Plastic Payment Costs Retailers and Consumers
Posted October 29, 1997
RALEIGH — Bills. Applications. Silver, gold and platimum plastic. It all adds up to green. It's big business that can be a volatile mix of convenience and cost. You pay and so do the stores.
Credit card usage across the country has almost doubled in the past two years alone, and industry experts say debit or check card usage has almost quadrupled in that same time.
More people are using plastic to pay. But when you're paying your bill, retailers are paying too, a lot more than before.
A scan and a signature. It's easy. But did you know that everytime your credit card is swiped, that retailer has to pay a percentage of that purchase back to credit card banks, usually a little more than 2.5%?
It's not a big hit for big retailers. But with small businesses, it's a different story.
"Now our charges are up 500%, and we're still getting charged the same percentage that we were two years ago," says Ed Moloney, owner of the Upper Deck 2 Sports Bar in Raleigh.
Moloney says 2 years ago he only paid $70 a month back to credit card banks, but since so many people are using credit cards as payment, now Moloney pays close to $500 every month.
There's been a huge rise in the number of check cards used. Even for those, every retailer still has to pay the 2.5%.
"There's plenty of money out there that if they were to lower that percentage compared to two years ago they'd still be making plenty of money," Moloney explains. "But if they just keep it as it is, they're the ones that are making a ton of money, and the retailers sometime or later are gonna have to start raising their prices to make up for that."
Many retailers feel the same pinch. Most say its a catch-22. They don't want to turn away business, but they also don't like watching that credit card payment skyrocket.
WRAL asked Visa, Mastercard, and American Express about it. They've yet to comment.
Editor's Note:As a group, Americans are swamped with credit cards and debt. A national credit card counseling company says the average adult gets 32 credit card offers every year, no matter what their credit history.
Your neighbors may never tell you. But on average, they owe $4,000 to credit card companies. Nationally, the bill comes to $400 billion dollars.