The high interchange fees being charged by the credit and debit card issuers has been in the spotlight for a long time now. In a recent move, many merchants have stopped accepting cards from consumers to pay for their purchase. Merchants say that they prefer this option since the only other alternative is to transfer the higher charges to consumers who will have to end up paying more than they have to.
According to this news article published in the LA Times, many businesses and retailers are against the interchange fees, also termed as payment processing fees, which accounts to nearly 2% of the total purchase value. This implies that every time a customer uses the credit card to pay for a $100 purchase, the business owner has to pay $2 to the credit card companies. Though this may not seem to be a huge amount, overall they account for millions of dollars of revenue each month.
The high interchange fees have to either be borne by the business owner or the consumer. Hence, in order to avoid this problem, many businesses including the large ones such as John Hancock have decided to stop accepting credit card payments from consumers. This company that is one of the bigwigs in the financial industry sent out letters to all its consumers informing them that they would not be accepting insurance premiums through cards considering the high costs associated with these transactions. While lawmakers are yet deciding on the approach to curtail this problem, businesses are taking the measures they can to keep costs low.
