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Hey.

So I'm watching a TV show, and it's regarding a business that is doing poorly and the host who runs the show takes all the staff to a private room to field their grievances with the manager without him knowing, to let it off their chest so to speak.

The hostess complains that customers often grief her over the fact that the business refuses to accept credit cards. Then the host says "Why not? Credit cards are a common courtesy these days".

I thought about it, and I've had plenty of times when a business says they don't accept credit cards. I've never actually understood why. I tried Googling it using various search terms to yield results, but all that comes up are debt collection issues and unrelated crap. Can someone explain to me why credit cards as payment are seen as a 'courtesy' and not just a method of payment that is as fine as say debit or cash? As I understand it, when I use my credit card, the balance at the store is paid by the bank, and then the bank charges you. The business gets paid either way, it's the bank giving you 'credit', which you then pay interest on, or pay off fast, don't pay at all and get credit issues, etc. Either way, it's the bank's problem. I know Dakka has a lot of shop owners and such who use it, so can someone explain this to me? It's something I've always been curious about.

Thanks!

The charges can be contested.

Also, the card carrier (visa, mc, etc...) charges the business a fee per transaction.

Credit cards charge the business a fee for each swipe, basically. So it cuts into their bottom line.

IMO, the cut is generally minimal compared to the increased business.

The credit card company charges the business a fee on every transaction. If you force your customers to pay in cash you get all of the money and don't have to pay the fee. It's up to you as a business owner to decide whether or not the extra per-transaction money is more or less than the business you lose from customers being annoyed that you don't take credit cards.

Many card companies charge the company for any payments made on their cards. American Express is a prime example and the reason so many places don't take it is they charge quite high fees for processing transactions on their cards.

Wow, I thought that any fees would be negligible considering the increase of business it could be responsible for. That seems like an extremely daft reason to not accept them. Maybe to pay for a $3.00 drink it sucks, but an average bill of say $30+ for a couple of diners it seems acceptable.

Now I get why most people decline Amex. It's like a regular phrase I hear and see when shopping.

Not a business owner, but I can speak on it.

Credit cards have fees that can mean on low-margin or small enough value items that you're actually losing money by doing business. Wal-Mart doesn't care because they make it back and gain mindshare by you going to them instead of to the Joe's Market when you just want a 12-pack of soda and nothing else, but Joe's gets hurt more, because they don't make as much.

The secondary point is also that it's easier to fudge the tax numbers. A lot of wait-staff actually prefer receiving cash, because then they can avoid claiming as much on their taxes.

Also, if you run an awesome enough business, people won't care that you don't take cards. Fast Eddie's in Alton, IL is a testament to that. It's a bar that has some of the best cheap bar food around, and it's all cash-only. It's also always so busy that it's practically standing room only.

 PrehistoricUFO wrote:
Wow, I thought that any fees would be negligible considering the increase of business it could be responsible for. That seems like an extremely daft reason to not accept them. Maybe to pay for a $3.00 drink it sucks, but an average bill of say $30+ for a couple of diners it seems acceptable.

For the most part, it is pretty daft. You will see some businesses who charge you a convenience fee or do not accept credit cards for payments under $5-10 though. That is far more common nowadays (at least in my experience) then folks who just don't take credit cards.

 PrehistoricUFO wrote:
Wow, I thought that any fees would be negligible considering the increase of business it could be responsible for. That seems like an extremely daft reason to not accept them. Maybe to pay for a $3.00 drink it sucks, but an average bill of say $30+ for a couple of diners it seems acceptable.

That's why virtually all businesses (other than random food trucks or whatever that don't have an internet connection available) take credit cards. However, it's entirely possible to have a situation where the customers will keep buying even if they have to pay in cash, in which case why would you want to give up the extra profit?

 Peregrine wrote:

 PrehistoricUFO wrote:
Wow, I thought that any fees would be negligible considering the increase of business it could be responsible for. That seems like an extremely daft reason to not accept them. Maybe to pay for a $3.00 drink it sucks, but an average bill of say $30+ for a couple of diners it seems acceptable.

That's why virtually all businesses (other than random food trucks or whatever that don't have an internet connection available) take credit cards. However, it's entirely possible to have a situation where the customers will keep buying even if they have to pay in cash, in which case why would you want to give up the extra profit?

Yeah of course, if the business is so banging that you're in a position to ask for cash only then sure. This particular circumstance just confused me because the business was failing yet still declined a form of payment. It's clear now, though.

