The Coming Credit Card Crunch, Can Your Retail Business Survive?

The retail business has been grand, absolutely peachy. What a great time to be in retail and especially juicy if you were lucky enough to have been selling, non-essential, tariff-free imported bargains to endless lines of over-extended, credit card junkies. Ahh, those were the days my friend, we thought they’d never end.

Now, I’m not saying that it been easy. Business is never easy; still you’ve got to admit it’s been a wide open shopping spree for last decade. It looked like there was no down side. I’m sorry to point it out, but, weather we’ve been aware of it or not, we have all been complicit in the biggest “easy credit rip-off” in the history of the planet and in the following nose-dive and belly flop of the world economy.

For several years now, the wealth of our county, the true base of our economy, the savings and equity of the American people has been quietly pillaged. With the implicit encouraged by the government, wall-street, the banking system and the credit card companies, the American public has been gleefully charging itself into the poor house. Many or more honestly most of us have been enthusiastically involved in the scam.

We have, all of us, to great extent, been living beyond our means; too many have been maxing out our credit cards and getting caught in the dreaded minimum payment undertow. And then, Brainstorm! To get out of the credit card trap, why not take a “leader” loans on our real estate. That’s the ticket, then either not read the fine print {shame on you} or hope we’ll get lucky before the roof falls in, but then what? Of course, max out the credit cards again. Gee, it just sounds too good not to go on forever.

If you have recently been revived from an extended coma resulting from looking at your 401k statement, you may still be too disoriented to have notice that the world has changed, and that it may never be the same again. Where did all the money go? Who is that guy headed for the ranch? No wait a minute that’s for another article.

To tell the truth, we, as retailer got some of the booty, just the crumbs, of course, for doing the heavy lifting. Now we need to find ways to hold on to our pittance and how to prosper into the future. Last year’s retail business model may be as dead as a door nail. Many of you have notices the changes in the wind, smaller crowds, smaller tickets and old customers not coming around as often. There is no end in sight. The credit card business will surely be in decline for some time to come for most segments of the retail world.

Well, here we are sport fans, so what now?

Well one of the things I just loved about this whole fiasco was the way the credit card companies start off charging us, the retailers, a healthy chunk of every transaction, it’s been like having a second landlord sucking on your neck. Then they follow your customers’ home and rifle their pockets, so they can’t afford to come back very often. Ideally they would like to continue this until our customers can only afford to stay home and pay the minimum for the rest of their lives. Even though this arrangement is oh so nice for them, it just doesn’t work out too well for the rest of us.

Don’t start looking for the exit. I’m not going to suggest that you go cold turkey on the plastic. But the truth is, many of your customers will have their limits reduced or their accounts closed and of course foreclosure and bankruptcy tends to slow down the shopping for non-essentials and let’s face it, non-essentials are some of our favorite things to sell.

So what can be done? Well there is one form of the luscious plastic that will not be going away, Thank goodness. More and more people will be using debit cards, it’s already more popular than cash in Canada and soon will be in the U.S. There are already 300 million debit card holders in the U.S and an increase of 160 million a year is projected, 30 percent of these customers have no other card.

So, we are all safe and sound right? Well, except for one little thing. The credit card companies discovered that with debit cards they didn’t get to mug your customers latter and that just didn’t seem right to them. They got sad and cranky. Then they decided that we retailers should be made to pay for this non-muggable transaction.

Did you know? if you run debit/bank/ATM cards though your credit card machine you are charged a premium rate for an absolutely risk free transaction. That’s right, there is no risk in an ATM transaction, if the money is in the account, it is transferred instantly, no chance of a charge-back or anything else, no risk at all. Even so, the credit card companies charge you an extra fee on every debit card transaction.

Drat, cut off at the pass again, so I guess we just bend over and touch our toes and take our medicine, I mean we wouldn’t want to be responsible for making the credit card companies sad. Would we? Sound like the perfect solution, right? The customer doesn’t get mugged, doesn’t cost them a cent and the credit card companies get to slam us twice, so they won’t have to be sad. Only we have to take it in the shorts. Sounds like the perfect plan for everyone…except us. Maybe it’s time we get sad and cranky. You think?

Well there is an answer; it’s time to let the customer help pay for the convenience of using ATM/bank cards. This can be accomplished with an inexpensive cashless or scrip ATM machine. Many large nationwide companies are already doing this. The new generation of these machines are the same size as your credit card machine, do not need a dedicated phone line and make a transaction fee for the merchant on every transaction. Yes, you heard me right, after all these years you can actually make a bigger profit on a card sale than a cash sale.

In Canada, Atm/debit card transactions have recently exceeded cash and credit cards for retail purchases. This will soon be the case here in the good old USA. There are more than 300 million ATM/bank cards currently in the US. For 100 million this is the only card they have. ATM/bank cards are expected to increase by 150 million new cards a years. These cards can either help your bottom line or hurt it depending on how you process them.

A study by AT&T Global and Visa recently reported that an ATM machine was the most profitable footage in any business, even businesses with gaming machine. The average ATM in America makes a profit of $20,000.00 per year. You can add to that 15 to 25% savings on credit card charges, elimination of bad checks and an increase in gross sales of 20% average.

So, here’s the story; let’s say you have a ten or twenty dollar sale and the customer hands you a visa or mastercard, that is actually a debit card, if you run that card though your credit card machine you will be charged your regular rate plus a surcharge for processing a debit card. This transaction could cost you between.85 and $1.50.

If you run that same transaction through a debit card machine, you receive a surcharge that averages $1.50 so the difference on that ten or twenty dollars transaction is $2.45 to $3.00. On these small ticket sales that can mean the difference between a tidy profit and losing money. You’ve put your blood, sweat and tears into building a successful business. Giving the lion’s share of your profits to the credit card companies is not something you can afford to do. In today financial climate you just can’t afford to let an average of more than $20,000.00 per year slip through your fingers. Even if it makes the credit card companies sad.

The author has over 30 years of retail and food and beverage experience. You can get the rest of the story on how to make the best of credit/debit card processing at