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"Excessive" card transaction fees continue to damage retailers' profits

posted on 06/06/2013 09:47:30 by Kevin Gill

It's expensive for retailers to accept card payments, but are they minimising the negative effects impact on their profits?

Credit card blues: Retailers are forking out 25 times more for processing card payments than they are for banking cash

The latest stats from the British Retail Consortium (BRC) show that - at 38p per transaction - the cost to a retailer of accepting credit card payments is a staggering25 times more expensive than it is for cash.

Another way of looking at it is that half the cost of processing all payments is taken up by handling credit card transactions even though they constitute only 10% of transactions made. In fact, the total charges associated with credit cards is on the rise even though the volume of transactions made with credit cards has actuallydecreased(down by 3.4%, whereas debit cards are up by 3.2%).

Disproportionately high charges

Charges are "excessive" and "disproportionally high" according to the BRC's report. It's hard to disagree.

But what's the alternative? Stop taking card payments and lose sales and customers? That's not really an option in most cases.

However, there is an opportunity here for retail businesses to minimise the damage to profits caused by card payments. Many retailers are under the impression that they're obliged to use the merchant services provider that's offered by their bank - but that simply isn't the case. Retailers absolutely do not have to stay with the merchant services supplier their bank set them up with. Actually, it's probably this misconception that keeps the rates high.

Many retailers are under the impression that they're obliged to use the merchant services provider that's offered by their bank - but that simply isn't the case

In fact, one of the biggest savings retailers can make is by switching their merchant services provider. The average independent shop, restaurant or garage pays around 20.7p for debit card and 1.9% for credit card transactions. Switching could bring these charges down by as much as 40% and give their profits an immediate boost.

A lot of beer

Let's take a typical High Street pub for example. Roughly speaking it is taking £1m a year on credit and debit cards - but it has never switched its merchant services. Doing so could mean the pub cuts its annual bill by about £10k.

Now imagine the pub sells pints for £4 and makes a net profit of 60p/pint. It would have to sell 16,666 pints, taking £66,666 over the bar, to put the same amount on its bottom line.

That's getting on for a month's worth of takings that the publican can simply substitute by reducing one cost base. Moreover, it costs him nothing and doesn't compromise his service in any way.

Try a similar sum for your business - you will probably find the figures look extremely appealing.

Read how a boutique owner in West Sussex reduced card transaction costs by £2,000 a year with Make It Cheaper.

Image credit: Ed Ivanushkin

Kevin Gill

Kevin is the Brand Communications Manager at Make It Cheaper, so he makes sure people know who we are, what we do and how we do it. He's from a family of small business owners (his dad runs a chippy, mum a dancing school, uncle a scaffolding company, auntie a fancy dress shop), so he's passionate about making it easier for customers to run their businesses. He spends lots of his time making our letters and emails easy to understand, nice to look at and a pleasure to read. You can email Kevin at

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