Credit Card Blog

Did you know that merchants pay a fee to process credit card purchases when you shop in their stores? These are called interchange fees. They are represented by a percentage of all of the sales that are charged onto credit cards which is only several points. But it adds up quickly for merchants. There are a few things you need to know about interchange fees and how they affect you as a credit card user.

Higher prices

Interchange fees are one of the highest expenses of a merchant right behind payroll. In fact, they are more than rent most of the time. That creates a situation where merchants are forced to raise prices as an off-set to these fees. They will say otherwise, but it has been all too often proven otherwise. Take away: merchants that do not accept credit cards might have lower prices.

Convenience to you

Merchants do not have much of a choice in accepting credit cards if they want to remain competitive in today’s retail market. Not doing so puts them at a disadvantage to their competition. Take away: it is easy for you to walk in and pay for your purchases with credit or debit cards because of this system.

Pending legislation

There is a law pending that will likely create a higher fee for interchange rates for merchants. This law will allow merchants to charge higher prices specifically when you use credit cards for your purchases. Take away: higher interchange fees means higher prices for you at the register.

There are different interchange fees for different merchants from card issuers. For example, MasterCard has over 120 different rates for the various kinds of retailers. Supermarkets have the lowest rates, while Internet based retailers pay the highest.

Knowing the above information can help you be a wise shopper and user of credit cards.

If you plan to travel overseas, you might be wondering which credit cards you should use. Between high exchange fees and surcharges, some credit cards don’t do much to add to your travel experience. USA Today recently listed their top picks for foreign purchases.

Lowest Foreign Currency Surcharge

Capital One: 0%
American Express: 2.7%
Bank of America: 3%
Citibank: 3%
Diner’s Club: 3%
Wells Fargo: 3%

Capital One came away the clear winner. That covers purchases made in foreign currency, but what about purchases made in US dollars? It appears that Bank of America, Citibank, and Diner’s charge the same amount, even if there is no actual currency exchange. American Express and Well’s Fargo don’t add a surcharge for dollar billing.

In keeping with their 2001 advice for foreign travelers, USA Today still recommends using debit cards for cash and credit cards for large purchases. Since traveler’s checks and currency exchanges lose 5-10% of their value in fees, stick with the plastic when you travel abroad.

For the full list of traveler-friendly credit cards, go to USA Today’s web site.

Intuit has just made it easy to process card payments anytime, anywhere. GoPayment, Intuit’s new mobile credit card processing software, lets you take credit card payments on your cell phone or other mobile device. All you have to do is swipe the customer’s credit card using a blue-tooth enabled card reader, and all of the card details populate a form on your cell phone. Then you send off the payment for approval, and the sale is done.

GoPayment will be convenient for small businesses that don’t operate from a traditional office setting. You can choose a card reader that has a built-in printer for on-the-spot receipts, or you can send customers their receipt through e-mail or text message.

The GoPayment card swiper is small enough to easily fit in a shirt pocket, while the card reader with built-in printer can comfortably clip on a belt. Card details can also be entered manually. GoPayment is available for a set-up fee of $59.95 and a monthly charge of $19.95. It can be used on any cell phone with mobile web browser software.

You can view Intuit’s GoPayment product demo here.

Have you ever been standing behind someone in a check out line who opens their wallet to get out their credit card to pay… and noticed a rolodex-style wallet containing what looks like a hundred different credit cards?

Are you that person?

How many credit cards is reasonable?  I guess it really depends on each individual, but the general recommendation is to carry somewhere between two and six different credit cards at the most, and they should be the top issuers- Visa, MasterCard, Discover or American Express.

You should also have a goal to pay off your credit card statements in full each month, so keep that in mind when deciding how many cards you should have in your wallet.  If you know you have a tendency to carry a balance from one month to the next, look for cards with no or low interest rates, and you should be receiving some sort of rewards from using your credit card, whether it’s in the form of cash back or airline miles or something else- with all of the various rewards programs, there is no reason not to have one you can benefit from.

The more credit cards you have, the harder it is to remember when each of the payments come due.  it’s better to select two or three cards with great rates and a solid rewards program than to try and spread your purchases out among fifteen different cards and attempt to remember when each are due!

MasterCard’s Easy Savings Program helps cardholders save money at various merchants and retailers when they shop using their MasterCard credit card. Previously, the Easy Savings Program added the United States Postal Service to the list of merchants, giving program members an automatic 5% savings when using the US Postal Service website for Click N’ Ship supplies, including shipping labels and postage.

Now, Dunkin’ Donut lovers can take advantage of a 5% discount on any purchases made at Dunkin’ Donuts for members of MasterCard’s Easy Savings Program. Obviously, cardholders are benefiting from savings at their favorite retailers, but it’s important to note that merchants who participate in MasterCard’s Easy Savings Program are also benefiting. The rebates and discounts cardholders receive encourage people to shop there, including people who maybe wouldn’t have shopped at that retailer without the discount as they want to gain the most benefit from the Easy Savings Program membership.

MasterCard estimates that members of the Easy Savings Program spent 60% more with merchants who are part of the program.

