Established Contributor
Posts: 855
Registered: ‎06-29-2010
Re: Merchants may be allowed to charge extra for credit cards

cassembler wrote:

It basically equates to a tax that the card processors can (and will) levy on the public. They'll use the money to offer more generous rewards, which we end up paying for with higher prices. More people sign up for more cards, and viola! Cash is further reduced from the equation, further pressuring merchants to accept cards.

 

The end result is that cash users come out the worst, since they pay the same elevated prices merchants charge to cover the credit card costs; but ultimately all consumers lose. Oligopolies suck sometimes.


It seems like every time one of these merchant swipe fees articles gets posted I'm defending the CCCs/networks/merchant banks and attacking the merchants. Here goes again.

 

The most important thing you can ever understand is that no form of payment ever comes without cost and risk of acceptance. Most merchants overlook the benefits of CC acceptance and just see the cost, and they also have no clue what it costs them to accept other forms of payment.

 

Here is some examples of the business costs of various forms of payment:

 

CASH:

  • Robbery (both in terms of actual cash loss and violence)
  • Embezzelment
  • Employee Skimming (not ringing up transactions)
  • Counterfeit Currency
  • Increased Beginning & End Of Shift Time (to count cash drawers)
  • Register Dropsafes
  • Office Dropsafes
  • Armored Car Services
  • Bank Fees (to process larger deposits)
  • Bonding Insurance
  • Employee Incompetence (employees who can't count)

CHECKS:

  • Counterfeit Checks/Check Fraud
  • Insuffifcient Funds
  • Check Verification Service
  • Increased Transaction Time (to account for the time it takes to process the check)
  • Bank Fees

CREDIT CARDS:

  • Merchant Swipe Fees
  • Merchant Account Fees
  • Credit Card Terminals
  • Data/Internet Lines
  • Chargebacks
  • Fraud (situations where the fraud comes back to the merchant)

For consumers, the direct costs are:


CASH:

  • Loss/Theft
  • Access Costs/Fees (ATM fees, teller fees, etc.)
  • Storage

CHECKS:

  • Banks Fees
  • Check Printing Fees
  • Increased Fraud Risk
  • Privacy Risk (full name, address, telephone number and driver's license number is usually part of the check acceptance process)

CREDIT CARDS:

  • Annual/Monthly Fees

BTW -- Have you ever noticed that many cash heavy businesses offer some form of reward if you report not receiving a receipt to a manager? It's because they have a high rate of employee skimming without that policy in place.