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For Some, No Purchase Is Too Small For Plastic

Fees for Card Use Irk Some Merchants

By Dina ElBoghdady
Washington Post Staff Writer
Wednesday, February 23, 2005; Page A01

For years, Marcia Levi refused to accept either credit or debit cards for purchases under $10 at her downtown gift shop, Chocolate Moose. Customers complained. She lowered the threshold to $5. Customers still complained, so two years ago she gave up on any minimum.

"People come in and charge $2.25 for a card or $1.75 for jelly beans," said Levi, who co-owns Chocolate Moose with her sister Barbara. "It's annoying. In the past two years, they've just whipped out the card without thinking about it, no matter how small the purchase."

Barbara Levi, left, and sister Marcia co-own Chocolate Moose on L Street NW. Marcia says credit and debit card fees can erase more than half the profit on small purchases. (Marvin Joseph -- The Washington Post)

The persistence of her customers was no accident. Visa International, MasterCard Inc. and other card companies are working hard to make sure that no purchase is too small for plastic.

Faced with a saturated market where just about everyone who wants a credit card has one, the companies have set their sights on what by one estimate is the $1.32 trillion in cash spent every year on purchases less than $5. Emboldened by consumers willing to download songs at 99 cents a pop or cell phone ring tones at $2 apiece, card companies are courting fast-food chains, taxicab companies and parking-meter manufacturers that have traditionally accepted only cash. Even American Express Co., whose cards are associated with expense accounts and luxury purchases, teamed up with PepsiCo Inc. to roll out credit card-accepting vending machines last year, mostly in casinos, malls and convention centers.

To woo these merchants, at least the high-volume ones, card companies started lowering the fees they charge them. They also began making better use of technologies that speed up processing and have said card users no longer have to sign for some purchases.

"Card companies tapped out the low-hanging fruit within the merchant community," said David Robertson, publisher of the Nilson Report, a payment card trade journal. "Now they're going after merchants that have been reluctant to accept credit and debit cards."

The push appears to be working. Credit and debit card payments under $5 totaled $13.5 billion last year, more than three times as much as they were in 2000, according to research firm CardWeb.com Inc. Charges under $10 climbed to $35.5 billion, more than six times as much as in 2000.

Angela Keo of Silver Spring certainly does her part. On a recent visit to McDonald's, Keo used her debit card to buy a cheeseburger and a yogurt parfait. Later, she used it to buy a pack of cigarettes at one convenience store and a bottle of soda at another, she said.

"I don't carry any cash ever because it's easy to lose, very easy to spend and too hard to keep track of," said Keo, 22, who had only a few cents in her purse while shopping at Tysons Corner Center earlier this month.

The mentality "absolutely drives me nuts," Levi said. That's because each time shoppers like Keo swipe plastic at her store, Levi pays a hefty fee.

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