"Credit Card Companies Are Amazing."

[Thailandnotes]

Re: "Credit Card Companies Are Amazing."

Thanks. Post of the week. Why I skim throught this site daily.

[flintlock]

Re: "Credit Card Companies Are Amazing."

It's not illegal to offer cash discounts, but rather it violates the contract with the CC company if I am not mistaken. That type of agreement should be illegal imo. People should have the right to know the premium they are being charged to use the credit card. I use a CC to buy almost everything because I know I'm leaving money on the table if I do not. I bought most of my Christmas presents last year with reward points. It also has warranty benefits in some cases. I always keep a $100 or so in my wallet for when cash is needed. Its understandable that when in a foreign country people may need to use an ATM. But that's just the cost of convenience. I have not used an ATM in 10 years or more and would probably look like an idiot trying to figure one out.

[flintlock]

Re: "Credit Card Companies Are Amazing."

I have a very small e-commerce store- a micro-business. My monthly fees for taking credit cards included a

• Gateway fee (for using the secure payment gateway where the card is processed- such as First Data, Authorize.net, Verisign...)
• Monthly service charge.
• Internet authorization fees (charged when each card is "authorized" as good for the purchase)
• Batch settlement fees (for transmitting the purchases at the gateway to my business bank account)
• Internet AVS authorization fees (verifies the customers' addresses)
• Penalty fees charged when the address does not match (sometimes someone enters their shipping address instead of their billing address, or they have recently moved and the records don't reflect that. The sale is honest but the vendor gets hit with a fee).

In addition, there are transaction fees on every transaction. This is the percentage that Visa, MasterCard, Discover, Amex charges the vendor on each sale. While the standard transaction fee might be something like 2% or 3%, with "cash back" cards the "cash back" given to the customer is also taken from the vendor. This happens about two months after the first fees are deducted.

What happened with me was I had a slow month, but had 10% of that month's gross pulled out of my account at settlement time because two months earlier a lot of customers used "cash back" cards. In addition to all the regular fees, I was having to pay them their "cash back". There's no way to plan for that except to raise prices across the board. I'm at a point now that if I raise prices anymore it will cut into sales, so I just stopped taking credit cards. Now my sales are down because of that, but at least I'm not working for the banks anymore.

For an e-commerce store with a shopping cart, all the transactions are handled automatically at the payment gateway. As a vendor I never knew if a card being used was a credit card, debit card, business/fleet card (higher transaction fees on those), personal card or "cash back" card.

Vendors are not allowed to refuse certain types of cards, e.g. if they accept MasterCard, they must accept all types of cards issued by MasterCard. Vendors are not allowed to charge an extra fee for credit cards, or to give discounts for cash.

Did this answer your question?

Thanks for posting this info. I have always held off taking CC for the reason that I know all my customers would use reward cards if given a chance. And the use of cards are not always customary in my line of business.

What would you estimate your net percentage cost of taking credit cards? As much as 10%? I'd probably lose some business if I started taking them and had to raise prices, but I'd also gain some . Ive also heard horror stories about charge backs.

[DSpencer]

Re: "Credit Card Companies Are Amazing."

My post starting this thread points to two grudges: 1.) people who rarely travel overseas are being taken to the cleaners (it's much worse than it was ten years ago), and 2.) credit card companies are raising/taxing the price on everything for everyone even the savvy.

My 2 cents:

Just got back from a trip to Italy last month. My first time to Europe. I got Euro's from an ATM down the street. My bank charged me a $3.00 ATM fee and like your story, did not tell me the exchange rate at the time. I looked up it later and they did add a fee to the exchange rate. All the being said: I was still happy with the transaction and actually got more money from the same machine later. All things considered my rate was still better than what other people got at the airport booths. Other people in my group tried to exchange at a bank and were told they couldn't unless they had an account there. So I won't claim that there isn't any convenience aspect to using a card.

Most of the restaurants and shops did not accept credit cards. I don't blame them. I would gladly trade an "cash-back" or "reward points" for lower prices. The problem is that we generally don't have that choice.

