Super Contributor
marty56
Posts: 5,696
Registered: ‎10-06-2007
Re: Merchants may be allowed to charge extra for credit cards

I would support this since online sales are really hurting small business - forcing them to cut margins  and it better than not taking CCs at all.

 

OT - Amazon just started charging tax in Texas.  In part  from complaint of local business.

11/28/2014 FICO: EQ: 796 EX:788 TU:803
Frequent Contributor
cassembler
Posts: 470
Registered: ‎02-07-2011
Re: Merchants may be allowed to charge extra for credit cards

thrasher865 wrote:

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.


Nope.  This will have quite the opposite effect.  It will make rewards cards much more worthless.  Even if you get 5% cash back, you then have to pay 2%+ on your transaction.  Card issuers will have to bump up the rewards just so the consumer can break even on using their cards.


You're right - I misread the article. I was thinking processors were pushing for higher fees, not merchants pushing for surcharges.

"Credit is purely a cash flow tool. Thinking of credit as extra money you didn't have before makes it an EXPENSIVE cash flow tool."
Established Contributor
bettercreditguy1
Posts: 760
Registered: ‎02-11-2012
Re: Merchants may be allowed to charge extra for credit cards

I am a merchant and also a cc user. Rewards cards cost the merchant more as the Merchant pays the cash back/ extra rewards from his profit, not the cc card issuer. This is why people whom have a Titanium Card (really high limits) can not use a charge card for new automobile purchase.  Example, a 5% cash rewards on a  $50,000. car would be a hit in the amount of $ 2500. just for the reward portion plus the transaction fees, etc. The merchant also must adhere to cc card isuer guidlines and soon will be required to upgrade swipe card readers to read the new implant chips. New swipe card terminals can approach  $700.00 each. Pros and cons of each payment media were discussed earlier. However, it is almost safely impossible to carry enough cash to pay for gasoline, a back to the school trip at the mall, a week long vacation, etc. The other item not discussed is when a merchant accepts a cc for a payment, there is a waiting period of up to five days before those funds are transferred to the merchant account thus creating a float or short term loan.

Starting scores 01/02/2012 EQ 707(Fico) TU 733(Fico) EXP 735 (FAKO)
Updated scores 06/01/2014 EQ 797(Fico) TU 768(Fico) EXP 769 (Fico), EQ 849 (Next Gen 5/27/14 Penfed)


Remember the Three P's: Pay early in Full, Pay on Time, Patience
Established Contributor
stan_the_man
Posts: 855
Registered: ‎06-29-2010
Re: Merchants may be allowed to charge extra for credit cards

bettercreditguy1 wrote:

I am a merchant and also a cc user. Rewards cards cost the merchant more as the Merchant pays the cash back/ extra rewards from his profit, not the cc card issuer. This is why people whom have a Titanium Card (really high limits) can not use a charge card for new automobile purchase.  Example, a 5% cash rewards on a  $50,000. car would be a hit in the amount of $ 2500. just for the reward portion plus the transaction fees, etc. The merchant also must adhere to cc card isuer guidlines and soon will be required to upgrade swipe card readers to read the new implant chips. New swipe card terminals can approach  $700.00 each. Pros and cons of each payment media were discussed earlier. However, it is almost safely impossible to carry enough cash to pay for gasoline, a back to the school trip at the mall, a week long vacation, etc. The other item not discussed is when a merchant accepts a cc for a payment, there is a waiting period of up to five days before those funds are transferred to the merchant account thus creating a float or short term loan.


You were probably misinformed about how the rewards work. Yes, certain premium cards do have higher swipe fees (and these cards usually pay higher rewards); however, you would never pay for 5% cashback though -- the merchant doesn't directly pay for any rewards:

 

http://usa.visa.com/download/merchants/visa-usa-interchange-reimbursement-fees-june2012.pdf

Blogger
FrugalRican
Posts: 2,876
Registered: ‎02-02-2012
Re: Merchants may be allowed to charge extra for credit cards

+1 Stan.

 

As a former business owner, it was the swipe fee that could become a killer.

I've never heard of having to pay for someone's rewards on their card.

Follow my financial journey: http://www.frugalrican.com


EQ FICO (01/16/2012): 656 - EQ FICO (02/16/2012): 743 - EQ (02/24/2012): 760 - EX (04/28/2012): 739 - GOAL 2013: 800+

AMEX BCE (0/10K) --- BOA 1-2-3 (0/15.9K) --- Discover More (0/6K) --- Chase Freedom Visa (0/1.4K) -- Hyatt Visa Sign. (0/5.8K) -- Barclay's NFL Card (0/7.5K) -- Chase Sapphire Preferred (0/5K)

Moderator
Revelate
Posts: 9,732
Registered: ‎12-30-2011
Re: Merchants may be allowed to charge extra for credit cards
[ Edited ]

FrugalRican wrote:

+1 Stan.

 

As a former business owner, it was the swipe fee that could become a killer.

I've never heard of having to pay for someone's rewards on their card.



Whoa, you guys are auto-dimissing what could be right, and is at least partially so.  

 

There are different tiers when it comes to processing merchant transactions, and under at least the typical 3 tier model I know regular bland cards are tier 1 (fully qualified) and rewards cards are tier 2 (partially qualified).  I don't know where they fall on a 6 tier model which I've heard is being more and more used or what the specific differences are.

