Yup - I'm a business, and I use that program, and I pay a minimum of 1.99% (plus a per transaction charge) for the best of circumstances, and up to 3.6% for the worst (some combination of reward and business cards). And that's not even getting into Amex.

If you want to see an industry rife with confusion, this is it. They generally can't tell you which transactions bumped to higher rates, much less why. They can only give you a list of general possibilities, which include things like address matching, rewards, business cards, days between authorization and capture, etc.

Sounds perfect for abuse -- er, I mean optimization. :D Perhaps we should all band together, skip the merchant step and go straight to processing.

If someone where to use a Schwab 2% rebate card to purchase goods or services from you, would you see how much Costco took for the transaction? If you could, it would be interesting to know that answer? I assume you say "that's not even getting into Amex," because it costs you substantially more to take Amex than other cards?

Right - Amex is always over 3%. I've been tempted many times to stop taking it, and I never use it at a merchant I care about.

But the problem is, your charges are never itemized by actual charge. They're lumped into categories by qualification type, so you never know what charge ended up where (we generally have at least 1000/month). And you can't get a breakdown. But some are as high as 3.6% for Visa/MC.

No way to get far enough below 2% to make that Schwab deal worth it, as far as I know, even if you could get the Schwab charge at the "fully qualified" rate, which I doubt is a possibility. I guess the float would be worth something, but not with today's interest rates.

What I truly love about the credit card acceptance industry is that when accepting a customer's card, the vendor has absolutely no idea what rate they'll pay. I do know enough to say "no Amex" to anyone asking for a discount, but that's the best I can really do.

I suppose we are going a bit OT here, but can't resist... First, you aren't in one of those special categories (e.g., food, gas, pharmacy) that get the user a richer return in miles or points, are you? (Hard for me to figure out how it is that those merchants can afford to pay for what the cardholder gets back in rebates on thin-margin operations, like groceries.

Second, if you and other merchants can't look at the statements your card processor issues you and see an explanation of how they categorized the charges, what is there to keep the card processors honest? It comes down to trust, since you have no opportunity to verify? If that is the case, I wouldn't be surprised to read one day about a huge class action lawsuit by merchants against card issuers alleging fraud. Invitations to defraud, like that one, usually get taken sooner or later, even by banks and other financial institutions if you can believe it.

I have a RBS card that gives me 3% cash back paid each month in the category that I use most (as far as I know, there are no excluded categories). So this card would work for this purpose even with the fee they charge.

The only thing is that I do not know how one would get the card today. I got it through a direct mail and have been using it for over 2 years now.

RBS is the Royal Bank of Scotland which is one of banking's mega disasters? I don't suppose it was the 3% deal they have been giving you which got them in so much trouble, but then I don't imagine it has been a very profitable undertaking for them.

I have another Chase card (not the MP Platinum Visa) that yields more points than any product they now offer, leaving me to wonder if the day will come when they tell me the good times are over and they cut back on the largesse. How long do you think the RBS is going to continue with 3% cash back? I hope for your sake it will be a very long time, but I wouldn't bet on it.

I'm not a special category - and I assume that the card issuer just loses on those. They want you to make the card a habit, so they lose on the common items. At least that's my understanding.

Yes, we also expect a class action lawsuit all the time. This whole area couldn't be less transparent. We don't see what card a customer uses since it's online, so we have no clue at all about whether we'll be socked for a rebate card charge. We do exclude Amex use for some discounts (although they've implied that they'll do legal stuff in certain circumstances for "payment discrimination" or something like that) but otherwise, it's just a gamble. You can't really ask a customer if they're using a rewards card or not.

In the end, our average non-Amex charge cost is about 2.2%, and we try to reduce it, but we live with it. The problem is, it's a cost of doing business, and anyone who spearheads a class action lawsuit will pretty much be out of business for the duration. They've got you either way.

In this new era of financial transparency with these banks, we can hope, but we doubt it will get to this level.

josephstern, thanks again for sharing. I am fascinated by this sort of behind the curtain info about credit card processing. We swim in credit card transactions and can as little about the out of sight details of them no more than we do about the air we routinely breath, at least if that air is not somehow foul with pollutants. Plastic has become so commonplace that cash often seems strangely old fashioned. I don't know that I have ever seen anyone produce cash at an airline ticket counter, and I think if you do pay for a ticket with cash, you are likely to get special screening when you fly.

