Most local Davis merchants generally accept credit cards, or Visa/MasterCard network debit cards for payment. Some of these merchants have set various conditions on transactions involving these cards, which is fairly common:
- Charging a fee, which is allowed currently. The old Civil Code prohibiting credit card surcharges in California was ruled unconstitutional in March 2015.
2013 update (most of the discussion on this page is now obsolete): Due to a recent lawsuit in Summer of 2012 between merchants and Visa and Mastercard, charging a fee is now legal as of January 27, 2013. Visa, Mastercard, etc. have agreed to allow merchants to charge customers fees for using a credit card. The fee will be limited to the amount of money that the merchant pays to the credit card company. Retailers who add the surcharge most post a fee disclosure to the consumer at the store point of entry(or websites), point of sale, and on the receipt.
Charging a higher price for a credit card purchase vs. cash will also be allowed. Giving a discount price for using cash is currently allowed in all states including California and was allowed even before this lawsuit.
Though American Express and Discover were not part of the lawsuit, neither of these companies have policies prohibiting merchants from charging extra to credit card users. Instead, their merchant agreements state that a retailer can not charge extra to use these cards if they don't charge for using competitors' cards.
So now that Visa and MasterCard have opened the floodgates to credit card surcharges, merchants are free to tack on the surcharge for Amex and Discover purchases.
The cost of credit card use is already factored into the final price of the products and services that we buy.
This credit card surcharge essentially results in a double-charge for those opting to use credit credit cards. If a merchant charges a credit card surcharge it is now purely the greed of the merchant trying to nickel and dime their customers. The customer is the reason why a business stays in business. When you treat a customer as something to be exploited, it shows that all you care about it money and there is no genuine customer service.
- Minimum purchase limit, which was prohibited until the Dodd-Frank Act went into effect in September 2010. Enforcing a minimum is now legally allowed.
Charging fees are occasionally confused with an authorization hold, which is temporary. They show up, especially on your internet statement, but if you look carefully, you'll notice that they don't actually apply against your available balance. They also disappear about two days or so later (sometimes a few days). They are how restaurants (and other service places) can run your card and then add a tip later without having to ask for your card again. It's a standard credit card thing (or debit card used as a credit card). This is standard and it has nothing to do with a scam or anything underhanded.
Charging a Fee
Surcharges are allowed in California as of a March 2015 Federal Court ruling stating that Civil Code Sec. 1748.1 which prohibited credit card surcharges is unconstitutional. Surcharges were prohibited in the state of California (but not in 40 other states) previously. The old law provided that no retailer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by other means. The retailer may, however, offer discounts for the purpose of encouraging payment by cash. The obsolete civil code is as follows:
Civil Code Sec. 1748.1: (a)No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means. A retailer may, however, offer discounts for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.
(b) Any retailer who willfully violates this section by imposing a surcharge on a cardholder who elects to use a credit card and who fails to pay that amount to the cardholder within 30 days of a written demand by the cardholder to the retailer by certified mail, shall be liable to the cardholder for three times the amount at which actual damages are assessed. The cardholder shall also be entitled to recover reasonable attorney's fees and costs incurred in the action.
Now that merchants will be allowed to charge fees as of March 2015, the fees are as follow: (this list is probably out of date)
- Aggie Liquor — $0.50 charge on credit card purchases under $8
- Delta of Venus — $0.40 charge on all credit card and ATM/Debit purchases
- Fluffy Donuts — $0.69 charge on all credit card purchases
- Hometown Chinese Food — $0.25 on all ATM/Debit transactions
- The Hotdogger — a 7.75% charge (sales tax) on all credit card purchases
- Quick Shop Market — $0.39 on all credit card and ATM/debit transactions
- Shah's Halal Food — $0.24 charge on credit card purchases
- Village Bakery — $0.50 charge on credit card purchases under $10
The way that businesses can defend themselves if they are ever questioned by credit card companies is very straight forward. Businesses can claim that the prices posted are prices with a cash discount. Cash discounts are perfectly legal.
Most businesses are up front and post actual prices. Instead of saying that they charge a 50 cent fee, a business should simply raise all of their prices by 50 cents. 50 cents could be the difference between losing a customer for life. However, if 50 cents is going to break a person maybe they should consider not spending money on food and dealing with their money issues first.
