posted on April 28, 2010 09:13:22 AM new
Merchants pay at least double fees for Reward cards, in essence the merchant pays for cardholders to rack up airline miles, etc.
I personally have canceled all of our Reward Cards. I refuse to pass these outrageous fees to small businesses and pay the banks annual fees to use their card.
It is the credit card companies/banks that have screwed up this economy and I simply won't participate in screwing over smaller businesses so that banks can make more money.
Here is a breakdown of how costly cards can be for a merchant on a $1000 transaction:
Regular Credit Card (20 cents + 1.69%)= $17.10
Reward Card (20 cents + 3.27%)= $32.90
Pin Based Debit Card (75 cent flat fee)= $0.75
If the cardholder earns 1 mile for each dollar it costs merchants about $822 for 25,000 miles.
Most tickets actually are 30,000-35,000 if you want to fly without all of the restrictions, so that costs merchants about $1000 for a coach ticket. obviously, banks are making a killing on this because they are buying these frequent flyer tickets at a fraction of the consumer price for those tickets.
Not only do these rewards cards cost the merchants money, but most of them also charge higher annual fees and interest to the cardholder.
I am hoping to see the Rewards programs fade away especially with the new restrictions on Credit Cards. We are already seeing less perks and higher fees to cardholders because the credit card companies can't make as much money on charging over the limit and late payment fees.
posted on April 28, 2010 09:25:08 AM newI am hoping to see the Rewards programs fade away especially with the new restrictions on Credit Cards.
Nice idea but probably not going to happen. Why? The continuing growth in eCommerce. Lotsa luck paying for something on most websites if you don't have a credit card, and if you do have one, why not earn points?
Or so most people reason.
Even Amazon has cut way back on the types of payments they accept. I think at one time they would even take Canadian Tire Money.
Locally, I've been watching a number of bellwether businesses that refused to take cards. All but one have succumbed in the last year. It's not about profits, it's about cash flow. A business can survive with slimmer margins, but not with inadequate cash flow.
posted on April 28, 2010 09:41:26 AM new
i wouldn't ever advise against refusing reward cards or not taking credit cards in general. 95% of our business is processed by cards. I just want to see Reward cards disappear altogether.
I don't fall for the scam any more and my point in bringing it up is to educate merchants (and cardholders) how the system works. most people simply don't know.
i am always surprised how many merchants don't realize it is reward cards that hurt the most. oftentimes it is because the processor that sold them on using their system never refers to the higher rate for "reward cards". They often use "tiers" to describe fees.
In my experience, I will tell a customer about the difference in certain circumstances, such as when we ask if they want a card run as credit or debit. A common response is, "whichever is better for you".
If you do the math you'll realize that banks rake in $1000-1500 for a $300-400 plane ticket (this is consumer cost). They get that money from the merchants in transaction fees and the cardholder in annual fees and higher interest.
That is $700-1100 gone from your local economy and into the pockets of the big banks.
These ploys by big industry are what hurts local business and why you see more and more For Lease signs all over America.
posted on April 28, 2010 09:53:58 AM new
I would add that online, things are a bit different. Paypal and Google charge a flat rate (no tiers). Generally speaking, online transactions are much riskier than in person when the card is present.
I have no problem paying 3% fees if I am going to be protected against fraud if I follow the rules. The 3% fees cover all types of cards.
posted on April 28, 2010 11:53:22 AM new
Hmmm, as a consumer I only use reward CCs. I have never paid a fee and pay no interest since I pay all of my cards in full each month.
The only time we ever have a glitch is if a certain merchant does not take Discover and then we switch to another CC that they do take, but all of our cards have some kind of reward attached. Not miles, but cash back or Disney dollars or GM car credits. It seems foolish not to take advantage of these perks.
posted on April 28, 2010 01:15:07 PM new
Regular Credit Card (20 cents + 1.69%)= $17.10
//////////////////
Not every retaliler gets this kind of discount 1.69%,also dont forget the annual fee,minimum monthly fee ,higher chargeback fee 25-75 dollars,also terminal rental fee.
