Monday, September 13, 2010

Let's End Merchant Abuse

Attention Merchants: Did you know that you do NOT have to accept VISA if you accept MasterCard (and vice-versa)? Yep, that’s right. Even though VISA and MasterCard share the same processing systems and they always seem to be in tandem at every store or online business in town, the truth is you DO have the right to pick and choose which company you would like to support. That comes directly from the mouth of a service rep at MasterCard.

I bring this up because the financial health of this nation depends largely on choice. Choosing not to do business with a company that costs your company too much money is one way of reducing your costs and increasing your profits. VISA USA is perhaps the most aggressive, hateful, fee-happy corporation in North America. It should come as good news to some of you to know you are not contractually obliged to accept their “product.”

There is a growing movement afoot to prevent merchants from charging a usage fee for debit cards. It’s being fostered by those politicians who claim to be serving the best interests of the consumer… and as usual, at the cost of the merchant. Here’s the problem. VISA assesses fees to the merchant for each plastic transaction – not just the typical usage fee, but an additional “interchange” fee as well. And VISA says that merchants are not allowed to charge their customers more when they use their VISA branded cards, even though the cost of accepting VISA is higher than the cost of accepting any other credit or debit card. Instead, VISA recommends that merchants raise the cost of their merchandise accordingly to defray the cost of doing business with VISA.

In other words, VISA would rather you penalize your customers for using American Express or Discover or cash than tack on a fee only on VISA purchases. They apparently don’t want consumers to know how deeply they are gouging merchants. They’d rather that merchants take it in the shorts because they’ve chosen to accept VISA.

Some merchants have gotten around this problem by simply adding a fee to all debit card transactions, and this has both consumers and legislators up in arms. Well, let’s be reasonable here, shall we? The money to pay for the increasing fees that VISA charges has to come from somewhere. If a merchant raises his prices to cover his losses, the consumer gets mad and may change where he does business. Because of VISA’s rules, a merchant cannot charge more for the same service that charges him more, so he either suffers the loss - which can be hundreds of thousands – even millions - of dollars each year depending on the size and nature of his business. Or he can charge a bit more to those customers who ELECT to use plastic instead of cash.

I see nothing wrong with adding a surcharge onto an elective service. You pay more to have other elective services with such things as your cell phones and TV signal provider. So why not the same thing at the places you buy gas and milk?

Currently, the merchant industry is all but surviving in an increasingly hostile environment. Municipalities keep raising taxes and licensing costs on businesses. Rents on storefronts are often high. A depressed economy means consumers aren’t spending as much, or are going to places that can offer them bargains. And if that isn’t enough, accepting credit and debit cards to make things easier for the consumer is getting to be a significant cost of doing business. Not only are the fees to accept credit/debit cards going up (VISA has raised its fees over 300 percent in recent years), but then VISA has also dictated that purchases made using VISA cards may be returned, for almost any reason, without penalty to the consumer.

The person who gets hit with all of this is the merchant. And that does not bode well for our economy. Here’s why.

When the cost of doing business becomes too burdensome, merchants are forced to either raise their prices and risk losing customers, or they are forced to cut back on their own internal costs, such as giving pay raises, offering benefits, hiring new people, keeping the employees they already have, shortening their business day (or conversely lengthening it in hopes of attracting night-owl clients). Or, they may simply elect to close up shop – as many have.

Each time a merchant has to lay off employees or closes shop, that increases the unemployment percentages in their community. The landlord who owns the commercial building where the merchant once had his shop loses income because of a vacant storefront. Vacant storefronts depress the communities and can adversely affect the property values of the area. The city, state, and nation lose tax revenue that once came from income and sales, and they then have to cut services and lay off government employees, which again adds to the burden of unemployment. Consumers have to travel to other places to purchase the things the out-of-business merchant used to offer, and those travel expenses add up, which in turn puts limits on the consumer’s spending power.

And all of this can happen simply because VISA wants an ever-larger piece of a pie they aren’t really entitled to. Sure, the folks at MasterCard are no saints either, but they are less aggressive and only do about half as much business as VISA. And that means that VISA doesn’t NEED to gouge its merchants as much. They just do it for the sadistic pleasure and overwhelming profits received.

So I say to the politicians who are up in arms about merchants who are trying to recapture income lost in the whole credit/debit card scheme, “you’re going after the wrong guys!” You NEED merchants in order to collect sales taxes. You NEED merchants to be healthy so they can afford to hire more employees, generate more income tax, and bring down the unemployment levels. You NEED merchants to provide a robust selection of goods and services to the communities they serve. So STOP THE ASSAULT ON THE MERCHANTS AND GO AFTER VISA and the others in the debit/credit industries.

It is admirable to plead the case for the consumer, however you cannot do that at the expense of the merchant class – not at this time. Aim your sights at the credit card industry, which is systematically pillaging your communities in order to line their own pockets. Create limits and caps on fees for their “services”. And for God’s sake, DON’T restrict merchants from charging more for services which cost them more. To do that would only serve to hobble an already crippled industry upon which you and your constituency rely.

*Consumer Tip: Use a pin-pad when making debit purchases. This actually lowers the cost to your merchant, whereas signing your sales slip costs the merchant a much higher percentage.
(You should be advised, however, that using a pin pad will not earn you extra points from VISA. As usual, they only reward you if you end up costing your merchant more dough.)

* Merchant Tip: Ask your service provider to cut VISA out of your account, in favor of accepting MasterCard, Amex, and Discover. Most of your customers have more than one brand of credit card, and will be happy to pay using one of the other brands. Encourage cash sales as much as possible.

* Additional tip for legislators: Pass legislation that requires VISA USA (and all other credit cards) to put a percentage of its ill-gotten profits into the Social Security system, so that each purchase made on plasatic goes to benefit the entire country.

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