The whole situation is a typical dilemma:

If you think the whole thing is a ripoff, you can choose to not use credit cards. But really that just rips you off more because you pay the same price (at least 99% of the time in the US). Or you can always use a card and get at least some of the money back.

[c1ue]

Re: "Credit Card Companies Are Amazing."

As a note, the reason we're all getting screwed on credit cards and ATMs abroad is due to a 'credit card' reform bill passed 4 or 5 years ago.

That bill mandated that exchange rate fees could not be more than 3% - but in reality allowed said companies to start almost uniformly charging 3% on all exchange rate transactions.

I lived abroad from 1998 to 2001; at that time I was paid in the US and used my ATM card every week or two for living expenses. In that period, the exchange rates I saw quoted were extremely close to the exchange rates I received.

I also used the ATM because the credit card charges would have a relatively poor exchange rate performance: 1.5% to a bit over 2% typically vs. 0.25% to 0.5% for ATM.

From 2003 to 2006, I travelled over 100,000 miles a year despite having moved back to the US. Until 2005 or so, ATM charges were still consistently with my ex-patriate experience.

Starting around 2005 or 2006, ATM's started charging 3% more or less flat on all foreign exchange transactions; at roughly the same time the credit card companies started doing the same.

As a note, there is one company that doesn't do this: Capital One. It (at least as of 2 years ago) only charges 1%.

At this point cash and traveller's checks are better - which one depending on the country.

[shiny!]

Re: "Credit Card Companies Are Amazing."

What would you estimate your net percentage cost of taking credit cards? As much as 10%? I'd probably lose some business if I started taking them and had to raise prices, but I'd also gain some . Ive also heard horror stories about charge backs.

In the month I spoke about above, the net percentage cost for credit cards was 10%. That included all the regular charges, plus the extra percentage taken out of each sale that used a "cash back" card several months previously.

Chargebacks are baaaaaad. You're not only hit with a fee, but they also raise your transaction rate on each sale going forward. In the six years I accepted credit cards I was fortunate enough to not have any chargebacks and only a few requests for refunds, which I resolved to my customer's satisfaction.

You can reduce the risk of chargebacks by having clear store policies, and making customers signify their acceptance of your policies before completing their purchase. The one time I thought a customer might want to initiate a chargeback, I called merchant services and explained the situation to them. They looked at my store policy page and shopping cart setup, heard all the things I had tried to do to satisfy the customer, and agreed with me that the customer was being dishonest.

[MarkL]

Re: "Credit Card Companies Are Amazing."

So your relatives paid 12%, in total (1-175/200), to not have to carry cash around the world, or put another way, to have cash delivered around the world, in moments to their hands in a small batch via a convenient ATM. They received the benefit of that ATM, the bank behind it, probably a transfer bank in the middle, their bank, and insurance against a thief doing exactly the same thing with their card and also didn't have to worry about getting cash taken en route.

American Express Travelers checks used to cost me about that if I bought a small batch. International Wire Transfers usually cost $25-$50 bucks and take a day or two. 8-12% is normal for the airport exchanges.

One could argue that this is somewhat high... but I don't see it as out of bounds for the convenience. If you don't like it bring cash!

Or perhaps you'd prefer a world currency?

[Sharky]

Re: "Credit Card Companies Are Amazing."

Although CC use in New Zealand has recently started to increase, it's nowhere near as rampant as in the US. Reasons why include:

1. All NZ-issued CCs carry an annual fee; no such thing as free cards that I'm aware of
2. I'd guess that roughly 20% of vendors don't accept CCs
3. The banks still have a meaningful application process for CCs -- I had to show my bank full details of my employment (contract, proof of wage, etc) in order to get one
4. Vendors prefer a no-fee electronic transfer system called EFTPOS (nearly all vendors accept EFTPOS, except some of the weekend open-air market folks)
5. With EFTPOS, vendors pay a flat monthly fee and no per-transaction fee
6. Most vendors will allow their customers to get "cash out" with an EFTPOS transaction (saves a trip to the ATM)

[lektrode]

Re: "Credit Card Companies Are Amazing."

