Advice Wanted - Credit Card Fees and Paypal Discussion

[icas.livejournal.com]

I've been wondering about this issue for quite a while now, so I'd like some feedback.

From my understanding Paypal charges additional per-transaction fees when using a credit card, as opposed to paying with pre-paid Paypal credit. I figured that these fees would correspond to those paid by a business when the customer pays using a credit card at the store.

When the whole issue of Google Wallet was brought up, I discussed the service both online and offline. From my understanding, using a credit card to send money with Google Wallet results in fees for the sender/customer, not the recipient. When making business transactions on Paypal, the recipient is required to pay those fees.

This feature of Google Wallet doesn't appeal to me. In my country, it's technically illegal for businesses to charge customers the credit card fees, and I'm pretty sure that it was or still is legal in the States. However, members of the furry community have justified the customer paying credit card fees because they don't technically own the money that they're paying with.

I don't disagree with that statement, since that's basically how a credit card works. However, I don't understand how it actually justifies the customer paying those fees and not the business owner. I've discussed this issue with small business owners from my area, and none of them felt that the customer should pay the fees.

This bugs me because I've always been using my credit card for Paypal transactions, for I'm not comfortable linking my Paypal account with my bank account. I also haven't seen any statements regarding the actual method of Paypal payment in the ToS of any artists I've bought from.

Basically, I'd like some advice and discussion regarding the following:
1. How exactly does the whole "the customer isn't paying with his own money" justify Google Wallet charging the customer, but Paypal charging the business?
2. For what reasons would the opinions of artists on online art communities differ from those of other art professionals and small business owners? (Preferably reasons other than Paypal fees being slightly higher with credit cards, as not all business owners use Paypal.)

Comments

[thecreativepen.livejournal.com]

In the US, businesses don't charge the fee (from what I've seen). Instead, many will do a minimum purchase (usually $10). That way, if you're buying a $.99 candy bar at a convenience store, the store isn't breaking even or losing profit on the transaction.

Personally, I agree. I feel the business should be eating the cost, and as it's been stated time and time again, the artist/business should be factoring in those fees with their prices.

And technically, they do own the money they're using; that's a very dangerous way of thinking when you own a credit card. A credit card isn't free money. It's a high interest loan on money you are borrowing, and you need to be able to pay it back if you use it.

[trentxandrew.livejournal.com]

I think the business should eat the cost because they are using a third party's services. The third party is completely justified in charging for their services.

Honestly, I had no idea Google Wallet charged the customer for fees. Maybe the reason they charge the customer is to get businesses to use their services more. "Hey, we don't charge per transaction; use us!"

[icas.livejournal.com]

I haven't personally used Google Wallet, though I'm not sure if it's still US-only.

I'm not sure about merchant services with Google Wallet, but their website stated that sending money (i.e. not necessarily for business purposes) imposes fees for the sender when they're using a credit card. Fees are not applied if the funds are already present on the account (after being transferred from a bank account).

I think that this has to do with the fact that Google Wallet's money-sending feature isn't geared for transactions with freelance artists and similar professionals; it's supposed to be a more general method of transferring money online.

[kayla-la.livejournal.com]

If I use a third party service specifically designed to make things easier on me, I expect to pay something for it. After all, it's doing something for me, I don't know why I would expect it for free.

[icas.livejournal.com]

Where I am, it is (or was, if it's already been changed) illegal for businesses to impose the credit card fees on the customer because they used a credit card.

For what reasons do you feel that the customer should pay and not the business? In my part of the world, local businesses that don't want to cater to the credit card companies just don't accept it as a method of payment.

[kayla-la.livejournal.com]

Oh, no, I was a little vague, I meant that I expect to pay the fees as a seller/business person because I am using a service designed to make it easier for me to make money. I was in a bit of a hurry when I left my original comment, don't mind me.

I don't think customers should be saddled with a fee for the privilege of sending me their money. If my business can't handle the cost of the CC/paypal/whatever fee, that means I need to raise my prices.

