As a longtime retailer, I find the discounts and feed charged to the merchant gradually rising – not because the card issuer’s costs are rising, but because they can get the higher fees, and the merchants can’t do much about it.
Bramble Berry’s fees have risen exponentially in the last 10 years, routinely topping 4% of the transaction if the customer is using a premium card or particularly lucrative reward card.
Visa announced in 2006 that it would go IPO and be a publically traded company. Mastercard is already a publically traded company, selling at over $200 per share, with most analysts saying it will outperform the market in 2008.
Well, at least someone’s making money off of my $4. And, it might as well be me … next time I save $1000, you can bet I’ll be looking into buying shares in this monopoly.
Shrock also singled out the difficulty in dealing with fraudulent cards, by stating:
The rules are set up so that the merchant generally takes the fall for accepting a card in good faith that proves to be a fraud. The fraudlent transaction is simply charged back against the merchant, who may be penalized by higher fees if he has too many such “chargebacks.”
Sadly, I don’t see a way around this. PayPal (which we started taking at the end of 2007) fees are higher, the system byzantine and difficult to work with and is not a legitimate version of Visa and Mastercard in terms of reporting ease. No one pays with checks or money order any more – why would you? Visa and Mastercard are much more convnient.
But, someone’s paying for this convenience and it’s not the consumer – it’s me. The vendor. At a rate of $4 for every $100 I take in.
PS – I’m not the only one saying this. There’s a new bill proposed just about this very thing:
http://www.reuters.com/article/bondsNews/idUSN1528648920080515
“Legislation is needed to give U.S. merchants more power to negotiate transaction fees with credit card companies Visa Inc and MasterCard Inc”
For the record, I’m against price floors and ceilings so I’d prefer the government not legislate fees. However, it’s nice to see that my views are not in the minority.
Convenience is definitely worth something – maybe not 4%, plus $25, plus the lack of support for chargebacks.
The average corporation on the Fortune 500 made 6.1% net profit last year (almost double the historical average).
What was MC’s take? AMX net? Or the newly IPO-minted Visa?
For MC, on total revenue for 2007 (4,067.60) the net was 1,085.89 – or 26.70%.
I’d say that’s more than healthy – and actually a little obscene.
Do they *really* need to be charging the 4% plus all the other stuff? You’d be hard pressed to convince anyone that MC is a hardship case.
The Financials for MC are here:
http://finance.google.com/finance?q=NYSE:MA
But, since I know how there is very few options for me to take money on the ‘net, I invested a few days after Visa’s IPO. I might as well make a little of that % fees back, right? =)
Don’t you think convenience is worth something? If there were no card payments, how would you operate? ACH is your only other option, or do you think anyone will give you direct access to their bank account? That’s why PayPal is successful, after all – they allow people to pay (by ACH or credit card) without the merchant seeing the account info. Or do you think that little ol’ you, on your own, can negotiate a lower rate than you’re paying now? Think again!
Renee, I checked out the Google thing and it looks like they want you to spend money with Adwords in order to use it and get reduced rates.
Heavenly Scent, I completely agree about minutiae taking away from what you really love to do. I am always shocked at BB how much time I spend working IN the business (managing staff, setting goals, crunching data, payroll etc… etc…) rather than working ON my business or just doing creative things that I love, like soapmaking. =) But, it’s a necessary evil. I just always remind myself that if it was easy, everyone would be self employed.
Shelley, we’re in the process of shopping credit card companies right now. It’s a long process but we’re definitely doing it in the hopes of lowering some of our percentages.
Hi Renee:
I agree with you 100% about Pay Pal! Many folks (including customers!) despise Pay Pal!
I also know how you feel about coding taking time away from soaps – although I still do love to code. But, sometimes I’m just dying to make soaps – rather than sit at the computer and work on websites!
Good luck with your solution! Please let me know if it works out for you.
Kind Regards,
Erin
Hey Heavenly..
I’m in the same boat just about. I was thinking of checking out the sites Google offers since supposedly you can accept Google Checkout for free (I despiiiiise paypal!). I’m just not sure how much creativity their site creation process would allow (and it may even be google branded like myshop.google.com). I am just annoyed that web coding would take so much time away from soaping 😛
There’s also the new microsoft pages, and they offer a shopping cart.
