2008

A quick Google search on the amount of cash we carry in our wallets shows that for most it’s little or none. In addition, research shows that more than half of us don’t even keep any extra cash in the house. In the food industry, the move to plastic is undeniable as well. Grocery shoppers use debit or credit cards for an average 53.3% of total transactions. Cash transactions continue to drop, although they are making a slight comeback in today’s economy. The mix of payment methods differs by store based on clientele, format, the presence of fuel operations & region. Why does this matter to retailers & consumers? The answer is interchange fees. Each time shoppers use plastic to pay for their groceries, retailers end up paying part of their profits to the credit card companies. The largest component of the ‘merchant discount fee’ that retailers pay on every transaction is an obscure, hidden credit card fee called ‘interchange.’ Interchange fees accounted for an average of 0.66% of sales in 2007. While this may not look like much at first glance, with median weekly sales per store topping $380,000 this translates into $2,500 per store on a weekly basis or $131,000 per store annually. For regional & national chains, interchange fees easily cost millions of dollars each year. While food retailers are trying hard to absorb the costs internally, these fees may lead to increased costs of food in the long run. Credit & debit card interchange fees are a great concern to retailers with their ever-growing share of total transactions. Higher-income shoppers & upscale stores tend to have a much higher % of debit & credit card payments. Some reported combined % as high as 65%. Reversely, low-price stores tend to have much higher check, cash & other payments. In these tough economic times it is crucial that businesses & consumers take advantage of any & all opportunities to save money. Credit card fees are one of the largest business costs & concerns with almost no ability to control them. Because there is no ability to negotiate this fee until we are able to get legislation passed in Washington or legal relief, there is probably not much we can do here today to lower ‘interchange’ fees. FMI is leading the charge to pass legislation to fix the problem & a number of our member companies are engaged in litigation. In the interim, every penny counts in the battle to keep costs down both for the shopper & the retailer. Processing costs are the only component of the merchant discount fee that is negotiable. While they represent only 10% of the total paid on every transaction, reducing this component can represent direct & immediate savings. Here are some ways for you to cut down on your processing costs & make every penny count. 1. Look at your statement. Ask questions. If you are not paying the rate you think you should be, ask why not. 2. Visa & Mastercard post their official rates on their websites. Know what the official rates are. Print them out. We haven’t found even one of their 15,000 banks that offer anything other than the published interchange rates. 3. Unbundle your charges. Tell your processor you want to be on a cost plus basis. You want to see the various rates you are being charged for each of your transactions & any additional fees that are being assessed. 4. Key entered transactions are expensive (highest rate). Keep your equipment clean & in working order so the card information is captured electronically & does not have to be keyed in by hand. Train your employees that key entered transactions are frowned upon & will be monitored. 5. If you are leasing equipment, check to see when your lease is fulfilled. Some companies are billed & continue to pay for leased equipment long after the lease is fulfilled & the equipment could be purchased for $1. Think rotary dial phones! 6. Avoid any vendor who wants to charge you a flat monthly minimum; a terminal fee; a statement fee or the like. 7. Get three bids every 2-3 years. There are lots of good processors & competition still exists in that market. Make sure your contract can be terminated at will or with 90 days notice after the terms are satisfied. 8. Generally, anything over 10c per transaction for processing is too high. 9. You are going to be charged fines & chargebacks. Know the sources of both & work to avoid them. Know what the fines are & what caused each of your chargebacks. Look for patterns & correct them. 10. Avoid fee creep. Before you sign a contract, ask that a sample invoice be attached & include verbiage similar to the following: ‘The attached invoice represents any & all fees & fee categories that can be levied by ____ on merchant ____.