Using a CC or debit card is so common now that I have trouble believing the money I would save via not having to pay fees would be more than the money I would be missing out on by not taking the most convenient method of payment for many people.

So TL;DR, I agree with you.

[mekania.livejournal.com]

Semi-on topic but my hair dresser stopped taking credit cards and her clients dropped over 50% and she only books things two days a week. When you're in a luxury business in this economy, you need to be able to accept credit it's definitely in your favor if you do!

[kayla-la.livejournal.com]

Yeah, that's what I imagine would happen to most businesses. It might be okay for some very specific businesses with loyal customer bases, but the average store or the like is going to suffer far more than they would just paying the fees. I guess in that way it's not as simple as 'don't like the fee, don't take CCs!'.

[hendikins.livejournal.com]

I guess it comes down to transparency.

The customer is going to pay for the fees charged by the credit card company and payment processing company one way or another - either it will be upfront as an additional fee (such as with Google Wallet) or factored in to the price quoted by the business (such as with PayPal).

At least if the credit card fee is an optional add-on I can see how much I'm getting stung and perhaps use an alternative method of payment.

Case in point: The hotel I just checked out of charges 1.5% for paying with MasterCard or Visa, or my credit union charges me 75c if I exceed my quota of ATM/debit transactions. Having that 1.5% as an optional extra certainly works out better for me than upping the room rate by a couple of dollars per night across the board.

[breakspire.livejournal.com]

Paypal charging more fees for credit card payments is news to me. Maybe I'm missing something or am confused? Can you link to that information?

As a small business, I pay fees to companies for their services - paypal fees, etsy fees, square credit card processing, and recently to amazon payments and kickstarter. They're providing services that I otherwise would have a hell of a time operating without, and I'm paying them for it. I keep fees in mind when I price my items, so that even though I'm paying to use those services it's not hurting my profit margin.

Sometimes when I pay for something as a customer and there are several options for accepting payments, I'm okay with paying a "convenience" charge to use my credit card because it's just that - convenient for me but not necessary.

[icas.livejournal.com]

This is from Paypal's Canadian site:
https://cms.paypal.com/ca/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_ca/fees

I'm assuming that any number of those fees could apply for someone accepting money in a business transaction, depending on the currency, customer's location, and customer's method of payment. I'm assuming this because I don't pay any fees when I pay an artist for a commission, but fees are imposed for a "gift" transaction (though I always choose to pay them myself in this scenario).

[germanchoclates.livejournal.com]

A feed store I go to charges a 2.5% credit card fee if you use it. They're a small business, and considering they have to store, haul, and then load my vehicle up I'd say they are plenty justified in charging it. Especially since I take 10 bags at a time and each weighs 50lbs a piece. It's not an uncommon practice for small businesses. Being able to run cards and online payments costs money, and it's not their issue that the other person doesn't use another means of payment (cash, check, etc.) that may not acquire charges.

Basically company A wants to accept company B's card. Well, that requires a special set-up and link in order for it to process through both systems. So company A has to pay company B for the set up and fees that are required to transfer the money across systems (from company B to company A from customer x.) See where it gets a little complicated? They have to be paid for the time and effort to do those things.

Most of the time people do end up eating the fee as it's factored into the cost of the product as it were anyways.

Also I don't understand how a customer isn't paying with their own money? Even if somebody handed money to them as a gift, it's still their money. Customers aren't loaning out their cash to an artist with an expect of return of payment. That's about the only time their money wouldn't be theirs.

[celestinaketzia.livejournal.com]

The thing with that is that some credit card companies can straight up prohibit merchants from charging their customers the fees. It's been a while since I read into the various cards, but my aunt is a small business owner and I remember her talking about her agreement. And also depending on where one is located, it can be just plain illegal. Most folks don't know this, so small businesses who do charge their clients can go along just fine doing it before anyone will say anything.

