Richard Oneslager enjoys a good joke, so he couldn’t help sharing one of his new favorites. "Did you hear the one about the retailer who sat down with Visa to discuss his interchange fees? Of course you didn’t. Visa doesn’t sit down with retailers!"
Oneslager, president of Balmar Petroleum and chairman of the National Association of Convenience Stores (NACS), is at his wit’s end when it comes to dealing with interchange fees, and NACS’ 2008 State of the Industry (SOI) report did nothing to ease his pain. The SOI found that credit card fees for the industry jumped $1 billion (15.2%) to $7.6 billion in 2007.
Meanwhile, industry pretax profits dropped by roughly the same amount, $1.4 billion, falling to $3.4 billion. "The net effect is that the industry’s credit card fees are now more than double the industry’s pretax profits, an extraordinary development considering that credit card fees surpassed industry profits for the first time ever last year," the NACS report said.
That is not a misprint–double the industry’s pretax profit. This is unacceptable and NACS, through its founding membership in the Merchants Payments Coalition (www.unfaircreditcardfees.com), is fighting back.
The industry is loathe to have more government involvement in its business, but this time it’s warranted. The government needs to regulate interchange and set up a system that is far less oppressive.
Among the steps NACS is taking to fight credit card fees is stepping up its lobbying efforts, both in Washington and locally. As additional support falls in line behind MPC, the more likely the interchange structure is to crumble. "Interchange fees increased to $7.6 billion last year," Oneslager said. "That tells us one thing, we can’t outspend them, but we can outwork them."
The industry got perhaps its biggest boost in March when House Judiciary Committee Chairman John Conyers (D-MI) and Rep. Chris Cannon (R-UT) introduced the "Credit Card Fair Fee Act."
This legislation, if approved, would provide retailers the ability to negotiate rates and terms with card companies. Currently, interchange rates are hidden from retailers’ contracts. Raising interchange fees is how Visa and MasterCard encourage banks to issue more credit and debit cards. As long as rising rates are kept top secret, consumers have no way of knowing the extra costs they are paying through higher prices.
Credit card industry policies and practices make it practically impossible for merchants to find out much they are really paying in credit card fees or why. Interchange fees amount to approximately $2 of every $100 spent using credit cards, and Visa and MasterCard have a collective share of nearly 80% of the plastic market. The MPC said the proposed legislation is an "effort to stop the price-fixing practices of the credit card industry and create a transparent market-based process."
Oneslager is urging NACS members to get behind the legislation financially and emotionally. There are three things retailers can do to make a difference:
• Support the NACS Interchange Action Fund. "Write a check and let your voice be heard with your financial support," Oneslager said, requesting retailers contribute $180 per store to the cause.
• Contact your congressmen. Let them know you’re fed up, and you vote.
• Enlist supplier support. "We are in this together and together we can make a difference to change this broken system," Oneslager said.
Relief needs to come sooner rather than later.
A Family Business
In this month’s cover story, Jay Ricker describes how he built the 30-store Ricker’s chain in Anderson, Ind. Not surprisingly, he attributes quite a bit of his success to being involved in all aspect of the industry, from new legislation to the lids on his coffee cups.
"You have to be involved if you’re in business, or bad things will happen to you," Ricker said.
In an industry racked by exorbitant credit card fees, uncertain profit margins on cigarettes and horrible margins on gas, involvement has its privileges, and Ricker is in the VIP room.