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January 28, 2009 12:44 PM   Subscribe

The True cost of credit. Via
posted by jourman2 (58 comments total) 4 users marked this as a favorite

 
Huh?

Am I supposed to be outraged that credit card companies charge money for the useful service they provide?
posted by Perplexity at 12:49 PM on January 28, 2009 [1 favorite]


Being somewhat naive on the subject, but wordly enough to suspect the internets.

... I'm not entering the first 6 numbers of my credit card.
posted by Lacking Subtlety at 12:50 PM on January 28, 2009 [4 favorites]


Interesting! But. I get rewards for using the credit card rather than not, so it benefits me directly. Additionally I am able to keep the money until the monthly bill arrives so that is also a benefit. Furthermore the money goes to a bank which then encourages bank solvency which is a greater component of the economic crisis than the profit margin of stores. And after all the bank will spend the money on things which will stimulate the economy. So I will continue to use a credit card, as well as quality bourbon.
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 12:53 PM on January 28, 2009


Uh, yeah, I'm with Lacking Subtlety above. I mean, it could be true that giving them the first 6 numbers won't tell them anything, buuut...sketchy. Don't think I'll take the risk.
posted by anthy at 12:53 PM on January 28, 2009


Am I supposed to be outraged that credit card companies charge money for the useful service they provide?

Probably not, but at the same time, shouldn't the extra money go back to the customer if they pay with cash? In fact, isn't that what discover and other cash-back cards do? Give you a kickback on their fees?
posted by delmoi at 12:54 PM on January 28, 2009


Also, it appears that this site is provided by "Transparent Financial Services", which exists to offer cheaper credit card processing to small businesses... ?
posted by Perplexity at 12:54 PM on January 28, 2009


East Manitoba Regional Junior Kabaddi Champion '94: If you don't make monthly payments, then you actual are taking liquidity away from the bank, and replacing it with what's currently one of the most worthless securities available: consumer debt.

Of course, a couple months ago, banks were going nuts for consumer debt.
posted by delmoi at 12:55 PM on January 28, 2009


I knew that it was generally cheaper for a retailer to run my Visa/Debit card as a debit... but does a $.25 fee explain why gum at convenience stores costs $.45 more than at a grocery or drug store?

On a more serious note, couldn't it be argued that these fees generate more revenue than they cost (in that a consumer will likely buy more if it's on credit than if they have to pay cash)?
posted by parilous at 12:56 PM on January 28, 2009


Huh?

Am I supposed to be outraged that credit card companies charge money for the useful service they provide?

QFT. Lame post.
posted by jckll at 12:59 PM on January 28, 2009


People who don't want to use the first six digits of their CC# can feel free to use mine: 440203.
posted by box at 1:03 PM on January 28, 2009


On a more serious note, couldn't it be argued that these fees generate more revenue than they cost (in that a consumer will likely buy more if it's on credit than if they have to pay cash)?

It certainly could. I'd also argue that the credit card companies aren't just throwing the fee money on a bonfire. They use it to pay employees and offer lines of credit to consumers.
posted by mr_roboto at 1:03 PM on January 28, 2009


Probably not, but at the same time, shouldn't the extra money go back to the customer if they pay with cash?

Stores can give you a cash discount if they want to. They just mostly don't.
posted by ROU_Xenophobe at 1:05 PM on January 28, 2009


Those who are squeamish about entering potentially sensitive info, look to the bottom of the page; there are a number of pre-generated, generic card examples.
posted by lekvar at 1:06 PM on January 28, 2009


Seriously guys, the first 6 digits of your credit card identify the bank and type of card. You know how some web sites know that you're paying with a visa as soon as you enter the number? That's how.

Still, I refuse to be outraged by this. I get 2% cash back paid out monthly, and never carrying cash keeps me from handing it out to every bum I see. I'm just giving that way.
posted by mad bomber what bombs at midnight at 1:06 PM on January 28, 2009 [1 favorite]


Oh, and there's a certain giant liquor store here, not sure how widespread they are, that gives you a 5% discount for paying with cash/check/debit. And it's not a markup in disguise -- even with credit card their prices are low.
posted by mad bomber what bombs at midnight at 1:08 PM on January 28, 2009


Stores can give you a cash discount if they want to.

I have no source, but I've heard that the merchant's agreements with the credit card companies prohibit cash discounts. True or not?
posted by desjardins at 1:08 PM on January 28, 2009


Huh?

Am I supposed to be outraged that credit card companies charge money for the useful service they provide?


Not everything is about outrage.

