Continuous and unrelenting increases in credit card processing fees have forced BHH to set a $5 minimum on credit card purchases in our cafes as of December 8, 2014, so that we may continue to offer competitive prices to our customers. As a smaller local business, BHH does not enjoy the favorable pricing offered to larger national chains, and is unable to absorb the full impact of processing fees that have quintupled in the past five years.
Visa and Mastercard control over 80% of the credit card processing market, and charge American merchants the highest interchange fees in the world. Small businesses like BHH pay a disproportionate share of these costs, due in large part to Visa and Mastercard’s response to government legislation in the form of the Durbin Amendment, part of the Dodd-Frank Act passed in 2011. Ostensibly created to lower processing costs for all merchants, The Durbin Amendment set a ceiling on the fees that the card brands and their issuing banks could charge merchants when they accept a debit card. Large ticket retailers with an average sale of more than $10 did see a decline in their fees as a result of the Amendment: Before Durbin a large-ticket retailer might pay a 35-cent fee on a $20 sale, while after Durbin the cost declined to a 22-cent fee, the maximum allowed swipe fee.
The card brands and issuing banks weren’t too happy about having their debit fees capped, so they responded by raising regulated debit interchange fees to the maximum allowed swipe fee across the board, without regard to transaction size. The result was that small ticket merchants like BHH – those with average sale less than $5 -- were caught in the cross-hairs and saw their processing fees triple overnight. After Durbin, a $2 cup of coffee incurred a fee increase of over 200%.
What happened in effect was that large retailers enjoy lower expenses at the expense of small ticket retailers, in order to protect the profits of card brands and large issuing banks.
In the years since Durbin passed in 2011, processing fees continue to skyrocket as Visa and Mastercard continue to raise prices twice a year with impunity. At this point, the costs are running so rampant that we feel we have no choice but to curtail the bleeding, so that we may continue to offer competitive prices and pay, benefits, and career opportunities for our employees.
I want to thank you for loyal patronage of BHH over the past 21 years and I apologize for any inconvenience this necessary action causes you. With your continued support, we look forward to serving the community as Delaware’s favorite coffee and gathering place for years to come.
For more information of how the credit card game is played by the Visa/Mastercard duopoly, please refer to the following articles:
http://www.rollcall.com/news/credit_card_swipe_fees_are_a_rip_off_by_banks_abetted_by_us_law_commentary-228158-1.html
http://dailycaller.com/2014/05/29/credit-and-debit-swipe-fees-are-killing-small-businesses/