Note: You can report illegal surcharges to Visa here. However, it is no longer illegal in California.
Minimum Purchase Limit
Tons of places charge you "processing charges" or set minimum purchase limits on credit card purchases. With the recent passage of the Dodd-Frank Act, minimum purchase limits are now allowed. This is all thanks to the members of Congress who pushed for this amendment that supposedly was created to benefit consumers.
Credit card company policies (as of September 1, 2010):
- Visa has just posted to its website "U.S. retailers may require a minimum purchase amount on credit card transactions. The minimum purchase amount must not exceed $10 and does not apply to transactions made with a debit card." http://usa.visa.com/about_visa/ask_visa/index.html
- A representative with MasterCard said that they will be modifying their rule similarly in the near future to match Visa's rule.
- A telephone representative with American Express confirmed that minimum purchase amounts are now allowed. American Express has no explicit policy regarding charges, but they have a policy against "discrimination" against their card, so if a merchant has no service charge for VISA and Mastercard, they cannot have a charge for American Express.
- Discover Card's policy is similar to Visa's policy.
Typically, the merchants who do this are smaller, as the charges from the credit card companies impact them more than they impact a larger-volume business. However, since some potential customers may wish to decide whether to patronize a business based on their minimum purchase limits for credit cards — or need to know to bring enough cash with them for small purchases — all known minimums as of 9/1/2010 are listed.
- Merchant card abuses information
- A Better Place to Bead — $4
- Agave — $15
- Bizarro World — $10
- CoHo/ASS — $1
- Davis Psychic — $20
- Ding How — $10
- Drom's Comics and Cards — $10
- G Street Pub — $15
- Illusions — $15
- Jusco — $15
- KetMoRee — $10
- Kim's Mart — $10
- Little Prague — $10
- Orange Hut — $10
- Posh Bagel — $3
- Redrum Burger — $10 (or $0.99 charge) can someone check if the charge is legal? (see above)
- Red 88 Noodle Bar — $20
- SPCA Thrift Store —$5
- Sunrise Restaurant — $5
- Taqueria Davis — $5
- Village Bakery — $10
- Zia's Delicatessen — Varies, sometimes not enforced
|This article is in need of Comment IntegrationPlease try to combine and move comments into the main article text.|
Food for thought - Would you rather they didn't break Visa's rules, and instead didn't accept Visa? It's simply not worth the retailer to pay Visa $.50 a purchase of a $1 bagel. I don't blame the retailers, credit companies are using their leverage to charge more and screw them over. Especially rewards cards. People don't realize it's not AmEx that's paying for your airline miles, it's the downtown shop you used the card at that is paying more. -PeterAnselmo
- If they are paying $.50 per $1 they seriously need to look into a new credit card processor. That'd be like 45 cents per transaction and a 5% processing fee. I've never dealt with credit card processing in a place that does a lot of small transactions, but I know there are agreements better suited to them. If merchant fees are a problem, then they could just raise the price (enough to cover the processing fee) and offer a discount for cash. -BradBenedict
- Yes, Peter, I'd rather that they not accept credit cards if they can't afford to do so, or that the credit card companies change their contract language. Better that than break the rules. Food for thought to you: in Japan, just about no one takes credit cards. It works that way too. —Marnen Laibow-Koser
Another option is to carry a little cash in your pocket. I feel that forcing a merchant to run a cc transaction on a $3.00 purchase is bordering on rude. The merchants really don't have a choice about whether or not to take plastic. Most of them must to stay in business. Rather than get all legalistic and threatening, the mannerly thing to do is to hit the ATM periodically and use the real thing for purchases under $10. The merchants will appreciate it, and you'll be sticking it to the big bank plastic man. -JimStewart
- I buy one-dollar sweet teas from my local McDonalds on plastic all the time. I doubt they care, being McDonalds, but I have often wished the cashier *would* take issue. My response would be, if your one-dollar sweet tea actually cost a buck, I would pay in cash every time. The fact that it actually costs 1.08 USD is offensive and annoying. In a lot of places in Europe, Germany in particular, vendors won't do business in pennies. Anything smaller than a 0.20 EUR peice gets rounded off, whether its to your loss or theirs, though this rounding is rarely required as prices are almost always set at an integer amount. And guess what? If the price on the menu says 3 EUR, you actually *pay* 3 EUR. If cash worked like that in the United States, I'd be a lot more happy to deal with it. —ianf
- I am creating a central clearinghouse for this sort of information. Right now it's at http://minimumpurchase.livejournal.com , but I'm creating a more sophisticated site. Come on over and name names! :) —Marnen Laibow-Koser
- note: not updated since 2010
Just curious, Marnen — why don't you just carry $10 with you? -DonShor
- Who said I don't? In fact, I often do. But by the terms of MasterCard's and Visa's rules, I shouldn't be expected to do so. —Marnen Laibow-Koser
