Credit-Card Fees Squeeze Small Businesses

Swipe fees have become a significant fixed expense for small businesses, and it's one they have absolutely no control over. At a time when companies are renegotiating everything from their leases to their labor agreements to save money, it rankles that such costs are not up for discussion.

While a few mom-and-pop restaurants may accept cash only, refusing credit cards is not a realistic option for most small businesses. But Visa and MasterCard make it tricky to sidestep the fees in other ways.

"Credit-card companies have very complicated rules, and they're hard to follow if you have more than a few products," Duncan says. For example, if you want to offer a discount for cash purchases, according to the credit-card company policies, you have to post both the cash price and credit price for every item you sell. That can work at a gas station, which sells three different types of gas, but it's not practical for an adjacent convenience store, which might stock 500 items.

The companies also can forbid stores from instituting minimum credit-card purchase amounts, which ties in to their strategy of promoting credit-card use for ever-smaller purchases. "They make more on low-priced products," Duncan says. "For the retailers, it's not a formula for success."

The next time you hop out of your car to pick up a quick drink or bag of chips, think twice before pulling out the plastic. For many small businesses, cash is still king.

>To order reprints of this article, click here: Reprints