Credit card Swipe fee

[Jack Gretz]

With the new law in place allowing Merchants to charge a "swipe fee" to cover the cost of Credit cards fees used during sales transactions, are you folks OK, with paying an addition, of up to 4% to purchase a Guitar or Amplifier?
I am asking for a discussion about this being that merchants don't want to lose customers over it and consumers for the most part don't want to pay for it. However it is a real cost when doing business, and it appears that almost all private sales among the guitar community, have a disclaimer that PayPal fees ( swipe Fees ) are the responsibility of the buyer. We also see a split between buyer and seller and even sometimes no fee at all.
I would really like to have a nice discussion about this as your input is highly valuable.

 

[]-[@n$0Ma☩!©]

Jack, it's a fair question. I just sold a pile of parts on eBay and paid (what I believe to be) a lot of ridiculously overpriced fees. I don't like it and I can see why stores don't like it. That said, I'm on the consumer side so I'll focus my comments there.

I use an American Express for all major purchases. I do it because of the benefits I receive like airline points and a middle-man to protect me when the item I paid for is defective or not what I ordered. I've used the later benefit twice. The first time was with a boutique amp builder who sent me a product that didn't match what we agreed on - then stopped answering my calls and email. AmEx gave me my money back and the guy called me immediately to fix the problem. The second time was with a parts supplier who continued to send me defective products and eventually stopped answering my email/calls. AmEx gave me my money back and guess what... the guy called me back immediately to fix the problem.

In both cases, AmEx looked at all of the evidence and made an informed decision. I always felt like they required me to prove my case before they pulled the funds from the merchant. And in all cases, the merchant had ample time to respond and defend their position. It seemed quite fair.

But those benefits cost someone money. Is that a Cost of Doing Business for you? Is that an insurance premium that should be paid by me? As I said... I can only answer that from a consumer's perspective.

Bottom Line (consumer perspective): If two merchants have a guitar I want and both have a street price of $3800 but one of the two is going to charge me sales tax, 4% Credit Card fees, and shipping/handling but the other guy is only going to charge me for shipping, then guy #1 gets my business.

 

[WEDGE]

Bottom Line (consumer perspective): If two merchants have a guitar I want and both have a street price of $3800 but one of the two is going to charge me sales tax, 4% Credit Card fees, and shipping/handling but the other guy is only going to charge me for shipping, then guy #1 gets my business.

+1

 

[QueenCityGuitars]

My personal opinion is that a private guitar sale is different than a retail guitar sale. I think most retail sales are generally done to make a profit, which sustains a business. Conversely, I think most private guitar sales (say, between forum members) are generally done to fund some other purchase or debt and are generally done at a loss. Private sales add the "you PayPal, you pay fee" verbiage in order to lessen their overall loss. I don't think that happens with every private sale...just most of them.

That being said, I have asked a retailer if paying with a check or cash would allow for a better purchase price since there are no fees associated with those payments.

 

[aduayer]

[QUOTE='Bottom Line (consumer perspective): If two merchants have a guitar I want and both have a street price of $3800 but one of the two is going to charge me sales tax, 4% Credit Card fees, and shipping/handling but the other guy is only going to charge me for shipping, then guy #1 gets my business.[/QUOTE]
+ 1 too

 

[sergiodeblanc]

The problem I have with it is our movement towards being a cashless society. If we are going to be forced to use cards instead of cash in the near future then fees like these should be viewed as an attack on consumers. When there is no more cash, I fear these fees will not go away and consumers will have to continue to pay more for less.... and we already enjoy that feeling, don't we?

 

[s.fitzsimmons]

I see it as a customer service and a cost of doing business. If the seller (guitar shop or otherwise) says that they accept credit cards, the fees should be on them. It is their "convenience fee" to get money from a customer across a long distance quickly, with very little hassle. It's also a service to the customer since pretty much everyone has cards, and it's not easy to mail cash and no one takes checks.

Knowing a little bit about retail and processing fees, they should be nowhere near 4%; half that at most. Also, I won't buy from someone requesting that the buyer pay or split the PayPal fees. It's against the user agreement for the service, never enforced, but ultimately their choice.

 

[veinbuster]

It is an interesting question. I know fees tend to be quite high for smaller businesses.
In the past, when dealing with people I trust and respect, I've been willing to use a card that carried a lower few, or pay cash.

I do really dislike the plus, plus model of pricing. It irritates me that very rarely in North America do you pay what the sticker says. Adding a credit card fee on top of taxes could have me walk out in a huff. I would much prefer a model that gave me a discount if I paid in a different way - and yes I know it amounts to the same price in the end, but I'd rather the price go down from the sticker rather than up.

 

[watelessness]

Is this in addition to the merchant fee that you pay now?

 

[Jack Gretz]

Is this in addition to the merchant fee that you pay now?

That has not been clarified to me as of yet. The reason I put this out is because our local media has been all over this issue. Just about every gas station has raised the price already. Apparently ( I am not 100% for sure ) the grocery stores in our area are starting today with this up charge.
If you pay with a debit card no fee can be charged. Also I am told that the merchant must declare to the buyer that the fee will be added before the process of purchased has been started so the customer is fully aware of the fee before anything can begin.

