7-Eleven Rallies Customers Against Card Fees

Riding a wave of public outrage over credit card practices, 7-Eleven Inc. wants to show merchants are victims of the industry too.

The convenience store chain announced a petition this week to give small businesses more power to negotiate the fees they must pay whenever a customer uses a credit or debit card. 7-Eleven said more than 6,000 of its franchisees plan to collect 1 million customer signatures to deliver to Congress this fall.

George Clift, who owns a 7-Eleven in McKinney, Texas, said he's keeping the petition on his store counter and asking customers to sign whenever they pay with plastic.

"We just want to let our customers help us, (to) see if Congress can get involved," said Clift.

Clift said he pays about $28,000 in credit card fees each year, which he notes is "a huge number for a small businessman."

Still, Visa and MasterCard warn that if such fees were lowered, banks would need to make up any lost revenue with higher credit and debit card fees.

The petition from 7-Eleven comes after sweeping reforms to credit card practices were signed into law by President Barack Obama in May. The law gives consumers new protections on interest rate hikes and cost disclosures, but does not include rules on fees paid by merchants.

It's this seeming discrepancy that 7-Eleven wants addressed. The company is hoping to generate support for legislation that would establish a negotiating process for determining the so-called interchange fees, said Keith Jones, director of government relations at 7-Eleven. Interchange fees, generated whenever a customer uses a credit or debit card, are typically between 1.2 and 2.2 percent of the transaction, according to Card & Payments, a monthly industry publication based in Skokie, Ill.

7-Eleven says the fees are becoming more burdensome to small businesses as people increasingly use plastic to pay for even minor purchases. These days, Jones noted that it's not unusual for people to buy a pack of gum or cup of coffee with a credit card. He noted that the average purchase at 7-Eleven totals just $6.

"If you're a very low margin business, that kills you," Jones said.

Last year, Jones said 7-Eleven paid $160 million in bank card fees, up from $40 million five years ago -- a 300 percent increase.

Interchange fees generated by bank cards totaled $23.99 billion in revenue last year, according to Card & Payments. That accounted for about 19 percent of revenue from bank cards.

While card companies such as Visa and MasterCard set the fees, the revenue is distributed to multiple entities, including the merchant's bank and the issuing bank -- with the latter getting the bulk of the fees, said Kate Fitzgerald, associate editor at Cards & Payments.

The "brutal competition" between Visa and MasterCard for bank business makes it difficult for either to lower interchange fees, she said.

The American Bankers Association, meanwhile, notes that interchange fees have remained relatively constant in recent years.

What's new is that more people are using credit and debit cards to pay -- a development that has led to higher sales and profits for merchants, according to Kenneth Clayton, general counsel for ABA's Card Policy Council.

"This is more about the merchant community trying to get Congress to intervene to lower their cost of doing business and improve their profits without passing anything on to consumers," Clayton said in an e-mailed statement.

The sentiment was echoed by Visa, which called the recent petition efforts "puzzling and misleading."

"Consumers are unwittingly signing petitions that would effectively hurt them in the end. The reality is that a group of large retailers are leading a campaign to shift their cost of doing business directly onto consumers' shoulders," Visa said in a release.

MasterCard meanwhile, says it suspects 7-Eleven isn't telling customers that if the merchant doesn't pay "its fair share" for transactions, then consumers will have to pick up the costs.

The tension between merchants and credit card companies over the fees isn't new.

The National Association of Convenience Stores, which is backing the 7-Eleven petition, last year ran its own push to educate consumers about interchange fees.

The group, based in Alexandria, Va., represents about 4,000 retailers and suppliers, the majority of which are independent operators.

The hope now is that consumers -- who in the past year have endured rate hikes and credit limits -- will be more sympathetic now.