Card users pay dearly

[oz_mark]

Some apparent research that backs what many of us think....

New research has backed up the growing suspicion that merchants are profiteering from credit card surcharges, with some businesses stinging customers, on average, three times the fee they actually pay card companies.

What's more, some merchants are starting to apply surcharges to debit cards and even to cash transactions.

Card users pay dearly

[Cruiser Elite]

Some apparent research that backs what many of us think....

Or to put it more acurately........what many of us know.....

Interesting story from last night - get a load of this - was at a restaurant - hand over AMEX card to pay - there is a 4% surcharge Sir....WTF....please explain to me why surcharge is 4% - what do you actually pay as a merchent fee?.....I do not know Sir......well get me the manager please.

Some snotty nosed little upstart wanders out of the back room and his first response is - I understand you have a problem Sir.

NO - you are the one with a problem - what do you pay to AMEX as a merchent fee?

I do not know Sir ......then might I suggest that if you are going to masquerade as a Manager may be best you find out.......you can always pay cash Sir.......yes I will - and you will NEVER see me again - and whats more within 1 week I can gurantee you 100 people will hear this story - now is it really worth the extra $4 you want to charge me over the $100 bill?

And whats more - your food was good - your service was good - but because you try to get up my skirt to the tune of $2 on your AMEX charge - no tip - now you are the manager so I will assume you can sit for 2 minutes and just do the maths on this one - you wanna be a manager - start by making some intelligent management decisions!

[simongr]

Wow cruiser - that's a lot of anger for $4

[Cruiser Elite]

Wow cruiser - that's a lot of anger for $4

Simon might I make 3 points in response to your post:

1. That was not anger - anger was what I displayed to one of our Chinese manufacturers in Nanjing last week when they prepared a full container load of one product that was built 180 deg from the picture they were shown

2. The law now states it is legal to 'recover' merchent fees not 'profit' from them

3. The $2 saving would represent 1/1700th of the extra $3,400 I am gonna need to stump up this year in Cent fees over AMEX Plat fees so I can join you rich guys.

[MarcB]

I am completely with Cruiser on this one. I feel it has become almost accepted practice to charge users of AMEX significantly higher amounts than can be justified by reference to actual merchant fees. I can appreciate paying a difference if it is extreme, but still not sure why if you are a merchant prepared to absorb 2% for MC and VISA, why the charge for AMEX is the full amount?? 4% is ludicrous. Thank so much RBA for your improvements to the payments system. So far they have resulted only in me paying more for the same things I used to get for free - credit card surcharges and ATMs.

[medhead]

But at least it is transparent now.

[yohy?!]

It's a can of worms really, especially for Amex - they have merchants out there surcharging their customers which hurts their loyalty to Amex.

Whilst at the same time they have more merchants than before the rules changed which combats their serious brand problem with acceptance.

Damned if you do, damned if you don't

[anat0l]

It's a practice which is done all over the world, unfortunately. Europe is quite notable.

Then you have societies like in Japan where credit cards are actually much rarer than in Australian society. (Flights, hotels etc. are mostly OK, but several restaurants except for really high end ones may not accept credit cards at all).

And how do you apply a surcharge to a cash transaction? How do you suppose to avoid the surcharge in a case like that (unless the cash method is surcharged and the non-cash ones are not, in a weird role reversal)?

Although the premise of the article is fine, I smell there's a degree of misinterpretation and mishandling of the data and analysis between the retailers surveyed, the research consortium and the media.

It is not overly surprising that the research finds that most people will still "finish" a transaction even if they are not fully aware of the credit card surcharge before the time of payment. Obviously, that comment is not necessarily representative at all of the member collegiate on this forum.

I suppose one can argue that even if the surcharge amount is 0.81% for Visa/MC, then that is purely the cost of the business to the bank/card company for processing such amounts. It does not cover the administrative costs of such arrangements, e.g. the payment infrastructure, the time required to examine and reconcile the paperwork related to credit card transactions (if that is such an action required when one decides to utilise a credit card payment system).

In the cases of fixed surcharges rather than percentage based ones, such as with airlines, that has been argued as one of either: (a) reflective of a different method of how credit card companies charge these companies (i.e. based on dollars per transaction rather than a percentage), or (b) the fixed amount results in higher than 'equal' charges for some people but lower than 'equal' charges for others.

Also, what's the deal on minimum amounts? If someone walks into a store with no minimum and pays for an item which is valued at 50c, what does the credit card company get? 0.81% of this amount (which is 0.405c), or a fixed minimum (e.g. $2 per transaction or 0.81%, whichever is higher), or is it simply aggregated over a period (e.g. day, week, month - and say an administrative/handling charge of $500 per month or 0.81%, whichever is higher)?

In the end, most of us who are proponents of card use without surcharging and wider acceptance of Amex feel it is detrimental to the perceived reputation of a business not to offer better payment options and/or absorb these costs into the business rather than passing it explicitly** onto the customer.

I'd really like to see what are the comparisons of a full cost cycle analysis between payment by credit card, debit card and cash. So not just the point expenses like administrative "cuts" to the card companies, but also including, for example, cash handling expenses.

**This is important to distinguish. For example, Hilton (and later other hotel brands) Australia started a 1.5% credit card surcharge on bills settled at the desk. Most of us on AFF and FT of course looked at the decision with considerable contempt. Now had Hilton instead increased their hotel room rates across the board, say by $5-$15, and suppose they instituted small increases in their miscellaneous chargeable items, would people have expressed an equal level of contempt?

[simongr]

Anat0l - great points to raise. This is not a simple question of % on a bill (I am increasingly annoyed that all hotels my company stays in have a default % for paying by ANY card). It is a very complex issue.

What I am annoyed about is that the RBA in their wisdom drove a simple solution to a complex problem that actually ended up not being simple and not being a solution.

I actually don't know what the cost of using my Amex card is at Woolies as they don't have a surcharge - so in fact now I don't have the option of reducing my transaction cost by not using a card there.

The issues of cash handling and security are also not considered when I get hit with a surcharge.

Then there is the black economy: cash income not declared, employee fraud/theft - the push to include the surcharge actually drives the push to the black economy.

[oz_mark]

I'd really like to see what are the comparisons of a full cost cycle analysis between payment by credit card, debit card and cash. So not just the point expenses like administrative "cuts" to the card companies, but also including, for example, cash handling expenses.

Last time I saw a comparison from the Retailers Association it was

Charge Card > Credit Card > Cheque > Cash > Debit Card.

The cost of handling cash was about 0.6% of transaction value, on average.