Um ....

Amazon can dictate the CC terms because of their size, the bodegas and other mom and pop businesses .... not so much.

I charged 86 cents at Kroger the other day because I did not want loose change form a dollar, but those kind of transactions can cause some harm at small businesses IMHO.

It's a brave new world, and heaven help those trying to compete with Amazon ....

If Kroger has to resort to no longer accepting Visa at some of their brands (not to mention Walmart killing Visa support in Canada for a bit), I'm not sure there's as much leverage as people think. Otherwise, I imagine it would have been resolved long before it got to that point.

IMO, Costco is probably one of the only retailers that has that kind of leverage--and in exchange, they don't accept any credit cards other than Visa.

Oh, the big guys surcharge all the time too, we just don't see it that way.
 

Yeah, so is it true that these 5% RedCard/Amazon type card savings (the new Capital One/Wal-Mart card has a much higher rebate for the first year when you use it within Wal-Mart's payment app) are really the same as a surcharge? It actually is worse because it means the cash/debit customers pay the higher listed price as well as credit customers of all other card types are paying a surcharge to these retailers. I can't say I feel these retailers are adding 5% on sale items, but for non-sale items, possible. I think Target has also been running promos doubling that to 10% which is pretty significant amount if you can stick to buying grocery and other low margin basics.

Seems fascinating that we are happy to tell it to the small guy who adds it at the register, but we gladly patronize these large chains that have been effectively surcharging for a few years now via their branded/co-branded cards. The co-branded payments are effectively ACH payments because you can't pay those cards via any other cards without fee. I won't even get into the conversation about those who are not paying off their balance monthly.

I doubt Target, etc. are paying 5% to accept regular cards though. In fact, they're likely paying at least slightly less than what merchants normally would for higher tier cards by virtue of their size. Not to mention that larger retailers in general are more likely to try routing debit cards on networks other than Visa or MC, resulting in even more savings.

What offering such a reward does do, however, is increase loyalty among its customers. More people purchasing more often can easily result in making up the 5%, especially for products that command higher margins.

Accept it as a cost of doing business or go back to cash only.

Let's face it the churners/card users have been subsidized by the cash & carry customer, and the balance carrying customer for a long time.

I've enjoyed that, but eventually someone notices and is demanding an adjustment.

If places are kind of ...... about card surcharges, I try to avoid them eventually.

My experience is that monopoly providers are the only ones who can behave this way.

As someone with a business that pays six figures a year in merchant fees, I feel this pain.
It's the salary of two decently paid people. So, I have two less staff for the privilege of taking cards.


I also know the flip side: as every trip around the world I do is in J and basically free, because of the millions of points that stack up from paying our vendors in credit cards.
One of our larger vendors (who runs our cards for maybe $400k a year?), stopped taking credit cards last month.
Or, I can pay them, but it's 2.75%.

I don't like that, but, I'm not going to take my business elsewhere.
I think most businesses realize that losing ~3.1% annually on millions of dollars of transactions is a big enough hit where they need to adjust.

it's complicated times, and I think more people will do surcharges, and then discounts if you pay debit/cash.
It's real money we're talking about here annually for us. Not $100 or $1,000 or just $10,000

--
I also love all the fake outrage by coffee buying customers.
Listen, if you leave a store and never come back because they charge you 3% more... the store doesn't want you there in the first place.

It will be interesting to see how this plays out. For too long, cash-paying customers have been subsidizing credit card customers, because of the fact that the credit card networks have monopoly power and could essentially set the terms. Now, due to a combination of lawsuits and legislation, that is changing.

If surcharges become common in the US, I think they will be limited to low-margin retailers. Currently, they are often found at gas stations, which is a very low-margin business. Perhaps discount supermarkets like Aldi will start surcharging, but I don't think department stores or high-end restaurants will do it since they have a comfortable profit margin and not upsetting customers is more important for them.

As for rewards, the game will become more complex. If the merchant is in a 5% category, or the purchase produces miles/points that the customer values highly, then paying the surcharge may be worth it. This could create more opportunity for those who are able to find the loopholes.

