CLEVELAND–Increasingly, many retailers are making it more expensive to pay for things with a credit card.
More small businesses—and even some larger ones—are charging shoppers a fee for credit-card purchases or offering them discounts when they pay with debit cards, cash or checks, noted the Wall Street Journal in a recent report. The moves are meant to offset the various fees businesses pay on credit-card transactions, costs that have grown alongside generous cash-back and travel rewards, the Journal added.
While estimates indicate that just 5% of the eight-million card-accepting small businesses in the U.S. charge fees for credit-card payments, according to estimates from payments consultancy the Strawhecker Group, that figure is still up from an estimated 2% or less of businesses that charged fees on credit-card purchases five years ago.
The Journal said the coronavirus pandemic has helped to accelerate the shift as businesses search of revenue to make up for lost sales. CardX LLC said more than 6,400 merchants—most of them online businesses—use its surcharge-calculating software, up from 4,030 a year ago and 2,380 in 2019, the Journal reported.
We All Scream For…25 Cents
The Journal profiled one small business, Karen’s Dairy Grove, an ice cream shop outside of Cleveland, that charges an extra quarter when customers use credit cards for purchases of less than $5. Owner Karen Morell told the publication she made that decision after cash sales fell and credit-card purchases rose during the pandemic.
“My business is made on the pennies. If I do everything right I have a small margin,” she was quoted as saying. “On a $5 ice cream, 25 cents is a big chunk of the margin.”
The Journal report cited data showing the total dollar amount of merchant fees from Visa and Mastercard credit cards more than doubled between 2012 and 2019 to $67.6 billion, according to the Nilson Report. Credit-card usage declined in the pandemic.
It isn’t just smaller businesses embracing the surcharges. The Journal pointed to Life Time Inc., which operates around 160 health clubs as well as co-working spaces and rental apartments in 29 states, as examples of businesses that have implemented a credit-card surcharge during the last year in response to rising credit-card fees.