Here’s the links:
http://smallbusiness.officelive.com/
http://checkout.google.com/sell/
HTH
Wait…there’s more!
I’m a professional web developer (and am starting my own soaping business to boot!). The first thing my friends ask is, “When are you going to have your website up??”
Well, the development part should be no problem (other than finding the TIME to design & develop my site), but what my friends don’t realize is the other costs involved.
First there’s the hosting which will cost about $185 per year (I know that there are cheaper hosting plans – but you get what you pay for). Next is the Shopping Cart. The provider I prefer to use will cost about $600 per year. And then, of course, is the part you’ve all be talking about – the 2 to 4% that Merchant Services will charge for EACH of my online transactions. Oh yes, and add on the 5% Sales Tax that Wisconsin wants!
Unlike several of my clients who sell “big ticket” items that pay for the Shopping Cart & hosting with 1 or 2 sales, I will have to sell a LOT of soaps, creams and scrubbies just to break even!
I am anxious to have a web presence and develop a nice website for myself which includes a secure eCommerce solution, but I don’t want to drive my prices through the roof – so it’s a Catch-22!
A-M,
In my prior like as an Asst. Controller for a PNW regional corporation, I had the pleasure of finding the best “deal” for our Visa/MC acceptance. Now, compared to our total sales, we had minimal CC charges, but still expected a great rate. We took this to a request for proposal process to local banks every 3-4 years to make sure we STILL were getting the best deal. Looked at other ways to process in order to save money, since we weren’t internet based, but instead were considered 90% mail order (phone order) and 10% card present. If we were internet based, I could have gotten a lower rate. I quickly was able to decipher which card would get what rate and had lots of spreadsheets to estimate expenses (including any monthly fees). I bet that we had fewer CC transactions (in # and $) than Bramble Berry, but paid around a 2% rate in total on those transactions. It was quite a process but wonderful experience, especially when I realized I was going to start my own business.
SJ
wow, that makes me want to pay by money order. that must sound crazy but injustices like that irritate me.
What most people do not realize is that merchants are charged a fee. CC companies take a bigger cut when you use a business card. They take an even bigger cut, on top of that, when most of the business owners don’t even know what address the CC companies have on file. No match, more $$. When you are doing mail order for some people they are totally clueless. Drives me nuts. I would love for all my soaping vendors to take checks, but alas, it ain’t gonna happen. Being minus 4% is better than being minus the total amount from unscrupulous customers. I always write checks, don’t own a check card. At my age all that is is another number I need to remember, that also ain’t gonna happen! I like to figure I am helping to keep costs down by writing checks, but I am a figbar of my own imagination.
rita
Joanna, I totally forgot – we have a monthly fee as well. I think it’s about $25 just for the privilege of allowing MC/Visa to take 4% of all my sales. Wow … what a great racket.
Yes, Product Body knows your woes. We use PayPal, but we not only pay money per charge, we pay a $30 monthly fee for having them in our lives! Isn’t that special?
They do make it easy and refunds (though I think we have made only one this year) is super easy. So we pay for the convenience and they know it.
Smart post, AM. Thanks for shedding light to the non-business owners…it is an interesting topic.
I heard a little about this from a crafting friend (who weaves beautiful scarves) who does the local fairs circuit and accepts credit card payments. So now I pay her with personal checks. I don’t mind it, and I know it saves her a bit of money.
On the flip side, it is nearly as difficult to get money back as a consumer when one is over-charged by a merchant. WildBlue, the company we now get satellite internet connection from, double charged us for the initial installation pkg. It was a couple of hundred dollars, so naturally, I was wanting to get my money back (I hadn’t realized it was double-charged until I got my Visa bill), but it took a lot of calls to both WildBlue and Bank of America to finally get the charge taken off.
Buying stocks in Visa and MC is a great idea! At least you’ll get a bit of it back. I wish the system worked more in favor of wonderful, honest companies like yours. If there were a better way to pay Bramble Berry, please let us know. I’d be happy to do that.