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19/01/2011 -
Exactly how do credit card providers such as Visa or MasterCard make their money? They charge merchant service fees for every time a shopper uses a credit or debit card.According to the website Press About, merchant costs are greater for debit and credit cards than processing fees for cash, as cash is slowly becoming a less popular form of payment by consumers. As cash transactions slow, plastic payments are dominating the retail market.
However, this dominance means that more money is spent by merchants to process transactions. There is also an added cost as businesses must buy debit and credit card terminals and supporting payment processing hardware and software. Additional spending may also be required for maintenance of the devices.
Although costs can be high, the site explains that failing to accept credit cards is not a feasible option if a business wants to stay afloat.
Merchants must stay on top of advancements in retail trends and "provide the customer with the absolute best options in payment processing," says the site.
The Federal Reserve has proposed new caps on debit and credit card swipe fees, writes Credit Card Guide, which covers interchange fees, assessments, and add-on and pass through fees. Interchange fees are by far the largest component of swipe fees imposed by credit card providers, and the average interchange rate in the U.S. is 1.79 percent.