What is your goal in "outing" merchants who do this? -DS
- They are breaking the agreements they signed with the credit card companies, and losing customer goodwill in the process. In other words, they are dishonest and provide poor customer service in these respects, and they should be identified as such and reported. -MLK
I don't charge a minimum, but I certainly sympathize with the ones who do. It must be very frustrating losing 5 - 10% on a $5 sale, when that probably eliminates the net profit on that sale. Merchants pay .25 - .50 per transaction, plus a 1 - 5% "discount rate". Small businesses have zero bargaining power when it comes to these fees and rates, as there are only a few card processing companies to work with and they all use the same rate structure. -DS
I certainly sympathize with the problem of losing money on small transactions — and in fact, I try not to charge small amounts for that very reason — but the rules are the rules, and must be enforced. If this is too onerous for the merchants, then they can certainly choose not to take credit cards — I know of many businesses that have done just that. Heck, if enough businesses do do that, market forces may come into play and some acquirer or card company may figure out how to make their terms more favorable to merchants. But the current practice of imposing restrictions in violation of signed contracts is completely inexcusable. -MLK
- Looks like we've got ourselves a saint here! Whatever would we do without these kind souls to save us from these evil peddlers? —AmandaGarrison
- I certainly sympathize with the problem of losing money on small transactions — and in fact, I try not to charge small amounts for that very reason — but the rules are the rules, and must be enforced. If this is too onerous for the merchants, then they can certainly choose not to take credit cards — I know of many businesses that have done just that. Heck, if enough businesses do do that, market forces may come into play and some acquirer or card company may figure out how to make their terms more favorable to merchants. But the current practice of imposing restrictions in violation of signed contracts is completely inexcusable. -MLK
The rate we pay is based on our average ticket and our monthly sales totals. Sales by credit card have increased to the point that they are the overwhelming majority of a typical retailer's transactions. Credit card companies are not going to change their contracts. Although the cost to them has gone down due to electronic efficiencies, the rates charged to retailers have continued to go up. Why? Because they can get away with it. Senate hearings have investigated collusion among the major credit card providers, but that is very hard to prove and they know that every retailer feels compelled to accept plastic. Many of the items sold at the stores you have listed are relatively low profit margin. If you continue to use credit cards for low-dollar purchases, the merchants will have to raise the prices for everyone to cover the lost profits caused by your usage. -DS
- I'm OK with that, since I think it will only be a question of a few cents. It's a small price to pay for actually enforcing the existing rules. —Marnen Laibow-Koser
- So just do everyone a favor and carry some cash.—DonShor
- but similarly to the fact that it the small business has no leverage in bargaining, the small business can also get away with a minimum because it isnt worth visa's time to go after them. —MattHh
- Plain and simple - the rules are the rules. Charging a surcharge because a person doesn't purchase a minimum of $10 is a violation of the rules set forth to all merchants by Visa and MasterCard. These businesses should lose their priviledge to accept credit cards altogether. I am personally a merchant. The average purchase at my restaurant is $9.02. No, I don't charge my customers a surcharge because "That is wrong". —Roy-Pope
- The possible downside to raising it with the manager is that businesses who do away with fees often just increase prices across the board. Cargo Coffee, for example, just raised their prices on all coffee by 30 cents or so when they got rid of the credit fee. —TomGarberson
- it is worth noting that when business accept credit cards they sign a merchant agreement. They can't give you a fee, but they sure can provide a cash incentive! Daubert
- Minimum charges are technically a violation (rarely enforced), but a adding fee is not. The merchant agreement vaugely states you cannot add an advertised "surcharge", but convenience fees are nothing new. Even the Yolo County website charges you 2.5% to use a credit card. Anybody that uses Ticketmaster or a similar website is also aware of added "fees". As long as merchants add it (and report it) as a separate line item on their receipts, it's perfectly legit. Most small businesses that do add a surcharge bypass this step, however, because the credit card processors rarely enforce these formalities. The card companies don't care anyhow, because they get a % of the credit card sales... so they actually make money on the fees. —KevinWan
