bound4bora

I have a small business, with $4000 in yellow page ads and phone bills a month. The carrier is allowing me to pay with my UAL visa, and says there is no extra fee. The post office allows me to buy postage on line for my machine with visa, with no extra fee. I thought that the card providers charged the merchants 1-2%. What am I missing?

plenow

The merhant absorbs the fee as a cost of doing business. For many firms it is a necessity to accept credit cards and pay the associated fees. These fees are built into their profit structure.

SRQ Guy

As a small company that accepts credit cards, we for one do not mind paying 1-2%. We get that cash nearly instantly, as opposed to 30-60 days through other channels. I can't speak for other retailers, but we actually give a 5% discount for credit card purchases, since they are direct, we get the money fast, and we have very generous discounts already built in for distributors.

JS

The yellow pages and the USPS are the merchants, and they are paying the fee. When you buy something with a credit card, you don't pay a fee regardless of what you are going to use the merchandise for (i.e., consumption or selling).

[This message has been edited by JS (edited 01-18-2001).]

sosafan

It is my understanding that merchants sign agreements that they won't charge a premium for a credit card transaction. But occasionally I have been asked (by small businesses) to pay a premium. Also, until a few years ago, many gas stations offered a "discount" for cash.
While I think I understand what' going on here, I don't understand why and how "debit" cards are treated differently, and why so many businesses ask if you have a credit or debit card, and why my credit union says to
say "credit" even though it is a debit card in my mind.

MBS MillionMiler

I agree with the above posts about an instant way to receive money...We are in the wholesale business and ship all over the country, so CASH is rarely received...Basically we sell either on credit or on V/MC/AX/DISC and even Diners (which none of our cometetors across the country even accept).

In a perfect would, everything would be cash cash and only cash...But since it isn't, credit cards are so much better than giving someone 30 days to pay. However, some of our customers have even found a loophole to our business...They have an open account, and on the 30th day or so, call in their payment to be put on their credit card...That way they get at least 60 days to pay, plus the point/miles associated with it.

It's explicitly against company policy, but how can you turn down excellent accounts? We're still getting our $, just 30 days later and less 2-3%, depending on the card. Better than losing the customer to a competitor who may or may not do the same.

It's all about cash flow...

UAL Traveler

Following SRQ Guy, most card issuers will guarantee payment once the charge is authorized. That eliminates the small percentage of bad debt from checks, in-house credit lines, and even counterfeit notes, that must be factored into the price structure.

AZ_MISMAN

OK, I work for a bank, though not in credit cards, but here is the poop as it was explained in a staff meeting. If you use your credit card, the fee is n% of the transaction; debit is a flat fee (something like 49¢.)

They were trying to get us to use our debit cards, figure what was best for the bank, and tell the merchant to process as "credit" or "debit". Personally, I don't even use the card... I use my mileage card!



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Bob

bound4bora

thanks all. I guess the motto is don't look a gift horse ....

johna

In addition to the businesses "eating" the credit card fee as a cost of business, I suspect many businesses know their volume would suffer if they didn't accept cards. Restaurants in particular: if you had to pay cash, how much less often, or less expensively, would you eat out. In businesses where the alternative is cash on the sale, I suspect this is fully as important as the timely payment aspect discussed above.

ozstamps

You better believe it! Mine would HALVE. Fully 95% of my business is via my website with credit card payment, and the bulk of that is shipped overseas. If you want to buy somerthing off me for $A50 I put it on your credit card, and one day a charge for about $US28 turns up.

Imagine if the ALTERNATIVE were for you to send me a bank draft? Go to your bank, waste an hour, get a $A50 bank draft, get royally screwed by the bank on (a) the exchange rate and (b) the $20+ or whatever a foreign currency draft costs, and your cost to buy the SAME items just doubled! Would you then bother? NO is that answer 50% of the time

Me, I gladly wear the 2%. So, I get $A49, and not $50, and you are happy. Simple solution for all.

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~ Glen ~

[This message has been edited by ozstamps (edited 01-18-2001).]

Comicwoman

The US Postal Service found that paying the merchant fee is cheaper than the cost of processing checks (both float and bounce).
(Edited to correct typo from typing in the dark.)

[This message has been edited by Comicwoman (edited 01-19-2001).]

SRQ Guy

Also, you can bet most retailers and restaurants have that 2% built into their pricing. In our business, we have our pricing set up so that when we sell our products at the deepest discounts we have, to our distributors, we are making our target profit %. Anytime we sell ABOVE that discount, it's pure profit, and extra commissions for that salesperson. So the 2% is just a bit more of the same thing, a little bonus when cash is paid.

jamiel

Conversely, I actually dealt with someone over the phone who didn't take credit cards--it was like stepping back to the 50s.

The father of a friend passed away, and I wanted to send flowers. They live in a small town in rural Virginia, so I contacted some nearby florists who wouldn't deliver to the small town. They suggested a 3rd florist, who I called and happily took the order. When I said "do you want my credit card", she laughed and said "no, we don't take them. We'll send you an invoice". I marveled, but later in the week got my invoice (it was a pain b/c I don't have a checking account for small amounts). She said they were just too small, and that their local custom was entirely on a cash/check basis.

jl

ozstamps

Jamiel. Want the 1950s? Talk to Lan Chile Australia about booking an airline ticket on credit card. Went thru this at Xmas. No way. Cash or bank cheque, regardless of the price or class of ticket. I kid you not. And the VARIG agent here same deal. Needed to book both,and annoyed no card points accrued.

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~ Glen ~

[This message has been edited by ozstamps (edited 01-19-2001).]