Charges for using debit cards in shops - is it a con and/or fraud?

[Psl]

Lately I have noticed that a couple of local shops that I use have started adding 25p and 50p to accept payment via debit cards. The first time it happened I didn't question it. The second time I did question it, in both shops. The answer I got, in both cases, was 'bank charges to process the transaction'.

Ok, that sounds reasonable, I thought. Then I asked how many transaction per week they did where goods were paid for by debit card? At this point both shop owners got very coy and refused to discuss it.

So, if a shop does 1,000 transaction per week where goods are paid for by debit card and the charges per transaction are 50p, then the shop is having to pay £500 in transaction charges, and that can't be right, or is it?

What is also strange is the fact that if you spend over £10 there are no transaction charges if you pay by debit card!

Takeaways, pubs and other shops do not apply a transaction charge.

 

[DavidWH]

I suppose it boils down to margins.

We have to charge it on photocopies sometimes or we would actually loose money.

If they're charging 50p though I'd suggest they get a new provider!

 

[Paul Kelly ICHYB]

They can add any charge they want, but their cost will be +/-£0.20.

They cannot add anything on AmEx cards!

 

[Psl]

They can add any charge they want, but their cost will be +/-£0.20.

They cannot add anything on AmEx cards!

So the actual charges are 20p but these robbing b******s are making money on the back of the charges?

 

[fairdealworld]

After some years of not charging for taking cards (we used to) I'm actually about to go back to doing so.

A careful examination of transactions shows that on a proportion of transactions we are making a loss, this can't continue, it is unfair to us and it is unfair to our other customers who are effectively subsidising those who want to pay for a small chocolate bar with a card. I've held out against this for a long time against the advice of my accountant among others but doing the sums again recently has convinced me. It is tempting to think that those who want to buy an item worth less than £1 or £2 with a card will buy more on another day but by and large small spenders stay small spenders.

1,000 card transactions per week? Wow I should be so lucky! If we did 100 such transactions per week I'd get wildly over-excited! Nowadays small businesses pretty much have to take cards but between the cost of the hire of the machine and the charge per transaction it is yet one more heavy burden on the business. Obviously I accept there are folk who do 1,000 transactions per week but most of us don't and many of us are looking at maybe 30 to 50 transactions per week.

For us there is a line round about £10. Under £10 a card sale starts to become a demand on the business but this only becomes a problem around the £5 mark where the demand on the business begins to get out of hand and when you get down to the 70p to £2.00 range it starts to be better if we didn't make the sale. So we will be charging 40p for sales below £5.

The OP comments that takeaways don't charge a fee. I couldn't comment personally as I rarely eat takeaway food. When I was talking over the idea of a charge with my staff intriguingly it was my young apprentice who was definitely in favour of a charge simply because she often has to pay such a charge herself in places like takeaways and a much higher charge than the one I'm planning to impose, she mentioned charges like £1 or £1.50 for takeaways. So maybe she is talking about late night takeaways in the Town Centre when she is out clubbing with her friends but her response was interesting. She's all for the charge even though she will be in the front line of imposing it and if it had just been up to her it would probably have been 50p and for all transactions under £10 rather than under £5 as she regards such charges as 'normal' which is intriguing coming from someone of her age.

We have a cash machine just opposite to us. Four more cash machines in the area within 1 to 2 mins walk. I think I just have to harden my heart. I never offer a card in a small shop or other small business for less than a £10 sale. In theory I love the idea of a cashless society but as a small business owner the concept terrifies me as the charge per sale would drive us out of business.

 

[kulture]

It depends on your contract with the card company, but you can be charged around £0.30 per debit card transaction. For a small sale this could be a significant part of the gross profit.

 

[IanG]

So the actual charges are 20p but these robbing b******s are making money on the back of the charges?

Assuming its a convenience store then they're making money by being convenient.

Your choice in an open market is to shop around for value.

Problem there is you end up in Tesco express killing small businesses.

 

[Faevilangel]

Most shops will pay upto 50p for the debit charge, then they have the rental of the machine so any profit from the charges is minimal imho.

My local convenience store charges £1 for cards, doesn't matter if you spend £1 or £50 as the guy who runs it says the margins on the items is so low he can't subsidise cards. There is no cash machine for around 10 minutes walk and it's the only shop in the area.

