The credit-card-processing world remains an interesting struggle in today’s commerce. Banks make billions of dollars, not just on monies paid on balances owed and interests charged, but also through charging processing fees to retailers. In 2010 the industry reported $18.5 billion in net pre-tax profits.
Somehow consumers remain largely unaware of this. At least three times a week at our small business someone is shocked to get asked if they have cash for a $1 purchase. Trying to explain that we pay the bank more money for charging a $1 paperback than we receive is treated with the skepticism one would reserve for The National Enquirer.
That is, until January 27th, when a new option became available as a result of a settlement from a lawsuit involving Visa and MasterCard. It allows merchants to pass on the fees that credit-card companies charge to process credit cards. It is optional: A business can choose to continue to absorb the processing fees or to pass the cost along as a surcharge to plastic-wielding customers. In order to do so, signs must be clearly posted at the business that the surcharge will be added; it cannot come as a surprise to the consumer.
The national news outlets were out interviewing consumers about this new option on the day it became available. In spite of a search through the video material available, I didn’t see anyone interviewed who actually paid a surcharge. However, many expressed dismay that this was a possibility. “It’s my money,” was the common refrain.
Well, my question to consumers who never thought of it until now: Why give a cut to the bank for no apparent reason? They make money off your deposits, and all the myriad fees that they charge.
There is never an insufficient funds fee for paying with cash. In fact, frequently in cash transactions, if you get within a few cents, the cashier will tell you not to worry about it. Unlike your debit card, which if you are a few cents short, will hit you with a $30 fee.
“It’s only a few percents,” one man whined at me a week ago when all this was announced. “It’s the cost of doing business.” Interesting that when it’s the business owner, it is “the cost of doing business,” but when the real expense manifests to the consumer it is “an outrage.”
Small businesses that operate much closer to the edge are the most likely to act upon the new option than the big chains with more volume and more control over their profit margins. For small business, every bit counts, and it makes a huge difference. Those “few percents” can add up quickly for us and easily be the difference between the ability to not only hire an additional person, but justify keeping the doors open. Please, remember businesses rent the credit-card terminals, pay monthly fees and a percentage of each transaction; that credit-card sale is a very expensive luxury.
Now, ask yourself: What has a credit-card company ever done for me? Charged interest, raised my rate, charged late fees, denied me credit—these are the answers that leap to my mind. Restaurants, on the other hand, have probably provided with hours of fun, camaraderie and enjoyment of lifetime. Likewise, retail stores—I will even concede chain stores—have probably offered considerable happiness in whether through gifts purchased, long-sought items found or unexpected rendezvous with long lost friends. At some point in time, a retail store has been the sight of great joy. Not so for a credit-card company.
So, why do you want to give them your hard-earned money for no reason whatsoever?
Though we will not be passing the surcharge on to our customers at the bookstore, from a Live Local standpoint, I am thrilled with anything that draws more attention to the realities of the credit-card industry. Personally, I really like Mike and Joan Loch’s approach. Last year I reported on their decision to give a discount to customers who pay cash. Joan told me if she had to pay a percentage of the sale proceeds to someone, she would rather give it back to her customers as a reward for paying cash than to the credit-card companies. The customers are the ones supporting Crescent Moon, the Lochs’ business, the ones keeping their doors open—not the credit-card companies; they don’t care. It’s a way to reward her customers and say thank you. Hopefully, it’s also a small way to raise awareness for people about the fees.
So what’s the real solution?
Pay cash. Keep your money and spend it in your community. Of the $18.5 billion of the industry’s net pre-tax profits, not a penny came back to Wilmington to be spent here. Worried about encountering a checkout fee? Pay with cash and keep all money circulating in our own economy, employing people, rather than lining the pockets of CEOs who can’t even find us on a map.