If you think the Credit Card companies robbed us with bankruptcy bill?

[kentuck]

Somehow, they have an agreement or a law to receive 2.5% of every dollar that is spent on the credit card. That comes out to about $1 dollar for each 15 gallons you put in your car, at todays prices. The gas stations have to pay this increasing fee, even though their profit margins are frozen at 7-11 cents per gallon. Think about this. This would be a great issue for a thoughtful Congressman to address.
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Read this:
http://www.washingtonpost.com/wp-dyn/content/article/2005/09/24/AR2005092400255.html

<snip>
Major credit card companies are reaping huge profits from rising gas prices because the fee that banks charge gas stations to process a credit card transaction is based on a percentage of the purchase price. As gas prices go up, the processing fee goes up.

Since last year, the fees that gas stations paid to credit card companies have risen 64 percent, right along with the price of gasoline.

<snip>
And lots of it. On a typical day, Americans buy 382 million gallons of gasoline, according to the Energy Department's Energy Information Administration. About 70 percent of that is paid for by credit card, said several trade associations representing gas stations. The credit card processing fees paid by gas stations, meanwhile, average about 2.5 percent, these trade groups agree.

So a year ago, when gas prices averaged $1.87, banks involved in credit card processing made about $12.5 million a day on fees. Now, with prices averaging $2.75 nationally, the credit card companies are raking in $18.4 million a day.

...more
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and when you finish reading the above, read this about the bankruptcy laws.

http://warrenreports.tpmcafe.com/story/2005/9/24/125032/719

<snip>
Finally, last night the Republican senator from Louisiana submitted his relief bill for the victims of Katrina--and his relief bill for the credit card companies. Yes, Senator Vitter says that there is a problem with applying the new bankruptcy law to the victims of a hurricane. (Loud cheering--he gets it!) But then he says that a teaspoon of help is enough to bail out these families. (Loud booing--he doesn't get it after all!)

Poor Senator Vitter. He's caught in the terrible dilemma of offering help either to the families washed out by Katrina and or to the credit card companies that want to wring every last dollar out of these people. Yesterday Senator Vitter threw his support to the credit card companies.

<snip>
If there weren't real people who would get help, the Vitter bill would be laughable. The amendments seem to say, "Yes, there is something wrong with the bankruptcy bill, but let's do as little as possible to fix it." Delay enactment of the bill? No way! Make it clear that hurricane victims are excused from procedures they cannot possibly meet? Nope. Senator Vitter ignores the letter from the Louisiana state bar that they aren't prepared to begin taking fillings under the new law. He ignores the statement from the Mississippi judge who says the new law won't give him the flexibility he needs to deal with people who have lost records and can't show up for credit counseling. It seems that Senator Vitter's main interest is doing what the credit industry wants done, not making changes to the bankruptcy laws that might make a difference.

I don't have the words adequate to describe the suffering of the people of the Gulf Coast, but I know that if there is ever a time their elected representatives should be looking out for them, this is it. It seems that Senator Vitter thinks the credit card companies need him more.

[BlueEyedSon]

1. The fee that every merchant pays is a set percentage of the

invoice total. It is called the "merchant discount." It is not "somehow", it is in their agreement (contract) with their merchant bank (the exact percent is fixed, usually between 1 and 3 percent).

Same is true of any other item. If you use your credit card at the grocery store, when the price of milk goes up the merchant bank takes out the increased merchant discount.

[Gman]

2. Exactly

That's standard no matter what is purchased. It's about what I paid 2.5% when I had a merchant account. American Express is a lot more but I forget how much.

[kentuck]

3. But the point of the article is:

the gas station makes 7-11 cents a gallon. He pays the credit card company 2.5% each time the credit card is used. So the station pays more to the CC company at $3 dollars a gallon than he does at 1.50 - he pays the 2.5% on the total. The gas station makes a set 7-11 cents a gallon. If he sells less gas, he is making less money on the higher price of gasoline as the CC companies are taking more money from him.

