Easing the Burden of Interchange Fees

Running a small business comes with a host of unique challenges. Should it really be that difficult to accept credit card payments from customers? Sadly, for many business owners, the fight over rising interchange fees - the fees that credit card processors charge for each credit card transaction a business makes - is getting tougher. What was a $16 billion industry just seven years ago has turned into a $48 billion racket in 2008. Small business owners are watching their profits dwindle as more and more of their money is spent on interchange fees.

How bad is the problem? Soon, you might find it impossible to fill up your gas tank if you pay with a credit card. Gas station operators are losing money because they must pay an interchange fee on every gallon of gas their customers charge. As the fees increase, profits go down the drain. And with the rising cost of gas, some store owners just can't afford to pay the interchange fees. In some cases, the fees cost more each month than gas purchases bring in.

Small business owners are caught between a rock and a hard place. On one hand, they cannot completely refuse to take credit card payments if they want to stay competitive. On the other hand, they feel as though they have no power to negotiate the fees. Luckily, Congress has heard about this plight and has decided to step in. There is proposed legislation that will permit the investigation of hidden fees that businesses report as being unfair. While some balk at the idea of the government getting involved, others hope that new rules will ease the pressure on small businesses.

If you own your own business and feel the pinch of high interchange fees, there are some steps you can take. First, look for merchant account providers that offer “Interchange Plus”. This is a straightforward pricing scale that used to be available only to big businesses. Now smaller businesses can take advantage of this simple alternative to the complicated, tier-based pricing structures currently in place. Some businesses save tens of thousands of dollars each year just by participating in an Interest Plus plan.

Another thing you should do is watch out for hidden fees. Avoid contracts that make you pay an interchange fee for declined transactions. Instead, look for a contract that doesn’t require you to pay for unauthorized charges. And ask plenty of detailed questions before you sign that dotted line.

Finally, look for merchant account providers that offer great customer service. When something goes wrong, you want to know that you can call the company and get it straightened out in a timely manner. This might mean ignoring the companies that offer rock-bottom rates. Remember that with customer service, you usually get what you pay for.

by: Janna Weiss