- Most of this page is ancient, and it'll disappear into the ether again shortly, but re-reading it just now made me see red. I've been around people who pay with plastic for everything and it makes no sense to me. Unless you have a boner for credit card companies you're just throwing some $.50 away into outer space. With the ubiquity of ATMs there's no reason not to have cash on you. I feel like there's no easier way to rob small businesses then paying with a credit card for your minor bullshit transactions. The idea that someone would actively try to 'out' businesses for fighting against this trend makes me want to punch myself in the eye. —TravisGrathwell
The following thread was moved from a different page in response to this comment about fees 2010-03-17 01:15:12 Merchants have to pay quite a few fees on every credit card transaction. You don't see this, because the fees are built into the prices you pay. (In fact, you pay higher prices if you pay cash, because you are subsidizing all of the "rewards" that credit card companies give to card holders." Merchants also can't charge more if you use a credit card. And they can't avoid taking them because most people insist on using one. This may have been what she was referring to. Restaurants like that are a low margin business, and using that card might have eliminated a significant share of their profits. Not their fault or yours, but it might be why they got upset. —IDoNotExist
- "And they can't avoid taking them because most people insist on using one." <- BS. If they are so concerned about the processing fee/monthly/quarterly charges, they can simply go cash only. There are plenty of successful businesses in Davis, and any other city, that are cash-only (Sam's, Mishka's, Crepeville, Jayme's Fatface, etc). Giving sass to a customer after charging them an extra fee for using a credit card (that they chose to accept) is beyond ridiculous. I enjoy their food, but I've also noticed their reluctant attitude when I pay with credit card at their old location. If they make more money by accepting credit cards than if they did not, they should happily take the card and stop their passive aggressive behavior towards their own customers. If they do NOT make more money by accepting credit cards, stop accepting credit cards. If they continue with their attitude, accepting credit cards WILL hurt their business not because of the fees, but because it affects their treatment of customers. —KellyM
- The problem is that many people won't shop at a place if it is cash only. Many customers will also spend more if they use credit cards instead of cash because it isn't psychologically tied to physical money. The business risks losing business if they don't take credit cards, and has to pay interchange fees and other fees if they do take them. I agree that they shouldn't be treating customers who use them differently, or giving them a bad attitude. —IDoNotExist
- Enough people use cash to keep the businesses I mentioned in business. You make it sound like merchants are saddled with being forced to accept credit cards, referring to how much it costs a merchant to accept them and how many people use them. But you say that people spend more with them AND the fees are baked into the price of the good anyway. Which is it? Net win or loss for the merchant? "The business risks losing business if they don't take credit cards, and has to pay interchange fees and other fees if they do take them." If it creates a greater net profit for the merchant, they should be happy to pay the fees for the service the credit cards processing companies provide and the fact that they pay fees becomes moot. "Grrr, I hate paying for this thing that generates more revenue than expenses!" —KellyM
- The merchant winds up paying between 2% and 5% of what they charge you to the credit card processor. Typically the charge is 30-50 cents + 1-2% of the value of the transaction. They pass this on to you if the market supports raising their prices by that much, otherwise they eat the cost. You wind up paying 2%-5% more as a result. Some of this money goes to paying for all of those rewards programs that credit card companies use to attract customers. So you are paying for it one way or another. In some cases, the merchant can't pass the entire cost onto you, so they eat the cost. There are advantages to taking credit cards for the merchant (potential increase in business). There are also disadvantages for *not* taking them (giving up business), and disadvantages for taking them (higher prices, interchange fees, subsidization of credit card rewards programs, etc.) No matter what the merchant does, they lose out here. So does the consumer, because of higher prices. The winner is the credit card company. —IDoNotExist
- I know how it works, I'm just saying that there are choices. If the merchant and consumer both lose for accepting credit cards, then the merchant can choose NOT to accept them. This hypothetical risk in losing business is moot if they still make more net profit than if they did not accept them. Not accepting credit cards will lower their prices, thus stand to gain more business to offset the business they might lose by people who don't carry 10 dollars on them. On the other hand, if they in fact do make more net profit by accepting credit cards, then the Merchant and the credit card companies win and the consumers lose. In either case, the merchant is not the victim. —KellyM
