Some restaurants stop taking credit cards to avoid interchange fees.
If you plan on using a credit card to pay for dinner in New York, you may be out of luck. In an effort to help avoid exorbitant interchange fees that credit card companies charge, so restaurants have cut credit payments entirely. This saves them money on these transactions, but it’s not exactly good for customers. So, will it hurt their businesses?
What are interchange fees?
Every time a business processes a transaction that results in credit card debt for consumers, the credit card company applies interchange fees. This increases the cost for businesses. With the Credit CARD Act cutting into revenue for issuers, they’ve upped things like interchange fees to make up the difference. But many restaurants in New York plan to fight back the only way they can, by putting credit card payments on ice.
According to a report in the New York Post, a number of popular eateries around New York City stopped accepting any payments by debit or credit card. Many feel that they have been giving a healthy percentage of their revenues to issuers for too long, and that’s cutting into their profits. One restaurant owner told the paper that he has given about 5 percent of his gross sales to these companies for years.
What this means for customers.
The report explains that some customers have been frustrated by the restaurants’ new policies, despite the fact that many have installed ATMs to help diners cope . But many diners simply aren’t biting.
It’s a trade-off between what you save and who you lose in terms of customers,” one cash-only restaurant owner told the paper.
Many consumers are leaving these restaurants because they prefer the convenience of paying by credit card over carrying cash.