Mom-and-Pop Stores and Interchange Fees: A Moral Dilemma
By Kelly Dilworth
June 10, 2011
I love local establishments, such as mom-and-pop stores that have been around for 20-plus years and local retail shops with a regional flair. I’m lucky to live in a city that celebrates locally owned places, and I deliberately patronize them as a way to show my support.
But whenever I use my debit or credit card, I’m painfully aware that I’m also forcing these shops – many of which are operating on extremely tight budgets — to pay a small but significant interchange fee on every purchase.
In the United States, if you use a credit card to make a purchase, the merchant will have to pay about a 2 percent fee to your credit card company for processing. And that number often goes up if you use a premium card, such as a rewards card.
For now, this is true if you use a debit card as well (typically, credit card companies charge merchants 1 to 2 percent in debit card swipe fees). But thanks to a key provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act, this won’t be true for long.
The U.S. Senate voted on Wednesday to go ahead with a Federal Reserve proposal to cap debit card interchange fees at just 7 to 12 cents. The new rule – set to take effect next month – makes me feel a lot better about using my debit card at my favorite mom and pops.
But I doubt things are going to change any time soon for credit card interchange fees — which is causing me to rethink my recent plan to apply for a rewards card. After salivating over travel magazines for the last year, I had planned to apply for an airline credit card and use it for everyday purchases in the hope of racking up enough points to score a free flight somewhere.
However, the guilt of imposing a potentially hefty fee on my favorite locally owned, cash-strapped shops will likely cause me to pull out my debit card instead.
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