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Credit Card Processing and the 2010 Financial Reform Act

Virtually all retail businesses accept credit cards because doing so is proven to increase total sales.  At this writing the U.S. House and Senate conference committee continues to work on the controversial merchant services reform legislation.  And a House-backed revision of the Durbin amendment — which gives the Federal Reserve authority to regulate credit card processing, seems likely to remain part of the final merchant account legislation.

All those that accept credit cards anxiously await news of how the Durbin “”merchant services”” amendment will affect how credit card processing at the point of sale (POS) is performed, and the impact on the merchant account. The “profit or loss” affect from the new legislation aimed at governing costs of merchant account services will directly impact how the credit card machine and credit card terminal are used.

All merchants that accept credit cards should wonder if implementing any of the new merchant account service reform practices will help increase profits by lowering credit card processing fees, or may lower total profits derived from credit card processing by driving away sales.

Whether these changes to credit card processing increase, or decrease, profits will depend greatly on how consumers will accept the merchant services changes. And based on the study results released today by NerdWallet — a credit card search site that helps consumers find a card that suits their spending habits, they won’t react well to merchant services “surcharging”, especially if they are high income consumers. The survey was meant to measure consumer reaction to the proposed merchant services amendment

According to the respondents of the survey who have incomes of $100K and more, 71% say they are “”not likely”” to shop at a store that charges a 2% surcharge for credit card processing, and 79% say that if faced with a $10 minimum to accept credit cards, they would rather leave the store than be forced to meet the credit card processing minimum.

For consumers making $50K or less, 46% say they rarely pay with cash and a full 80% are unlikely to shop at a place that charges them to use a business credit card machine. 70% of this same group say they use credit card processing for most or all small purchases, while 57% say they would leave to find a different store if they were hit with a $10 minimum in order to accept credit cards.

What may appear on the surface of the of the Durbin amendment to regulate credit card processing fees, beware!

Gino Kauzlarich