My local takeaway also charges for anything under £10 but only charge 50p but they are in the town centre next to loads of cash machines.

At the end of the day, it's my choice to use my card so I am happy to pay a fee for the convenience

 

[Vectis]

So the actual charges are 20p but these robbing b******s are making money on the back of the charges?

Have you actually rented a terminal yourself? Do you know the rental costs? If you don't then I'd say it was a bit unfair to call retailers 'robbing b******s' when you don't know the costs involved.

 

[Psl]

Assuming its a convenience store then they're making money by being convenient.

Your choice in an open market is to shop around for value.

Problem there is you end up in Tesco express killing small businesses.

One of the shops I am talking about is right next to a Tesco Express. So my choice was to use the independent, was being the operative word.

 

[Psl]

Have you actually rented a terminal yourself? Do you know the rental costs? If you don't then I'd say it was a bit unfair to call retailers 'robbing b******s' when you don't know the costs involved.

I am happy that the costs of small shop keepers incur for debit card transactions to be passed on in their pricing structure, that's business. But if the cost is 30p charge 30p and don't add 20p because you can. What me renting a terminal has to do with this, I don't know!

 

[swankypants69]

Telephone line rental

Terminal rental

Receipt rolls

Time taking to process transaction

Associated banking charges

Etc etc

Plus 20p per transaction

 

[Psl]

Telephone line rental

Terminal rental

Receipt rolls

Time taking to process transaction

Associated banking charges

Etc etc

Plus 20p per transaction

All part of running a business...factor these costs into your product pricing.

My point is not about the actual cost per transaction but about the additional charges added by the shop owner over and above the charge set to process each transaction.

Adding an extra 20p, 30p or whatever just because you can and stating it is transaction processing charges is fraud in my view.


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[Faevilangel]

All part of running a business...factor these costs into your product pricing.

My point is not about the actual cost per transaction but about the additional charges added by the shop owner over and above the charge set to process each transaction.

Adding an extra 20p, 30p or whatever just because you can and stating it is transaction processing charges is fraud in my view.


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Hows it fraud? You are made aware of the costs before you pay! Just because Tesco etc can absorb the costs, smaller busineses can't so I am more than happy to pay a fee for the convenience.

 

[Psl]

Hows it fraud? You are made aware of the costs before you pay! Just because Tesco etc can absorb the costs, smaller busineses can't so I am more than happy to pay a fee for the convenience.

If the fee is 20p or 30p fine, no problem. But ADDING more is bang out of order.


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[swankypants69]

Not sure how it constitutes fraud

We don't charge our customers

They are all costs associated with running a business, my point was its not just 20p per transaction

To "factor it in" accurately, you would need to know how many transactions you were going to do in the forthcoming year

Obviously you could look at past transaction history and approximate your forthcoming years costs, then try and apportion that across your pricing structure of perhaps 1,000s of items. Or not.

We have a minimum spend of £5 on card. That ensures we make a gross profit on every sale

 

[swankypants69]

Adding more constitutes fraud?

If marking up profit on services is fraud then I think most of this forum members are fraudulent ;-)

 

[promdressers]

When I had a retail shop, we paid 16p per debit card, but that was 2 years ago. I loved DC's as they are cheaper than cheques or credit cards to accept. However, my average sale was in the order of several hundred pounds, so 16p (+VAT?) was irrelevant - 1.36% on a CC was a financial pain.

If I was talking of 50p sale of a KitKat, I would certainly be charging. In addition to the costs mentioned by Swankie, each card payment involved at least 2 phone calls, chargeable to the retailer. On my system they were, I think, 0844 numbers so outside our "calling plan". I wouldn't mind betting that the majority of card acceptors have even thought about the call charges - the providers certainly do not highlight their existence!

The other point is that they are more time consuming (unless you have contactless - and even then they sometimes demand the card be entered in the normal way), and in , say, a busy newsagent type scenario, you then have other customers tutting away, as they need to get to work or eleswhere. A good reason for charging is to dissuade people from using them for such pathetic amounts. I have never used a card for small items, but then I like to have a decent wedge about me. Call me old fasghioned

 

[Psl]

Adding more constitutes fraud?

If marking up profit on services is fraud then I think most of this forum members are fraudulent ;-)

So you think it's perfectly acceptable to make a margin on the product your sell, then make a further margin on processing the payment for the product you have just sold, which you are already making a margin on?