- So I have to chime in and offer my 2 cents here. As a local small business owner, I feel I can speak for most businesses in the area. Credit card companies and their processing companies charge us up the !@#$. A percentage of every credit card/debit card transaction, a flat fee per transaction (cheaper on debit, but I don't see the benefit unless the transaction is over $100), in addition to monthly statement fee, terminal lease and key pad lease (unless you buy the terminal outright.. usually $450+ $100 for the key pad for debit cards). Also, if your card doesn't swipe, and I have to key it in, I get charged double fees and if its an international card, I get charged tripple. I see a regular LOSS of nearly $5000/yr, and I'm a small business. In the almost 4 years I've been in business that's almost $20 grand... I would really love to have that money back. But I have to look at it like this... how much business would I lose if I didn't take CC/debit? You have to spend money to make money. Try to be understanding though, that $6 tube you want to buy from me, after wholesale cost, shipping, CC fees etc... I probably made $1.50 profit. An international card would drop that down to probably less than $1. Same goes for them... not a super high profit margin in the food industry. Pay cash... makes me happier. —Aaron.Curtin
2010-03-18 11:21:29 I gladly support small businesses who have a surcharge on credit cards. A few weeks ago, I saw a guy trying to buy a .75 can of soda with a credit card, and the clerk just gave it to him for free because he said he "gets charged almost that much just to swipe it." Obviously, this means that the processing fees are ridiculous. Stupid rules are made to be broken. But out of respect for the places that don't charge me for using CC, I try to avoid using plastic on purchases less than ten dollars even though I hate carrying around change.
It's well into the 2000's; why haven't we switched over to a totally account-based monetary system as in the cyberpunk novels of yore? I feel like some kind of ancient Roman thug when I feel the dead weight of coinage jangling in my pockets. —ScottMeehleib
How are processing fees ridiculous? Should the processing company lose money on the sale instead? He probably didn't mean that he gets charged more than .75 on the .75 charge, but that it would wipe out his profits on the .75 (which was probably .20 at most). http://truecostofcredit.com - .37 charge for a 1.50 pack of gum. As Aaron said above, takes money to make money. Some customers may buy small things that wipe out your profit, but you may gain enough business from other customers to greatly offset those small losses. It all depends on the business' service and product. The credit card processing just adds convenience to the experience. —KellyM
It probably costs the bank far less than one cent per transaction to process it. It's just adding a number to a database somewhere. The whole process could actually be done without the banks being involved at all. Merchants pay these fees because they have no choice. —IDoNotExist
- Running a large number of servers (think of how many credit card transactions there are each second), transmitting huge amounts of data, and trying to keep everything secure probably costs more than one cent per transfer, even with the economies of scale. —hankim
- It probably costs the bank far less than one cent per transaction to process it. It's just adding a number to a database somewhere. The whole process could actually be done without the banks being involved at all. Merchants pay these fees because they have no choice. —IDoNotExist
What would the processing company be losing money on? Sure, it would cut into their grossly undeserved profits, but there is really no excuse for the fees being as high as they are. Technology costs have fallen a lot over the last ten years, and yet the processing fees have almost doubled. These companies that set the fees are being investigated all over the world on suspicion of price fixing and collusion. Some countries like Australia have forced the interchange fees to be reduced by about half, and have disallowed the policy in which credit card companies tell businesses they can't have a surcharge on CC purchases. http://en.wikipedia.org/wiki/Interchange_fees The site you linked to doesn't even seem to be sympathetic to credit card companies. I typed in my credit card number and it said a merchant would get charged 42 cents on a $1.50 pack of gum; that's 27.8%! And then below that it said, "the average convenience store paid $52,064 last year in credit card processing fees - 2.25 times the average earnings of such a store." —SM
As far as Aaron, it sounds like he works in a bike store, so his situation might force him to take CC whether he likes it or not. Assuming that he actually sells bikes, and not just tubes, most customers are probably not going to be willing to walk in with wads of hundreds. I think that's probably the main reason he said that, even though he is clearly not a big fan of the gouging either. For cheap restaurants and convenience stores, it's a totally different story. Places like Quickly and Old Tea House are cash-only because they actually like profiting on the drinks they sell. —SM
Exactly! Yes I work in a bike shop, and yes I sell bikes, and no, I don't expect people to carry wads of hundreds in their pocket. Thats why I'm forced to take credit cards. If I told you sorry, I only take cash and your bill is $800... you'd look at me like I was crazy. Who walks around with that kind of cash anymore. Being in my industry, we rely on cc for a majority of our transactions... I don't have a choice. Psychologically, is way easier to hand over a card than cash anyhow. Thats why 20% or more of the american population is in serious debt. We should all go back to the barter and trade system and do away with cc's in general. —Aaron.Curtin
