Poor logic of credit card surcharges

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one9

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It's the ad valorem impost that gets me. 2.5% on $700 is much more ($17.50) than 2.5% on $100 ($2.50) and yet each transaction takes the same amount of effort to process electronically. If I have the time I'll pay by cheque and put the cost back on the merchants. One day they'll realise that it would have been better to absorb the transaction costs instead of paying higher wages bills.

A cheque for $700 or $100 costs the same amount for the business to process (ie. the trip to the bank plus the time for the staff member to record ID). But an Amex purchase of $700 would cost the business much more (eg. $17.50) than a $100 purchase (eg. $2.50).

It is the credit card company that you should be annoyed at - not the business.
 

oz_mark

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A cheque for $700 or $100 costs the same amount for the business to process (ie. the trip to the bank plus the time for the staff member to record ID). But an Amex purchase of $700 would cost the business much more (eg. $17.50) than a $100 purchase (eg. $2.50).

It is the credit card company that you should be annoyed at - not the business.

But the credit card company is providing funds, and the cost of those funds has to be covered somewhere.
 

Nutcase

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To the cardholder, not the merchant, so the cardholder should pay for it.

Interesting debate.

The card company (Visa M/Card) only supplies the network on which the transaction takes place.

They funds are provided by the bank. Keep in mind that in most transactions there are 2 banks (acquiring and issuing) as well as the scheme (Visa/Mastercard)

The rationale behind merchant service fees is that the customer would not spend as much money if they had to pay cash. There are also issues of security and cash handling. If the customer paid for everything - a merchant service fee would be around 10%.

None of this is really fair to the merchant I suppose, however he does have a choice not to accept cards in the first instance
 

coco50

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The cost of processing the transaction is probably the same. The cost of providing the funds (as it is essentially a loan) increases in line with the value of the transaction

But the merchant is not lending the funds - the credit card provider is. The merchant is getting paid for the transaction. Just remember that without credit and electronic funds transfers these merchant would be in a medieval souk selling their wares
 

oz_mark

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But the merchant is not lending the funds - the credit card provider is. The merchant is getting paid for the transaction. Just remember that without credit and electronic funds transfers these merchant would be in a medieval souk selling their wares

Yes, but the credit card provider is charging the merchant, and the merchant is (optionally) passing it on. To claim that the merchant should pass on a fixed rate (the Qantas model), ignores the way in which fees and charges currently swirl around the system, the merchant is being charged more by the credit provider.

A fairer system would simply be to charge interest and provide no interest free days, but this is not how it is implemented.
 
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coco50

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Yes, but the credit card provider is charging the merchant, and the merchant is (optionally) passing it on. To claim that the merchant should pass on a fixed rate (the Qantas model), ignores the way in which fees and charges currently swirl around the system, the merchant is being charged more by the credit provider.

A fairer system would simply be to charge interest and provide no interest free days, but this is not how it is implemented.

Well the merchant will eventually have to decide (just as the customer will, I suppose) whether he wants to play in this market and absorb the fee and do business or pass on the fees from the credit provider and do less business. Imagine how much business Qantas (or any other service provider) would do if there was little EFT business and they had to operate from shopfronts like they did ten years ago where people paid cash or by cheque - that's why they went to an EFT system to save the costs of physical shopfronts and more employees. Let's see how they go if the world reverts to manual transactions.
 

Mal

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I saw the biggest credit card surcharge I've ever seen today for a merchant [ excluding Airline sale fares!]

A merchant had an item marked for $80 ($87 if paying by credit card). That's nearly 9%.

They had one of those mobile POS devices, so I assume they're factoring in data costs, paper costs, rental, the phases of the sun and moon etc in their pricing.

I don't think they accepted Amex.
 

serfty

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Mal said:
... They had one of those mobile POS devices, so I assume they're factoring in data costs, paper costs, rental, the phases of the sun and moon etc in their pricing. ...
Don't forget the possible -ve cost related to undocumented cash transactions being factored in.
 
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