topic Re: Will we be charged for swiping credit? in General Credit Topics

Will we be charged for swiping credit?

Anonymous — Fri, 30 Mar 2018 16:28:07 GMT

Small business I walked into for lunch... I asked if I would be charged any extra for choosing credit. They said not right now. The clerk went into detail about some lawsuit with credit card companies and charges and acted like something was coming down the line where they would be charged 1 point something percent per transaction and the consumer would be charged 3 point something.

What was that all about?

Re: Will we be charged for swiping credit?

Anonymous — Fri, 30 Mar 2018 16:43:56 GMT

CC companies always charge retail merchants a fee. The merchant doesn’t have to take credit if they don’t want to, but they’re missing out on a lot of business if they don’t. Did the business ask you prior to your purchase whether it would be cash/debit/credit? If not, let them give you the price and pay in whatever form they accept. Many merchants also have variable prices to offset CC fees, so that’s really not anything new.

Re: Will we be charged for swiping credit?

Anonymous — Fri, 30 Mar 2018 19:29:03 GMT

@Anonymouswrote:
Small business I walked into for lunch... I asked if I would be charged any extra for choosing credit. They said not right now. The clerk went into detail about some lawsuit with credit card companies and charges and acted like something was coming down the line where they would be charged 1 point something percent per transaction and the consumer would be charged 3 point something.

What was that all about?

Sound like the average guy who wants to sound smart but has no idea what he talks about because thats a great way to kill the credit card business.

Re: Will we be charged for swiping credit?

Anonymous — Sat, 31 Mar 2018 04:15:08 GMT

Never heard of such news until now but some corner stores will charge a small fee if you use a credit card and pay for something under $10.

Re: Will we be charged for swiping credit?

iheartwings — Mon, 02 Apr 2018 04:55:09 GMT

Wonder if this person was talking about the current case at the Supreme Court, Ohio vs American Express, which is an antitrust suit. AmEx contractually prohibits businesses from suggesting the use of other cards that have lower swipe fees, and by doing so, are accused of limiting competition. (On the flipside, AmEx argues that higher swipe fees are needed to pay for perks they give customers via rewards).

https://thepointsguy.com/2018/02/supreme-court-antitrust-claims-amex/

Re: Will we be charged for swiping credit?

Gregory1776 — Tue, 03 Apr 2018 01:39:32 GMT

You already pay Credit card fees, whether you use cash or credit, you pay a bit more because businesses raise the price a bit to offset fees. Just like taxes. Every thing we buy is more expensive because of Taxation and we don’t even see or think about the extra cost....

Businesses aren’t in business to make Credit cars companies money.

Re: Will we be charged for swiping credit?

Anonymous — Tue, 03 Apr 2018 03:30:59 GMT

I know many restaurants pass the cost of a credit card tip transaction on to the employee. For example, if the guest check is $40 and they tip $10 on the CC for a total of $50, the merchant will pay the 3% (or whatever) on the $40 but the employee (server, bartender, cashier) will pay the 3% on the $10, receiving $9.70 in this example.

Re: Will we be charged for swiping credit?

RobertEG — Tue, 03 Apr 2018 23:19:45 GMT

If the clerk did not even know whether what was coming down the line involved a decision in a single pending case, a class action suit, a proposed state reg or statute, or an over-arching federal reg or legislation, I would chalk it up to chatter and rumor.

Federal rulemaking or legislation would be widely published and generally known, so it is doubtful that any such proposals are pending that would have any general implications.

Re: Will we be charged for swiping credit?

AppHappyTog — Wed, 04 Apr 2018 16:04:11 GMT

@Anonymouswrote:
I know many restaurants pass the cost of a credit card tip transaction on to the employee. For example, if the guest check is $40 and they tip $10 on the CC for a total of $50, the merchant will pay the 3% (or whatever) on the $40 but the employee (server, bartender, cashier) will pay the 3% on the $10, receiving $9.70 in this example.

Typically that 3-6% restaruants have servers pay is for tip out to bar and table cleaning staff. Atleast that's how it worked in all the restaurants I worked in as a bartender.

I agree with previous posters, businesses are typically smart enough to add that extra cushion into their pricing to accomodate the fees they'll pay. I own a service related business and 99% of my revenue comes from credit/debit cards and I have the expecation that 100% of my revenue will come from credit cards and I'll be paying processing fees, its just the cost of doing business. I've run into many small businesses that will offer you a cash pay discount and my local UPS store won't allow you to use any card on a purchase unless it's over $15.

