The Credit-Card Fees Merchants Hate, Banks Love and Consumers Pay

In this interesting article by AnnaMarie Andriotis and Harriet Torry from The Wall Street Journal, they highlight how cash is becoming a less preferred method of payment due to an increased dependability on credit cards, apps, and online shopping, especially during the pandemic. With the use of non-cash payments, comes increased costs for merchants in the form of high interchange fees. Interchange fees are paid to the card issuing bank and can be as high as 3%. These fees help pay for cardholder rewards offered by many credit cards in the form of cash back, points, or airline miles. Merchants paid $53.6 billion in just Visa and MasterCard interchange fees in 2019. That does not include the fees paid to the merchant acquirer or to the payment networks.

Customers generally pay the same price, regardless of the payment method. For small businesses, increased dependability on credit card payments may not be as rewarding as it is for customers. For instance, Bump ’n Grind, a local coffee and vinyl record shop in Maryland says it’s a “growing burden.” More money was spent on roasting its own coffee beans ($12,827) than on credit-card processing fees ($18,645) to financial institutions enabling cashless transactions. The burden persists with rising COVID-19 pandemic tensions.

Click here to read the article published in The Wall Street Journal

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