Monday, June 19, 2006

What Are Credit Card vs. Check Writing Risk Factors? (

Covering the risks of credit card fraud has been a primary justification for higher interchange fees, according to the card associations and banks. And, the value to merchants by accepting credit and debit cards rather than checks have been another promotional tool touted by the credit card companies.

Remember, there are no interchange fee when writing checks. There are even no interchange fees when using a PIN debit card in Canada either.

As an ecommerce and retail business, our rate of fraud and bad check writing fees are practically zero. We cannot recall the last time there was a bad or fraudulent check presented at 30 Minute Photos Etc. Perhaps, it might have been two or three years ago. We therefore are particularly curious about the card associations’ arguments. While credit card fraud is a real issue, the value of accepting electronic payments over checks to reduce fraud is, in our case, questionable.

Certainly there are adjustments to risk factors for different businesses regionally and other factors which weigh heavily in a shift for various risks. However, the argument that credit cards are safer than checks and thus the reason for charging interchange fees is in question, at least at 30 Minute Photos Etc.