The convenience of using a credit card could cost you more at the register.
This week, business owners nationwide got the option to pass on the fees they currently pay every time you swipe your credit card instead of paying the cost themselves.
That means the fee of 1.5 to 4 percent of the total bill that businesses previously paid could be added to what you pay at the register.
Mastercard and Visa agreed to give business owners the option of passing on the fees as part of a court settlement with a group of retailers last summer, Indianapolis economist Kyle Anderson said. The settlement does not include customers who use debit cards.
Businesses pay a fee per credit card transaction as a way to cover processing costs, but the fees have increased in recent years as more customers use cards instead of cash, Anderson said.
J.P. Parker Co., a local florist, pays more than $18,000 a year for the fees. And Cecily Harlow, owner of Wavelengths Hair Designs in Greenwood, said 95 percent of her customers pay with a card instead of cash.
Anderson said small businesses, like the florist and hair salon, could benefit from passing on the fees, because it would reduce their expenses. But many small businesses have taken the same stance as larger corporations, including Walmart and Macy’s, and said they don’t want to make their customers cover the costs.
“I think people are getting robbed enough. This is hard enough times. From taxes to these kinds of fees and things, they keep going up. I don’t want them to associate that with my business,” Indigo Duck owner Joseph Hewett said.
Hewett pays a few thousand dollars a year in credit card fees for the Indigo Duck, a Franklin restaurant that opened in 2010. His customers most likely would not notice the extra fee, but he does not want to make them pay more than they already are, he said.
But some business owners are mulling over the fee, since it could help with their bottom line.
Bob Schofield, owner of the Willard in Franklin, said he is considering whether his restaurant should pass on the fee. He said he doesn’t want to make credit card users pay an extra charge, but he is working off a small profit margin and has to cut expenses where he can.
“I just don’t know what to do. I really don’t want to pass it on, but the bad part about this is it’s so confusing. Everything’s up in the air,” Schofield said.
Business owners who do pass on the fee are not allowed to charge customers more than what the credit card companies charge their business.
For instance, if a business pays 2 percent per Mastercard transaction, 2 percent could be added to Mastercard customers’ bills, but nothing higher, so businesses won’t be able to make money off the fees.
Business owners also would have to post signs on their front doors and at their registers to let customers know they’ll pay more if they use their credit cards, Anderson said.
Jay Shively, co-owner of Benjamin’s Coffeehouse and Bakeshop in Franklin, said switching the fee to customers’ bills also would mean changing the setup on the shop’s registers.
The change would add a few seconds to each order, because employees would have to ask customers if they want to use a debit or credit and then ring them up differently based on how they were paying.
“I don’t think people would appreciate it, either. People are nice enough to us anyway on tips and things. We can absorb most of that cost,” Shively said.
Pam Parker, owner of J.P. Parker Co. in Franklin, said she also can continue to absorb the cost, but she hopes the discussion about credit card fees makes customers realize how much small businesses pay every time they swipe their card.
She said her floral business, which has been open since 1986, cannot compete with larger businesses that get better deals from credit card companies, but she would lose customers if she decided to pass on the fees.
“Even though credit cards are expensive to have, I don’t think we can afford to lose the customers that we would lose,” Parker said. “I’m not sure there’s an option.”