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Local retailers demanding lower credit card transaction fees

MANATEE — The swipe of a credit card is a swift and convenient action for consumers.

But those types of purchases are taking a chunk out of profits, and small business owners say the cost is too steep.

The credit card interchange fees they’re charged for every credit transaction, retailers say, are unfair and excessive.

“Processing fees as a whole have just caused a great problem,” said Rick Vitale, owner of Pup In A Tub in Bradenton.

The credit industry defends the fees as a cost of doing business. They average 2 percent per transaction and are paid by retailers on a monthly basis.

Interchange fees depend on the number of credit card uses, purchase amounts and the retailer’s contract with its processor.

The fee covers the advanced payment the retailer receives on a credit purchase, as well as the risk that the consumer’s card limit doesn’t cover the charge, according to the Electronic Payments Coalition, a national group that represents banks and credit card companies.

“The merchant has the convenience of getting their money right away,” says Trish Wexler, spokeswoman for the coalition. “For that service, the interchange fee is in place.”

Still, the interchange fee has prompted a popular convenience store to start a campaign against the charge.

7-Eleven plans to bring a petition — it screams “Help Us Fight Unfair Credit Card Fees” at the top — against interchange fees before Congress sometime in late August. Keith Jones, director of government affairs for 7-Eleven, said the convenience store is trying to act as the voice for small business and urge Congress to require credit card companies to negotiate the interchange fee with retailers.

“It’s our single, biggest uncontrollable expense,” said Jones, who is based in Dallas. “We’re looking for Congress to give us the ability to sit down with credit card companies and negotiate these rates like we would negotiate prices with any other vendor.”

Interchange fees among convenience stores totaled $8.4 billion in 2008, up 10.5 percent from 2007, according to the National Association of Convenience Stores.

But small businesses do have the power to negotiate interchange fees, argues Wexler. They can shop around and negotiate their rates with about 1,000 banks and card processors.

In 7-Eleven’s case, she said, individual stores do not have the power to negotiate because the fees are negotiated by corporate.

But Paul Tobio, owner of Ryder Bikes, said the negotiation process is not as easy as it seems. His Bradenton bicycle shop has gone through several processors because of fluctuating fees.

Each processor assigns a different interchange rate per credit card type. Ryder Bikes is charged 2.1 percent on purchases made with Visa and MasterCard ,and 3.25 percent on American Express purchases. Tobio said the fees eat about 10 percent of each month’s profit.

“I’d love to see them lower,” Tobio said.

Vitale said interchange fees cost Pup In A Tub about $300 a month until the business switched to cash and check only.

“We changed to cash and check only because the fees are increasingly going up and the amount of fees vary from processing group and from bank,” Vitale said. “We’ve just eliminated it and that’s 300 more dollars in our pocket. It just makes life a lot easier.”

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