UPDATE (3-1-10): The day I uploaded this post Barney Frank Chairman of the House Financial Services Committee announced that they will not pursue interchange reform legislation in 2010. I guess we’ll have to wait another year…or ten.
Now that the new credit card legislation has gone into effect for consumers, I’m wondering when retailers are going to get a break. Anyone that has had the misfortune of having to deal with a merchant services account knows that there is a lot of room for improvement if one looks at it from the cheery side, and down right monopolistic thievery if you see it more skeptically.
What does credit card reform have to do with sustainability? It really comes down to local commerce and really just sustaining an open business… 3% going to VISA and MasterCard is 3% lost from a local economy, and lost from businesses in an industry where 3% is the profit for the year. I’m sure it benefits a local economy somewhere, but not the majority. The new laws have made a lot of positive changes for credit card users, but I fear the new reforms that the credit card companies claim are going to cost them millions will just wind up on the bills of restaurants and retailers.
Similar reforms could benefit retailers as well. Clarity and communication are big pieces of the new standards, and if there is anything out there that could use some clarity it’s a merchant statement. I’ve seen some pretty good statements. Heartland Payment Systems does a decent job of producing a straightforward statement that you can understand with a little help, but I’ve also come across statements that the company’s own sales reps couldn’t understand, nor could their bosses. This should be step one. A statement that the people working for the processing company can understand. It seems so simple…
Fees are the other big part of the new reforms. Fees are what kill you with a merchant statement. Discount fees, transactions fees, international transaction fees, half cent fees, “oh that’s just a standard VISA, MasterCard fee” fees, the “oh I didn’t tell you about the .0945 cents per transaction fee” fee, and on and on as creative as they can be. The fees for merchant services should be clear, stated boldly in the contract and simple enough to calculate without an algorithm.
Finally, (actually I’m sure there are about a hundred more things – share your thought) there should be transparency in how they calculate the interchange rates. Currently the supposed competitors VISA and MasterCard independently come up with the same fees every April and October behind close doors. You as a merchant cannot find out how or why they calculate those fees or how they are apply them to your bill. Its just magic – they somehow come up with basically the same rates and noone needs to know how or why. Now keep on swiping those cards…
I’m sure we’ll see how the new reforms treat the business community soon enough, April is just around the corner.
Check out Unfaircreditcardfees.com for information on interchange reforms.