I saw this AP article on Yahoo about a gas station in West Virginia not taking credit cards because the fees are higher because of the cost of fuel.
"
His complaints target the so-called interchange fee — a percentage of the sale price paid to credit card companies on every transaction. The percentage is fixed — usually at just under 2 percent — but the dollar amount of the fee rises with the price of the goods or services
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Now I take credit cards for my business and I don't understand the logic in this statement. Merchant accounts charge two fees. The first fee is a transaction fee. This is a flat fee just for processing the card. The second fee is the discount rate. Usually between 1-4% depending on the deal with your processor and the dollar volume amount of your transactions. You get a better deal if you process $100000 transactions a month vs. someone processing $1000 a month.
My processor charges 24 cents per transaction and somewhere between 1.5% and 1.75% for Visa/MC transactions (Amex/Disc have their own rates) Using those numbers I did some calculations.
The charge amount is the dollar amount of the purchase. The discount is the amount based on the discount fee from Visa/MC. The Trans Fee is the per transaction fee. The total is the total of those two fees. Gallons is number of gallons purchased. I used $5.00 a gallon to make the numbers easier. The cost per Gallon column is the how much that cost the retailer per gallon
Charge Discount Trans Fee Total Gallons Cost per Gallon
$10 $0.18 $0.24 $0.42 2 $0.21
$100 $1.75 $0.24 $1.99 20 $.10
On the 2 gallon purchase the total works out to about 4% of the total sale and the 20 gallon purchase works out to about 2% of the total sale. These percentages are the SAME if gas is $2 a gallon or $5 a gallon.
Since the rates remain the same, regardless of the price of fuel, I dont think the price of gas is hurting the gas stations with credit card fees. What is probably more true is that people are putting less in their tank per trip to gas station. Meaning the stations are not able to allocate that fee over more gallons of gas.
I used numbers for a small retailer. Service stations generally dont remain in business if they do not sell at least 80000 gallons in gas a month. So even A small service station probably gets much better discount rate and smaller transaction fees than a small retailer.
I guess what bothers me about this is that you will soon see people asking congress to intervene on this issue and we will have another case of our government getting involved in something that should be settled by the markets.
I hosted a small party for Andrea, a friend of mine from work. It was sort of an informal house-warming-ish party at least for some of the girls.
I meant to take a vew pictures of the house before it got completely messy again but alas I did not.
Another busy weekend, maybe next weekend I'll get around to more of the unpacking.