Tree Talk: When Credit Card Companies Get More of Your Returns Than You Do

Credit Cards

Goodbye, cold hard cash; the convenience and perks offered by credit and debit cards have consumers everywhere reaching for plastic, leaving small businesses no choice but to accommodate them. With the state of the current economy, many small businesses are feeling the pinch from offering consumers the luxury of using their cards and finding already low profits disappearing to credit card interchange fees. Signs are popping up on registers requesting the use of cash over credit, and unfortunately there’s little to be done as the debate of regulating the credit card companies continues.

Credit Cards
Last year, an article was posted on on the proposed Credit Card Fair Fee Act that was introduced to Congress that would stop price-fixing in the credit card industry and create market-based prices for interchange fees.1 The National Restaurant Association praised this action and business owners applauded the chance to open the process of negotiating. However, since the bill was introduced in a previous session of Congress, it is now considered dead in the water.2 Despite the slow progress, small merchants are hoping that Congress will reintroduce the bill in the new session since the issue is still a major concern.

The problem expressed by many small business owners is that Visa, MasterCard and American Express frequently change fees without any explanation or justification, and it’s hard to measure how much money businesses continually lose from interchange fees.3 If the government was able to regulate the fees, small businesses could better control their revenue and pricing, as many are feeling the pressure to increase prices to cover the fees.

A report recently released by the Small Business and Entrepreneurship Council argues just the opposite. The report reveals that the regulation would make it hard for card issuers to offer small merchants competitive, flexible rates that would yield them the best prices. Card issuers explain that a regulation like this would take away from evaluating and negotiating with each business individually. The report also highlights that limiting the credit card companies and capping fees would cause larger repercussions for the service side of the industry, resulting in fewer cards issued and/or benefits received by the end-consumer.4 The solution is clearly not black and white, but one that requires further negotiation by small businesses and credit card issuers so that a viable solution can be determined and in a timely matter. Let us know your thoughts by e-mailing and stay tuned for updates regarding this issue on

1 “Congress to Credit Card Companies: ‘Play Fair’; Retailers Applaud Introduction of ‘Credit Card Fair Fee Act,’”
2 Farside, Agnes. “Chase Credit Card Increases Fees, Interest Rates Before Credit Card Fair Fee Act Takes Effect in 2010,”
3 Spors, Kelly. “Regulating the Credit Card Industry: Good or Bad for Small Business.” Blog on
4 Keating, Raymond J. “Credit Cards and Small Business: The Benefits, Opportunities and Policy Debate,” The Small Business & Entrepreneurship Council’s Small Business Policy Series, Analysis #34.