Comments on: Credit Card Processing Fees

By: Edd H

Edd H — Fri, 30 Oct 2009 05:01:48 +0000

A store cannot charge a higher fee if you use a credit card, but yet it’s ok to charge a processing fee if you do? Some stores advise you that there is a 75¢ processing fee if you use a credit card. Today I was charged a $3.50 processing fee for using a credit card without any notice. Is that legal?

By: Megan

Megan — Sat, 18 Jul 2009 19:02:07 +0000

Discover card the least widely used card may have the most neagative effect on the way Intercharge fees end up relating to businesses view of purchases by credit cards. I also think you need to rethink that example in the article, again lets take the shed at $100.00, first take off 50.00 for the part to begin with because the business has already paid for this, then take off a percentage for employees wages, utilities, insurance and other costs related to running a business, then when the banks and credit card companies start asking for their 3-6% ( and before anyone asks this is actual numbers from two major companies) it gets a little tough to swallow.

By: Merchant Account Expert

Merchant Account Expert — Thu, 09 Jul 2009 13:53:38 +0000

The reason why the Interchange for business, corporate and government cards have always cost more is because most businesses do not carry a balance. So the only money the card issuer receives from those clients is what they get from Interchange.

By: Rosa

Rosa — Mon, 06 Jul 2009 14:48:24 +0000

Dave – the alternative depends on so many people going back to cash that it’s worth it to retailers to go back to cash-only, or to offer other services (store credit, layaways).

Any way of handling money costs some money. Credit cards just outsource the cash handling costs for both consumers and businesses (like the cost of tracking layaways, or the risk of being mugged).

By: T. Derscheid

T. Derscheid — Mon, 06 Jul 2009 13:21:29 +0000

American Express is also so much slower at paying vendors than Mastercard et al that many companies use a different accounting schedule to track Amex payments. Saw this accounting setup quite frequently while reviewing accounting setups for car dealerships.

By: Dave

Dave — Mon, 06 Jul 2009 12:26:33 +0000

So what is the alternative? Is there areal alternative to the credit card system? Accepting credit cards added over 25% of growth, in volume, to my business. I think the secret is making sure your margins can take the fees. And another secret is negotiating your merchant account provider. Don’t just apply with the first one you find. I used http://www.creditcardprocessing-r-us.com to get few offers and narrowed them down. It took me a while but I managed to cut few points% on a regular transaction. Until there will be another cheaper, commonly used method of payment (mobile payments?) merchants who wants to do business will have to accept credit cards!

By: Chris

Chris — Sun, 05 Jul 2009 03:31:26 +0000

But beyond gas stations…if I go to Target (which I believe has a one-price policy) and pay with cash, I’m paying the credit card fee, which has been factored in to all the merchandise prices as overhead costs. So if that’s the case, I might as well pay with a credit card that offers me rewards. If I pay with cash, I’m in a sense subsidizing the convenience of other people using credit cards.

Of course, credit cards kill you if you carry a balance….so get a card that offers rewards, always pay the entire monthly balance, and you’ll be taking advantage of the credit convenience instead of it taking advantage of you when you pay with cash.

By: Shawn

Shawn — Sat, 04 Jul 2009 19:12:57 +0000

Chris, merchants where there is 1-price policy for both cash and credit means the consumer who pays cash pays the same as consumer who pays with credit card. If you want “to save”, then go with another merchant. This is very common with gas stations. However, prior to the time of pricey gas, most gas stations accepted cash or credit at same price. There were always some gas stations that were 5-10cents cheaper than the rest (or, there was always ~5cent difference within same town). But, now, most of the gas stations who were cheaper have 2-price policy. Pay by cash, gas is $2.42; pay by credit $2.49. At Exxon, gas is $2.50 with cash or credit. The different price policies between cash and credit purchases does depend on the laws of your state; but, it’s somewhat vague in the Visa/MC/AMEX/Discover merchant agreement about whether they can do this.

By: Kevin@OutOfYourRut

Kevin@OutOfYourRut — Sat, 04 Jul 2009 10:53:47 +0000

Regarding the different price policies between cash and credit purchases, I believe it all depends on the laws in your state. In some states the practice is common, especially with gasoline.

By: Chris

Chris — Sat, 04 Jul 2009 06:28:51 +0000

So if I understand the conversation here, at merchants where there is only a one-price policy for both cash and credit, the consumer who pays cash is actually paying more than the guy who pays with a credit card…right? Since the merchant has to factor the credit card fees into the posted prices on the shelves, the final price at the cash register is non-discriminatory. If I pay with cash, I’m paying the credit card fee too….so I might as well pay with a credit card and get rewards like miles or points.

