Dealing with credit card interchange fees
November 19, 2014

For many retailers, the problem of being able to accept credit card payments has never been a matter of paying a lot of money just to get the hardware installed. For many, even a couple hundred dollars up front is not that big of a concern for small retailers. The real issue is paying interchange fees every time someone uses a credit card in the store. While the percentages vary for credit, the average fee is 2 percent, according to the Institute of Local Self-Reliance. That number may not seem like much to the average customer, but to many retailers, that is usually the percent of their profit margins. It also doesn't help that many of the large store purchases are usually done by credit card. That's why many smaller stores are incredibly hesitant to bring plastic into thepicture. However, there are many ways around this, especially with the use of integrated payments systems.

Playing with the rules
A merchant can afford to use point of sale equipment that allows them to accept plastic so that more customers can visit the store with a greater frequency than before. It's just a matter of understanding some of the rules that are in play to ensure that they don't get heavily impacted by the interchange fees.

The most basic example of this, as PYMNTS notes, is to use surcharges on credit card transactions. As part of a settlement, the Justice Department allows retailers to add a surcharge for using a credit card so that the interchange fee can be compensated for in some fashion. The only stipulation is that merchants cannot take American Express, which didn't involve itself in the case that led to the settlement. While limiting customers' options somewhat, it's worth noting that Visa, MasterCard and Discover control more than 80 percent of the market share in credit card usage, so it shouldn't dampen most business.

Another way of getting around interchange fees is to have customers use debit cards instead. These cards are under different regulations than credit through the Durbin Amendment, in that their interchange fees are far lower than credit. In so doing, retailers should encourage debit over credit use, perhaps through special incentives that favor debit use at the store.

Finally, something to consider, especially with integrated payments systems, is ACH payment processing. These are direct interbank payments that don't require any interchange fees and work well with frequent customers. All these options can help minimize the impact of interchange fees.

Nexus: G-WEBCD1