Re: AT&T charges extra to pay cash [Telecom]

Due to a law known as Check 21, that particular horse has left the barn, and the barn has been torn down and replaced by a suburban subdivision.

Even if the recipient presents the physical check to the bank, the bank will almost always scan it and present the check electronically.

By the way, in case it's not obvious, bank security is designed around auditing, not prevention. The response to most mistakes is to undo them, not to keep them from happening in the first place.

R's, John

I forgot to mention I see the opposite situation occuring: I patronize a small deli that takes only cash. From time to time a new customer attempts to pay for a $4 sandwich with a credit card and is angry when declined. They think the store has an _obligation_ to take credit cards, which of course they do not. (And I think it's odd to pay for a $4 transaction by credit card, years ago, most stores had a $10 minimum to use a credit card, and that was when things cost much less.)

***** Moderator's Note *****

I'm curious how much master_visa_xpres charges to clear each transaction: is it a fixed fee, a percentage, or both?

Bill Horne Temporary Moderator

(Please put [Telecom] at the end of the subject line of your post, or I may never see it. Thanks!)

Generally it's both - fixed or around $0.35 and then somewhere around 1 -

2 - 3 % depending on volume.

The store could charge a service charge, like AM&PM does on each debit card charge, as do a lot of other businesses do. You are right about the $10.00 minimum or get charged a service charge. I worked for a business for a while that did not take credit cards an he lost a few sales, but that was the way he worked.

Everything about electronic payment transactions is completely negotiable between the banks and the merchants. Generally speaking, the higher the transaction volume, the lower the costs, but there's typically a fixed fee (which is higher for debit transactions, which are processed in real time over different networks, than for credit transactions) plus a fraction (which could be as little as 1/2 percent or as much as 5 percent).

Costs vary greatly among transaction processors, and also depend on the merchant's level of technological sophistication. An isolated merchant without telephone or Internet service (think Woodstock) depositing a few manual card impressions without pre-authorization will pay much more per transaction than a large supermarket chain doing a thousand all-electronic transactions a minute.

(Many people do not realize, when they sign the "merchant's copy" of a credit card slip, that that piece of paper was historically deposited, like a check, along with the store's excess cash. Today, it's more likely to be scanned in and then destroyed, again just like a check, but in either case, if the merchant loses the slip, they may not be able to collect their payment.)

-GAWollman

Good question. But don't merchants need the transaction verification machine? Does that required a dedicated phone line? That's an additional expense.

As an aside, one the last products of the old Bell System was an integrated transaction/telephone set for this purpose.

In nearly all cases, it's too much!!

But to answer the question, the discount paid depends on several factors: is the card physically present for a swipe through a reader? If not and if this is a mail order purchase, does all the address information given by the purchaser match up exactly with what is on file for that card? (Tighter restrictions might not even allow mismatched transactions depending on what doesn't match.)

Is it a corporate purchasing card or a personal card? Is it an Amex? Those folks are greedy and get a 1%+ premium; that's one of main reasons why we don't take Amex.

Percentage or transaction fee: generally it's some combination. Some merchants can skew the balance a little. We do larger tickets here and thus push for the smaller discount but with a higher per transaction fee. Merchants with many small tickets generally want the opposite.

With a card present, it's possible to get discounts in the 1% range. Mailorder folks where there is no card to swipe pay 2-3%, perhaps even more. Specialty 3rd party processors (say for a musician selling CDs off the stage) might pay something horrific, in the neighborhood of 20-25%.

It's a racket, generally with four noses at the money trough that the merchant fills: the international credit card franchise, the network, the local processor, and the merchant's bank. They all take their cut; they're always trying to push it higher.

At each recent rate hike I said I'd simply stop taking credit cards. Each time, the local processor backed off.

Frank Stearns Specialty Software and Audio Services Merchant

Authoritative answer: "It depends." There are a number of different sets of terms/conditions that a 'merchant account' is established under. Depending, among other things, on the nature of the business, and the type of transactions (retail storefront, mail-order, telephone order, internet-based, etc.)

Typically, there is a fixed amount 'per transaction', _and_ a percentage of the transaction amount. The actual quantitative figures are all over the place, depending on the perceived 'risk' of a bad transaction. Things range from a low of somewhere around $0.10/transaction + 0.8% of the charge amount, up to around $1/transaction + around 7% of the charge amount.

Actually, no, they *cannot*. It is contrary to the merchant agreement contract to charge extra for a _credit-card_ transaction. I _think_ this prohibition may actually be enshrined in federal statute, but, either way, The merchant account terms expressly prohibit it, as well.

Note: It _is_ o.k. to give a 'discount' for cash payment, but you *are* prohibited from charging above the posted item prices for credit-card purchases. "The law is the law, don't ever make the mistake of thinking it has to be consistent."

"Debit card" transactions are treated somewhat differently, both in contract, and in statutory law.

For a fair number of shops, it's not worth the hassle to take 'cards'. Almost universally, there is a minimum monthly charge of at least $30 for maintaining the merchant account, _plus_ the 'rental fee' on the 'terminal' used in a retail storefront.

That would violate their merchant agreement. Visa and MasterCard both prohibit charging a "service fee" to customers who use credit cards. Although some small merchants ignore this rule, they risk losing their merchant account by doing so.

You can, however, offer a cash discount.

