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People already pay a sort of fee for credit-card use. The credit-card companies charge the merchant for each transaction, and the merchant passes on the cost of the fee to the customer, n the form of higher prices. Some places I've dealt with in past would charge 2% less, or something like that, for cash purchases (which we can recast as 2% higher for credit-card purchases), but they tend to be in the minority.

There are pros and cons to the separation of credit-card processing costs from stocker price.
  • One the one hand, it makes calculation easier when the two are rolled up; not unlike the way some places roll up applicable taxes into the price. On our recent trip to Scotland, it was a delight to NOT have something listed as 14 pounds suddenly turn into more at the till. But...
  • It's nice to know when and how use of a credit card might raise the price of a purchase. But...
  • Having to anticipate that a purchase costs THIS much more because of applicable taxes, and THAT much more because of card-use. But...
  • If prices are lower for those who DON'T use a card, as opposed to merchant cost-recovery and prices being spread out over ALL customers, without respect to their individual card use. But...
  • If customers view an explicitly added fee as a deterrent to card use, they might conceivably purchase less, which both economists and businesses would look askance at. But...
  • If citizens take on LESS credit-card debt, another set of economists would view positively.
Of course, whether there is any benefit whatsoever will depend on whether businesses and credit-card companies are ethical in making this transition. If explicit separation of card-purchase fees results in proportionally lower prices, great. If merchants just end up paying more for CC-processing or don't adjust prices appropriately, then it will suck.

I only use my VISA when I absolutely have to. Otherwise, I suppose I'm a mugger's dream; using cash for all purchases.
 

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Merchant fees are a cost of doing business. As mentioned, merchants already pass this cost on to customers in the product price. But offering a discount for cash (aka surcharge for plastic) annoys me. I use plastic for the protection and the perks. I'm not willing to give up the protection, and the surcharges always outweigh the perks. So when a merchant offers two levels of pricing, they are telling me that I should shop elsewhere. I'd rather give my money to someone who is savvy enough to run their business without treating customers differently or making excuses.

What's next... the cost of electricity is too high so merchants start adding a surcharge to the bill? That seems ridiculous to me, and this is no different.
 

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This is one of those cases where perception is everything, and most people don't look beyond the surface. When I was younger, I worked at a small store that decided to implement a 3% fee for customers paying with credit cards. You wouldn't believe the number of pissed off customers who said they wouldn't come back because they thought the store was just being greedy and wanting to rip people off.

After months of arguments with customers, the owner decided to remove the sign and just raise all the prices about 3%. No one noticed and no one complained. If savvy customers asked for a discount for cash, he was happy to offer it.

Eventually he put up a sign saying there was a 3% discount for paying cash. Cue the complaints again by anyone paying credit card. After a while he removed the sign ... no more complaints.

Perception is everything.

All of the costs of doing business should just be part of your pricing structure. Otherwise, all you're doing is asking for trouble.
 

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Merchant fees are a cost of doing business. As mentioned, merchants already pass this cost on to customers in the product price. But offering a discount for cash (aka surcharge for plastic) annoys me. I use plastic for the protection and the perks. I'm not willing to give up the protection, and the surcharges always outweigh the perks. So when a merchant offers two levels of pricing, they are telling me that I should shop elsewhere. I'd rather give my money to someone who is savvy enough to run their business without treating customers differently or making excuses.

What's next... the cost of electricity is too high so merchants start adding a surcharge to the bill? That seems ridiculous to me, and this is no different.
I have clients who want to pay $10K to $20K on their Visa. Can I dig that $600 outta your pocket, so I don't keep them from shopping elsewhere?

I had a client who wanted to put $10K on her card. I told her there's a 3% surcharge as mentioned in bold within the contract. She wanted the rewards points. I wanted to tell her to do the math, you f'n idiot. A 4% surcharge versus a 1.5% reward (Amex). There's a social study to be had in there somewhere.

Anyway, that wasn't the issue - she actually used to work for American Express and apparently what I was doing was illegal. So I changed the wording on the contract, and now I'm good.

I suppose I could just make everyone pay an extra 4% (cuz that ain't shady).