And I assume that the author of the article agrees:

"This is not to say that there is anything wrong with those fees."
posted by SpacemanStix at 1:11 PM on January 28, 2009 [1 favorite]


CC companies can charge these because consumers like them, and being able to take them is hence a competitive retail advantage. Also, it's probably cheaper to not have to process large quantities of cash and have automated checkout at gas stations. It's not like there's just one; this is one of the areas where market competition makes sense to produce rational fee structures.
posted by a robot made out of meat at 1:13 PM on January 28, 2009


They prohibit the vendor charging an extra fee for using a credit card, but technically they don't prevent offering a discount off the marked price for using cash. I guess it's a game of semantics from that point on.
posted by Rhomboid at 1:17 PM on January 28, 2009 [1 favorite]


automated checkout at gas stations

Oh yeah, I drive right back out of a station without card readers at the pump. Human interaction when buying gas is not an option. Except in New Jersey.
posted by uncleozzy at 1:19 PM on January 28, 2009 [2 favorites]


Odd, it pegged one of my cards as a reward card and but missed the reward feature of the other one. And I had no idea rewards carts were handled differently.

Human interaction when buying gas is not an option. Except in New Jersey.

And Oregon. I hate buying gas in NJ because the lines are so long.
posted by exogenous at 1:23 PM on January 28, 2009


This is why, whenever you are not buying from some entity roughly as evil as credit card companies, you should either pay cash or use a debit card WITH ENTERING YOUR PIN. That is, neglecting haggling for the cash discount that the credit card companies can't completely ban but do try to quash, would you rather Visa or the business you are patronizing have the funds that make up that 3 or 4 percent of your purchase? Or, you could enjoy your kickbacks and happy meal toys the credit card companies use to bribe you into helping them take the stores you shop at for every cent you can get.

This is all pretty moot if you just shop at Wal-mart and McDonald's but if you're buying something from Joe's Restaurant or Locally Owned Store you're keeping the money within the hands of people who probably need it more and hopefully who you expect to be reasonably moral actors.

(If you enter your PIN it goes through the ATM network and the business pays a nominal processing fee. If you don't enter your PIN it goes through the credit network and the business pays the ridiculous cut.)
posted by TheOnlyCoolTim at 1:29 PM on January 28, 2009 [1 favorite]


IF YOU REALLY CARE ABOUT YOUR LOCAL SHOPS YOU WILL ONLY BARTER. DO YOU WANT YOUR LOCAL STORES BEHOLDEN TO FIAT CURRENCY? I DIDN'T THINK SO.
posted by jckll at 1:36 PM on January 28, 2009 [9 favorites]


If nothing else hopefully this will make people think twice before whipping out the card to pay for their goddamn $.75 cookie. Happened to us all the time. It was actually cheaper for us to just give 'em the damn thing.

Fuckers.
posted by Atom12 at 1:38 PM on January 28, 2009


If you enter your PIN it goes through the ATM network and the business pays a nominal processing fee. If you don't enter your PIN it goes through the credit network and the business pays the ridiculous cut


Except that my bank charges me a $.50 fee if I use the card as a debit card, and charges me nothing if I use it as a credit card. Sorry, I'll save that 50 cents any time I can.
posted by pjern at 1:39 PM on January 28, 2009 [1 favorite]


I am not outraged by this. Of course credit card companies charge interchange fees. The interchange fee is a cost of doing business. There's no law saying that a merchant must accept credit cards. They do so for the convenience of the customer. And yes many merchants pass along this cost to me.

I'm probably not alone when I say I probably spend more at merchants that accept credit cards than at those that do not. My dinner checks in restaurants are higher and those larger amounts offset the interchange fee. Everyone wins.
posted by birdherder at 1:40 PM on January 28, 2009


I'm surprised there's not some sort of business union that tells Visa and Mastercard where they can stuff it.
posted by crapmatic at 1:50 PM on January 28, 2009


pjern, your bank sucks.
posted by fantabulous timewaster at 1:55 PM on January 28, 2009 [4 favorites]


If the problem for the small business owner is that people are using credit cards for small purchase, just set a minimum credit card purchase, like just about every bar in the world. It doesn't have to be $10, but it can be $3 and people probably won't gripe.
posted by craven_morhead at 1:57 PM on January 28, 2009


I once made a $0.01 donation by credit card.
posted by grobstein at 1:59 PM on January 28, 2009


Sheesh, you people are slow.

The true cost of credit?

$20.

Same. As. In. Town.
posted by GuyZero at 2:05 PM on January 28, 2009 [1 favorite]


The Visa check card my lame-ass bank (TCF) gave me doesn't even work as a debit card. In an ATM, yes (but it had better be one of their ATMs or they get to charge me $3). At POS, no (believe me, I've tried!). My theory has always been that they get kickbacks from Visa for making it that way.
posted by neckro23 at 2:30 PM on January 28, 2009


Good god. Get a new bank.
High Interest Savings + Reward Checking.
No reason to settle for that crap.
posted by jckll at 2:45 PM on January 28, 2009


I'm surprised there's not some sort of business union that tells Visa and Mastercard where they can stuff it.