 

[Faevilangel]

So you think it's perfectly acceptable to make a margin on the product your sell, then make a further margin on processing the payment for the product you have just sold, which you are already making a margin on?

In most cases the business isn't making money on the fee, they are covering their numerous costs which come with the processing of cards.

At the end of the day it's upto you to use your card

 

[Faevilangel]

If you think paying 50p for a card fee is excessive, don't ever fly with Ryanair and other low cost airlines, they charge upto £15 for using your card. Their costs will be lower than a small shop...

 

[Psl]

In most cases the business isn't making money on the fee, they are covering their numerous costs which come with the processing of cards.

At the end of the day it's upto you to use your card

In my cases I doubt most businesses are making money on the fee. But clearly the shops I used to use are and my point is, that based on the fees outlined here, 20p and 30p per transaction, it's bang out of order to add more money to the fee.

 

[silvermusic]

In my cases I doubt most businesses are making money on the fee. But clearly the shops I used to use are and my point is, that based on the fees outlined here, 20p and 30p per transaction, it's bang out of order to add more money to the fee.

Maybe it's to deter people from using cards, it ties up staff in busy shops like newsagents where they could have taken three or four sales in the time it takes to process your 50p bar of chocolate. Those customers in the queue may well go elsewhere if they have to wait. My local newsagents will take a card but has a minimum £5 spend which I think is very fair. Personally I'd be embarrassed to pay for items that cost pence with a card.

 

[swankypants69]

You PAY for the service whichever way you look at it

It's either factored into the overall margin, or you pay for it separately at point of sale

There is no escaping the cost

Charging it as a separate amount is pretty transparent to be fair

 

[swankypants69]

Personally I encourage debit card sales over £5 and I push the "cashback" facility we offer as I'm happy to get rid of the cash, saves on cash banking charges

But that's what suits me and my business

 

[promdressers]

So you think it's perfectly acceptable to make a margin on the product your sell, then make a further margin on processing the payment for the product you have just sold, which you are already making a margin on?

As another contributor touched on, the likes of Ryanair charge a little more than 50p, MO'l is a robbing individual. You have already indicated that a retailer is probably not making a serious profit at 50p, so, really, what is your beef? Why not just get some cash in your pocket - and save the retailer the hassle?
As a business man, you will know that every activity, where possible, should add value to the business; if you offer an additional service - you should aim to profit, or at least not lose, from it. That may be in strict cash terms or as an increase in trade etc. At least a retailer offers DC's as an alternative, MO'l has no realistic alternative option, unless you use his own card brand!


.

 

[Psl]

Once used RA and vowed to never use them again.

I did say in my opening post that I did ask the shop keepers about the charges and they went all coy and refused to discuss it. If there wasn't a problem with the extra charges they would have no problem explaining them, they didn't because they can't.

And for the record, I agree with the points made about making sub £5 purchases using debit cards. The transactions in question were £7.68 + £12.10 respectively.

I have decided to ask about charges now in independent shops before I make a purchase if I am out and about, but for local shopping it will be Tesco Express from now on.

 

[kulture]

I am quite frankly surprised that an member of a BUSINESS forum should rant and get overly annoyed when another business wants to make a small profit. No business can survive if they simply charged COST.

 

[Psl]

I am quite frankly surprised that an member of a BUSINESS forum should rant and get overly annoyed when another business wants to make a small profit. No business can survive if they simply charged COST.

I am not getting overly annoyed at any business making a profit. I asked what the additional charges were for, I didn't get an answer, so I view it as a con by charging the 'extra' simply because they can. As has been pointed out to me, I can chose where I shop and that is what I intend to do in the future, and it won't be at the independent business that make this extra charge.

Following your thought process kulture I should add a 'profit percentage' to the payment process part of my business - I will add a 1% transaction charge to cover my banking costs, rather than treat it is a 'cost' and address it accordingly in the accounting process - it now becomes an ' additional profit opportunity'.

 

[kulture]

I have not looked at what your business is, so I have no idea if your suggestion is in any way relevant.

So just dealing with a retailer offering you the opportunity to pay by card as opposed to cash, they are offering a service. Why should they not make a profit from offering that service. Or are you going to suggest that the retailer should not make a decent profit on sales?