[germanchoclates.livejournal.com]

The thing is, the university I went to also later dropped the ability to pay by CC unless we paid a 2.5% fee. I have to think that if a major 4 year uni can do it, the feed store in the same state can probably do it, too through some loophole.

[thecreativepen.livejournal.com]

Just because someone does something, doesn't mean it's right. I responded to taasla's comment below. I would honestly look into it for your state, because that sounds fishy to me. To my knowledge it's a base fee that a business is charged per transaction, and not a percentage based on the amount spent.

[thecreativepen.livejournal.com]

Fact. I'm pretty sure that isn't allowed period. All I've read about is that there's a minimum purchase that a business can set so that they aren't losing profit.
2.5% does sound a bit hefty though. To my knowledge, credit card rates for a business are one base price per transaction. I'd be a little suspect and look into that more. And if they're doing everything the OP says, tip them appropriately instead of eating a potentially large overcharge.

[germanchoclates.livejournal.com]

From what I am reading there's been a recent bill that's been dealing with surcharges, but all I am seeing it for is retail stores with no mention of small business directly. Oklahoma state law does have it banned, but when is the question entirely. The last time I went to the store was probably back in March and since I come so often they pretty much knew that I was well aware of the additional charge to my total so it never got mentioned after a few months of me going there (which was years ago). I'd have to ask my parents if they are getting charged as they have taken over that task for me since I'm in an intense school program right now.

[hendikins.livejournal.com]

It varies by jurisdiction. In Australia it is perfectly legal to pass on the cost of handling credit cards to the customer, and it is common to do so.

Depending on the card the merchant fee may be up to 3% or so (Diners, AMEX), although MasterCard and Visa are around 1%.

[thecreativepen.livejournal.com]

Yeah, I was speaking on behalf of the US. Everywhere I've traveled has had that policy in place. But I know they're cracking down on businesses taking advantage of credit card users.

[kadaria.livejournal.com]

Yes, at least in MA I've noticed that some merchants will have signs that either have a minimum purchase for a card (which is usually something like $10). But a few offer discounts to people who pay in cash and they have the added convenience of an ATM on site that doesn't charge a transaction fee.

[arikla.livejournal.com]

This was actually just changed in the last year. It is now legal for a business to charge a set fee for credit card users and can vary that fee depending on the type of card (less for debit, more for "rewards" cards) if they so choose. the biggest reason is the variability of the fees imposed by the cards on the merchant. For instance, many rewards cards take a larger percentage of a transaction in fees from the merchant than would a debit card or non-reward card. Essentially, this meant for years the merchant was paying for the rewards the CC company gave the purchaser. The law was made to even that out some. However, there are restrictions to the maximum amount charged and how much "cherry picking" a business can do for one card or card type over another.
http://www.practicalecommerce.com/articles/3894-U-S-Merchants-Can-Now-Charge-for-Credit-Card-Transactions

[celestinaketzia.livejournal.com]

Ah, so that explains why a lot of little places here offer "discounts" for cash options like actual cash or debit cards. c:

[icas.livejournal.com]

A feed store I go to charges a 2.5% credit card fee if you use it. They're a small business, and considering they have to store, haul, and then load my vehicle up I'd say they are plenty justified in charging it.

I think that it depends on where the business is located. That practice you just described is (or was; not sure whether or not the law's changed now) illegal for businesses that operate in Canada. Here, businesses that don't want the credit card fees just don't offer it as a method of payment.

Basically company A wants to accept company B's card. Well, that requires a special set-up and link in order for it to process through both systems. So company A has to pay company B for the set up and fees that are required to transfer the money across systems (from company B to company A from customer x.) See where it gets a little complicated? They have to be paid for the time and effort to do those things.

Business owners who I know and who offer credit cards don't have a problem with covering those fees.

I'm more looking for reasons (perceived by either end of a transaction) as to why a business would choose to impose the fees on the customers, as opposed to cover themselves or simply not accept the cards at all.