 

[watelessness]

From what i gather, instead of the merchant fee being unknown to consumers and eaten by the merchant, it will now be upfront. So merchants can now lower their prices by the amount of the merchant fee and it's a wash to consumers.

Maybe i'm missing something...

 

[László]

I see business as a win-win situation for customer and store. I want the store to make a profit. I want my trusted vendors to prosper.

I am seeing merchants get squeezed hard by the banks, by their vendors, and by customers. We all want top notch service, but we all want to pay as little as possible for it. Not only do merchants pay banks a relatively exorbitant amount for the customer's convenience to use credit instead of cash, but they are also paying carrying costs for "floor plans" regarding their inventory, they have rent, sales and other taxes, utilities, salaries for employees, benefits, and a host of other things that few customers see or think about. Most stores are on triple-net leases, where they pay rent, plus utilities, plus property taxes, plus any applicable personal property taxes for fixtures and inventory, etc. Stores in some malls and centers even pay a percentage of sales in addition to rent.

It's no wonder that the big chain stores can handle these expenses more easily - they are in a position to squeeze the manufacturers who desperately need them - and the guys many of us really and truly would rather do business with have a more difficult time competing. But we tend to squeeze them hard and make it even more difficult for them, and then complain about how the big box stores have taken over!

Back in my lawyering days in the 70s and 80s, I learned a lot about the costs of doing retail business. My eyes were opened. I've negotiated these kinds of leases, floor plans, etc.

And a big store has another advantage: they're seen as an "anchor tenant" and can cut themselves a better rent deal. Not so a small vendor.

I have no problem with a merchant not shipping until a check clears, or asking for a bank check. Takes a couple of minutes to get one. If I want to have the time to pay at my convenience and therefore use a credit card, I'm not sure that should be the store's problem. I can wait a couple of days til the check clears. It's no big deal.

This is a difficult issue, but always I ask a vendor if the vendor would prefer payment by credit card or check.

It is not my nature ask for a discount on an agreed price if I pay by cash or check. I want the vendor to continue in business. I'm not saying anyone else is wrong, we all do business differently, but I like happy relationships and great service.

It's funny, we willingly pay a 15% service charge as a tip in a restaurant for a meal that will be poop the next morning, or however much for a bottle of wine that will be a mere memory and a hangover the next day, but for a guitar and good service, we are not willing to be as magnanimous.

I dunno the answer to the question for everyone else, but to me it's pretty simple. What it takes for both me and my vendor to be happy is a win-win.

Honestly, I just hope that everything works out for everyone!

 

[Sage]

With the new law in place allowing Merchants to charge a "swipe fee" to cover the cost of Credit cards fees used during sales transactions, are you folks OK, with paying an addition, of up to 4% to purchase a Guitar or Amplifier?

Just for clarity's sake, I'd like to point out that the law doesn't exactly "allow" merchants to charge a swipe fee, though that is the practical upshot. Up until now, it was the credit card companies who prevented swipe fees via their terms of service, not the law. Retailers were not allowed to charge more for a product based on method of payment, as a condition of their contracts with the credit card issuers (Interestingly, Ed Roman used to break this rule, which is how I learned about it). The new law prevents the credit card issuers from enforcing those rules.

This really burns me up because retailers are trying to have their cake and eat it, too. Credit cards are good for merchants because credit card transactions are safer than keeping a bunch of cash on site, and they increase sales because consumers aren't limited to the amount of cash they're physically carrying at the time. Retailers want to take advantage of these benefits but don't want to pay the cost, which is hypocritical and short-sighted.

Sellers of big-ticket items like guitar amplifiers, appliances, electronics, etc. are especially benefitted by credit card transactions because someone visiting a store can drop a lot of money on an item right on the spot, without having to go get the cash first. This essentially turns big-ticket items into impulse buys, and avoids the danger that someone might leave the store with the intention of buying but change his mind and not come back.

That said, it's probably not the big-ticket sellers that will do this -- competition will likely keep them in check. But the little convenience stores and gas stations will definitely start charging. The argument in their favor is that the swipe fees they pay to banks are inordinately high for small purchases. The guy who just buys a soda is actually hurting business more than he's helping. But as I said, there's hypocrisy in this, because for every guy who just buys a soda, there's someone who is picking up $20 of junk food because he's free of the limitations of cash. These retailers want the convenience. They just don't want to pay for it.

You'll notice that some of these merchants have already started setting a minimum purchase requirement for people with credit cards. Again, this was prohibited by the issuing banks' terms of service, but the same new banking regulations now prevent the banks from enforcing that rule as well.

I've made it a point not to do business with merchants who charge me for their own conveniences, but that'll be harder to do if these new regulations remain in place.

I use an American Express for all major purchases. I do it because of the benefits I receive like airline points and a middle-man to protect me when the item I paid for is defective or not what I ordered. I've used the later benefit twice...