None of this will change my plans to pay with my MP Visa as much of my taxes as will bring me double miles and no more. It does, however, help inform me about what is going on. (BTW, no double miles offers from AmEx, especially SPG AmEx, which has had them in the past?)

josephstern, a couple more questions in this vein, if I may - are merchants allowed to set a minimum charge, e.g., $10, below which they will not accept plastic, or does that violate their agreements with Visa, MC, and/or AmEx? Do they get hit with a fixed fee component, making small charges more expensive for them, and thus their cash requirement for small purchases? Do you care to say what sort of business you are in?

The "Ads by Google" I see at the top of the page here are: "IRS Installment Agreement...Affordable monthly payments. Call today for a free consultation. IRS-Tax. FreedomTaxRelief.com" and "Merchant Account Rates As Low As 1.18%, 24/7 Support & Free Credit Card Machine. www. RockBottomMerchantAccounts.com." This ad placement follows from the direction we have gone with this thread, particularly the second one about low "merchant account rates?" That deal may charge merchants "rates as low as 1.18%," but I very much doubt that it costs merchants that little when they accept a 2% back Schwab card, or even an SPG AmEx or an MP Visa.

I'm in the consumer electronics business - a small niche of it.

Yes, merchants are required to accept a card for every purchase if they accept the card for any purchase, according to the merchant agreements. No limit, low or high, can be set, although plenty of merchants do.

There is a per-transaction fee, but it's usually about $0.27 for us. The lowest I've seen is $0.10 and we might move to that - that's the "interchange" rate, as far as I know, and there's basically no escaping that. I've also heard that business with smaller average purchase sizes end up with deals that work at a higher charge percentage and a lower per-item fee, to ease the pain of the $1.50 cup of coffee. I should note here that all this pertains to Visa/MC.

I don't pay too much attention to Discover (although I do accept it) and Amex is really in a class of its own on all fronts. I've mentioned before my hatred of Amex's business tactics. I'm really proud when I walk into a restaurant and they don't take Amex - good for them! It's the only place I bother (3% via Costco Amex).

I know that, being an online business, we pay higher rates ("card not present") than many retail businesses. Our rates basically start at 2%. But retail could start much lower - but 1.18% would surprise me.

But, again, we pay well over 3% for premium/rebate cards. These guys always market at the lowest number, not surprisingly.

I should also add that the overwhelming majority of our sales (probably 70% - I could calculate an exact number if anyone's curious) are, in fact, at the base level. This means we met all of the various security and time criteria, and that the customer used a non-rewards card. So, based on that metric, lots and lots of consumers don't bother with rewards cards. That never ceases to amaze me. It's free money!

SF property taxes (minimal flat-fee for double miles w/Discover Escape)
 

There's an obscure deal (tune out if your county doesn't allow for flat
rates in lieu of the 1.5-2.5% convenience fee ripoff payment for miles)
regarding Discover and the City and County of San Francisco, who
must have some sort of sweetheart arrangement going on here...

Although if you pay property taxes *online*, there's the 2%+ fee
that makes you actually pay for points/miles, try the walk-up
window for a maximum $35 charge, but only using Discover.

For a typical Frisco homeowner, the savings can be non-trivial.
Here are the particulars -- only the Over-the-Counter rates are
worth it:

http://www.sfgov.org/site/treasurer_page.asp?id=13395

I did this starting 2007 on a 0% APR Miles card; that year one could
get an extra 5% per annum by banking the balance for 12-18 months,
while collecting the miles bonus, so that was money back.

This year, there's not much advantage playing the 0% APR game
but there is the double-points Escape by Discover card with a 25,000
point bonus to boot.

Using the City Hall walkup window on a multi-thousand dollar
tax bill can pay back, unlike the 2% "convenience" fee offers where
you'd lose big the other direction! So, does City Hall eat the typical
"retailer" fee on this Discover deal, or does Discover, by paying
San Francisco for the privilege?

This thread seems to have nothing to do with Tax payments BONUS miles or points, as the title suggests....

I had to go to "other credit card programs" to get my tax payment bonus miles question answered.....