Interchange Fees Cost Retailers on Returns
NEW YORK ( LowCards.com) -- Debit card interchange fees will decrease Oct. 1. This is good news for merchants who have long complained that the interchange fee, also known as a swipe fee, was too high and cut into their profits. The new regulations are helpful, but the interchange fee will continue to be a complicated and costly issue between retailers, banks and credit card processors.
Consumers give little thought to the interchange fee charged every time they swipe their debit or credit card, but the fee can take a large bite out of a retailer's profit. The interchange fee averages 44 cents per transaction; the reduced fee will be 21 cents plus an additional amount to cover losses from fraud.
|Swipe fee rules don't account for returned items, but many merchants are reluctant to make up for it by charging restocking fees that could anger customers.|
This will save retailers a lot of money, but the new ruling did not address what happens to the interchange fee if a debit or credit card purchase is returned. Even though the merchant refunds the full purchase price to the consumer when an item is returned, the retailer may take a loss on the transaction because card processing charges are not refunded to the retailer when a transaction is reversed. Some processors may even charge a second interchange fee when an item is returned.
Returns and chargebacks are costly and a retailer with a high percentage of chargebacks can pay a higher fee.The easiest way for merchants to recover this fee is to charge customers a return or restocking fee, but many merchants are reluctant to charge this restocking fee because it could stir anger in their customers. -- Reported by Bill Hardekopf of LowCards.com.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV