For shoppers, the main decisions come before reaching the cash register: Should I buy this sweater? Do I need really need a new set of golf clubs?

But the simple act of contemplation when asked, “Cash or charge?” rather than just handing over the plastic could provide a boost to retailers’ bottom lines.

Unbeknownst to many consumers, store owners pay thousands of dollars annually to credit card companies on interchange fees, a percentage of each transaction, sometimes accompanied by a flat fee. Though most store owners chalk it up a cost of doing business, an increase in credit card transactions, as well as an increasingly complicated fee system, has led to more frustration.

“I’ve been in the industry for 10 years, and it’s getting even more confusing and frustrating for the retailer,” said Paul Huntley, marketing director for the Iowa Retail Federation. “Fifteen years ago, it was one rate, based on whether it was electronic or paper. Now there are close to 30 rates a retailer could qualify for.”

Josephs Jewelers, which operates four stores in Greater Des Moines, shells out more than $50,000 in interchange fees annually. Co-owner John Joseph said the company pays an average of 1.62 percent in fees on each credit card transaction, but can pay as much as 2.3 percent on transactions in which the card number must be entered manually or require a telephone call to the credit card company.

“The fees definitely impact our bottom line,” Joseph said.

This month, stores such as Josephs could see an increase on their monthly credit card statements after the latest fee increase took effect April 1. Merchants will pay a higher fee when customers use several premium Visa and MasterCard credit cards, such as those that allow users to accrue frequent-flier miles with airlines. According to Huntley, credit card companies have not differentiated these cards from others in the past, which creates a big question mark for merchants.

“It’s really going to be a new level of pricing for the retailer,” Huntley said. “There’s really no track record, so we don’t know how it’s going to affect the bottom line.”

But retailers have grown accustomed to steady increases in credit card processing fees, particularly in a world where consumers are pulling out the plastic more frequently.

Caren Sturm, owner of The Lagniappe in Valley Junction and at Merle Hay Mall, said that during her 16 years in business, she has seen an increase in the percentage of customers who pay for purchases with a credit card. At Kitchen Collage in the East Village, co-owner Teresa Adams Tomka said some days as many as 75 percent of customers pay with a credit or debit card.

“I would encourage the customer to think about paying for their purchase differently, but we all have to accept credit cards,” Adams Tomka said. “There’s no way around it.”

Twenty years ago, Joseph said, 60 percent of the store’s customers paid through an in-house charge account. Today, approximately 64 percent pay with cash, check or credit cards. Despite the fees, he recognizes the benefit of credit card purchases.

“MasterCard and Visa settle in 24 hours, and you’ve got your money in the bank,” he said. “If you charge in-house, you can wait up to 60 days for your money.”

Kathy Dunbar, owner of Kathy’s Fashions in West Des Moines and Blue Willi’s by Kathy at Jordan Creek Town Center, estimates she paid $13,000 in credit card processing fees in 2004. She recently invested in a debit card personal identification number pad that will allow her to differentiate between credit card and debit card transactions. On a $300 sale, she would pay about $6 in credit card processing fees, but only 82 cents with a debit card.

“That will pay for itself,” said Dunbar, who estimates she will save $1,000 this year on processing fees because of the PIN pad.

HIDDEN COSTS

Mallory Duncan, senior vice president for the National Retail Federation, says credit card interchange fees are “out of control,” particularly following recent rate increases for transactions made with premium credit cards. The increases range from 2.7 percent for Visa Consumer Standard Credit to 9 percent or more for purchases made with a MasterCard corporate card.

A recent Morgan Stanley report found that the weighted average for Visa and MasterCard interchange fee rates increased from 1.58 percent, or $9.4 billion in dollar volume, in 1998 to 1.75 percent, or $17.4 billion, in 2004. It is forecast to grow to 1.86 percent in 2010, with a dollar volume of $32.4 billion.

Duncan said the steady string of increases is driving up prices for consumers, as retailers are forced to pass along their higher costs of doing business.