Credit Card Swipe Fees and the Profit Equation

While I don’t typically cover P&L statements in my classes, I do feel it is important that students have a basic understanding of how various costs and expenses (i.e. labor, taxes, utilities) can impact a retailer’s net profit.  Credit card swipe fees are one of the expenses that should be included in that list.

Some interesting classroom discussions can be held concerning credit card fees.  Most of my students seem to realize that they exist, but don’t realize exactly how much money retailers have to pay credit card companies monthly.  Once we start messing around with dollar figures, the situation becomes much more concrete and interesting for them.

An article by Emily Maltby appeared in the Wall Street Journal on July 11 that gave an excellent explanation of the credit card fee situation. (see “Bank Fees Squeeze Retailers,” Wall Street Journal, July 11, 2012.)

The article also reported that there might be a settlement reached in the lawsuits between retailers and banks and credit card networks this fall.  Whatever comes from this settlement could have some interesting implications for retailers.  This is especially true when you consider how the changes resulting from this settlement might impact both small and large retailers approaches to setting prices.

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