As someone who formerly worked in retail (in a store that sold money orders, mind you) and who currently owns a small business on the side, I don't think I'd call myself misinformed on this subject. Nor do I think it's particularly polite to call someone misinformed simply because you do not agree with them.

It is, however, significantly better than the flaming I've otherwise withstood in this thread and other threads on similar subjects, so I will digress.

I never have disputed the fact (nor will I dispute the fact) that credit card merchant fees are a cost of doing business. A certain percentage of any transaction is built into the cost of the good, anticipating that it will cover the credit card merchant fee.

Where your analogy falls, though, is that the sale of money orders by a third-party merchant is not the same as simply buying a gallon of milk or a loaf of bread. When a person buys a money order (say, for $100), that $100 gets passed onto the issuer of the money order. The extra fee (which is often set by the issuing bank) is all the profit that the merchant will see off of the transaction. They do not get a percentage of the money order - only the 50 cents or a dollar flat fee (or whatever) that is charged for the purchase.

A store selling $10,000 worth of milk makes a percentage on each gallon of milk, because they derive revenue from the entire price of the milk. A store selling $10,000 worth of money orders, however, will only make as much money as the number of money orders they sold. If the fee is $1, they'll make $1 if that came in the form of 1 money order, and they'll make $100 if they sell 100 money orders.

If the store has a 20 percent margin on milk, they'll have $2,000 in profit, which is more than enough money to cover any fees. Were the store to accept credit cards for money orders, however, they'd be paying 2 or 3 percent of the $10,000 in money orders - not just the fee. In a good-case scenario, the store that made $100 off of fees will only lose, perhaps, a hundred bucks in merchant fees. Someone wanting to buy thousands worth at one time, however, will buy them at $1000 intervals, not $100 intervals. Therefore, the loss that is incurred is much greater - 10 $1000 money orders will only net $10 in fees, at a loss of $200 or $300 in merchant fees.

I am also fully aware of the concept of the loss leader - bringing in people and selling them a low-cost item with the hopes that they'll buy more and more merchandise. However, this is not a loss leader that they can avail themselves of, contrary to this statement you made:

It is not up to the business to decide whether they should take credit cards for money orders, because they are not generally supposed to be doing it.(See below.)

The transaction is not illegal. It is, however, a violation of the merchant agreement of nearly every single money order issuer in the United States. (Those that explicitly do accept credit cards, such as BidPay, pass along the percentage fee to the purchaser). This is for a couple of reasons:

1) It's an easy target for fraud. A stolen credit card (which is fairly traceable) can be easily converted to a more untraceable form, with no real means for recovery of the goods.

2) It easily allows for the circumvention of cash advance policies set forth by credit cards.

I tend to believe (especially given the BidPay example) that the disincentive of credit card fees is part of the reason as well. Money order companies want their merchants to make money off of the transaction - if the merchant doesn't make money, there is no real incentive for them to sell them, and they'll move on to something else. And the fewer merchants that are selling the money orders, the less that the money order company makes.

(That is purely speculative on my part - but I do believe it may play some part in the decision.)

For the final time in this thread (because I'm sick and tired of being attacked for having a contrary opinion), my issue with any scheme that comes up on FT has to do with whether any rules were broken to get to that point. I don't have a problem with loopholes or deals that work within the rules and the framework of a program or a business.

For that matter, I don't have issue with the fare errors that come up here. Mistakes happen, and people need to be responsible for them. If I screw up the pricing on one of my items, I'll honor the price. This is not only the right thing to do from a legal standpoint, but I think it's the right thing to do from an ethical standpoint. In other words, I screwed up, and I'll make it right.

This one, however, is predicated on the fact that the consumer must violate a policy - to go outside of the rules - in order to gain benefit. As a small business owner, I have no sympathy for schemes - deliberately designed to flaunt the rules or policies - that ultimately cause businesses to lose. And, to that end, the consumer will lose as well, since businesses will generally raise their prices on all goods to correct the inefficiency elsewhere.

Mike