Credit card processing costs set to rise

Do you handle a lot of credit card transactions at your business? If so, you may pay more in processing fees in the not-so-distant future.

Visa and Mastercard planned to raise processing fees last April, but the hikes were postponed due to the COVID-19 pandemic. For now, fee hikes are back on schedule, set to rise in April 2022.

Visa and Mastercard merchant fees totaled $67.6 billion in 2019. With new increases, Visa and Mastercard are expected to take in an additional $1.2 billion.

Businesses will pass on these increased costs by raising prices in products and services. Some may raise prices across the board. Some may pass on credit cards and only accept debit cards. Others may add surcharges for credit cards.

The Strawhecker Group estimates that less than 5 percent of eight million card-accepting small businesses levy credit-card surcharges. While this may not seem like much, it’s up from less than 2 percent five years ago.

Declining card payments altogether is a risky decision. More than 40 percent of people prefer paying with debit cards and 33 percent favor credit cards. Just 18 percent prefer cash.

It should come as no surprise that cash accounted for only 19 percent of transactions in 2020. Meanwhile, debit cards accounted for 28 percent of transactions, while credit cards were used in 27 percent.

Those companies that don’t accept cards may do so to their detriment. Finder.com, a website that helps people find credit cards, estimates that businesses (in total) could be missing out on 11.8 million customers by not setting up a card transaction facility.