7-Eleven Fights Credit Card Transaction Fees

The Bottom Line: Every time you use your credit card, even if you pay off the balance in full every month, someone is paying for you to use it.  Usually that someone is you.

This past week 7-Eleven – home of the Big Gulp and Slurpee — launched a petition drive calling upon Congress to reform unfair and excessive transaction fees.  Read all about it at their website: Stop Unfair Credit Card Transaction Fees.

Credit card companies don’t only make money by charging interest to borrowers.  Interchange (or transaction) fees are hidden fees to the consumer and are set privately by credit card companies and charged to store owners every time that a customer uses a credit card.  In 2008 these transaction fees totaled $48 billion dollars according to the press release.  That ain’t no small change!

I’m not bringing this to your attention to support either side.  Credit card companies have a right to charge for using their service, and retailers have a right to protest these charges.  Heck, retailers aren’t forced to accept credit cards – they could just stop taking them entirely (although in their defense credit cards have become so ubiquitous that not accepting them could possibly cost sales as customers turned elsewhere).

Rather, I am bringing this up because I’m not sure everyone who uses credit cards is even aware that there is a transaction fee.  Even if you are aware you might not care.  Credit cards are so convenient to use, right?  Besides, the fee is not being assessed to you is it?  Or is it?

As someone who has spent years in the retail game I can assure you that these fees are definitely taken into account when prices are set.  Retailers are painfully aware of how much they are spending in transaction fees and they will offset those fees by increasing margins (higher prices), reducing payroll hours (resulting in less service) or in other ways.  Nothing in life is ever free – SOMEONE is paying for you to use that credit card, and chances are that someone is you!

Also, it is also interesting to do a little math (shudder) on the numbers they present in the press release.  Don’t worry – this will only hurt a bit.

If $2 out of every $100 (2%) we spend goes toward transaction fees and we spent $48 billion on those fees in 2008 that means credit card companies processed approximately 2.4 trillion dollars in sales.  Yes, that is trillion with a “T” and that means a whole lot of zeroes!

The estimated population of the US is 307 million as of today.  That means each person on the US is responsible for, on average, charging $7817 in 2008 on credit cards.  That is every man, woman, and child regardless of age.  Wow!

This is a broad hypothetical mental exercise based on numbers from a press release so don’t get all bent out of shape if my calculations are a billion or twenty off.  Credit cards have become ubiquitous in our society since they first came out around 1951 in large part because they are convenient to use.  Just remember that convenience costs.