatures in an effort to reduce the credit card transaction fees that it pays.

Credit card processing and interchange fees
Money may make the world go round, but most people still use plastic to pay for purchases at shopping centers and convenience stores. To stay competitive in this turbulent economy, most businesses need to open up merchant accounts so they can accept credit cards from customers.

In return for the ability to accept MasterCard, Visa and other credit cards, business owners have to pay an "interchange fee" for every transaction (also known as "swipe fees"). This surcharge amounts to about 2 percent of the sale every time a credit card is swiped through an electronic card reader. By the time the proceeds are deposited into merchant accounts, these fees have already been deducted by the bank that issued the credit card.

"Just a cost of doing business"
In the wake of sweeping credit card reforms designed to help consumers, retail organizations such as the National Retail Federation and the National Association of Convenience Stores (NACS) are lobbying hard to get swipe fees reduced. According to the Dallas Morning News, 7-Eleven had to pay $160 million of the estimated $48 billion in interchange fees that were collected in 2008 alone.

On the other side of the card, NACHA -- The Electronic Payments Association -- maintains the position that these fees are "just a cost of doing business." It points to such merchant benefits as reduced fraud and guaranteed payments. Still, retailers argue that escalating swipe fees truly are getting out of hand.

Passing the cost on to consumers
Even though these credit card processing fees are a merchant's responsibility, retailers eventually do pass on the cost of doing business to the consumer in several ways, including:

  • Higher prices. As swipe fees increase, the cost of basic staples, such as milk and bread, will go up, too.
  • Minimum credit card purchases. It is not uncommon to see signs posted behind cash registers that read "$5 minimum on all credit card purchases." Some merchants will accept plastic for smaller amounts, but they also will add a surcharge to cover the swipe fee.
  • Incentives for cash. Merchants that sell gasoline sometimes offer a lower price per gallon to customers who pay with cash instead of credit cards. If you only carry plastic, you will pay the higher price.
NACHA vs. NACS
7-Eleven plans to continue its petition drive until August 10, at which time the signatures will be taken to Washington. The convenience store chain's efforts are just another shot fired in a long-simmering feud between credit card companies and retailers. Merchants want the ability to negotiate more reasonable swipe fees, but the banking industry says that lower surcharges will affect the ability of smaller banks to stay in business.

Based on statements issued by both sides, neither the credit card industry nor the merchants are willing to give an inch -- or, in this case, a percentage point. Reaching a compromise without government intervention seems about as difficult as keeping a Slurpee from melting in the hot summer sun.

Article by Steven Bryan

Published: July 13, 2009

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