How The Plastic Money Can Increase Your Small Business Costs

We all know how helpful business credit cards are for entrepreneurs. What we don't know is how much it costs your business when you swipe those cards. It has been noticed that often business owners pay more swipe fees in a year than their total income. As the number of people using such plastic money is ever increasing, the cost of accepting  these credit card payments is also becoming higher day by day. Whether you sell fast food and beverages or gifts, every time your customers swipe their credit card, you need to pay a percentage to the company who has issued the card. Though credit card companies say that this swipe fees is a small price that ensures a guaranteed payment for your convenience, it can increase your small business costs considerably.

In general, this swipe fee includes an interchange fee and a  transaction fee. The former is paid to the  credit card issuers, whereas the later is paid to those companies or financial institutions that process the transaction. This fees may range from 1 to 5.5 percent of the total amount that has been swiped. Moreover, the pricing structures is extremely complex as it is based on the size of the transaction made as well as on several different factors. The type of card and the rewards programs associated with it also play a significant role in determining this pricing structures.

According to the National Retail Federation, the swipe fees racked up by these credit card companies have increased by 300 percent in the year 2008 in comparison to what they earned in 2001. It's needless to say that the majority of this amount is pure profit for these credit card companies. And the chances are high that that this fee will go unchecked and thus costs more to your business in the coming years. The CARD Act (i.e the Credit Card Accountability, Responsibility, and Disclosure Act), that went into effect recently aims to protect the consumers from various destructive credit card practices.

However, this act remained oblivious in terms of protecting small businesses from ever increasing swipe fees. Moreover, experts believe that due to this act small businesses have become even more vulnerable. Since the credit card companies can no more earn bulk profit from the individual card holder, they are going to increase the swipe fees and the other fees that are paid by business owners to make up this loss.

The credit card companies claim that this fees are fair and just, as it offset the risk that they bear by extending the credit to the individual card holders and businesses. And they believe if this fee is lowered, the credit card companies will be left with no other choice other than increasing the other rates so as to sustain their credit card program. On the contrary, there are countries where such fees are regulated by law. In fact, it is high time for small business owner to raise their voice for limiting the swipe fees. Otherwise the next time you swipe your customers' credit cards, you will have no option other than calculating how much it cost your business.