What manner of business was it?

It was a restaurant. That's why I mentioned it's understandable if people are using a CC to pay for a $3.00 beer or whatever (likely less than the CC company's fees). Yet as someone mentioned, they could have just put a policy "No credit cards for purchases under $15.00", or whatever.

 Peregrine wrote:
The credit card company charges the business a fee on every transaction. If you force your customers to pay in cash you get all of the money and don't have to pay the fee. It's up to you as a business owner to decide whether or not the extra per-transaction money is more or less than the business you lose from customers being annoyed that you don't take credit cards.

Many of the gun stores that I frequent tack the percentage charge onto your total bill, so you are in fact paying their credit charge, easiest way to mitigate losing money over using CC.


Automatically Appended Next Post:

 PrehistoricUFO wrote:
It was a restaurant. That's why I mentioned it's understandable if people are using a CC to pay for a $3.00 beer or whatever (likely less than the CC company's fees). Yet as someone mentioned, they could have just put a policy "No credit cards for purchases under $15.00", or whatever.

IIRC, here in the states it is a 2% of the total bill that the CC company charges, so whatever 2% of 3 dollars is, is what the restaurant would eat. Or something along those lines, I don't think it's a "you pay X amount per swipe, regardless of purchase amount"

In the UK you generally pay about 30-50 pence minimum fee per transaction, or 2-4% (depending on card type) overall if that would be more than 30-50 pence. On things with tight margins like computer hardware it can really scrape out your bottom line and paying with a debit card (which incurs little or no fees, or a fixed fee of a few pence) is much more desirable for them. As others have mentioned, there is additional overhead dealing with credit cards for people who instigate charge backs against you, the high cost of dealing with credit card fraud (people using cloned or fake cards), etc.

In Wisconsin it's a percentage of the bill for credit, but a flat rate for debit, So they would for sure rather have you pay with debit.

I suspect that there is often both a percentage taken by the CC company, as well as a minimum fee (hence why some places don't allow CC transaction below a certain amount). Debit cards may be different, as the Specs chain of stores gives a 5% discount when you pay with a debit card (at least, here in Texas they do).

Its generally around $0.25 and 2.4~3% per transaction, with a monthly fee of $30 for Visa/MC/Discover. AMEX is about the same, but has a 'You didn't have this much in sales? here is a significant monthly fee'.

 Ensis Ferrae wrote:

 Peregrine wrote:
The credit card company charges the business a fee on every transaction. If you force your customers to pay in cash you get all of the money and don't have to pay the fee. It's up to you as a business owner to decide whether or not the extra per-transaction money is more or less than the business you lose from customers being annoyed that you don't take credit cards.

Many of the gun stores that I frequent tack the percentage charge onto your total bill, so you are in fact paying their credit charge, easiest way to mitigate losing money over using CC.


Automatically Appended Next Post:

 PrehistoricUFO wrote:
It was a restaurant. That's why I mentioned it's understandable if people are using a CC to pay for a $3.00 beer or whatever (likely less than the CC company's fees). Yet as someone mentioned, they could have just put a policy "No credit cards for purchases under $15.00", or whatever.

IIRC, here in the states it is a 2% of the total bill that the CC company charges, so whatever 2% of 3 dollars is, is what the restaurant would eat. Or something along those lines, I don't think it's a "you pay X amount per swipe, regardless of purchase amount"

Yeah I've heard of the percentage/set fees for cards. If my business had a percentage, I think it would be more convenient for smaller purchases but then it's a huge loss on big purchases. Yet a set fee may lead to losses with smaller purchases. In that regard, I suppose this philosophy is only a problem for restaurants or businesses that have low-cost items. This is all very interesting to me, I'm so ignorant with these sorts of things.

A lot of businesses ban credit cards because they're not very good at figuring out the costs of their business.

They see a credit card company wants to take 3% of the bill, and they see that right there as real money, and they don't want to just give it up. But in banning the credit card, they incur all kinds of other costs. They miss out on all the business that gets annoyed that they can't pay by credit card, and becomes that much less likely to return (a surprisingly large number of people getting really sucked in to those rewards programs). And it means they end up with a lot more cash on premises, and that means a lot more cash handling, a lot more scope for cash to go missing, a lot more time spent reconciling cash taking to the till, and more risk as that cash has to get transported to the bank.

And that last point is a big one - when major retailers have looked at the costs of different kinds of payment, the conclusion has come down so strongly in favour of credit and debt payment and against cash that businesses stop wanting payment in cash. This gets complicated because its illegal to decline cash, of course, but there's plenty of ways around that (encouraging over the phone payment, just wearing the credit card charge etc)

That's why most big box retailers off their own credit cards to their customers.

God save us if GW ever officer'ed a "GW credit card account"!

A failing small business may also be denied service by credit card processors if the business's credit and financials are bad. The payment processing company has a credit and risk department which evaluates whether the business is a good risk or is likely to rack up chargebacks and other costs which the payment processing company could also wind up on the hook for. If the business is shaky they might insist on the owner signing a personal guaranty to make himself jointly and severally liable if the business can't pay up. Such a business owner may not want to put himself on the hook if he's not confident in the long term profitability of the business. He'd rather keep the damage limited to his LLC if it goes bankrupt, and just take cash if the acquirers aren't eager to do business with him.

 Cyporiean wrote:
Its generally around $0.25 and 2.4~3% per transaction, with a monthly fee of $30 for Visa/MC/Discover. AMEX is about the same, but has a 'You didn't have this much in sales? here is a significant monthly fee'.

Rates vary quite widely. Large businesses with a high volume of transactions are able to negotiate lower rates per-transaction than small businesses. Wal-Mart and McDonalds and Starbucks of course pay much lower rates than those quoted above, but their payment processors and the payment brands (Visa, MC, Amex) still make lots of money from them. Small businesses may have a monthly minimum as you mentioned. The payment brands levy an absolute ton of little tiny microcharges which the payment processor than has to pass on to the merchant as well.

 whembly wrote:
That's why most big box retailers off their own credit cards to their customers.

God save us if GW ever officer'ed a "GW credit card account"!

Yep. It also helps with information collection on customers.

Not sure how it goes overseas, but around these parts there are often minimum transaction amounts required before a bank will give you credit card processing facilities. So it's just not a viable option for a lot of small businesses.

Although it's getting easier these days. Hell, you can even get a little swipey gadget from Paypal for processing credit card payments through a smart phone now...

The fee for the transaction is often pushed onto the customer themselve.
My work charges 40 cents for transaction. It is fairly standard here to do that

 hotsauceman1 wrote:
The fee for the transaction is often pushed onto the customer themselve.
My work charges 40 cents for transaction. It is fairly standard here to do that

This was not generally permissible under cardholder agreements until recently, and a few states still prohibit this; as well as AMEX still prohibiting the practice.

It's also a great way of discouraging customers from doing business with you.

It's like charging customers a surcharge for the extra power used by your drinks fridge because they opened the door to get a drink out...

Your business expenses are your own. Work them into your prices, don't tack them on top and make the customer think that they're being charged extra for the privelige of buying from you.

 insaniak wrote:
It's also a great way of discouraging customers from doing business with you.

Not really, like I said, all the gun stores that I frequent do add the CC fee onto your purchase price. It's not really advertised, and most people just assume it's part of the state/county sales taxes.

 whembly wrote:
The charges can be contested.

Also, the card carrier (visa, mc, etc...) charges the business a fee per transaction.

This.
It means they've been burned, they're cheap greedy turkeys, they're margins are so thin it doesn't work (in which case they won't last anyway), or they're not competent.

 Ensis Ferrae wrote:

 insaniak wrote:
It's also a great way of discouraging customers from doing business with you.

Not really, like I said, all the gun stores that I frequent do add the CC fee onto your purchase price. It's not really advertised, and most people just assume it's part of the state/county sales taxes.

Well yeah, I suppose people might not notice it as much in the US, with your crazy 'the price on the tag isn't actually what you pay' retail system... But down here, credit card surcharges tend to not be popular with the punters.

Credit card transactions average around 3% per transaction for the establishment, more for American Express, or a "rewards" program card. You didn't really think the rewards were free somehow right?


American Express charges in the 5% range per transaction, and Rewards Cards can be around 5-6% as well. So in placed like Restaurants where the profit margin is only around 3-5% that really stings and takes away from being able to hire and pay employees much less keep the business open.


Automatically Appended Next Post:
Also, a lot of credit card processing, you as the business do not get the money to your account for several days.

The money goes out of the customers account right away but then the banks and processors collect the interest float on it for a few days before turning it over. It makes book keeping a headache for small business.