RWRetailWire
Back to Discussions
DISCUSSION

Retailers hate rewards cards and the swipe fees that come with them

Written by George Anderson

Rewards credit cards, the type that offer perks such as air travel and cash back for continued use, have grown increasingly popular with consumers in recent years. Retailers do not share that sentiment as they continue to bristle at the fees banks charge them for processing transactions when reward cards are used as payment.

Today, 92 percent all purchases made with credit cards are done with those offering rewards, up from 67 percent a decade ago, according to estimates provided to The Wall Street Journal by Mercator Advisory Group, a research and consulting firm specializing in payments.

While the popularity of rewards cards cannot be denied, retailers want the option of choosing which ones they accept. So-called swipe fees, what banks charge for processing card payments, may vary significantly from card to card, with those offering rewards having the largest associated cost for retailers, up to three percent, according to the Journal report.

The National Retail Federation (NRF), the Retail Industry Leaders Association (RILA) and other groups along with their members recently rejected a settlement of a class action suit brought against Visa and Mastercard over swipe fees. The group said that the $6.2 billion settlement did not resolve the core issue, either by reducing high swipe fees by banks or by giving retailers the option of refusing to take those that have the highest associated costs.

In their arguments, retailing advocates argue that they are looking out for the best interests of the small guys — businesses and people.

NRF, RILA et al argue that it is smaller merchants that bear the biggest burden associated with high swipe fees. While higher fees are a challenge for merchants of all sizes, it’s mom and pop retailers that have the hardest time absorbing the lost profits that come with high cost card transactions.

“Swipe fees are not just a business-to-business issue,” said Stephanie Martz, NRF general counsel, in a recent statement. “By driving up prices, they cost consumers hundreds of dollars a year — nearly as much as the average family spends on Christmas gifts or back-to-school supplies.”

Card companies and banks say they are the ones looking out for consumers.

“Visa believes consumers should always have a choice in how they pay, including being allowed to use their Visa credit card regardless of the card type or issuer. When consumer choice is limited, nobody wins,” a Visa spokesperson told the Journal.

Discussion Thread0