Right?

By: SavingEverything

SavingEverything — Sat, 04 Jul 2009 04:57:03 +0000

What happens if customer makes a return? Does the retailer get the merchant fees reimbursed for transactions that get returned?!? (ie. customer1 visa $100 charged; merchant process fee -$2; customer1 visa returns item -$100; does the merchant process fee get refunded?)

Also, almost all gas stations have “reduced” prices for cash compared to credit, and differs from 5-9cents per gallon. Strangely, sometimes my local Exxon Mobile and BP, which have only 1 price for cash/credit, is the same rate as the “cash price” at its competitors or only 2-4 cents over. Ever since the local or off-brand gas stations, like LukeOil, Valero, and others have offered cash and credit prices, I took my business away from them. I only support those gas stations that have one-price and accepts credit. When gas was $3.99 a gallon, I was not willing to constantly get cash for them. So, I paid $4.06 per gallon with my credit card at the one-price only gas stations, and even got 1% cash back on that for using credit card. Sure, I paid about 2 cents per gallon over to use a credit card; but, I got good gas from a business that does not have different prices. They got my business!

Nickel, the problem is, I’m not sure how/who/where we can report these merchants who require “Credit card purchases minimum $10 purchase”. What are we consumers supposed to do? Can we make purchase by buying more stuff, and then return items we never wanted? Will our report or complaint really cause the major card issuer to revoke the ability of merchant to accept cards? (that’ kinda sounds counter-revenue for them)

By: Nickel

Nickel — Fri, 03 Jul 2009 17:50:33 +0000

Arvin: Unfortunately (or fortunately, depending on how you look at it), you’re not allowed to charge a fee or require a minimum purchase for credit card transactions. None of the major card issuers allow this, and they can revoke your ability to accept their cards if you do.

By: Arvin

Arvin — Fri, 03 Jul 2009 17:25:06 +0000

I can totally empathize with business owners who insist on having a fee for credit cards or a minimum purchase amount, especially if they specialize in selling low cost items (a 99 cent store, for example), if I put myself in their shoes I’d feel like I was getting scammed if the same guy keeps coming back frequently buying a bag of chips and charging it on his card.

I myself feel the pinch receiving paypal payments.

That being said, just as it’s their freedom to impose such limits, I have the freedom to use my credit card as a means of making money, not incurring debt.

By: Kevin@OutOfYourRut

Kevin@OutOfYourRut — Fri, 03 Jul 2009 14:33:49 +0000

Greg–absolutely true. But consumers direct their displeasure at the merchant, who as no choice but to act in the role of statutory tax collector–which also costs them money for the cost of compliance. Guess who’s paying that too???

By: Greg

Greg — Fri, 03 Jul 2009 14:14:22 +0000

So it’s a hidden fee that still comes out of the consumer’s pocket when using a credit card.

That’s why some merchants give a small discount to buyers who pay cash. It can be significant on big-ticket purchases. Good bargaining tactic is always to ask if there is a “cash discount” on expensive items.

Taxes work the same way… hidden fees in the retail price.

Manufacturers, distributors, and retailers pay dozens of taxes to federal/state/local government every step of the way– but average consumers only notice the ‘final’ sales tax on the purchase.

In reality, about 1/3 of the retail price for a loaf of bread or can of soda is government taxes.

Home utilities are taxed 25-35% for the privilege of having water and electricity. Total taxes on airline tickets & hotel rooms exceed 50%. Beer & Wine 70-80%. Cigarette taxes now well over 100%.

Credit card fees are a real bargain compared to what your politicians demand.

By: Manshu

Manshu — Fri, 03 Jul 2009 14:14:08 +0000

@Kevin @ Mathew, Thanks for your comment and like you, I too think that the fees are ultimately passed on to the end customers either in the form of money or inconvenience.

And thank you to nickel for letting me guest post.

By: Matthew

Matthew — Fri, 03 Jul 2009 13:01:35 +0000

And sadly, this is how the credit card companies get our money without us even realizing it. Charge the merchant 3% more, give the customer 1-2% back in the form of rewards, and then the merchants raise the prices to compensate. There’s no such thing as a free lunch.

By: Kevin@OutOfYourRut

Kevin@OutOfYourRut — Fri, 03 Jul 2009 12:57:04 +0000

Manshu–Very informative article. Bet most people don’t know about those back end fees, because we tend to be singularly focused on the costs that we bear directly.

But rest assured, we’re paying the back end fees as well, in the form of higher prices on the products and services we buy.