Squeezing the small businesses
It's not only poorer consumers who get screwed by the major credit card oligopoly. Thanks to the big firms influence over government policies, less well-off customers pay usurious interest rates and are about to be denied bankruptcy protection when the temptation of "free money" offered by the credit companies blows up in their faces.
But now it is small businesses that are getting the screws tightened. A recent Wall Street Journal article ("Merchants Balk At Higher Fees For Credit Cards", 4/12/2005) points out that fees that small merchants pay are going up. This takes the form of premium credit cards that earn extra points for credit card customers. What is happening is that merchants are being forced, whether they want to or not, to pay for the bonus points which get perks for the users. As one merchant is quoted as saying "This is another one of those opportunities for credit-card companies to enhance their revenue stream on the backs of merchants." But other cards, including corporate accounts, are exacting higher fees as well.
But the big think is that smaller merchants pay much higher fees than large concerns. As the article puts it:
The same purchase made on a basic Visa card might cost the merchant $1.51. But the pricing structure is far from simple. Like the intricate fare schemes in the airline industry, there can be dozens of interchange rates at the same time, based on the types of merchants and the amount of card transactions they generate. Big merchants with large numbers of transactions can often negotiate better interchange rates from Visa and MasterCard than smaller businesses. A large gas station chain, for instance, may pay less than the owner of a single restaurant.
As ever, being rich means life is less expensive, and being big means you can negotiate a better price.