Recently, an app was developed for the iPhone that allows business owners to accept credit card payments with their iPhones - called iSwipe.  This is ideal for businesses that travel to trade shows and expo events as it allows them to accept credit card payments from their customers even when out of the office.

iSwipe is also useful for people who run party-plan businesses (Tastefully Simple, Tupperware, Creative Memories, etc) because when you are out giving parties in your customer’s homes, you can easily accept and verify credit card payments before you get home.   Rather than having your customers write their card information down on an order form, you process their payment immediately (avoiding potential problems with illegible writing or nonsufficient funds), and save yourself the extra step when entering customer orders at a later date.

The iPhone app works with the three most commonly used payment gateways for small business owners, including Paypal, Authorize.net and Cybersource.

It’s wonderfully convenient for customers to swipe their credit or debit cards and make a purchase, but it’s not always convenient for the merchant to accept credit card payments. That is, the bulky card readers aren’t easily portable for door-to-door sales, flea markets, or trade shows. But ProPay has changed all that with the introduction of a card reader so small that it easily fits into a shirt pocket.

Merchants, meet the ProPay MicroSecure Card Reader. Weighing in at a mere 1.4 ounces, this super-small reader makes it simple for anyone, anywhere, to accept credit card payments. The reader retails for $150, plus a $5 monthly service fee. It features an internal battery that lasts for 8 hours at a time and stores up to 71 credit card transactions. The device can be connected to a computer via USB, where the data can be safely uploaded.

Unfortunately, since the ProPay MicroSecure Card Reader doesn’t have a screen or even keys, merchants will need to hand out written receipts to their customers. Most feel that this is a small price to pay for such a convenient and portable tool. You can learn more about the ProPay MicroSecure Card Reader at ProPay’s web site.

Congress is hard at work trying to find a way to restructure the way credit cards operate. They may have good intentions, but keep your eyes open, because they may actually cause more harm than good.

We all know the government is bailing out big-time banks and now, perhaps, the auto makers. Jumping on the bandwagon, some representatives from the retail industry came up with a great idea. Why not lower the disease that retailers pay to credit card companies when people buy merchandise on credit? The theory as this savings would be passed on to the consumer. Think again.

The fee for using a credit card is usually less than 2%. It provides for the electronic network that allows major credit cards to be accepted. Retailers get their share of the pie right off the bat, while the credit card company takes the risk if the customer doesn’t pay the bill. However, small merchants are struggling and some members of Congress feel that reducing the fees will help the average consumer.

Keep an eye on the Conyers-Cannon bill (HR 5546). This bill would waive antitrust regulations for as many as 15 million retail companies and allow them to force banks and credit card companies to provide basically free credit. The Justice Department doesn’t like the idea, because they believe antitrust laws make sure that markets are fair and competitive and protect consumers. That won’t stop Congress, however, because some members are espousing a theory that by reducing expenses for retailers, it will ultimately lower prices for consumers.

It won’t work. Why? The authors of the bill did not include amendments that that would make sure the savings are passed on to consumers. Instead, it would only increase the earnings of the huge corporations, while all the little guys would once again be left out in the cold.

If Conyers Cannon becomes law, credit card companies will lose profit, in turn, they will as restrict credit even more smaller providers might even drop out of the market altogether. And it will leave merchants in struggling communities unable to offer credit cards to their customers. Once again, only the big guys will win credit card companies will most likely recoup their losses simply by raising interest rates on cardholders even higher than they already have

The last thing anyone can afford is Congress to continue to try and solve the economic crisis by bailing out the rich and ignoring the poor.

You know the scene. You need to pick up a couple of small items from the convenience store, but you don’t have any cash on hand. That’s okay, because you’ve brought along your credit card. So you browse for the stuff you need, put it on the counter, and whip out your plastic – only to be directed to a sign that spells out a minimum purchase amount for credit card use.

According to Visa and MasterCard, merchants can’t do this. There are specific clauses in the merchant’s agreement that forbid minimum purchase amounts or surcharges for credit card use. American Express discourages these practices as well, though their written rules are more vague. So what should you do if a merchant is imposing these limits?

First, realize that merchants who take credit card payments are themselves required to pay some hefty processing fees for every transaction. Those fees add up and cut into the store’s profitability.

If a small shop owner takes credit cards, they usually set minimum purchase amounts to recoup the cost of those processing fees. If they were to accept credit card payments for tiny dollar amounts, they’d actually lose money on those transactions.

If that knowledge isn’t enough for you, experts recommend complaining to the bank that issued your credit card.

Ebay power sellers will soon have more options when it comes to credit card payment processing. ProPay, an electronic payment services company soon to launch on Ebay, released its pricing details today.

Not to be confused with online payment processor PayPal, ProPay is geared toward Ebay power sellers Silver and higher. It also costs more to use ProPay, but some sellers enjoy the idea of having an alternate means of payment processing that isn’t owned and governed by Ebay.

So far, two ProPay membership levels have been announced: eAuction and eAuction Pro. An eAuction account costs $24 a year or $2 a month. In addition, ProPay charges transaction fees comparable to Paypal’s. ProPay’s annual fee will be credited back to sellers who process $3,000 of payments within their first six months.

eAuction Pro accounts cost $240 a year and come with a slew of features that make payment processing fast and secure: a secure card reader, an online virtual terminal, and much more. eAuction Pro accounts are subject to the same transaction fees as regular eAuction accounts.

The bottom line? ProPay is marketing their service to high-volume Ebay sellers for good reason. Smalltime auctioneers might do better with Paypal, where no monthly or annual fees are required.

ProPay will launch on Ebay later this month.