Bottom line is that we're fighting with each other, when we should be bitching about the credit card companies.
 

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I had a client who wanted to put $10K on her card
Yeah, I guess it depends on what's being sold. Most of us would think that buying a new car on plastic would be a little weird. For me, it's all about the middle-sized purchases... things that cost more than the amount of cash I want to carry, but less than would max out my card in a couple purchases. When I say I value the protection of using a credit card, I mean that I don't feel I have to carry around loads of cash, and also protection against fraud on my card. (i.e. If my debit card is compromised somehow, I have to fight to get cash back, while credit card fraud just means I have to get a new card.)

As @jbealsmusic pointed out, perception is everything. As a consumer, I have to wonder why 20 or so $500 purchases are okay on plastic, but one $10k purchase is not. To me, it's like the same thing. But I also get that 4% of $10k to a merchant is a big single hit. Instead of adding the surcharge and irritating customers, I would suggest just letting customers know that only certain payment methods that don't include credit cards are acceptable above a certain limit. I think removing the option alters the perception that one is being treated differently, and then there is no argument with the customer.
 

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Almost any computer store will give you 2% off if you pay cash. I'm sure there are still tons of places that give you a bit of a deal to pay cash instead of plastic
 
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Yeah, I guess it depends on what's being sold. Most of us would think that buying a new car on plastic would be a little weird. For me, it's all about the middle-sized purchases... things that cost more than the amount of cash I want to carry, but less than would max out my card in a couple purchases. When I say I value the protection of using a credit card, I mean that I don't feel I have to carry around loads of cash, and also protection against fraud on my card. (i.e. If my debit card is compromised somehow, I have to fight to get cash back, while credit card fraud just means I have to get a new card.)

As @jbealsmusic pointed out, perception is everything. As a consumer, I have to wonder why 20 or so $500 purchases are okay on plastic, but one $10k purchase is not. To me, it's like the same thing. But I also get that 4% of $10k to a merchant is a big single hit. Instead of adding the surcharge and irritating customers, I would suggest just letting customers know that only certain payment methods that don't include credit cards are acceptable above a certain limit. I think removing the option alters the perception that one is being treated differently, and then there is no argument with the customer.
The bottom line is that it's a tricky subject, and no matter what happens, the consumer ultimately pays and the companies that pocket the fees are to blame.
 

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Correct. Some merchants used to offer a 2% discount for cash :)

People already pay a sort of fee for credit-card use. The credit-card companies charge the merchant for each transaction, and the merchant passes on the cost of the fee to the customer, n the form of higher prices. Some places I've dealt with in past would charge 2% less, or something like that, for cash purchases (which we can recast as 2% higher for credit-card purchases), but they tend to be in the minority.

There are pros and cons to the separation of credit-card processing costs from stocker price.
  • One the one hand, it makes calculation easier when the two are rolled up; not unlike the way some places roll up applicable taxes into the price. On our recent trip to Scotland, it was a delight to NOT have something listed as 14 pounds suddenly turn into more at the till. But...
  • It's nice to know when and how use of a credit card might raise the price of a purchase. But...
  • Having to anticipate that a purchase costs THIS much more because of applicable taxes, and THAT much more because of card-use. But...
  • If prices are lower for those who DON'T use a card, as opposed to merchant cost-recovery and prices being spread out over ALL customers, without respect to their individual card use. But...
  • If customers view an explicitly added fee as a deterrent to card use, they might conceivably purchase less, which both economists and businesses would look askance at. But...
  • If citizens take on LESS credit-card debt, another set of economists would view positively.
Of course, whether there is any benefit whatsoever will depend on whether businesses and credit-card companies are ethical in making this transition. If explicit separation of card-purchase fees results in proportionally lower prices, great. If merchants just end up paying more for CC-processing or don't adjust prices appropriately, then it will suck.

I only use my VISA when I absolutely have to. Otherwise, I suppose I'm a mugger's dream; using cash for all purchases.
 

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This is why behavioural economists successfully argue that humans should not be viewed as rational. The basis on which we make what we think are rational economic decisions is often anything but....as John's parable of the signs so richly illustrates.
 