That'd be interesting. Or entire parts of town that are cash only, say, for purchases under $100.
posted by salvia at 2:52 PM on January 28, 2009


never carrying cash keeps me from handing it out to every bum I see. I'm just giving that way.

This is also why I never carry cash. I'm a sucker and I would so be giving cash to bums and then, pretty soon, would have none for myself.

The only, ONLY time I have cash is if I go someplace that's "CASH ONLY" and man, I hate those places.
posted by grapefruitmoon at 2:56 PM on January 28, 2009


Seriously guys, the first 6 digits of your credit card identify the bank and type of card. You know how some web sites know that you're paying with a visa as soon as you enter the number?

Is there something here I am missing? I worked in a hotel for a decade and saw literally tens of thousands of credit card numbers from around the world. I cannot recall ever seeing a Visa that did not start with 4, so it seems to me as soon as you type the first digit, then yeah, anyone knows it's a Visa.

And by the end, I was savvy enough to intuit which numbers went with which countries: A Barclaycard from the UK had a different flavour from a Citibank Visa from the USA.
posted by ricochet biscuit at 3:03 PM on January 28, 2009


Or entire parts of town that are cash only, say, for purchases under $100.

If they're cash-only under $100, they're cash-only for all prices.
posted by oaf at 3:09 PM on January 28, 2009


And by the end, I was savvy enough to intuit which numbers went with which countries: A Barclaycard from the UK had a different flavour from a Citibank Visa from the USA.

You licked them?
posted by nasreddin at 3:12 PM on January 28, 2009 [2 favorites]


A Barclaycard from the UK had a different flavour from a Citibank Visa from the USA.
You're not supposed to lick them.
posted by desjardins at 3:15 PM on January 28, 2009


damnit, nasreddin.
posted by desjardins at 3:15 PM on January 28, 2009


Merchant fees have always been a bit high, but they can be lowered by the merchant if they swipe the card (rather than entering the numbers by hand), enter the zip code, cvv, etc. The first six numbers of a credit card can't be used by anyone for anything except to check the card issuer and brand (which then can be useful in researching fees). I use a cash back card, personally, but I'll pay cash or debit to certain small, local businesses which are hurt more by the fees.
posted by krinklyfig at 3:21 PM on January 28, 2009


I'd like to see the source of the site's estimated figures.

It claims the average fueling station's credit card processing fees are $52,064, "2.5 times" its average earnings. So according to the site, the average gas station earns about $20,825 a year.

That's markedly underestimated, according to Hoovers: "An average store may sell close to a million gallons of gasoline per year; the average gross profit per gallon is about 13 cents."
posted by terranova at 3:25 PM on January 28, 2009 [1 favorite]


I have no source, but I've heard that the merchant's agreements with the credit card companies prohibit cash discounts. True or not?

Cash discounts are ok in most states, but surcharges for credit are not. It's all in the wording and I'd guess advertised price.

Minimum purchase requirements, while often imposed are in violation of MasterCard and Visa agreements. AMEX will let you impose a minimum purchase requirement, but only if you do so with all credit cards you accept (no AMEX discrimination).

If nothing else hopefully this will make people think twice before whipping out the card to pay for their goddamn $.75 cookie. Happened to us all the time. It was actually cheaper for us to just give 'em the damn thing.

Fuckers.


You are blaming your customer for benefiting from the terms of your agreement with the credit card company? I'd give you crap for that, but I see you have brain cancer, so instead I'll wish you well.
posted by BrotherCaine at 3:43 PM on January 28, 2009


For those who were skeptical about putting in the first six digits of their credit card number, be aware that the first six digits are the issuer identifier numbers. Account numbers start on the seventh digit.
posted by Hot Like Your 12V Wire at 4:02 PM on January 28, 2009


desjardins : I have no source, but I've heard that the merchant's agreements with the credit card companies prohibit cash discounts. True or not?

False. The agreements forbid *surcharges* for using plastic. PayPal has the same sort of policy. At shows, I would have a cash price and a credit price. Rather than saying that there was a surcharge for using plastic, I said there was a discount for paying cash. I also wouldn't take a credit card for any purchase under X, where X was the point at which I was losing money by taking plastic.
posted by dejah420 at 5:19 PM on January 28, 2009 [1 favorite]


This is also why I never carry cash. I'm a sucker and I would so be giving cash to bums and then, pretty soon, would have none for myself.