I rarely carry cash anymore. It's far more convenient to use my debit card, and virtually every place I shop takes it. I stopped carrying cash on a regular basis when the fast-food restaurants started accepting credit cards.

ObTelecom: I've noticed that McDonald's seems to have on-line processing of credit cards; they must equip their restaurants with data lines of some sort, because it takes about a second to complete credit authorization. Burger King, on the other hand, still uses a standalone dialup terminal. It takes a lot longer to check out, and seems to waste a lot of paper -- they have to print a register receipt for you, a register receipt for the till, and a credit receipt.

Does anyone know how and why McDonald's can afford to use dedicated data lines for their card transactions, but Burger King is stuck in the dialup era?

[Moderator Snip]

The problem with the service charges and minimums is that many of them violate the merchant agreement that was signed and delivered to the card processor.

It's fairly complex, and varies with which processing agent a store uses. In general, there is a fixed transaction fee plus a percentage charged by VISA and Mastercard. The processing agency (most banks offer this service) then adds on its own service charges on top of VISA/MC. The card companies also vary the percentage rate depending on card type. "Rewards" cards carry a higher percentage, though some processing agents just charge one percentage that covers all of them, but some vary the percentage in step with VISA/MC rates. It's a very competitive climate, at least there are a lot of agencies vying to get your credit card processing business, much like long distance services a few years ago, and the deals vary depending on the size of your business, average transaction amount, and probably moon phase. For some reason, gas stations get a worse rate from a lot of places.

Suffice it to say that minmum transaction cost is about $0.30. Technically, the merchant agreements forbid setting a minimum charge amount, though that clause is widely ignored. Anything under about $5 is not a good deal for the merchant, and under $1 they might as well give away whatever the item is.

I just spent a bunch of time going over all this for my wife's chocolate shop. I think I got as good a deal as possible, but the sales folks can be high pressure and the terminology seems to be deliberately confusing. Again, similar to long distance services of a few years ago.

Bill Ranck Blacksburg, Va.

No.

Transaction verification is -not- required. Un-verified transactions are more expensive, per transaction, than verified ones, however.

No.

With some clearinghouses, you can do it all over the Internet, or a lease-line data circuit.

Small-volume merchants usually have a 'dial-on-demand' device, which can be hooked up to -any- phone line -- e.g. the last line in the incoming hunt group, or programmed to talk through a PBX over "any" line in the outgoing line pool.

There _are_ expenses associated with maintaining a 'merchant account' to take credit cards.

The ones you ask about are not necessarily among them.

Not necessarily. In a small shop with few transactions (e.g. a single shopkeeper), a single phone line might be adequate for everything. It's just that you can only use the line for one thing at a time.

OTOH, if you had several clerks doing verifications, you'd probably want to reserve a line for that, so your phone wasn't always busy..

Dave

Chase Bank has a "blink" card where the card is merely waved across the reader and registered quickly. It is faster than swiping and even faster than paying cash. McDonald's in our area supports that, as does a local convenience store chain, "Wawa". The Wawa chain offers a credit card (through Chase) and free food is the bonus.

What bothers me about credit card use for small transactions (eg fast food, pizza, convenience stores) is that all of us are paying higher prices to cover the cost of the credit card discounts and handling.

While I think it's stupid to use a credit card for small transactions, I do use the Wawa card. I get to defer payment until the bill comes so my personal cash flow is improved. As mentioned, I get free food. Since the prices are higher whether I pay cash or credit, I might as well get the benefits.

At my local pizza place, it amazes me how many people charge their dinners.

Merchants get one benefit from credit cards--since people are not pulling real cash out of their wallet, they tend to spend more freely. I find myself doing that at times in the convenience, buying a magazine that I'd otherwise skip.

Maybe, maybe not. Handling cash isn't free--they need to count it, take it down to the bank, and it's a lot easier to miscount or steal than bits from the credit card. If the place negotiates a good rate with the bank, which the giant fast food chains have certainly done, it may well be a wash.

I always pay for my pizzas with plastic, but then my master card gives me 12 months interest free and about 1.4% in rebate points. My bank seems to have severely overestimated how much business they'll be getting.

R's, John

PS: What does this have to do with telecom?

***** Moderator's Note *****

The credit card machines are connected to the clearing houses by phone lines. ;-)

Bill Horne Temporary Moderator

(Please put [Telecom] at the end of the subject line of your post, or I may never see it. Thanks!)

They also have less cash in the till and in their deposit bags, making them a less attractive robbery target. Also, one does not have to make change with electronic transactions.

----- Geoffrey Welsh

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Traditionally you'd use the phone line that's also used for the fax machine. That has the advantage of also being a "real" one, as opposed to something whacky that requires a proprietary PBX type phone set.

Only the ma and pa stores use dial up for credit card validation. Most are done either by dedicated circiut or satellite service.

***** Moderator's Note *****

It was a joke. Look at the smiley that follow the remark while you repeat after me: J-O-K-E.

The digest's policy on "relevancy" has always been "whatever the moderator wants". I am continuing that tradition.

Bill Horne Temporary Moderator

(Please put [Telecom] at the end of the subject line of your post, or I may never see it. Thanks!)

A surprising number validate over the net. That's what my merchant account does. Nova gave me an application that has its own local web interface or that I could integrate into a computer controlled cash register, uh, point of sale terminal.

R's, John