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
- $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
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV