The Chocolate Life

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I am having the following dilemna:  My business is about transparency, and I am struggling with the whole issue around accepting credit cards.

 

Simply put, credit cards are an expensive rip off.  Both the consumer and merchant pay to use them.  Small merchants pay close to 5% when all is said and done (1.9% to Visa, plus merchant fees, plus their internet connection fees, plus equipment fees, plus bank fees, plus the cost of their time to reconcile everything monthly).

 

The average consumer has no clue how much businesses are charged, because most merchant agreements have up until recently forbid the merchant from charging service fees at the time of the sale.  As a result, most businesses have simply increased their prices across the board, building the fees into the overall cost of their product.

 

But what about the cash buyer??  50% of my customers pay in cash.  Why should THEY subsidize the person who buys $200 worth of bars on his Master Card?  Mr. $200 purchaser doesn't want to pay ATM fees, but they don't realize that the ATM fee is just $2.50, whereas the cost of that order to them for using their credit card is $10. The merchant certainly isn't going to suck it up.

 

What's worse is that as a consumer I don't see many merchants giving incentive to pay cash.  Instead they are grabbing the extra $$ from the cash customer and hanging on to it.  The cash customer is subsidizing the credit card buyer, and to me that's not fair.

 

The question I have is, AS A CONSUMER, (not a business owner) which option would you feel better with?

A) The price be increased overall by 5%, and cash purchasers offered a 5% discount.

B) The price be what it is and know what you are being charged for the "convenience" of using your card.

 

Personally, to me A is deceptive, but that's just how I am.

 

There is no right or wrong answer here.  I am just soliciting feedback.

 

Thanks

Brad.

 

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The underground economy in Europe is not about credit cards, it is about TAXATION! LOL!

B

I have run retail chocolate shops for half of my 48 years. For those of us who went to public schools that is 24 years.

Accepting credit cards is kind of like adapting to the internal combustion engine & automobiles about 90 years ago. At that time there were still horses in use, but you really had to be backwards looking to believe that the trend to automobiles was not going to overwhelm everything and the horse and buggy would really become a thing of the past. Cash is the horse, and credit/debit cards are the automobile. It is what it is. In five years we will be accepting 90% of our sales that way. In ten years we will be pushing 99% credit/debit to 1% cash.

In 20 years, youngsters will not even grasp that we used to exchange paper money! It will not exist.

Raise the price and everyone pays it, just stop agonizing over the inevitable and focus on doing something else in your business better, and that 3 or 5% won't bother you OR the customer as much.

I live in Germany and everyone uses debit cards. There are plenty of business with "cash only" signs. I used to use the credit card very often but these days, I really have gotten use to cash and debit cards. I really find it easier to keep track of what I'm spending. If it is impacting your business, why not try and implement a scheme with just debit cards and cash and see if it pays off? If not, you can always revert to the way it was.

The real question is whats your split? We see only 10% cash here the rest is all CC, so is your demographic a huge cash basis or real even split? CA may be different than the US I dunno.  

Making up lots of rules confuses customers. I educate card goers on fees from time to time but otherwise they just want their product and no one cares.

If you are also paying 5% for your fees you really need to find another provider. You have more power than you realize if you stick with traditional merchant services. You're a hard core arguer so you should really battle them. Or go with a one size fits all like Square, Paypal, Fee Fighters, etc.

Lastly I wouldn't raise your rates unless you felt that you weren't doing 5% more business by accepting the cards. I educate a lot of people at farmers markets. If you don't accept cards you have nothing to lose. If you accept cards and you do 20% more business, is it worth paying them 5% for that? They don't call it Cost Of Doing Business for nothing. ;-) Again though you should be able to get a much much lower rate.

Andy;

Thanks for the feedback.

 

Hard core arguer eh?  I resemble that comment!  LOL

 

The credit card fees are low (about 1.9%).  However there are lots of other "fees" involved when it comes to accepting credit cards, and all of them add up to almost 5%.  My system is 100% web-based, so I pay a merchant fee (to Visa) for each transaction, then a gateway fee, then a monthly service fee, plus the cost of connecting to the Internet.  If it were just paying Visa I wouldn't complain.

 

Last year I paid $20,000 in "fees" to accept credit cards and subsidize people's desire to collect airmiles. At $20 per average transaction, over 1,000 people would have to walk out out my doors without purchasing anything before I break even with my losses in fees.  That's a lot of people.

 

The challenge I'm faced with is that with multiple stores, consistency in the eyes of the consumer is very important.  Accepting cards at one and not others pisses people off.  One of my stores is in a marquee financial building in Calgary, and EVERYONE uses their corporate cards to buy things.  It's crazy!!! You wouldn't believe how many people buy their $2 morning Starbucks tea with their visa!!  That's just ridiculous!

 

My manager at that store is getting pushback, and that is the reason I'm exploring the option.

 

Now having said all of that, I have given my staff the green light to begin accepting cards again, and have designed the cash register so that it just adds 5% to the total when the person chooses to pay with plastic.  You know what?  Nobody even looks at the invoice or cares about the increase! (at least not yet).  Sales have gone up at the corporate location significantly (we put a 6 foot high sign up saying we now accept visa and mastercard), and at our other stores, revenue has remained flat, but the split has become about 50/50 between cards and cash.

 

My conclusion:  People are strange......

 

Brad

Slightly off topic.  But you said that customers use credit cards, even though they are being charged an extra 5%, without noticing.  I have a small shop and normally we avoid stocking items that the big supermarkets stock... simply because they will normally be cheaper.

However some products we simply have to have, and even though we can be 20% more expensive, people will still buy them... not everyone, but enough. And I would say that over half the customers never look at the price, at least not in detail.

My conclusion:  People are strange......

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