Although I do sympathise with that, it's a bit worrying if everyone starts thinking that way. Before you know it there'll be no more cash, only credit cards. An outcome that many in the banking industry were predicting a few years ago, and would still very much like to see. The credit card processing industry will become even more of an oligopoly than it already is, once it no longer has to compete with cash, the bums will get hand-held wireless payment processing machines, and when you give $1 to a beggar, the banks will get 90 cents of it. Personally, I'd rather stick with paper money.
posted by sfenders at 5:55 PM on January 28, 2009 [1 favorite]


neckro23, no consipiracy there - the state of MN is the only state that doesn't allow its banks to issue debit cards.
posted by Coffeemate at 6:09 PM on January 28, 2009


Oh, and there's a certain giant liquor store here, not sure how widespread they are, that gives you a 5% discount for paying with cash/check/debit.

Ooh, I'm going to Spec's liquor on Friday to stock up on wine. And gin!

When I had a business a decade or so ago, I never minded the credit card fees. It meant that I couldn't be robbed of large amounts of cash taking it to the bank (or put a check in my pocket and subsequently wash the pants, like my husband did.) If more stores thought the fees were a problem, they'd be offering more cash discounts and I'd have no idea who mad bomber what bombs at midnight was referring to.
posted by zinfandel at 6:52 PM on January 28, 2009


Everybody knows bums like new socks more than cash anyway. So leave your money at home and just walk around with big sack of socks.
posted by mad bomber what bombs at midnight at 7:00 PM on January 28, 2009 [2 favorites]


To understand the true cost of internet credit card theft, email me your credit card number, expiry date, and the last 3 digits on the back of the card. Confidentiality guaranteed!
posted by blue_beetle at 7:17 PM on January 28, 2009


The most evident example of cash/credit cost changes is with diesel fuel. I know here, paying with credit card will typically run you 3-9ยข/gal more. I've always figured this was why.
posted by rubah at 7:17 PM on January 28, 2009


If they're cash-only under $100, they're cash-only for all prices.

How so? A bunch of places I go to have minimums for credit card use.

(I'm not saying I like those places either, but if every where was like that, I'd get used to it.)
posted by salvia at 8:57 PM on January 28, 2009


One of my favorite breakfast spots back home had a good thing going for them: purchases under 10 dollars could be made with a credit card, but there was a 50 cent charge that you had to pay them to cover costs, etc. Usually I would just end up buying some more food to go so I wouldn't have to pay it--win-win in my book.

Almost everything is cash where I live now in Japan, and I have paid for single sodas at convenience stores with 10,000 yen notes many times. I actually perk up a bit when I see someone paying with a credit card--"Eeehhhh?!"
posted by incompressible at 9:57 PM on January 28, 2009


This doesn't bother me in the least

It's all the other bad things credit card companies do that bugs me.
posted by poppo at 4:27 AM on January 29, 2009


If nothing else hopefully this will make people think twice before whipping out the card to pay for their goddamn $.75 cookie. Happened to us all the time. It was actually cheaper for us to just give 'em the damn thing.

Fuckers.

You are blaming your customer for benefiting from the terms of your agreement with the credit card company? I'd give you crap for that, but I see you have brain cancer, so instead I'll wish you well.


Heh. I totally see your point, and it's the same one I would have made had I not owned a business. Most customers have no idea what the charges are, as this thread shows.

We've since sold the bakery (hooray!!), but that was the best deal we could get at the time from the credit card processing companies and their needlessly Byzantine contracts. Our contract had all sorts of different fees, with frequent flyer-type cards being the worst for us as a merchant. Those were something like $1.50 per transaction. Maybe more.

We also thought about the whole "no cards for sales under $5" thing but were told that was illegal. I don't remember if that was from some government agency, a lawyer, or what.

And as for the brain cancer thing, thanks for the kind words.
posted by Atom12 at 6:02 AM on January 29, 2009


A bunch of places I go to have minimums for credit card use.

If they take Visa or MasterCard, they aren't allowed to have a minimum or a maximum transaction amount. If they take American Express, they aren't allowed to do it for American Express if they don't do it for other cards.

So I suppose they can have a minimum for credit cards, but only because they don't think that it means anything when they sign a contract.
posted by oaf at 6:22 AM on January 29, 2009


"We also thought about the whole 'no cards for sales under $5' thing but were told that was illegal. I don't remember if that was from some government agency, a lawyer, or what."

It's not illegal. It's a violation of your terms with the merchant account and Visa/MC. They can revoke your use of their services, but they can't send you to jail over it.
posted by krinklyfig at 7:42 AM on January 29, 2009


,em>Most customers have no idea what the charges are, as this thread shows.

Usually in the town where I live, if the credit card transaction is so small that it would cost the business money, I ask them to run a tab until the next time I come in with cash. For some reason business owners from middle eastern countries are more creative about that than the locals. Breakfast places are often cash only or cash/check only, I'd guess to keep waitress IRS tip reporting low?
posted by BrotherCaine at 2:17 PM on January 29, 2009


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