But those benefits cost someone money. Is that a Cost of Doing Business for you? Is that an insurance premium that should be paid by me? As I said... I can only answer that from a consumer's perspective.

My attitude is that the benefits to the consumer are covered by the interest rate. The benefits to the merchant are covered by his own fees.

Bottom Line (consumer perspective): If two merchants have a guitar I want and both have a street price of $3800 but one of the two is going to charge me sales tax, 4% Credit Card fees, and shipping/handling but the other guy is only going to charge me for shipping, then guy #1 gets my business.

I assume buy "guy #1" you mean the one who isn't charging you the swipe fee? Because that's actually the second guy in your example.

 

[SuperFly53]

Here's my take....

As a business, credit card fees are a huge expense. My fees are the same for cash, check, or credit card. The reality is that rates have come up to compensate for the added fees that the credit card companies charge. The crappy part is that the cash guy is paying more than he has to.

The fairest thing to do is charge to regular fee (that has the credit card upcharge included) to the credit card purchaser, and give a cash discount to the cash buyer.

 

[Harker1440]

Here's my take

The fairest thing to do is charge to regular fee (that has the credit card upcharge included) to the credit card purchaser, and give a cash discount to the cash buyer.

+ 1000

 

[11top]

That being said, I have asked a retailer if paying with a check or cash would allow for a better purchase price since there are no fees associated with those payments.

I often ask if the retailer would prefer a check.

 

[Sage]

Here's my take....

As a business, credit card fees are a huge expense. My fees are the same for cash, check, or credit card. The reality is that rates have come up to compensate for the added fees that the credit card companies charge. The crappy part is that the cash guy is paying more than he has to.

The fairest thing to do is charge to regular fee (that has the credit card upcharge included) to the credit card purchaser, and give a cash discount to the cash buyer.

I completely disagree with this, for the reasons I mentioned above. That expense is what the merchant pays for the convenience of accepting instant payments without limiting his customers to the cash they're carrying at any given moment -- this convenience increases the merchant's sales. Charging someone extra while reaping the benefits of their payment method isn't fair at all. If you don't want to pay those costs, then the fairest way to deal with it is to not accept credit cards as payment.

 

[rugerpc]

[ramble] I stopped taking credit cards for payment in my practice because by the time I added up all the fees I was charged by the clearing house, I was losing between 10% to 15%. I know it was because my credit card volume was low - you get volume breaks which I never qualified for.

At the time, the clearing houses did prohibit vendors from charging customers more for credit card purchases vs cash or check. I made the hard decision to just not take credit cards any more. Fortunately, it has not adversely affected my practice.

Having had that experience, I understand the desire on the merchant's part to pass along the credit card fees to their customers as the fees can be substantial. They can be high enough on some purchases to eat up a substantial part of the profit.

But charging a set 4% fee on every credit card purchase is still an onerous thing. I object that the 4% is probably not the actual percent the merchant is paying. It will be too much for some and too little for others. It is complicated by the fact that the merchant doesn't know until the end of the month what the fees will be since some of the fees vary with both the number of transactions and the actual total dollar amount passing through each month. Setting the exact swipe fee for each purchase at the time of sale is therefore impossible.

But the merchants need to do something to recoup the expense. Their options are:
• charge a swipe fee.
• raise all prices and don't charge a swipe fee
• raise all prices and give a cash or check discount.

Of the three, I think the last one would be the most appealing to consumers.

A side note: Credit card companies and banks issuing credit cards milk the cow from both ends. The charge merchants fees to process the payments. And the charge consumers fees like annual fees and membership fees for using the cards - that is over and above the interest.

Once the accounts are set up, I believe that the merchant fees should be lower than they are. There is overhead and maintenance involved in the credit card companies processing of transactions, but the fees they are charging don't really reflect those costs and a reasonable profit.

The fees to the consumer are largely bogus. Annual fees in particular. Some fees are just dumbfounding - I actually saw a card that charged a fee for not using it.

Add in the idea that, for banks in particular, the more things we do electronically, the less we use checks and human tellers, the higher their profit margin, yet we get fees to do things electronically that would be free if we used a teller. So the bank gets a double boost in profit - less tellers to pay and new fees on using electronic services (which let them get rid of the tellers in the first place!).

The whole system stinks.

Bottom line - my local PRS dealer is (now) a friend. He gives me a 'good guy' discount that you get by long patronage and I pay in cash or by check whenever possible.

[/ramble]

 

[Jack Gretz]

I do not plan on charging the fee here at the store. I think it would hurt me in the long run, and upset the customer relationships that I have made. It is a huge expense at the end of the month that you have to always keep in the back of your head.
I was curious to hear from you folks; In our home area, I have been quite surprised as to how accepting the locals have been about it. Just yesterday I sold a SM58 to a young girl and when I went to the counter I told her $99 plus tax and she responded, "plus the credit Card fee." I told her I was not adding that on and she was saying Wow great .
I think this is a valid discussion as it is a real time expense and business challenge.

 

[László]

Just a comment on what a great membership this forum has; this has been a really intelligent discussion, and good points have been made on all sides of the issue.