TOWNSHEND — At the end of April and the beginning of May of this year, both the Vermont House and the Vermont Senate unanimously passed a bill that will change the way credit card companies interact with merchants in this state. U.S. Representative Peter Welch (D-Vt.) has introduced legislation in Washington that will do the same nationally.
This is good news, especially for small businesses.
But legislation needs to be reinforced by action on the part of the buying public.
Last year, during the holiday season, the final statement on our home page was, “ 'And friends, they may think it's a movement,' Local, cash, big box, the card.” Appropriate reference to Arlo Guthrie was, of course, noted.
While many were attempting to get people to spend their money locally, we were attempting to get people to take things one step further and pay by cash or check when dealing with their hometown establishments.
Why is this important?
Every time you use a credit or a debit card at a local store, part of that money goes to a variety of financial institutions, including some that you bailed out recently. For the most part, that money leaves the local economy. In some cases, you are actually denying your favorite storeowner any profit if you are in the habit of constantly charging single small items using your favorite piece of plastic.
I will use some examples from our own business to make things a bit clearer.
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It is important to keep in mind that we do no “swiping” of cards. When we are at a show or festival, we use the old-style imprinters and come home and manually punch in the numbers, just as we do when we process and ship an order. It costs us more to do it this way.
When you purchase from a merchant, be it with a debit or a credit card, the credit card company - Visa, MasterCard, etc. - gets a percentage of the sale plus, in many instances, a “per ticket” fee. These amounts vary widely. Visa, for example, charges us higher fees because we don't punch in your telephone number or the security code on the back of your card. Our interchange fees range between 1.64 percent and 2.95 percent. Our per-ticket fee ranges from 10 cents to 20 cents.
Second, the company that processes the transaction for the merchant adds its fees. Again, these fees and the methods used vary widely between processors. Our processor adds .93 percent.
Then there is more. One of our statements lists five additional percentage fees for a variety of reasons, like transactions with a foreign card.
When customers use a debit card rather than a credit card, the per-ticket fee is higher but the percentage charge is lower. If you buy a pack of gum or a cup of coffee for $1 from a store with your debit card using the rates our business is charged, the per-ticket fee with Visa is 20 cents, and the percentage charge is 1.75 cents. Then there are the other charges as well.
That type of activity is becoming the norm these days, and it is killing the little stores that we all say we want to support.
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So, while MasterCard and Visa are encouraging you to use that card - while they tell you it is just like a check or better than cash - what you are doing is giving a largely unregulated financial system money that that store owners needs to pay their mortgages, their employees, or maybe even just buy a cup of coffee for themselves.
Credit and debit cards are wonderful tools, especially when one is making a big purchase, but we want to add one more line to the “use-your-credit-card-wisely” lesson plan. Your local stores are important, and even in a good economy, survival can be difficult.
Are those airline miles really worth more than that little store you love so much?