For decades, hundreds of thousands of businesses have chosen not to accept payment via American Express cards, due to the company’s high transaction fees, which were sometimes more than 100% higher than those charged by banks issuing Visa and Mastercard credit cards. In recent years, American Express has responded by dramatically dropping their transaction fees for most businesses.
Today, many merchants, unaware of the drop in transaction fees, still refuse to accept Amex cards, upsetting their customers who wish to use that card to accrue “the benefits of membership.” Fortunately, those merchants can always suggest payment via Visa or Mastercard as an easy alternative, quickly defusing a tense moment without having to disclose the ticklish fact that all of those benefits are fully funded by the fees paid by business owners.
The Rise of Rewards Credit Cards
Today, merchants are facing a new dilemma: whether to continue accepting Visa and Mastercard payments in light of their increasingly high transaction fees. The explosive rise in the issuance and use of so-called Rewards Cards, is costing business owners a fortune, cutting into their already razor-thin profit margins.
In a recent article, Wall Street Journal reporter AnnaMaria Andriotis cited a Nilson Report that found, “All told, merchants paid credit-card issuers $43.4 billion in Visa and Mastercard credit-card interchange fees in 2017, up 68% from 2012.” Andriotis also reported that, “Shares of Visa and Mastercard have soared 31% and 46%, respectively, so far this year.”
Consumers Love Them, Businesses Hate Them
Merchants find themselves caught between the irresistible force of frenzied consumer demand for rewards cards, and the immovable object of “honor all cards” rule, which requires merchants who accept any Visa or Mastercard-branded credit card to accept them all, irrespective of the transaction fees charged.
It seems that merchants have only two choices: accept the cards and pay the ever-increasing fees, reducing their profits on some sales by as much as 50%, or refuse to accept credit card payment and watch their sales plummet.
A Third Option
Fortunately for all parties involved, a third choice is available. Clarus Merchant Services of Gaithersburg, Maryland offers a unique technology solution, which is fully compliant with card brand regulations, that allows purchasers to use rewards credit cards while relieving business owners from paying the high transaction fees.
Their platform, available to merchants across most of the U.S. and Canada, gives the purchaser the option to complete their purchase with a credit card by paying a 3.5% fee to cover the cost of credit card fees. They may also choose to use a debit card or some other form of payment to complete their transaction without the additional charge.
The Freedom To Choose
“It’s all about giving people options,” states Clarus founder and CEO, Randy Tillim. “Our system gives everyone on both sides of the transaction as many different options as possible.”
Interestingly, the big credit card companies appear to agree with the power of choice in smoothing credit card transactions. A spokeswoman for Visa was quoted in the Wall Street Journal article as saying, “Visa believes consumers should always have a choice in how they pay, including being allowed to use their Visa credit card regardless of the card type or issuer. When consumer choice is limited, nobody wins.”
Education Is Key
“We have the solution to this problem already in place,” says Clarus President Eric Pottebaum. “The key element now is educating both buyers and sellers. Buyers need to know that all the rewards they are enjoying are coming straight out of the pockets of the people they are buying from. And sellers need to understand that they have a third option between the ‘honor all cards’ rule and refusing to accept credit card payment entirely.”
About Clarus Merchant Services
Since 1999, CLARUS has positioned itself as a specialist payment provider in the distribution and B2B sectors, and today services over 5000 merchants and processes more than $5 billion in transactions each year. CLARUS is the preferred MSP to some of the biggest buying groups and co-operatives in America, and provides its members with wholesale rates for credit card processing and equipment.
Clarus Merchant Services
3 E Diamond Avenue
Gaithersburg, MD 20877