The Card Fee Battle Saga - Is it Really a Victory for Small Businesses? .

Small businesses have long suffered at the hands of banks that have imposed service charges when customers use their debit cards to pay for goods. A ruling made in the US Senate on Wednesday, however, has brought some relief for retailers fearful of losing custom as a result of excessive card transaction fees. The ruling postpones the introduction on a cap for fees imposed on businesses when customers pay using their debit cards. The cap secures charges at 6-12 cents, as opposed to the 63 cents some banks were planning on charging.  

However, the banks will seek to recover their losses elsewhere to offset some of the predicted $6.6 billion loss that the new regulation may cause. The Bank of America has recently announced it will charge $5 a month to cardholders who wish to use their card to pay for items in store, with other major banks following suit with similar charges.

This marks a “win” for small businesses, who campaigned at Capitol Hill to protest any proposed postponement of the cap. They argued that the money saved could be used for reinvestment and the creation of jobs in an ailing economy. As true as this may be, there are two possible flaws to this “victory.”

The first is subtle, but possible: as was suggested earlier, banks will not merely accept losses of $6.6 billion. They will, instead, seek to recoup those losses from the customer directly. The proposed charges to the customer for the use of debit-cards for transactions will, inevitably, put some people off using their debit cards in store. Even though the charge is only going to be $5 a month, there are many who will resist either as a matter of principle or by virtue of economic circumstance.

This leads to the assumption that these customers would pay using cash. This in turn would cause one to believe that there will be larger cash reserves in the drawers of cashiers around the country. Following from this, there are two specific groups of people who will be thoroughly excited by the prospect of higher cash reserves in tills: thieves and insurers.

People will be click to point out that such a pessimistic link is tenuous at best, but it would do well to remember that subtle changes often have big consequences. If customers take the $5 a month hit (as most undoubtedly will), there should not be too many concerns for small retailers.

If, however, they do not, then small retailers should be wary of the consequences of having higher levels of cash in the till and take the appropriate security measures to avoid any financial, or physical, injury.