My 2 cents:...
The whole situation is a typical dilemma:
....
If you think the whole thing is a ripoff, you can choose to not use credit cards. But really that just rips you off more because you pay the same price (at least 99% of the time in the US). Or you can always use a card and get at least some of the money back.

way back when (2000), for only the 2nd time - i left the country (didnt have a passport, didnt need one)...
flew over to YVR and went up to whistler for the weekend...
dint have time to chg $, looked into it at the 'cooks' (i think it is) booth at the airport upon arr YVR
decided i'd take my chances...
used my biz MC
paid about 1% over market spot rate on the FCX
it was a good deal vs conv $US to $CAN
dont think it would work out nearly as well today???

[Milton Kuo]

Re: "Credit Card Companies Are Amazing."

way back when (2000), for only the 2nd time - i left the country (didnt have a passport, didnt need one)...
flew over to YVR and went up to whistler for the weekend...
dint have time to chg $, looked into it at the 'cooks' (i think it is) booth at the airport upon arr YVR
decided i'd take my chances...
used my biz MC
paid about 1% over market spot rate on the FCX
it was a good deal vs conv $US to $CAN
dont think it would work out nearly as well today???

You should have just taken the hit at the currency exchange booth, bought more Canadian dollars than you needed, and kept the leftover money in a mattress. At that time, you could buy one Canadian dollar for less than 70 cents U.S. I was in Calgary in 2001 or 2002 and paid 63 cents U.S. per Canadian dollar (I think that was the bottom). At the time, I was astonished that I couldn't seem to spend enough to deplete all of the Canadian dollars I'd bought.

As for current exchange rates using a credit card, I was in India just last month and used my Visa credit card (issued through my credit union) and found that not only did I get an excellent exchange rate (it was the actual market rate as far as I could tell), there was only a 1% fee for a foreign currency transaction. Had I known that the terms were so advantageous and that where I went in India readily accepted credit cards, I would have never bought rupees at a booth in the Indian airport, where I was fleeced for over 12% in fees and taxes.

[flintlock]

Re: "Credit Card Companies Are Amazing."

There's a reason they call it "usury"! Banking is like having a license to steal. But only if the victim invites them in.

[lektrode]

Re: "Credit Card Companies Are Amazing."

You should have just taken the hit at the currency exchange booth, bought more Canadian dollars than you needed, and kept the leftover money in a mattress. At that time, you could buy one Canadian dollar for less than 70 cents U.S. I was in Calgary in 2001 or 2002 and paid 63 cents U.S. per Canadian dollar (I think that was the bottom). At the time, I was astonished that I couldn't seem to spend enough to deplete all of the Canadian dollars I'd bought.

yeah, no kiddin, eh?
and to think that what i did end up converting, i was determined to eat and drink _all_ of it before i left whistler!
(and boy, do they give you _plenty_ of opportunity to do that up there...)

As for current exchange rates using a credit card, I was in India just last month and used my Visa credit card (issued through my credit union) and found that not only did I get an excellent exchange rate (it was the actual market rate as far as I could tell), there was only a 1% fee for a foreign currency transaction. Had I known that the terms were so advantageous and that where I went in India readily accepted credit cards, I would have never bought rupees at a booth in the Indian airport, where I was fleeced for over 12% in fees and taxes.

and on only the _third_ time i left the country (well... if ya dont count emmigrating to hawai`i) in 2006, went down to fiji to do a boatjob and found creditcards essential to doing biz there, as the transaction cost vs exchange at ANZ made it a nobrainer (tween that and 12$F cocktails at the hotel bar, i still ended up with some 'souvenier$f' rather than re-exchanging) - so my experience/advice would be: dont leave home without it (but fergit amex, since most places that takes them will _always_ charge more/too much)