Do you account for CC and processing fees in your prices?

[Harold Mansfield]

The other day I was at a store and went to pay using my debit card. The clerk told me that there was a $1 charge for using a debit card. I thought that was pretty ghetto, (meaning : a pretty classless way of doing things).

I'm no idiot, I know that businesses pay a company to process such payments, but do I really need to know that when I pay? Can't you just assimilate that into your overall pricing structure?

I was wondering if any of you do that (not that anyone would admit it now :)), or just account for possible processing charges in all of your pricing overall?
Especially if you are like me and all of your payments come by way of Pay Pal or Credit Card.

[KristineS]

It's taken into account when we price things, just like anything else would be. We don't call it out as an extra added charge though. It's just one of the things we consider when pricing products.

I do think it's weird when someone brings up a separate fee. Particularly when you were trying to use a debit card. Those are used so much these days that it seems kind of odd to penalize people who use them.

[Harold Mansfield]

That's exactly what it feels like when you announce it like that, a penalty. Especially in this day and age.

[KristineS]

I really don't see any reason to handle it like that unless you were trying to keep people from paying in a certain way. If that's the goal, then trying to keep people from using debit cards is pretty short sighted, as that's a very common form of payment now days. You'd be better off looking for a processor that didn't charge you a fee for debit card payments.

[Steve B]

Ironically, it's again most credit card company rules to charge someone using their card more than someone who pays in cash. However, it's O.K. to give a "cash" discount (which is really the same thing).

You probably got off cheap if you were only charged $1. The store probably had to pay 3 or 4% of the purchase price to the card company.

You certainly run the risk of losing customers if they feel penalized. I know I certainly would. I think it's better to pass this cost on to everyone like other overhead charges typically are.

On a similar note - I stopped using my auto mechanic partially because he charged me $25 for "Shop Supplies" one time. He could have easily added it into his general hourly rate and I wouldn't have thought anything of it. I have 4 cars that all get a lot of miles put on them every year - I hope he was able to buy a lot of rags for that $25 he got from me!

[Evan]

I "remember" the days (oh, say last year!) when these sort of practices would result in the merchant's account being revoked. Now they are making it allowed again.

I can understand businesses frustrations with "small" debit purchases, especially those $2 and under... but those costs need to be factored into the pricing strategy. It does feel like a penalty when you tell a client they need to pay something extra because of how they're paying.

It's nearly as ridiculous as the gas stations that give "cash" discounts or charge extra for cards... but post only their discounted price!

[greenoak]

we dont do that at all....we do grumble when these new girls use their card for under 5$$$.....but we just treat the fees as part of overhead, running a busness...i cant imagine charging extra....and i even thought it was illegal...not sure on that...
.. your example seems totally cheap and takky...

[Steve B]

ann - it's not illegal, but it is against the rules of the credit card companies. This is where the goofy "cash discount" came into play. It's O.K. to give a cash discount, but not O.K. to charge extra for those using credit cards.

[Harold Mansfield]

This is where the goofy "cash discount" came into play. It's O.K. to give a cash discount, but not O.K. to charge extra for those using credit cards.

Well...considering that there are only 2 ways to pay. Wouldn't a cash discount just be a way of charging more for using a credit card?

[greenoak]

ive seen signs like that , getting around the credit card rules...i think its a bad reflection on the business doing it...kind of cheap and dishonest......... they signed up to take the cards,and agreed to abide by the cards rules.... .
some of the antique malls do it around here...and some auctioneers.... .....not the better ones tho....

[Steve B]

eborg9 - that's why I gave the opinion of "goofy" to preface the description of what is being done.

The businesses are forgetting they made a gamble that by taking on the extra fees of the credit cards, that they would more than make up for it in profit because it is much easier for people to pay with credit cards. Most people don't carry significant cash anymore and they tend to spend more with cards because it's so easy. I guess they want to have their cake and eat it too.

[Evan]

ann - it's not illegal, but it is against the rules of the credit card companies. This is where the goofy "cash discount" came into play. It's O.K. to give a cash discount, but not O.K. to charge extra for those using credit cards.

Pretty sure it is no longer against the rules, but I may be wrong. Minimums are also now allowed, which was previously disallowed before...

[Steve B]

Evan - If you could confirm that, I'd really appreciate it. That would be very significant if that were the case.

[Steve B]

I did a quick little Google search and confirmed what I had thought.

What I found below is consistent with what I was saying. Evan, if you have heard any changes to these rules I would love to know so I can confirm. Here is what I found:

VISA states that "you may not impose any surcharges on VISA transactions. You may, however, offer a discount for cash or another form of payment (e.g., proprietary card or gift certificate) provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment"1

MasterCard states that "A Merchant must not directly or indirectly require any Cardholder to pay a surcharge or any part of any Merchant discount or any contemporaneous finance charge in connection with a Transaction. A Merchant may provide a discount to its customers for cash payments."2

Discover states that "You may assess a surcharge on a Card Sale conducted using a Credit Card provided that (i) the amount of the surcharge may not exceed the Merchant Fee payable by you to us for the Card Sale, and (ii) you assess surcharges on card sales conducted using other credit cards accepted by you."3

American Express states that "You must not accept the Card for costs or fees over the normal price of your goods or services (plus applicable taxes) or Charges that Cardmembers have not specifically approved."4

Every originator except for Discover forbids surcharging credit card sales, however, as MasterCard so clearly states, "A Merchant may provide a discount to its customers for cash payments." This statement holds the secret to passing credit card processing fees on to customers. The trick isn't charging customers more for using a credit card; it's charging them less for using cash.

