D.C. merchants say credit, debit card fees hurt profit on small purchases

Washington Post: "People come in and charge $2.25 for a card or $1.75 for jelly beans," said Marcia Levi, co-owner of a Washington, D.C., gift store. "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."

Merchants like Levi say credit and debit card fees can erase more than half the profit on small purchases. Yet 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.

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. (Registration required)