What you say may be true about groceries or whatever, but what else has gone up as much as gasoline?

[BlueEyedSon]

4. Would you be happier if the margin was not a fixed NUMBER (7 to 11

cents), but a fixed PERCENT? That would most likely make gas even more expensive to the consumer.

Hear me now and believe me later on this one: you are not going to get any traction trying to change the Merchant Banking system.

[kentuck]

17. The point is :

Joe Blows owns the service station. He makes about 10 cents a gallon off each gallon he sales. 70% of his sales are by credit card. He pays 2.5% fee to the CC company each time a credit card is used. If he sells 5 gallons of gas, he makes 50 cents. At 3.00 per gallon, the CC company makes about 37 cents off that same 5 gallons. If the price were to double to 6.00 a gallon, the station owner would still make 50 cents off of 5 gallons of gas but he would probably sell less because of the higher price. But the CC company would make about .62 cents off that same 5 gallons of gas. The station owner would have to pay that. The point is that the gas station owner makes less as the prices go higher and the CC companies make more. It puts a squeeze on the station owners at the benefit of the CC companies. Whether right or wrong, that is what is happening.

[1932]

5. The more powerful the bargaining position of the retailer, the lower the

merchant fee.

Nonetheless, this is another good reason to join a credit union.

[BlueEyedSon]

6. But in the end, it is a FIXED percentage, contractually specified.

if the end-customer invoices go up so do the fees.

[1932]

8. Absolutely.

Incidentally, there's a law that prevents retailers from giving cash discounts. The law protects credit card companies from being prejudiced by retailers who want to, say, charge 1% less to cash customers to avoid paying 2-2.5% to the credit card companies.

[aion]

16. Haven't given it an enormous amount of thought

But that does seem fair to me. It seems to be simply trying to prevent any undermining of the credit system.

If I am understanding properly, it is not okay to offer lower prices to cash-paying customers. But it is okay to charge extra fees for credit transactions. The dilemma seems to focus on the perceived advertised price.

[aion]

7. Let's hope there is not a run on the banks anytime soon

The number of credits in circulation far excedes the number of dollars printed. As the dollars become worth-less, the banks are trying to offset that loss via increased fees for credit transactions.

Remember that when you spend $2 to take out $20 from an ATM machine.

[OregonBlue]

9. Now, even when using your debit card, the merchants gets charged

the fee. Many places no longer can just run a debit card as a debit, it gets processed just like a credit so the bank can collect the fee. Lots of merchants unhappy about it but not much they can do unless they're huge and can fight it. Needs to be looked at by Congress as well. In the end it adds to all of our costs.

[aion]

10. Can you pay your utility bills, in person, with a debit card?

I tried that, and was told "We cannot take those. We're a municipality." (although you can go through a 3rd party payment processor who takes a cut)

I might better understand it if it were a credit card. But this was a debit card, drawing directly from my checking account.

[OregonBlue]

11. Actually, I can pay my utility bills with a credit card. I cannot pay

with a debit card. Bank makes $2-3 on each credit card transaction, only $.50 on debit card. What a racket. Here in Oregon, many companies will only take credit cards or will only run your debit card as a credit transaction. What a major rip!!

[aion]

12. Are you certain?

I edited my message perhaps after you replied. I meant to emphasize the 'in person' part. We, too, can go through a 3rd party payment organization. But again, they take a cut. Sometimes I think we're being treated like a bunch of ant-cow aphids by the money changers.

[OregonBlue]

13. Gee, I don't know. I can call my utility companies and pay with a credit

card over the phone. Can also pay in person with a credit card. Actually I'm on auto pay from my bank account so usually don't have the problem but have called and paid my son and his wife's bills with credit card.

[aion]

14. Are you in a metro area, or rural?

I am in a metro area. Payments made to "City Utilities".

[OregonBlue]

15. Live in the toolies!! I have to drive 40 miles to a town. Many of our

services are set up so we don't have to leave home. I also of course internet shop a lot!