*
There is no 'Global savings glut',only wild horses and loose bankers.
posted on April 28, 2010 01:29:52 PM new
My favorite fee in the last few years is the PCI Compliance charge. First it was a "one time" fee. Now it is an annual fee. The banks are passing the costs of securing their credit card systems onto the retailers. Every year I make a big stink of it and they refund it. First it was $59.50, now it is up to $89.50.
Basically, if you care about your favorite small businesses and local economy, you'll pass on using Reward Cards at them.
I would rather save my neighbor $17 on that $1000 purchase than get 1000 reward miles any day. It helps his bottom line, and keeps him in business. This helps me by having our neighborhood thriving, bringing people to our neighborhood, and helping pay him a decent salary rather than give the money to a bank in china. The damage to the local economy isn't worth a free plane ticket to me. I like living in a city that has many choices and independent businesses thrive.
posted on April 28, 2010 08:39:42 PM new
Another thing to watch out for. if you buy from another country the card people charge us for converting the transaction monies into the local currency of that country. in my case i was charged 2% of total. That amounted to $138.us. plus they charge the seller a fee to do the total transaction.
posted on April 29, 2010 08:39:43 AM new
I totally agree with cash. Unfortunately, that is not always an option, especially for high ticket items. It isn't safe to carry a lot of cash, and some people need to use debit or credit cards to pay.
When I make purchases for our business, I pay cash or checks at Estate Sales, Garage Sales, and even customers who bring items in. Everything else has to go through our business debit card. We have no credit cards for our business and never plan to. We even switched from Wells Fargo to my long time Credit Union for our business account. We have 3 accounts that all earn interest. We were paying $240 a year to Wells Fargo for inferior service, no interest. On top of paying them for using our money, our government bailed them out for making bad banking decisions. I refuse to support these banks any longer.
One thing all merchants should have is a PIN pad on their machine. The PIN pad alone will save you big because it is a flat fee, usually between 50 cents and $1.00 to process payments vs. a percentage that can get quite costly. Even a regular credit card will cost us almost $17 for that $1000 transaction... $2000 is $34. I'll take the $1 fee each time!
In one month, PIN based debits save us between $50 and $150 in processing fees.
If you have 100 local businesses paying $75 more a month to process Reward Cards, that is $7500 gone in a month from your community. Over a year that is $90,000. If you have 1000 businesses paying that, it is $900,000 gone.
posted on April 29, 2010 09:07:52 AM new
The flip side is, if you do not accept the payment of choice of your customers they will go some place else or will forgo buying non essential items.
I boycott gasoline stations in my area that charge more for CCs than for cash. I do not carry wads of cash. That is in my checking account which I use to pay my cards off each month.
All of the economic talkers talk of a cashless society, I am not sure how far away that is, but it is close for me.
posted on April 29, 2010 10:06:53 AM new
i understand where you're coming from on the gas stations... but do they know you are boycotting them because of it? Probably not, so they will continue the trend of doing so.
I would never turn away a Rewards card or exclude them from being used at our store. I think it is tacky and will definitely turn people away.
Rather than do that, I educate people on the effects of Reward cards... just like I was educated by a gas station owner almost 4 years ago who asked if he could run my card as debit vs. credit when we used to have a Wells Fargo Rewards Debit Card. It was the first time I was aware of it.
I never bring it up unless a conversation arises about business, fees, banks, etc. Many of our customers own their own businesses, so it is common for conversations about the economy, fees, licenses, etc come up.
[ edited by shagmidmod on Apr 29, 2010 10:09 AM ]
posted on April 29, 2010 04:54:55 PM new
I will not shop talk with customers,credit card fees are included in the listed price of the items in your store.
What next?
Once I walked into an art gallery and the air conditioner was turned off and the owner was sweating ,pouring over some papersworks.
Then she turned it on for us while we browse her shop,then turned it off when we left.
Does she know it cost her more turning on and off?
*
There is no 'Global savings glut',only wild horses and loose bankers.
