Credit, debit card swipe fees unfair

Keeping restaurants afloat financially in a deep economic recession is tough enough on its own. Ever increasing and unpredictable credit card and debit card swipe fees make it that much more difficult, and it's high time that the swipe fee system be changed.

It's not news that we continue to endure hard economic times. But to many, it may be news that using a credit or debit card costs the business accepting those cards a healthy chunk of change.

Each time a credit card is used in either of our two Paymon's Mediterranean Café and Hookah Lounge Las Vegas locations, 1.5 percent to 2 percent of the total tab goes to pay card companies and the banks sponsoring the cards. Consider that in the context that, according to the National Restaurant Association, restaurants average only about 2 to 4 percent in pre-tax profits on every dollar in sales.

Eventually, the bulk of those card swipe fee expenses are passed on to the customer. But in these troubled economic times, restaurateurs sometimes absorb those costs, at least short term. That's because we're constantly looking over our shoulders, knowing that any price increase can cause customers to vote with their feet and seek out cheaper establishments.

But that's not an option for those of us who run businesses. We can't walk away from swipe fees. There's no negotiation. No discussion. We have to deal with a price-fixed duopoly. Visa and MasterCard control 80 percent of the market, and we either pay the swipe fees they set for what their member banks charge or we can't accept credit cards. Not accepting cards is a really quick way of going out of business.

I've long known that the swipe fee system is dysfunctional, but serving on a Nevada Restaurant Association committee studying card processing companies really opened my eyes to how incredibly confusing and unpredictable the system can be.

There are dozens and dozens of wildly differing fees assessed for different cards accepted in varying circumstances. There's every reason to think that the confusion is intentional: If you don't genuinely understand the system it's that much harder to contest charges.

In my opinion, a major problem is the wide range of rewards programs offered by the banks and credit card companies. I don't blame consumers for participating in the programs. I do it myself. The rewards programs are marketed as being "free," but the reality is that the money funding those rewards has to come from somewhere, and with the way it's set up now, that money comes right out of America's businesses.

I think its fine that the card companies and banks want to use rewards programs as marketing tools. Have at it. It's a free country. But the banks and card companies should foot the bill for the rewards programs, not the businesses that have no real alternative to accepting their cards and the customers themselves who don't know they really are paying for those rewards.

While the Paymon's restaurants - named after founder Paymon Raouf - are best known for starting, in 2000, the first hookah operation of its kind in the United States, the lounges account for only about one-fifth of the business. Customers come in for the healthy Mediterranean cuisine, and an overwhelming 75 percent pay with credit or debit cards (about 70 credit cards for every 30 debit cards).

So our business sure won't be excluding cards. But like many businesses, we're struggling. Receipts are down 30 percent from 2007, and our employees now number 80, down from 110.

Calling on the government to solve a problem is not exactly my first impulse - or my 10th. But I don't see any way around the need for Congress to act. Price-fixed swipe fees are part of what's hurting businesses.

Congress last year took a good first step by placing a limit on the price-fixing of swipe fees for debit cards sponsored by big banks. Now it needs to take on the much bigger credit card swipe-fee problem.

I know the banks need to stay in business. But they should do it by setting their own prices and competing, like we do, not by price-fixing.

It's about time that they had to do business like everyone else and competed on transparent fees made reasonable by the market. If they did, it would go a long way toward helping America's businesses and our customers.

Jeff Ecker is the corporate general manager of Paymon's Mediterranean Café and Hookah Lounge, which has two Las Vegas locations. He is a member of the Nevada Restaurant Association board of directors.