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Merchants Reduce Costs for Fees Through Policies and a New Law

By admin | November 19, 2011

It may be convenient to pay with credit cards or debit cards at the checkout stand, but merchants are feeling the pinch.

Unlike cash or check transactions, merchants are charged for each transaction when you use plastic. In July, federal laws went into effect to shrink debit card fees. But even before the law was enacted, merchants were seeking to limit transactions by reducing the amount of cashback that consumers can get and taking other actions.

For example, the Walgreens drugstore chain cut their limit down to a maximum of $20 cashback in the spring. Many small stores have minimum purchase amounts for credit card transactions to compensate for the cost. Some small businesses like independent doctors, dentists and restaurants are offering cash discounts for those who pay without using plastic.

The credit card intercharge fees can eat away at the profits for small business owners. Fees cost merchants $62.75 billion last year, according to the Nilson Report, a newsletter that tracks the payments industry. This was up 29% since 2005 and is due to both increasing fees and more merchants using credit cards and debit cards to pay.

In addition to encouraging less expensive spending behaviors from customers, merchants have changes in the law to look forward to. As part of the Dodd-Frank financial-overhaul law, debit card fees have dropped 75% starting just last month.

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