 

Anyway, to my limited knowledge the rates on tier 2 are higher than tier 1; I don't know if this is the full rewards price, but it's non-zero.

 

 

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


Take the myFICO Fitness Challenge
Blogger
FrugalRican
Posts: 2,876
Registered: ‎02-02-2012
Re: Merchants may be allowed to charge extra for credit cards

You're paying "something", but it's not specifically the "reward structure" of that particular card.

At least, 6 years ago, that's not how it was for me... "paying for rewards".

 

Do merchants pay MORE for processing a rewards card? Yes.

Are they paying the full amount of the rewards owed to the consumer? No.

Follow my financial journey: http://www.frugalrican.com


EQ FICO (01/16/2012): 656 - EQ FICO (02/16/2012): 743 - EQ (02/24/2012): 760 - EX (04/28/2012): 739 - GOAL 2013: 800+

AMEX BCE (0/10K) --- BOA 1-2-3 (0/15.9K) --- Discover More (0/6K) --- Chase Freedom Visa (0/1.4K) -- Hyatt Visa Sign. (0/5.8K) -- Barclay's NFL Card (0/7.5K) -- Chase Sapphire Preferred (0/5K)

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

Revelate wrote:

FrugalRican wrote:

+1 Stan.

 

As a former business owner, it was the swipe fee that could become a killer.

I've never heard of having to pay for someone's rewards on their card.



Whoa, you guys are auto-dimissing what could be right, and is at least partially so.  

 

There are different tiers when it comes to processing merchant transactions, and under at least the typical 3 tier model I know regular bland cards are tier 1 (fully qualified) and rewards cards are tier 2 (partially qualified).  I don't know where they fall on a 6 tier model which I've heard is being more and more used or what the specific differences are.

 

Anyway, to my limited knowledge the rates on tier 2 are higher than tier 1; I don't know if this is the full rewards price, but it's non-zero.

 

 



The spread ranges from 0% on up to a max of 95 basis points (0.95%) for Visa cards:

 

http://usa.visa.com/download/merchants/visa-usa-interchange-reimbursement-fees-june2012.pdf

 

One issue smaller merchants may run in to is that merchant service providers heavily advertise the swipe fees for the lowest cost/tier of cards and bury the costs of the more expensive cards. They do this, because 1) the system is complex but also 2) because it allows them to hide important details. It's entirely possible that you pay more than a 1% spread between the cheapest and most expensive cards because of that marketing.

Valued Contributor
trumpet-205
Posts: 2,505
Registered: ‎11-11-2010
Re: Merchants may be allowed to charge extra for credit cards

marty56 wrote:

I would support this since online sales are really hurting small business - forcing them to cut margins  and it better than not taking CCs at all.

 

OT - Amazon just started charging tax in Texas.  In part  from complaint of local business.


Not really, if any online sales pay more on interchange fee than retailers. On average online sale pays 1% more interchange fee since card is not present during transaction. Like all retailer (be it B&M or online), their profit margin is around 2% to 3%, not a lot.

 

These merchants already included interchange fee into the price. I really don't see the point of whining. You could say that if using certain payment method you can get a discount, like Target REDCard gives you 5% discount on the spot, to discourge the use of regular CC.

 

But charging additional fee to accept CC is downright stupid.

In My Wallet:
Citi Forward (12/2010) | Citi Dividend (05/2011) | Chase Freedom (11/2011) | GECRB/PayPal (05/2012)
Discover it (07/2012) | AMEX BCP (09/2012) | TD/Target REDCard (10/2012) | Chase Ink Classic (11/2012)
BofA BBR (04/2013) | FNBO/Overstock.com (02/2014) | Barclaycard Arrival (04/2014) | FIA/Fidelity AMEX (04/2014)
Frequent Contributor
Dadaluma83
Posts: 364
Registered: ‎08-23-2011
Re: Merchants may be allowed to charge extra for credit cards

So if this goes into effect looks like I am back to paper cash and debit cards. will keep a no AF card to keep my score up.No way will I pay extra to use a card. In fact as a way to screw with the merchant and make their life as difficult as possible I will pay paper cash whever possible and use debit only when cash isnt accepted, like online.

 

I have done some google searching on this topic of course but one thing I haven't really figured out is if this surcharge only applies to credit cards, or if it will cover debit cards as well. I can just see some rather greedy merchants try to tack on the surcharge for debit as well.

 

It will really hurt online purchases like plane tickets, hotels, car rentals because a credit card is basically your only choice.

 

I hope a compromise can be worked into this. The big argument is when someone buys like a 75 cent bag of chips on the card the merchant actually loses money. A fair compromise would be to surcharge purchases less than 10 dollars so the merchant doesnt get their profit margin eaten up on small purchases. Large purchases should already have the interchange fee built into the price. Another way could be to surcharge only swiped transactions because card not present transactions like online it is kinda hard not to use a card and would be totally unfair to the customer if in order to buy something online they had to use their credit card, and pay 3% or whatever of the cost of the product as well.

FICO Scores: TU: 768 (Jan 2012), EQ: 755 (Jan 2012 Lender pull)