[thecreativepen.livejournal.com]

Well, a lot of people have cards, and less people carry cash. You're losing a potential client base if you don't accept cards. I personally carry only my card on me because I don't want to lose cash or have it stolen (when it's gone, it's gone), while with a card, my company protects me under those circumstances.

Don't really see many cash-only establishments anymore.

[amarafox.livejournal.com]

In Canada we have an amazing Debit system (Different to the US one), so companies not offering credit cards is actually not a big thing. I never carry cash, but I'm always able to pay without my credit card.

[kaputotter.livejournal.com]

I guess you have to look at it as a 'convenience fee'. Some businesses will take credit cards basically because it will give them more business, even if they don't like to otherwise. I've even been a customer at some businesses who took cards, but were still vocal about encouraging cash transactions just on principle.

Me, I factor my fees into my commission prices. I'm not sure what Google Wallet is trying to do here. They may get more clientelle who are confident about selling, but the buyers sure won't be as happy. Maybe they just want to directly compete with PayPal... although they'd have to have some more serious policy shifts to be able to do that with any leverage, IMO.

This is a very interesting cultural thing to learn about from a country right nearby.

[synatri.livejournal.com]

"the customer isn't paying with his own money"

See, that way of thinking is the reason so many people are saddled with cc debt. CC money is still THEIR OWN money, only they get the items/services first and be billed later. As others have said, it's like a very high interest loan. The idea that it's not their own money is very misleading and dangerous, as it makes it sounds like it's okay for people to pay for stuff with money they don't have (this is a general statement, not necessarily just about furries).

To be honest, I'd just use the pp fees as an overhead and factor it into my costing. Yes, cc fees cost more (and iirc even gift payments have fees involved if you use a cc, EXCEPT the sender is the one who pays for them, not the receiver, so the sender gets an extra 2??% tacked on to the amount they're sending), but what can you do? In my country, you can't connect paypal to your bank account, so credit card is the only way I can use it. I occasionally ask people if they charge extra for credit cards, but most people don't. Besides, I think it's not a good idea in general, if an annoyed customer decides to report you to paypal for charging extra fees.

[thaily.livejournal.com]

In my country the bank would charge an extra 25 cents for ATM transactions under €10,- and the shops would charge those 25 cents to the customer, legally. So in my country it's legal ;P
That said, most business who don't specifically charge extra to cover fees like that, just raise prices a little in order to cover the additional overhead. So don't think you're not paying the fees just because some businesses don't explicitly state you are, because you are.

[alopex.livejournal.com]

Where I live most places have a credit and debit card fee or a minimum purchase set in place. A good example of the fee being in place is ordering food from a takeaway online. Also the banks will charge you a fee for having under a certain amount in your account, for use of ATMS etc.

I think the issue here is the fact that in some countries it's normal to expect card fees to be paid by the customer and in others it's expected that the business pay the fees. I'm not sure why Google Wallet does it one way and Paypal another but I'd expect that is part of the reason. For a small business the option for the customer paying the fees would be tempting.

The last two times I've used paypal I've been given the option to pay the fees, Is this something new? I'm not using a credit card.

[ljmydayaway.livejournal.com]

I don't like the idea of charging my customers extra fees. If they want to pay me a little extra to help cover it, that's one thing, but I won't ask for it.

I use a lot of different payment options, one of them being WePay, which automatically has it set to the customer paying the fees, and I have to switch it back every time I send out an invoice. :P

Plain and Simple

[snapcat.livejournal.com]

Paying fees to process customers' payments is a cost associated with doing business. For those who pay taxes on their income, as all people should, can write off the fees so in the end, its a no cost/no tax situation. Markers cost money, thread costs money, computers and graphic arts software costs money... we dont charge our commissioners an extra $5 because we have to buy a new bright pink prisma marker for their commission... its a cost we eat thus it should be figured into the commission cost itself.