- Over 80% of my transactions are by credit card. —DonShor
- Exactly! Yes I work in a bike shop, and yes I sell bikes, and no, I don't expect people to carry wads of hundreds in their pocket. Thats why I'm forced to take credit cards. If I told you sorry, I only take cash and your bill is $800... you'd look at me like I was crazy. Who walks around with that kind of cash anymore. Being in my industry, we rely on cc for a majority of our transactions... I don't have a choice. Psychologically, is way easier to hand over a card than cash anyhow. Thats why 20% or more of the american population is in serious debt. We should all go back to the barter and trade system and do away with cc's in general. —Aaron.Curtin
- As far as Aaron, it sounds like he works in a bike store, so his situation might force him to take CC whether he likes it or not. Assuming that he actually sells bikes, and not just tubes, most customers are probably not going to be willing to walk in with wads of hundreds. I think that's probably the main reason he said that, even though he is clearly not a big fan of the gouging either. For cheap restaurants and convenience stores, it's a totally different story. Places like Quickly and Old Tea House are cash-only because they actually like profiting on the drinks they sell. —SM
2010-03-19 11:58:42 The main argument here seems to be that credit card companies are overpaid for their services. If that is true, why would merchants continue to accept credit cards? They certainly would not if they lost money with each purchase so this must mean that currently the merchant and the credit card companies think that they are at some equilibrium point where they both profit a significant amount by working with each other. Of course, credit card companies might want to move that equilibrium point over by providing incentives for using a card but the thing is, this is all the work of individuals who benefit from the services provided by another and as long as no one is being coerced I do not see a problem with it. Because of this, I believe that processing fees are most likely not ridiculous and I agree that surcharges are quite fair as well (law was probably pushed by credit card companies). Of course, I also do not think that the government should get involved and tell individuals what their contracts can or cannot have (banning the banning of surcharges and such). If people think the contracts are fair and they are willing to sign, what is the problem? That the credit card company might earn a little more than the merchant even if the merchant receives a net benefit as well? —hankim
"If that is true, why would merchants continue to accept credit cards?" First of all, there are several Davis merchants that do not accept credit cards at all. Also, if the fees are not ridiculous, why are so many small Davis businesses willing to either break the law or go against credit card policy? They realize that customers expect the convenience of credit cards, and they are willing to take risks to give it to them so long as they maintain a profit. I'm guessing that the high processing costs are also the big reason behind why so many Davis restaurants get pissed off when you try to split bills. I have even had shop owners try to dissuade me from using CC for small purchases even when they have no set policy, but at least they asked nicely. The truth is that, the smaller the amount of purchase, the more they get screwed over because there is a fixed fee and a percentage fee charged. This is why sit-down restaurants and stores that sell expensive goods tend to be less picky; because a much smaller percentage of their profits will be eaten up by flat fee. Hankim, I also think you might be a bit confused about the way the surcharge works; the surcharge actually hurts the credit card companies because it encourages consumers to use cash instead. This surcharge is charged by merchants who are trying to offset the cost of the interchange fees. This is why credit card companies have a vested interest in NOT having surcharges. —ScottMeehleib
- Yes, there are merchants that do not accept credit cards, but there are a lot more that do. And I said the credit card companies probably pushed for laws banning surcharges. And for the law/policy breaking thing, there are plenty of other things that business owners do to keep costs down (not all of course). Sometimes you might see people use a small hand-held calculator if you pay with cash so that there is no records made for sales tax and such. People tend to break laws that they find useless or annoying all the time. —hankim
But the tax thing doesn't negatively affect the store's business relationship with the customer. IMO, the surcharges exist precisely because of the ridiculous fees. If the interchange fees were actually reasonable, I sincerely doubt that most places would risk looking like penny pinchers by having 5 to 10 cent surcharges on candy bars or minimum purchase requirements. If pettiness was actually a widely acceptable social norm, then we would expect to see 35 cent debit surcharges even when we purchase things like expensive furniture. —ScottMeehleib