Re: Will we be charged for swiping credit?

Anonymous — Wed, 04 Apr 2018 16:45:09 GMT

Good comments from all. As AppHappy just pointed out, almost all businesses just view it as part of the cost of doing business. In the same sense customers also pay for toilets, plumbing, electric lighting, air conditioning, cost of replacing the stove and fridge, etc. It's all part of the price of your hamburger.

It may also be worth observing that there are also costs associated with being paid in cash. Employees and robbers steal it, it can be lost, you have to make special trips to the bank to deposit it, you have to count it, it spreads disease (cold and flu germs) amongst your employees who touch it, etc.

Re: Will we be charged for swiping credit?

Anonymous — Wed, 04 Apr 2018 21:08:39 GMT

@AppHappyTog
Typically that 3-6% restaruants have servers pay is for tip out to bar and table cleaning staff. Atleast that's how it worked in all the restaurants I worked in as a bartender.

I'm not referring to tip outs; they are completely different than a "tip processing fee" which is what many restaurants are moving to. Tip outs are funds passed from one employee to another. A tip processing fee is the business passing the cost of allowing a tip on a credit card on to the employee. Most restaurants will disclose this up front to the employee at the time of hiring and it's usually handled via the POS system, so it's not something they actually see. If the server makes $200 in tips on a shift, $100 of which are cash and $100 of which are on credit cards, they'd net $197 at the end of the shift, because $3 (3%) would be taken from their credit card tips.

Hopefully that makes sense.

Re: Will we be charged for swiping credit?

Anonymous — Wed, 04 Apr 2018 23:41:25 GMT

I am guessing that the biggest practical penalty to servers in customers tipping with credit cards is that the management includes that as money that will eventually be reported to the IRS, and thus the server will have to pay social security tax and federal and state income tax on it. Cash tips are (I am guessing) only reported if the server decides to do so, which I imagine most do not (hard for me to blame them given how little money they make).

That's all guesswork on my part -- maybe BBS or the other folks discussing this will know better.

Re: Will we be charged for swiping credit?

Anonymous — Thu, 05 Apr 2018 02:00:58 GMT

I tell my tipped employees that they're supposed to claim everything they make (in cash) by law. I'm doing my part by telling them to do so. Realistically, most don't. The POS system is fully aware of what they've made in credit card tips, so upon clocking out when they are prompted to input their tips the minimum they can enter is what their credit card tips were. I do have some different tip percentage audits set up though to flag those that are claiming far too little. Servers typically make 15%-20% in tips as a bare minimum on their sales. I'd say CC tips constitute roughly half of their tips on average, so by claiming just CC tips they're likely claiming around 8%-10%.

In the event of an official IRS audit, if they see that a tipped employee over a length of time has only been claiming a single-digit percentage of tips relative to their sales, it can only mean one of two things, both of which point the finger at me, their employer. One, they aren't being truthful about what they're claiming and I should be enforcing that better. Two, they are a horrible server, as they're providing sub-par service if they're only getting tipped a single-digit amount regularly, so I should have replaced them long ago.

From the reports I run, I tend to just verify that they're claiming > 10% overall. I've found that to be sufficient enough to not raise any significant red flags. When I see someone claiming less than that, I simply reiterate the fact that they're supposed to "claim 100% of their cash tips..." and I find that the problem is fixed over the course of their next several shifts, weeks, months... until it's a problem again and another reminder needs to be given.

I think the money that servers make is likely impacted quite a bit by the area of the country they are in, the type of restaurant, etc. I'm in NY, so they make $7.50/hr which is 2X-3X more per hour than some states down south paying $2-$3-something per hour. My servers typically clear around $20-$30/hr in tips, so with their hourly wage that's $27.50-$37.50/hr. For a full-time server working 35-40 hours per week, they're easily taking home more than managers working 50-60 hours per week.

Re: Will we be charged for swiping credit?

Anonymous — Thu, 05 Apr 2018 05:29:29 GMT

I worked at a place that automatically claimed the minimum (8% of sales) for you. You had to request to claim more, for example if you wanted to buy or refinance a home and needed to prove income, because the owner didn’t want to ay the increased social security taxes.