In order to charge customers for credit card processing fees you must create a dual pricing model. To accomplish this, raise all prices to offset processing fees and then offer a discount on cash purchases that's equal to the price increase.

[nealrm]

I think it is great that a business would charge for the use of credit or debit cards. By the rules improssed by the credit card companies, we all must pay an extra 3% or more on everything we buy. On top of that, the credit card then charge us intrested on top of that. I encourage all my customer to pay by chech or cash. Those that want to pay via credit card can send a payment via paypal. Yes, I do charge a processing fee for those by paypal. Personnely, I think we would all be better off without credit cards.

[greenoak]

my customers want to pay by credit card.... i would never say no to one...but using one for 5$$ is ikky....those girls are my customers...
..im more at home with guys with wads of cash i guess....

[501graphics]

I take all credit card payments through PayPal (I know, I know. It's due to convenience, really...) and charge every client the same, whether I am paid by check, cash or credit card. I've considered adding processing fees to my quotes if I think someone's going to pay me by CC, but haven't done so as of yet.

[jamesray50]

I have always considered any type of bank charge, whether it is a credit card fee or anything else as a cost of doing business. Therefore, it needs to be included in your rates even if not everyone uses a credit card. It's still a business expense against your income. You need to budget accordingly.

[huggytree]

id include it in my pricing...adding $1 seems petty and will turn a percent of people off...if 50 percent use credit cards they should just add .50cents per customer into their pricing.....i have gotten discounts on gasoline for cash..ive always thought it was odd and i never expected it when i bought..its like leaving money on the table. if they charged me full price i wouldnt have given it a 2nd thought.

[Evan]

What I found below is consistent with what I was saying. Evan, if you have heard any changes to these rules I would love to know so I can confirm.

I forget where it was, but I heard it. I believe it may have been part of legislation that would have allowed merchants to do so... but of course the contractual relationship that the CC companies have with merchants prevails. As I doubt they'll allow for fees to be added, I don't see that really changing despite what the law may allow.

But I do believe that minimums and maximums can be allowed now by a merchant, that was supposed to be part of the changes with the law too... Again, the credit card companies may prevent it, which is a contractual thing.

[Paper Shredder Clay]

I have had a couple incidents of finding out that I was charged extra for using a card. I do understand there are merchant costs but if I am correct most costs is about 3-4%, so usually they charge more than what they are actually being charge. If I was running a store, I would probably take a look at how many card customers I have vs. cash customers and add a small percentage 1-2% to all items, for everyone, and not have to call out the additional cost. If most of my customers were card, then I would have charge 2-3% on all the items.

[grabbd]

I know some places put a minimum purchase amount to use a debit/credit card. Sometimes it's only a purchase of $3-$5. If it doesn't come to that much they make you use cash. I don't have a problem with this since I think it doesn't make sense to use a debit/credit card to buy a .99 bag of chips that I've seen some people do.

[Harold Mansfield]

I know some places put a minimum purchase amount to use a debit/credit card. Sometimes it's only a purchase of $3-$5. If it doesn't come to that much they make you use cash. I don't have a problem with this since I think it doesn't make sense to use a debit/credit card to buy a .99 bag of chips that I've seen some people do.

I'm one of those people. I don't always have cash. I also purposely avoid places that make it point to announce that they are charging me for using a card.
There is new regulation as part of Wall Street reform to manage fees that banks can charge merchants for the privilege of taking cards.
Swipe Fee Deal: Merchants Beat Wall Street (http://www.huffingtonpost.com/2010/06/21/swipe-fee-deal-merchants_n_619903.html)

[Harold Mansfield]

Had to revive this one.
I needed a money order today, thinking it would be easier than using 2 different cards. So I went to this "money center" that's a stone's throw from the place where I walk to get coffee every morning (closer than the bank).
The price of the money order itself was only .50 cents. Cool. No big deal.

Then the teller told me that it was an extra 3% to use my card, which would have come out to an additional $26 (based on the total that I needed it for)

Needless to say I went to my bank.

[jamesray50]

What a rip off. I have noticed small charges on my bank statement for $1.00 a few times. I'm thinking it's for using my debit card for online transactions, but I haven't called the bank to find out. You have to pay somehow when you buy online and there will be some kind of fee hidden somewhere.

[Businessfirst]

The other day I was at a store and went to pay using my debit card. The clerk told me that there was a $1 charge for using a debit card. I thought that was pretty ghetto, (meaning : a pretty classless way of doing things).

I'm no idiot, I know that businesses pay a company to process such payments, but do I really need to know that when I pay? Can't you just assimilate that into your overall pricing structure?

I was wondering if any of you do that (not that anyone would admit it now :)), or just account for possible processing charges in all of your pricing overall?
Especially if you are like me and all of your payments come by way of Pay Pal or Credit Card.

It is wise to take it into account IMO. However, you certainly want to keep prices competitive. For example if 50% of your purchases are cash and 50% card and when a card is used they take 2%, you wouldn't want to raise prices 2%; just 1%. That is how I do it. I also like a neat price though so somtimes this is difficult. I don't want a price to be $3.03 so that makes it a bit difficult at times.

[mettro2]

Has anyone tried the new "square" device that runs credit cards for a flat rate with no fees? I ordered one on the mail for my locksmithing business, and from what i'm reading it sounds awesome. I was wondering if someone is already using it. Would like to hear if its working well in practice.