- It could also be a way of having customers spend more or creating an incentive to use cash, not as much pettiness. —hankim
- I am not pro or anti credit card processing companies, I am just saying that there's no reason to get angry at them. As SM and I have both pointed out, there are plenty of places that do not accept credit cards, nobody is going to force a small business to accept them. There is a very simple question that businesses can use to decide whether or not to use them: Do the benefits outweigh the costs? If accepting credit cards benefits the merchant (inclusive of fees), why are you so angry at them? —KellyM
The assumption here seem to be that there is a free market with many options when it comes to choosing payment options. This is not the case. You must take cash, and for a very large percentage of the customer base, you must be willing to take a credit card or lose their business. For Internet companies, it's 100% of the customer base. Essentially, the credit card companies have a monopoly on a large percentage of the customers, so they can charge what they want for access to them. Most merchants have no choice - they'd lose too much business. It's not that they gain business by accepting credit cards. It's that they avoid losing people who aren't willing to pay cash. —IDoNotExist
- Again, what about the businesses that seem to do quite well without accepting credit cards (for example Crepeville, Quickly, and The Old Teahouse)? If the credit card companies decide to really extort to the point that the businesses do not have a net gain, then they would go back to using only cash. It still is a choice of the merchant to accept cards or not. Also, larger online retailers that have a trusting customer base are able to use direct bank account transfers. I believe I have this set up with Amazon. —hankim
- We are talking about brick and mortar retailers/small businesses. For them, there definitely is a choice (why is nobody acknowledging that there are successful businesses that do not accept credit cards?). Re-iterating my point on not taking cards: Operating costs go down, prices of goods go down, lower prices attract more business from competitors. It's all about how much the convenience is worth to the consumer. As for online: http://www.wired.com/magazine/2010/02/ff_futureofmoney/ —KellyM
- It depends on the market that the business sells to, and many other factors. Crepeville is immensely popular. They have problems with overcrowding, so they can choose to ignore credit cards - they'll still get enough business to fill their whole restaurant. High volume businesses like Taco Bell or In'n'Out can deal with it, because they have hundreds of customers per day. But try that at a low volume restaurant, and the restaurant will go out of business. If you do the math, many businesses become infeasible if they take credit cards and don't maintain high volumes. And again, there is not a choice if you want to reach the entire customer base. If your customer base wants to shop at places that take credit cards, you have no choice. —IDoNotExist
- The problem I have with it is that the state put in place protectionist policies for the CC companies (or the CC processing companies; whatever). The simple fact is that CC processors have small businesses over a barrel. You're right that it's not mandatory, and you're also right that some (very few, proportionally) businesses do quite well without taking CCs. You can't pretend that they're not in the vast minority, though. Every business gets to make the choice, but the nature of the choice and the massive bargaining advantage the CC processors have makes it a difficult choice indeed for anyone that does high volume, low value transactions. —TomGarberson
- KellyM and hankim, the only problem with your line of reasoning is that it's simply not very realistic for every business to be cash-only. Just because one has a choice in theory, doesn't necessarily make it realistic or practical. The only places that can really survive as cash-only establishments are places that sell cheap foods and knick-knacks. Brick-and-mortar places in Davis that sell things like bicycles, jewelry, clothing, and Tibetan artifacts are basically forced to take credit cards or go out of business. As far as why some people are "angry" at CC companies, as Tom points out, it's mainly because of the protectionist laws here in California that most likely were the result of Visa and Mastercard schmoozing the state legislature. And of course there is the very real possibility of price fixing and collusion that upsets some people as well. —ScottMeehleib
- Well that's fine, because that's exactly what I'm saying. If you are selling larger purchases, then accepting credit cards is a no-brainer: more business and margin covers the fees. My point was made on the Hometown Chinese restaurant page, they can easily go cash only like many other restaurants do. Their prices are about on par with Sam's, which does not accept credit cards. If they did not accept credit cards, I assume their prices would go even lower. —KellyM
