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(May 14/09) CRFA Chairman Brenda O’Reilly took the issue of skyrocketing credit card fees to Parliament Hill on May 12. She appeared before a joint session of the Standing Committees on Finance and Industry to outline the foodservice industry’s concerns. Here’s what Brenda told the more than 20 members of Parliament who attended the hearing:
On the impact of “premium” cards:
“The greatest single contributor to the (increased fees paid by restaurateurs) is the profusion of “premium” cards.
Starting last fall, both Visa and MasterCard introduced new “premium” cards with more reward points for cardholders at “no additional cost.” But every restaurant operator knows that there’s no such thing as a free lunch. Merchants are stuck footing the bill for these perks.
For my business, these premium cards are 12 – 30% more expensive to accept than the standard card. Because the fees paid to banks are so much higher, issuing banks are actively marketing them and even automatically switching customers over to them. And because the perks are so generous, cardholders are using them.
If these increased premium card costs were offset by these cardholders purchasing more, as suggested by the card companies, well that would be one thing.
But this is not the case.
In fact, credit card usage is actually down over the same period.
What we are doing is paying far higher fees on less business.”
On why the situation is particularly dire in the restaurant business:
“Restaurants are extremely competitive – with thin margins. In Newfoundland, where I operate my own restaurant businesses, the situation is the tightest in the country, with an average profit margin of 2.1%. For that return, we invest capital, pay rent and utilities, employ staff in much needed jobs, buy from our fishermen and farmers, promote and advertise.
That 2.1% return for the industry is lower than the 2.2% merchant discount rate charged us as the transaction fee on some credit card transactions.
Don’t get me wrong. We’re not asking the credit card companies to take a haircut because the times are difficult. What we’re here fighting for is an end to the gouging on fees by the credit card duopoly.”
On how the credit card companies hold merchants hostage:
“What choice do we have on acceptance of these higher fee cards? In a word, none.
Through our merchant agreements we are required to by Visa and MasterCard’s “honour all cards” rule to take all of their credit card offerings.
Plus, it is hard to refuse a legitimate payment method chosen by the consumer, especially since that consumer is probably unaware of the detrimental impact on the merchant – and of the inevitable boomerang effect in higher consumer prices.
Even if merchants were to be allowed to decline such higher fee cards, it would be next impossible for one of our thousands of food service workers to identify them from among 200+ credit card products … and it would be very difficult for our employees to explain to the customer why their particular card is not accepted.”
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