What is it with PC stores and the 2% credit card surcharge? Options

[te0p]

It seems that every PC parts retailer is runnning the 2% surcharge on purchases.

I dont get it? Why do they need to charge it? It seems like a cartel or shennaginas ...i cant remeber the word for it...but the ACCC cracks down on it when a industry implements a industry wide charge that is kind of unspoken and universally agreed.

I understand the charge on AMEX as it is how the amex system works. But Visa and Master should no be included?

I can walk into 7-11 and buy a pack of chewing gum with out a surcharge on a Credit card.

Or buy $1200 worth of concrete and not get the surcharge.

Go to a PC store and ask if they will forgo the surcharge for a $1200 purchase it is a flat no.

What is so unique about this? it really shits me....and a bit of a trap.

Thoughts?

[discoInferno]

I don't work in retail so have no idea if there's a legitimate reason for the surcharge (eg. Visa charge the retailer 2% for the use of their service), but it seems to me that it would make good business sense for the retailer to suck it up and just wear the 2% to separate themselves from the masses by providing this as "good customer service". I would 100% support a company - even if they just added 2% to the price of everything - if they didn't openly hit me with the extra 2% when I chose to pay by Visa.

The surcharge thing is something that's spreading too. I recently had to pay a surcharge when I checked out and paid for a two night stay in a hotel with my credit card. WTF's with that?!? They made me provide a credit card on check-in in order to secure the room, but was then still hit with a surcharge when I checked out? What other choice did I have? Paypal?

[sponger]

7-11 isn't a fair comparison...they have many outlets and huge turnover and thus would receive better rates.

It's the same reason a lot of places have a minimum EFTPOS limit...it's because they get slugged per transaction and for small purchases, often the fee will be greater than their margin.

[Devilsmurf]

Sponger pretty much said it.

IT retail is a bastard of a business. Super slim margins means often that wearing a 2% charge on a transaction means you just lost a huge amount of your profit. They can't hide it in the price because then they are now more expensive than 50% of their competition.

How to avoid it :

Don't use credit ! Pay cash for hardware, that way you save as much as possible. Retailer is happy because then he has cash in hand for
a) Immediate recompensation so he can buy dinner tonight ,
b) Less reputable businesses can hide the odd cash transaction from the tax man.

In regards to being hit with a surcharge on a hotel bill, that's shit.

Query your credit card provider on the nature of the charge, and why you should pay it. Find a better provider that won't charge you for motel holding charges, or a motel that won't charge you in future.

[smadge1]

I know MSY charge a surcharge on credit card transactions. But they're in it for every cent to keep their prices low. At least they don't try to hide it either.

Oh yeah, I know MegaBuy.com.au charge the surcharge as well, it's not too big a deal for small purchases, but I can understand the pain it imposes on large purchases.

[unco_tomato]

7-11 isn't a fair comparison...they have many outlets and huge turnover and thus would receive better rates.

It's the same reason a lot of places have a minimum EFTPOS limit...it's because they get slugged per transaction and for small purchases, often the fee will be greater than their margin.

Wrong.

Well, at least it wasn't that way when I worked for Ingenico (Australias largest supplier and producer of EFTPOS/Visa/Mastercard terminals for all of the national banks) as a fresh young lad out of Highschool. All transactions are percentage based, not flat-fee based, so minimum purchase signs are a load of shit. This is the reason you can buy gum at 7-11 without a fee, as they pay a set percentage on all transactions, no matter the cost.

I know Visa put their rates up recently (and possibly some of the banks added some extra rates of their own), but when I worked at Ingenico it was around 0.01% of a transaction went to the bank as a brokers fee, and around 0.02% of the transaction went to VISA/MC. This is why you can walk into a McDonalds and withdraw $150 cash out without purchasing anything, Mcdonalds will happily pay the 15-25c to offer you that service, in the hopes you return at a later date. Most fees at the PC store would be less than $1 unless the order is over $1,000 as the banks make their money on a volume of scale, not a set fee per transaction.

I'm not sure if it is still against the major banks TOS, but you weren't allowed to actually have a "minimum purchase" amount when I worked there, and if they found out you were doing it, would quite politely ask you stopped, and would alter remove their hardware from your store if you continued (forcing you to buy your own).

Basically it's all a load of shit, and businesses get charged around $20-$30 a day if they are a large PC store turning over $20-$30K a day. The banks aren't ripping people off here, it's the retail chains trying to sneak in an extra charge, though sometimes the are operating of such small margins they need the 2% to survive.

As for a stick of gum, spending $1 on VISA will attract a $0.0003 charge to the retailer (going off old fees, they have likely gone up), so it's hardly an excuse to force the customer into spending $10 on other shit. It's simply a sales tactic, forcing the customer to spend more money with you.

[tantryl]

All transactions are percentage based, not flat-fee based, so minimum purchase signs are a load of shit.

Wrong.

I paid BOTH as a small retailer. A monthly fee + a transaction fee + a percentage (the same percentage I passed onto the customer, which was 2-3%, I can't remember).

