I find myself a bit apprehensive about writing a blog post pertaining to something I know next to nothing about. So I go straight to the source, a small business owner. My parents own a small restaurant in Dunedin, Florida that serves mostly ice cream and burgers. So I asked my mother, “What is one aspect of the global market that affects your business on a daily basis?” I am surprised to find out that what she notices most is something that as consumers we think little about; credit card purchases. I think as consumers we have become accustomed to using credit/debit cards provided to us by global companies to make our purchases, whether online or in store. We just think it’s easier. I hand you the card, you swipe it and pass me a receipt. However, we don’t often consider the effects on the small business owner. Every time that card is swiped, it costs the business owner money. Swipe fees, support fees and batch fees are all paid to companies like Visa, Discover or MasterCard. Not to mention most companies get a percentage of each sale which differs depending on the company. In the case of my parents business, this total comes to about $500 per month. While these credit card companies are in fact businesses that need to make money too, the effects on the small business are much greater than on globalized companies.
Sources:
Merchant Express - http://www.merchantexpress.com/mg_merchant_account_fees2.htm
I find your posting about the affects of credit card transactions on a small business owner very true. Up until the economy took a nose dive, and people started getting laid off (including me), I helped run a small business in Largo. This included accepting payments, and paying the bills. While it was very easy to accept payment via credit card, the fees also took a noticable portion of the sales. I do understand that the card companies are in the business to make money too, but I could never understand why they took a percentage of the sale ON TOP OF the transactions fees. As I understand it, it takes as much work to process a $10 sale as it does to process a $100 sale. I asked several card processing companies this questions, and never was able to get a satisfactory answer.
ReplyDeleteCredit card fees are one of those costs of doing business that larger, global companies can absorb better than the a small business owner. When making sales worldwide, the dollar amount of sales will naturally be higher than local, small businesses, and therefore, it stands to reason, their profits are larger as well. This justifies the cost of accepting credit cards for the sake of higher profits. Higher sales volume in a global company also actually lowers the transaction costs for the company, giving another the global company another advantage over the small business owner.