Personally, I'm not angry at the credit card companies because of California's laws. Could you point me to the laws you are referring to? I am, however, rather unhappy that the credit card companies have suddenly decided to charge high fees to use their cards, and generally made the terms unfavorable to anyone who pays their bills on time and in full. I just had one company say that they would charge me $60 a year unless I spent way more than I do on their card. I canceled the card, and from the sound of things from the human who processed my cancellation, a lot of people did too. If my other credit provider or providers decide to pull the same sort of thing, or decide to terminate me because I pay my bills on time, my credit score will drop substantially because I'll no longer have an account open for as long as I currently do. I consider that blackmail - pay us a fee, or we damage your credit rating, which you've built by paying every bill on time. Then, of course there's the idea of a credit rating in itself, which is determined using a secret formula, and that is incredibly hard to correct if someone steals your identity and damages your credit rating. Also, there's the fact that if I decided to start my own business, a large chunk of my profits would be taken off the top by credit card companies, and that I'd have little say in this (or depending on the type of business, no say at all.) Then there's the poor security practices that these companies have. For example, in Europe, the cards have chips to authenticate them and make them hard to clone. They also process them differently. In the US, when you go to a restaurant, you hand them your card and sign something (which no one ever checks against your actual signature.) Copying the info on your card in that time is trivial. In Europe, the card never leaves your site. They have wireless scanners that they bring to you. There is no chance to copy your card info, because they are swiped right in front of you. Oh, did I mention that the credit card companies spent 10 or 15 years extending credit to people who were extremely high risks, then sold that debt to wall street, which bought, packaged, and resold it? That high risk debt (plus mortgage debt) became the basis for credit default swaps, which are bets on the likelihood of default on a certain collection of debt. Those were sold with no real understanding of the chances of default on the debt, and when people started defaulting, that became one of the major contributors to the economic collapse. Those companies cost people throughout the world dearly, even people who were doing everything right... —IDoNotExist
- "Could you point me to the laws you are referring to?" Read the top of the entry, "Charging a Fee", first paragraph. -jw
There is enough blame for the recession to go around. Banks, credit card companies, improper use and ratings of complicated financial products, government incentives/subsidies, and consumers. If you are angry at the credit card companies, you should probably get mad at your neighbors who didn't live within their means. As for the annual charge, I think we all know which company that is so just say Citi is being a douche and forcing people to either use their card or close their account. But again, there isn't anyone holding a gun to your head and telling you that you must keep your account with them open. Just walk away. —KellyM
- I, for one, AM mad at my neighbors. Somebody should make a separate page about it so we can complain about them also. :)
2010-05-28 15:35:27 If these companies that set minimums are really doing something so wrong, the credit card companies would actually go after them. The fact is that the credit card companies don't go after them. The credit card companies actually expect retailers to set minimums and break their contracts. The truth of the matter is that credit card companies are not going to sue a small business or cancel their contract over this. Canceling their contract would make them lose money. Suing the local mom and pop shop would hurt their PR and would also be very expensive. A google search of credit card companies suing vendors only turned up cases of fraud and security breaches. —~~ —MattHh
- Everything you just wrote is untrue, Matt. All they have to do is send a letter threatening to cancel the contract. Report a retailer if it bothers you. Visa will contact them. I don't know what you base your assertions on, and can only assume that what you state with such certitude is merely conjecture on your part. Are you a retailer? Do you work in the credit card industry? And how are things in Ithaca? —DonShor
2010-06-01 17:35:22 Congress is preparing to pass new legislation that would allow merchants to set minimum purchase amounts. Also included in this bill are rules to lower the interchange fee charged to merchants. What does this mean for customers? Using credit cards could cost more and it will mean less convenience for those who want to use credit cards. Who wins? Merchants such as stores and restaurants will make more profit. Who loses? Banks and credit card companies will lose out on profit. What does this mean to consumers? Credit card rewards programs will be impacted. You will see fewer rewards, less cash back, and credit card companies may have to charge annual fees for credit cards.
Is this legislation supposed to help average consumers? No. It aims to increase profits for merchants. Will this benefit consumers? No. In Australia, when interchange fees were lowered, customers did not see lower prices. Merchants simply pocketed the profit and kept prices just as they were. —MaxLucas