July 16, 2008

College Bookstores Back Bill That Could Lower Their Credit-Card Fees

Washington — College bookstores are supporting a bill in Congress that would allow them to negotiate the fees they pay banks when students make purchases with credit cards.

The stores say the fees, which average around 1.75 percent of a purchase, are passed on to students in the form of higher costs. Student groups also support the bill, HR 5546.

But opponents, including banks and some members of Congress, fear the bill could harm small banks and credit unions. They point out that there is nothing in the measure to ensure that cost savings are passed on to consumers.

College bookstores paid banks some $85-million in so-called interchange fees in 2003, according to an estimate from the National Association of College Stores, an industry group representing stores and vendors. The merchants have no say in the size of the fees they are charged.

The bill, which the U.S. House of Representatives Judiciary Committee will vote on today, would create an exemption in antitrust law that would allow merchants, including bookstores, to negotiate the interchange fees with banks. The committee is expected to approve the bill. —Kelly Field

Comments

1. The last time the big financial institutions tried to use financial incentives to attract college business, we ended up with the student loan abuse scandal. This smells of the same early odor.

   — Jim    Jul 16, 04:35 PM    #

2. A couple ofquestions for you, Jon (response #1)…what would you consider to be an acceptable profit margin and what do you believe bookstores are currently getting? I am seriously interested in your response, because there is an astonishing amount of ignorance out there regarding this matter.

   — Kaybar    Jul 16, 04:54 PM    #

3. Just offer a discount on the purchase at the cash register to students that pay with cash. That would save the bank fees and ensure that the savings is passed on to the consumer.

   — Jeff    Jul 17, 10:14 AM    #

4. Well said, Kaybar. Few people really understand how difficult it is to run the college bookstore and make any kind of profit. Unlike other businesses, we have to buy the product because the professor requires it. Our margins are razor-thin to non-existent because textbook processing is very labor intensive and costly. If we don’t have winning sports teams or a large alumni base, most of our business is textbooks. We operate in an environment where our customers mostly hate us because they think we are always ripping them off. Yet many times we can’t win them over because their professor hasn’t even given us his/her adoption so the shelf is empty when they need the book. The credit card fees have increased for me almost 125% in the last two years and I really don’t even know what I’m paying for. Please don’t blame the college bookstore unless you have actually looked closely at a college bookstore p and l statement like I have for the last 25 years. If college bookstores were the huge profit centers everybody assumes them to be, Wal-Mart would be in the textbook business and I would be driving a huge SUVs and taking trips like most of the students on my campus do and I have never been able to afford.

   — jb    Jul 17, 10:27 AM    #

5. When I attended Washington State University, the bookstore discounted books by 7%, and upped the costs of non-essentials. Back in the 70s, they still turned a profit of 1 million for the year. At my current community college, the bookstore is now run by Barnes and Noble. The markup to my knowledge is 25%.

   — Jay    Jul 17, 11:43 AM    #

6. Even the big companies run on relatively short textbook margins. They make their money the old fashioned way…short staffing and centralized business processes.

   — Book Guy    Jul 17, 06:10 PM    #

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