Merchants got the right to impose them almost a decade ago and yet they still aren't all that common. And it's not like major retailers don't have the resources to, say, ensure that they only occur in states where they're legal. Considering how long interchange has been an issue, you'd think more would be eager to discourage CC use.

OTOH, a merchant does have to notify the networks before imposing surcharges, which could trigger backroom dealing that ends up preventing them from taking effect. Plus, even if they did impose surcharges anyway, they're limited to 4% or the merchant's actual cost, whichever is lower; it might not be ideal for customers to know exactly what the merchant is paying (especially if the ultimate goal is EU-style interchange caps or outright bans on interchange).

I understand that merchants have to pay CC fees, but aren't there benefits to accepting them? First of all, you get broader audience. The what about protection: what if someone paid with fake currency or a bad check? Aren't you SOL if that happens? With a credit it's a bank's problem, right?

Yes, but absent robust price competition some merchants think the amount of the fees exceed the value. I have not seen anyone argue that card fees should be zero, only that merchants should be able to negotiate to bring costs in line with value. ONE way to negotiate is to pass along the cost to customers and steer them to lower cost payment methods. This isn't an all/nothing choice, it's opening up a market that has been artificially constrained by regulation and contracts that were accepted only due to duopoly power.

I'm not sure the available alternatives are all that much better for the merchant. From what I can tell, they are the following:

• Debit cards:
  • Customers could still use a debit card from an issuer not covered by Durbin (which could result in significant costs to the merchant, though likely still less than with a CC).
  • Merchants may still end up paying the same as running a CC, depending on their processing agreements.
  • Customers could still chose to run a debit card "as credit" (unless the merchant specifically blocks this, but customer backlash is possible since people in the US expect to be able to do it).
  • Merchants won't be able to recover their costs due to the above thanks to Durbin/card network rules (though the ones that surcharge don't particularly seem to care about that rule IME).
• Cash:
  • Increased cash handling costs (though potentially not by much if most customers are already paying with it and/or if the business is small enough).
  • Increased risk of cash-related crime (depending on the business and location).
• Checks:
  • High risk (having to wait for payment to clear, etc.)
  • Increased checkout time.
• Retailer-specific payment apps:
  • "App fatigue" impeding adoption by customers.
  • Requires good UX design (to keep customers using it) and/or customer incentives (to get customers to use it in the first place).
  • Many still allow use of credit/debit cards (though there are ways to reduce the impact, such as Starbucks' loading money onto GCs and thus reducing the number of transactions).

On the other hand, perhaps those alternatives are perfectly okay (at least in the short to medium term) if surcharging does bring about the changes merchants desire. Assuming customers end up ultimately okay with surcharges, of course, which is in no way guaranteed.

Thanks for the link up top. I had an issue with a black car service in New York. I got hit over the head for $7.50 in a card surcharge (on a ride quoted as $65 to start with and then hiked to $75 because of the toll into Manhattan...as if the toll was a surprise, and he passed on more than the "actual" toll anyway). Suffice it to say, I've dropped a little complaint in Visa's inbox.

tmiw However, cash does allow for tax shenanigans (particularly if the owner is prepared to simply not deposit all of the cash in the company's bank accounts). It really isn't implausible for an all-cash business to under-report revenues by, say, 1-2% and blame some mix of shrinkage/waste, shoplifting, and the like...which can suppress stated/taxable profits significantly.

This is actually one of the problems Italy has been fighting with (and why the governments in many countries are pushing electronic transactions as much as they are). I remember reading a story (I think it was in the New York Times, but could have been the Washington Post or the Wall Street Journal) about problems with merchants adding 10-20% if you wanted a receipt, something that was taken as a clear sign that they weren't remitting VAT if they could help it. I would not be surprised if this was at issue in New York as well (given the near-10% city sales tax).

Sure, but there are ways of proving that underreporting is occurring with "cash intensive" businesses. (The IRS even has an entire guide about it.)

Of course, in countries that have issues collecting taxes in general (or if the underreporting is low enough to avoid audits), electronic payments do make things a lot easier.