In 2008, over half the money spent at the Co-op came in through bank cards. The Co-op paid over $92,000 in bank fees for those transactions. That amounts to 1.3 cents out of every dollar spent. That's a lot of money.

Co-op shoppers can help us reduce those bank fees by using cash for small purchases, selecting the appropriate bank card, and by using Co-op gift cards. To explain why those choices save the Co-op money, please keep reading.

The cost of doing business.

I should first point out that every method of payment has a cost to the Co-op. Checks have processing fees and cost us even more when checks bounce. Even cash payments cost us money to process. We pay a modest fee for the change we get from our bank. It also takes labor to count and reconcile the cash and checks from each cash register. 
So, every dollar you spend at the Co-op costs us a little bit to process, regardless of how you give it to us. That's just part of doing business. But bank card transactions clearly cost us the most. How much do we pay in fees each time a customer uses a bank card? The answer depends on two things: the type of bank card and the amount of purchase.

Three kinds of bank cards

There is more to the world of bank cards than Visa, MasterCard, debit, and credit. Invisible to most people, cards that seem the same have very different fees structures. Debit cards: These carry a flat fee regardless of the amount of the transaction. Typical fees are 37¢ per transaction.
Credit cards: These carry a lower flat fee, but have an additional fee based on a percentage of the transaction. Typical fees are 13.5¢ per transaction, plus 1.25 percent of the total.
Reward cards: Reward cards are really a type of credit card but deserve separate treatment. These are bank cards that offer you some incentive to use them, such as frequent flier miles or cash back on your purchases. Typical fees are 18.5¢ per transaction, plus 1.66 percent of the total purchase.
Debit cards presented like a credit card (you sign a slip instead of entering a PIN) incur the same fees as a credit card.

Size matters.

Let's look at how fees change with the size of purchase:

Let's look at that a different way. Suppose you spend $100 at the Co-op, either all at once or in smaller amounts over time. Here's what the Co-op pays in fees:

Small bank card purchases cost the Co-op more in fees. Spend $100 on a cart full of groceries, and at most the Co-op pays $1.85 in fees. Spend $100 with your debit card, $2 at a time on your morning coffee, and the Co-op pays a whopping $18.50 in fees.

There is no simple answer to the question, "Is it better for the Co-op if I choose debit or credit on my debit card?" For smaller transactions, credit is better. For bigger transactions, debit wins out. The break-even point is around $20 for regular cards and $10 for reward cards.

Why take bank cards at all?

You might wonder, if we have to pay fees, why accept bank cards at all? The answer is simple: it's how our members and customers want to pay. The sign over our door says, "Everyone can shop, anyone can join." If over half of "everyone" who comes through our door wants to pay with a bank card, we would be foolish to refuse. And, going back to other forms of payment wouldn't be free, but it would reduce convenience for the customer.

You might also wonder, if small purchases cost more, why don't we refuse bank cards for purchases under a certain amount? The answer is: we can't. Our contractual obligations with Visa and MasterCard are clear—if we take bank cards, we must take them for any amount. If you have ever had a merchant refuse to take your bank card for a small purchase, be assured they did so in violation of their contract terms.

What can you do to make a difference?

We are always happy to take your bank card, but we are also happy to tell you how you can reduce your Co-op's expenses with simple payment choices.

First, whenever possible, use cash to pay for small purchases.

Second, be mindful of your purchase amount, and choose "debit" or "credit" accordingly.

Third, be aware that the rewards on your reward card don't come for free. Ultimately you are paying for those rewards through higher prices.

Finally, give thought to...

The Gift Card Option

This article wasn't intended to be a pitch for our gift cards, but I have to mention them as a perfect solution to the small-purchase problem. Once paid for, Moscow Food Co-op gift cards have zero transaction costs, and they are just as convenient to you as a bank card.

If you have a small purchase and only have your bank card, consider this: add a Co-op Gift Card to your purchase, stick it in your wallet, and use it the next time and every time you have a small purchase.

Parents, considering giving your high-schooler a gift card to buy their lunches. Load it up at the beginning of each week or month. It will save the Co-op some money, and give your child a chance to learn about budgeting.

Gift cards aren’t just for small purchases, but for bigger ones too. Some customers fill up a gift card with their month's grocery budget, and report it's a great way to keep track of their grocery expenses. The savings in bank fees to your Co-op would be more modest, but still very real.

With some simple and easy choices in how you pay for your purchases, you can make a small but real contribution to your Co-op's bottom line.