Whoever said the reason computer retailers do it is because computers are a bastard of a business is dead on. The margin's are razor thin if you want to be competative and the CC fees would put some purchases as net losses.

This post has been edited by tantryl: Jun 15 2012, 11:46 AM

[orcone]

Because when you're dealing with a market that decides where it shops based on price differences in the cents, you've g ot to get as much money as possible from anywhere possible.

[trololo]

It's an obvious scam.

What if your are using a credit card from the provider that is the same financial institution as the retailers?

Ohh... and Derp!?

[sponger]

All transactions are percentage based, not flat-fee based, so minimum purchase signs are a load of shit.

Wrong.

I paid BOTH as a small retailer. A monthly fee + a transaction fee + a percentage (the same percentage I passed onto the customer, which was 2-3%, I can't remember).

Whoever said the reason computer retailers do it is because computers are a bastard of a business is dead on. The margin's are razor thin if you want to be competative and the CC fees would put some purchases as net losses.

Not to mention PSTN rental for EFTPOS, although some banks are starting to catch up with the 21st century (IP).

[nesquick]

I have seen people blow up big time over this at Umart and threaten to bring the police in and all kinds of crap.

[te0p]

Because when you're dealing with a market that decides where it shops based on price differences in the cents, you've g ot to get as much money as possible from anywhere possible.

I dont agree with this reasoning. If the industry is that tight, some retailers would take the surcharge off to attract more customers and put a toucj more on popular lines.

I am not debating that margins are tight, im accusing the industry of a cartel behaviour in what appears to be a standard 2% surcharge.

If you own a shop and i come in and say...."im going to spend $1500 but only if you wave the 2% surcharge", would you do it? Of course.

But if you know your competion dosnt...and none of them will....you will say no. Basically it is a Cartel.

Also there is a second reason....alot of people live off there credit cards, this would effect if they use it or not.

ALso a third reason....to help promote you to use your cash. The PC parts stores want you to use Cash so they can avoid paying Tax.

They would rather 20 people come in a day and spend $20 each in cash, than through the machine.

[The Tick]

As a small business, this is pretty much the standard rate coming from Westpac.

$22.00 per month as a service fee
$22.00 per month as a minimum charge
.15% (or thereabouts) per transaction. (That $22 per month above is used for this until it goes over).
$.50 transaction fee

Consider that if you don't do any visa/ mastercard transactions in a month, you are paying $44 per month. I haven't included terminal rental in this as I haven't rented a terminal in ages but way way back it used to cost me about $90 per month for one of them. Online systems nowadays make that redundant although for POS - everyone still uses a terminal.

With scale of course, those figures come down. For Joe blogs starting a new business though, that is about right when dealing with a major bank for merchant facilities.

Paypal charge about 2.4% + 30 cents for every transaction (less as volume increases) but they are PITA to deal with for the most part in terms of holding funds and the time it takes to transfer can be days.

You are legally allowed, as a business in Australia to pass on CC fees to the customer. Paypal do not recognise this though for Australia and it's against their terms and conditions.

The 2% rate is probably more than they are paying on the actual transaction until you factor in all the other stuff and I guess that a retailer charging 2%, depending on volume may not actually make back the amount they need to spend and then some, if doing a fair amount of trade at 2% would possibly make money off it.

As already mentioned, the rate 7-11 or Maccas pay would be far less than you would going into a bank requesting merchant facilities and why it most likely doesn't hurt them like it would a low margin retailer.

[rs727]

$22.00 per month as a service fee
$22.00 per month as a minimum charge

Shouldn't things like that be seen as a fixed cost and be taken into account when working out profit margins/business costings etc?

[The Tick]

For some businesses - yes. In others where it's hardware on incredibly slim margins, I understand where the retailer is coming from and I have no problem paying the surcharge to cover their cost of offering the convenience of merchant facilities.

I am curious though, how you would feel, as a cash paying customer knowing that there is an inflation on price to accomodate the potential that you would pay with Visa? I am not sure how the Good Guys "Pay cash, pay less" policy works today but that is kind of where you are going. Overinflate the price to accomodate the surcharge then offer a discount for someone paying cash.

[discoInferno]

I understand retailers doing it - at least hardware retailers in a tight market - but I guess what I don't like about it is that it effectively forces me into trusting the retailer and paying by direct money transfer, rather than using the much more secure method of credit card. It means no proper receipt for my transaction, no easy recourse should there be some error with the transaction and so on. That's why I always want to use credit, or even better PayPal, when I make purchases online.

I know I can choose to pay by credit and pay the surcharge, but I just shouldn't be penalised for wanting security in my online transaction.

[Caelum]

Security isn't free.

[The Tick]

Security isn't free.

It costs a buck o five

[discoInferno]

Security isn't free.

That's why I choose to pay an annual fee to hold a credit card.

[te0p]

Security isn't free.

That's why I choose to pay an annual fee to hold a credit card.

Touche