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The other problem is that the math doesn't add up. It isn't so straight forward as X% for all credit cards. With most merchant systems the fee depends on the type of card being used. Generally speaking, the more the rewards and better the card for the customer, the higher the transaction fee to the merchant.


It isn't 3% across the board. It is anywhere from 2%-4% on average. I've seen in rare cases certain cards as low as 1% and others as high as 8%. Are businesses going to start looking up the transaction fee for the specific card you're using so they can charge you the appropriate surcharge for your card?


No. Transaction fees are an expense line just like rent, office supplies, etc. Plan for them as part of your operating expenses and price your products and services accordingly.


Or, just don't accept credit cards. ;P
^)@#
 

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I assume that Paypal does relatively little to the cost to the merchant, but simply results in the specific card's fees being added to the merchant's overhead? Or does Paypal add even more to the merchant's costs?
 

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My feed store charges an extra 3% to use a credit card so I use my debit card. No problem. What I don't understand is why some places like the beer store ask me if I want cash back when I use my debit card. Is there any financial advantage for them to give me cash back? Quite a few places are doing it.
 

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Either way, the consumers get screwed and the banks make more money. The credit card fees are like double dipping, they make money from the retailer from the transaction and from the consumer in interest and other charges. Like they need more money. What are those assholes going to do when they finally have ALL the money, I hope they choke on it. They ought to outlaw the fees all together. Pricks!
 

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I only use my VISA when I absolutely have to. Otherwise, I suppose I'm a mugger's dream; using cash for all purchases.
I'm not sure anymore if carrying cash is a bigger risk. That was my logic for using my cc for all purchases but based on my experiences in the last year and the comments from the fraud and security reps. at the cc company, it's getting pretty scary with credit cards. I even purchased a wallet with anti scan protection yesterday. Perhaps I should start wearing the tin foil hat as well.....

 

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I assume that Paypal does relatively little to the cost to the merchant, but simply results in the specific card's fees being added to the merchant's overhead? Or does Paypal add even more to the merchant's costs?
Online merchant fees operate very differently than the usual brick and mortar ones. Stripe, PayPal, Square, etc. all have a single percentage fee plus a dollar fee (2.9%+$0.30 for example) per transaction, regardless of the card. They are also taken "off-the-top". As in, they take the money as the transaction is occurring and only ever give the merchant access to the remainder.

In contrast, the typical solutions for brick and mortar stores do the opposite. You get every penny the customer spends deposited to your bank account. However, the fees are billed at the end of each billing cycle rather than at the time of the transaction. So the merchant sees a hefty fee for the machine rental plus whatever transaction fees they've accumulated over the last 30ish days. The "sticker shock" of seeing all the transaction fees added up might play a role in why some merchants resent those fees.

It's worth noting that you can always negotiate better rates in both cases. However, the flat rates that online providers offer will only stay flat for so long. If you negotiate them low enough, they'll start to charge fees based on the type of card used as well. So you'll see 1.5% on this transaction, 2.5% on that transaction, etc.

My feed store charges an extra 3% to use a credit card so I use my debit card. No problem. What I don't understand is why some places like the beer store ask me if I want cash back when I use my debit card. Is there any financial advantage for them to give me cash back? Quite a few places are doing it.
The only benefit I can think of is that customers might shop there again over another place because they offer that service. Debit transactions are generally a flat rate fee to the merchant so they aren't gaining or losing anything by doing it. Maybe losing a little because of the extra trips to the bank for cash? Or, maybe the boost in sales from happier customers makes the extra trips worth it. Good question.

Either way, the consumers get screwed and the banks make more money. The credit card fees are like double dipping, they make money from the retailer from the transaction and from the consumer in interest and other charges. Like they need more money. What are those assholes going to do when they finally have ALL the money, I hope they choke on it. They ought to outlaw the fees all together. Pricks!
While I agree with the general sentiment, they are providing a service and have a right to charge for that service. I'll admit the interest is ridiculous, but there's an easy fix for that. Don't ever carry a balance on a credit card. Pay it off completely every month or don't use it.
 

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Interest rates at 21+% and another 3% on the front end? F that. Pure greed.
 
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