Note: The following article was originally written for publication in early October. We went for a different one, but after recent news we find this newly relevant. It turns out we were wrong - instead of other banks releasing fees similar to the Bank of America one mentioned below, Bank of America revoked the fee after a public outcry. But that makes the analysis below even more important. Small businesses must continue to be on the lookout for the ways in which taxes and financial costs are bared by them above all, in order to be able to adapt and educate.
Ever since Bank of America announced last month that they'll be assessing a $5 charge every month whenever a checking account user charges a payment with their debit card, there have been a ton of complaints about how unfair the new charge is to consumers.
All the different types of fees that banks charge are a real nuisance, and many of them do extort the complexity of the banking system to squeeze a few more dimes and nickels from the uneducated. But is it necessarily the case that charging consumers for using their debit cards is unfair?
If you own or manage a business, you know about a different side of the story. You know how much money you pay every month for the ability to allow customers to pay by card. Despite the fact that these fees make a serious dent in your margin, many consumers simply don't know that you have to pay them. When I first started working for a processor, and talked with my friends about the job, I was amazed by how many individuals didn't even know that merchants pay a fee whenever a card is swiped.
What these new fees really mean is that the economic costs of the use of debit cards will now be more apparent to the consumer. That's actually a good thing for businesses who already know about those costs so well. Consumers will, not all at once, but surely on occasion, switch from debit card use to other forms of payment.
Maybe some will switch to credit cards, which are no better for merchants. However, consumers have plenty of reasons to avoid using their credit cards too often. There will probably be quite a few who switch from using debit cards a couple times of month to using cash. Now that's good for small businesses. To adapt an old idiom: a buck in hand is worth two charged on a card.
Thomas Craig is a Sales Agent for Priority Payments Northwest, a credit card processing and payroll service provider located in Portland, OR. He also works with Matthew Koren, President of Priority Payments Northwest, at the consulting firm Causeit, Inc. You can contact Thomas by filling out the Contact Us page, or by calling 503-548-6312, ext 760.