Comment by ensignavenger
2 years ago
What I want to do is pass on the exact processing fee to my customers, then they can choose their payment method based on how much it is going to cost them. I might then choose to cover a portion of the fee for electronic transactions, because they mean I save money vs processing cash. But the customer would pay the excess.
I would need a system that can display to the customer what fee they would be charged with their selected payment method, and be given an option to switch to a less expensive payment method.
It's already impossible in the USA to know what you're going to pay for something until you get to the checkout line. This just makes it worse.
Why not go even further? Itemize the marginal cost of maintaining your property's parking lot for those customers who visit your business by car? Charge customers a "store heating fee" in the winter? Customer support fee if they talk to anyone? Just as ridiculous. Processing credit cards is just one of many costs of doing business that you need to account for when you price your products.
> Itemize the marginal cost of maintaining your property's parking lot for those customers who visit your business by car
This isn't that uncommon, quite a few places in Europe do this actually.
Usually there's a barrier at the parking lot entrance. You get a ticket when entering, which you then have to put in a machine when leaving. The machine calculates your fee based on how long your car was parked. Modern systems are far more automated and use license plate readers instead.
Those parking lots are not owned by the stores. It's usually by the city or some other property investor.
If it happens to be a store-owned parking that charges per hour, it's to prevent abuse from drivers going to other stores nearby if it's in downtown. Charging for parking outside your store in a less dense district is equal to putting up a sign that you don't want customers.
I can give discounts to customers however I want to, thank you. As long as the customer knows what card they are going to use, they know exactly what the cost will be. I am all for posting sales tax rates as well as any transaction processing fees at the door, too, though.
No thanks, I’m just gonna go to the grocery store down the street where they don’t make me do linear algebra just to buy a box of Froot Loops.
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There's a local restaurant that has a 3% CC surcharge and a 10% cash discount. I like going there and paying cash.
> Why not go even further? Itemize the marginal cost of maintaining your property's parking lot for those customers who visit your business by car?
Aka... charge for parking? I mean? This is pretty common? I've always found it annoying that stores will validate parking for motorists but if I choose to take public transit or bikeshare, I don't get any corresponding debate.
They eliminates your ability to advertise prices honestly, without overwhelming your customers with detail that will distract them.
I will clearly state which payment methods are free and which ones the customer will pay a conveniance fee or recieve a discount if they use. I will clearly show the customer at checkout what their total is with their chosen payment and shipping (if applicable) options would be, and give them the opportunity to change their selection. It is about customer choice and convenience. You are welcome to shop somewhere else that bundles these expenses into the price of the item and givea you no choice in avoiding them.
I can only speak for me, but if I have to do that much mental math to figure out the best options to pay or see a bunch of random (to me) fees and adjustments at checkout, I'm leaving and going somewhere else. It feels scammy even if your goals are noble.
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Or just make your prices have the credit card fees built in just like normal businesses. Your system is a ton of work for very little benefit to anyone and it’s probably lowering your revenue and it’s as annoying as places that charge for takeout containers — missing the point that takeout containers encourage people to buy more food.
It’s an unsophisticated approach to business. That’s why it’s common in mom and pop places — mom didn’t go to business school and pop is tripping over dollars to save a nickle — they see the “expense” but they can’t see the revenue that aren’t getting.
There is a reason most small restaurants fail — they don’t know how to be more profitable. So they start to add on these little fees when they begin to struggle and don’t realize that they’re making the problem worse. In other words, most people that start restaurants don’t know what they’re doing in the back office even if they’re great in the kitchen. Restaurants fail for many reasons, but not controlling costs is the biggest — however, they’re naïvely choosing to control the wrong costs.
One of my good friends owns a chain of 30 Tex-Mex restaurants in Texas. After several burglaries of the safe at several locations, they went cashless at some locations. The cashless locations, without exception, saw sales increase by over 12%. He quickly made all of his stores cashless and sales increased among all stores. My anecdote isn’t data — but there is plenty of data out there.
The credit card surcharge scheme is endemic among small business owners who actually haven’t done the math. Or, more accurately, they’re doing the wrong math.
Credit card users spend more than cash users. So you make up for the “savings” with lower sales volume. And credit card users that have to pay higher prices will go elsewhere. Or, if they pull out cash, they’ll spend less of it.
https://www.nature.com/articles/s41598-021-83488-3
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No payment methods are free...
... So just like US sales tax already does? I'm not saying it's a good system, but I'm already paying some random amount on top of the sticker price for everything I buy, depending on what state, county, and city I'm in at the time.
Do you actually want to do that? When a customer wants to make a purchase, I think it is best to get the hell out of their way and not go stand between their wallet and your wallet, blocking their money and yapping about fees or some other completely unimportant stuff.
Can't you just print up a sign for this?
I've seen signs that say stuff like "Prices listed are for cash, 3% surcharge for credit cards."
How many different fee tiers are you as a retailer really trying to charge?
Ahhh yeees, the Ryanair strategy. Everyone's absolute favorite airline.
How do i know you are being transparent with the surcharge? What if you add 2% for a card payment when your actual overhead is only 1%. I suspect this is the reason why EU made these type of schemes illegal many years back. It just creates bad incentives for stores to add random fees everywhere.
How do you even calculate the processing fee of cash on a single transaction? A lot of comment here seem to assume cash is free, when in fact you need a safe, take time to go to the bank, security transfers, counting it, and so on.
I think there's some technical reason you can't do this, because even gas stations don't. They just have a separate cash/credit price.
That just seems like an irrational amount of energy to spend on 1-3%. I guess you’d get a lot of payments nerds?
Some donation platforms do this! They show and add on the processing fee for VISA/MC and Amex separately, and Amex is a little higher.
Do they account for the different interchange rates on different classes of cards within a processing network? Not every merchant will want to be that granular, but I think it is worth it for big ticket items.
I don't think most merchants have the option to be that granular. I believe that most payment processors only provide a simplified view of interchange rates (and other fees) to all but very large merchants.
For example Braintree is 2.59% + $0.49/transaction, plus 1% if non-USD and 1% if the card was issued outside the US.
They used to split transactions into two tiers, based on how much the actual interchange and other fees were, and you monthly bill as a merchant would show charges for each tier. Within each tier the charge to the merchant was a fixed percentage and a fixed transaction fee. There was no good way for the merchant to know ahead of time which tier a given charge would fall under, although they could guess that a high rewards card was more likely to fall into the higher fee tier.
They should A/B test this. My theory is that this creates some amount of friction. I was all set to donate $100, but now I have to go find my debit card or figure out some bank transfer nonsense and by the time I get back (if I get back) my motivation to donate has diminished.
Donation platforms ought to do some analytics on this. If I’m giving money, I want it to be simple without requiring me to second guess.
If a donation platform takes Apple Pay, the friction is even less. I don’t want to fill out your stupid long form, create a password, share my address or whatever.
But, I’m one person — this might be an interesting Masters thesis topic to study the behavioral economics of donation platforms.
What I've personally seen is a checkbox, you put in your donation amount and then you can check/uncheck "cover processing fees."
Found an example - https://donorbox.org/nonprofit-blog/donors-to-cover-processi...