Businesses paying
all-time high fees
for credit card use

By Misti Drew
Tribune-Courier News Editor
mstrader@tribunecourier.com

MARSHALL COUNTY – With the continuing economic downturn and impending recession, people are relying more on credit to get them through the holiday season, leaving the potential for further economic crisis down the road and a larger financial burden for businesses today.

Kentuckians are just slightly behind the national average with each Kentuckian having approximately 3.5 credit card accounts, and 13 percent of people using more than 50 percent of their available credit.

The amount American consumers charge to their cards has grown from an estimated $69 billion per year to a whopping $1.8 trillion over the past two decades, and everyone is paying the price.

Interchange fees are percentages tacked on to each transaction Visa and MasterCard banks collect from retailers.

The fees vary depending on the type of card used, size of merchant and other factors, but as much as $2 of every $100 spent goes to card issuers.

Some local businesses are trying to stop the hemorrhaging.

Business around the county, such as Cigarettes for Less in Draffenville, are now charging a “convenience charge” to customers who use credit cards for their purchases.

In order to offer customers the convenience of credit and debit card use, businesses pay a monthly fee to a middle-man who authorizes and completes credit card transactions, in addition to the interchange fee to credit card companies. The cost of offering that convenience can be high.

Solomon’s Porch in Benton reports they are absorbing additional costs and are not charging an additional fee for credit card use at this time.

The quaint shop on Benton’s court square offers Christian themed items, including many condolence and specialized gift items. A favorite among young children, Webkins plush animals, are also available at the store.

Shop owner Glenda Rawls said, “Like a lot of businesses, we usually see more credit card use this time of year. One day we will get almost nothing but credit card transactions, then the next day it will be all cash.

“But taking cards is something we simply have to do,” Rawls said. “I personally think the fees are extremely high, but we have to be able to offer that service to our customers to stay in business.”

Perhaps one of the most recognizable signs of exorbitant credit card use can be found in fast food lines.

According to Money Monitor Magazine, McDonald’s is now the second largest merchant-vendor for credit card use.
Small ticket items such as fast food meals charged on credit cards is said to be an indicator that a financial crisis is looming for consumers.

Locally, increasing credit card use seems to be something Marshall Countians are experimenting with as local businesses report slight but noticable increases in plastic transactions.

A long-time local favorite for holiday shoppers is Shop-o-Rama in Draffenville.

The multi-themed store offers various specialty items from hardware to apparel, often popular for gift giving during the holiday season.

Store manager Lana Burkeen said “we normally see an increase in credit card use during the holidays, but this year we have seen a little more.”

Other businesses like Willow Pond have had to re-evaluate which credit cards they will accept.

When Discover Card fees went up earlier this year, restaurant owners were forced to stop accepting the card altogether.

Some local restaurants, such as Four Pigs in Benton, offer cash and check payment options only, avoiding the Interchange fees completely.

The Merchant Payment Coalition reports Americans paid more than $42 billion in credit card interchange fees in 2007 alone, more than all other credit card fees combined. Payouts in Interchange fees have increased more than 100 percent since 2001.

• Credit card use is something the folks at CFSB are watching closely and advising local consumers to use cautiously this holiday season.

“Basic expenses can put a strain on consumers’ finances — especially in an already stressed economy,” said Frank J. Nichols, Chairman/CEO of CFSB.

“And being a savvy spender is key to avoiding the debt of Christmas past and having a financially happy new year,” added Betsy Flynn, President of CFSB.