The Hardware Man - Credit Card Surcharges
- Editor
- 7 days ago
- 3 min read
As we mentioned last week, we are out of town at our wholesaler’s buying market in Sevierville, TN. We left early to take a couple days’ vacation and had an enjoyable time experiencing the area.
Personally, I enjoy traveling and seeing the country. I put a lot of miles on my vehicles over the course of a year and would prefer to drive at my own pace instead of flying. One reason why I prefer the drive is the stops along the way to visit friends. It’s a privilege to randomly text someone and ask if they have time for lunch or dinner as we pass through their area. A quick, one-hour break and we are back on the road.
Traveling and taking family vacations quickly reveal how expensive life on the road can be. For a family of five like ours, it gets a little pricy eating out, sleeping in and sightseeing. We try to balance normal living expenses, free activities, eating in when we can and shopping for packages and deals where possible. It can get a little tiresome trying to manage it all.
One thing that really got my goat this week was the proliferation of credit card surcharges, convenience fees and requests for gratuity. Every place around had a cash price listed and automatically added 3% to 4% the moment plastic was introduced. The final straw for me was a coupon for a free* ride with a $3.99 convenience fee for the ticket. Tipping culture also is prevalent, and something we are accustomed to, and support, but everywhere. Before we know it, we’ll be tipping the cashier at Wal-Mart after doing self-checkout.
For all frustrations around the surcharges, I totally get it and understand the need in certain situations. Many businesses, restaurants and retailers alike, work on thin margins with increasing pressure around rent, wages and cost of goods. The credit card that gives you cash back or travel points has a cost to the merchant every time you swipe or tap it. The cheapest no-frills card, whether it is a debit or credit card has a base processing fee of at least 1%. Add that 2% cash back card, and the merchant is paying up to 4% to run your card. That’s a 4% hit on their bottom line.
From the credit card company’s standpoint, the overwhelming cost is risk. Credit card fraud, chargebacks and bad debt make the cost of managing transactions difficult. Sure, they make their money, but the summary of their business is Risk Tolerance. A card manually entered into a machine has higher risk than a tap to pay transaction. A card entered online has little validation that it is legit, other than entering a ZIP code or a CID number. And for all the two factor authentication and biometrics, our checking account is connected to our debit card and protected by a four digit pin.
The merchant is the low man on the totem pole, and they are most at risk of losing both money in a disputed transaction as well as product that has left their store. That double whammy puts them in a lose-lose situation when a customer (or a crook) argues a charge.
Reality is, swiping the plastic is something we all are used to. Unfortunately, the costs associated with that convenience are borne by the merchant. Should we complain if they pass the charge back to the customer?
Convenience fees aren’t convenient, especially when there is only one way to complete a transaction. In fact, it’s more insulting than convenient. Just add it into the transaction line item. Tips and gratuities? I will happily give for excellent service, but I reserve that choice.
I’ve had conversations with other store owners about the credit card surcharge issue. Personally, I think it’s not good for business, especially my business. But in a low margin environment like a lumber yard, it makes a huge difference to the bottom line. Also, if the area has multiple stores with an adder, it makes it easier to implement and fit in.
Either way, cash is still king. Until we run out of pennies and have to deal with that rounding issue. We’ll save that for another column.
Daniel Karns and his wife own Clintonville Hardware & Rental along with other businesses. Join the discussion by contacting him at info@clintonvillehardware.com.