Where an option is a significant cost in relation to the profit made, why not charge for it? The idea that the retailer should add £0.30 or £0.50 to the retail price of something that is only selling at say £2.00 is ludicrous. Customers would soon go elsewhere. You are asking the retailer to attempt to penalise every customer for the sake of the few who wish to use an expensive way to pay a small amount.

As for the retailer being reluctant to say what their true transaction cost is, why is that a problem? Would you ask what the trade or wholesale cost of that item you are just purchasing? Retailers are naturally reluctant to say how much their merchandise costs because we are all too aware of idiot customers who assume we can make a living off a small mark up.

 

[MikeJ]

Ryanair charge 40p credit card fee on a £20 flight. It's a flat 2%.

 

[promdressers]

Ryanair charge 40p credit card fee on a £20 flight. It's a flat 2%.

That's okay if you can find a £20 fare! You are also likely to want to come back again. Most holiday makers tend to want to take luggage. So 2% flat fee is a nice earner for MO'L, considering he will definitely not be paying more than 16p per transaction. RA's turnover is slightly more than mine

PSL, I have never seen a retailer charge a fee for a transaction over £10, £5 or £10 seems to be the standard threshold, but you have obviously seen differently. However, have you an idea of the margins that a small food retailer works on? The likes of the big merchants, having made life difficult for the relatively few remaining "corner shops" are now also moving into the local neighbourhood.
Your product, I am guessing, earns you more than a few coppers per transaction - but it is difficult to know, as your website appears not even to be open about what your product actually is, let alone the cost.

 

[Psl]

That's okay if you can find a £20 fare! You are also likely to want to come back again. Most holiday makers tend to want to take luggage. So 2% flat fee is a nice earner for MO'L, considering he will definitely not be paying more than 16p per transaction. RA's turnover is slightly more than mine

PSL, I have never seen a retailer charge a fee for a transaction over £10, £5 or £10 seems to be the standard threshold, but you have obviously seen differently. However, have you an idea of the margins that a small food retailer works on? The likes of the big merchants, having made life difficult for the relatively few remaining "corner shops" are now also moving into the local neighbourhood.
Your product, I am guessing, earns you more than a few coppers per transaction - but it is difficult to know, as your website appears not even to be open about what your product actually is, let alone the cost.

I am not talking about the margins on products the independent retailers sell. I am well aware that the margins are extremely low in this sector. My point was, and remains, the 'loading' of fees to process debit card transactions and the refusal of two particular retailers to outline the said charges.

The big chains have decimated the 'corner shop' sector and where possible I like to give them, the independents, the trade. All I ask is that I am made aware of any additional charges for processing transactions, either by a sign in the shop or when I specifically about the said charges. The refusal on retailers part to afford me this information leads me to question whether the transaction processing charges are legitimate and simply 'loaded' by the retailer to increase profits.

In reply to your statement promdessers, about the products I sell and kulture's point about wholesale and trade prices being divulged; I sell a number of products, and yes, all of which earn me more than a few coppers per transaction. One of the products sells for £72 inc vat per litre and it is explained quite well I think on the website, see here: http://www.greenfrogenterprises.co.uk/endomed-energysaver.html . The wholesale price of this product is freely available to online retailers, that want to sell it.

Other products I sell include biomass air heater units for industrial premises that generate £3,500+ PA from the RHI for the building owner. These units cost £10,950+VAT + installation.
Biomass EnergyCabins prices start from £140k but they do generate £500K + over 20 years from the RHI. Combined Heat and Power Units (CHP) both mechanical and hydrogen fuel cell units that range from £170k to £2.5mill.

Everything we sell is itemised in a quotation to clients as the product trade prices can be freely obtained from the manufacturers. But being in possession of those prices doesn't mean you can buy the product or indeed will the manufacturer sell them to you. There is also that fact that any Biomass/CHP individual unit product has to be combined with other products to create a complete solution for the client.

I don't and never have asked, an independent retailer what their wholesale or trade prices are because it is not relevant to me. If I wanted to know I would simply go to the wholesalers that service this sector. If an independent retailer is not making a margin on the products he sells, even if it is a small margin, then it is them that are the idiots and not the customers. But the discussion is not about what margins an independent retailers is achieving.

 

[promdressers]

Fair enough, PSL, but nowhere, as far as I can see, have you previously mentioned that your gripe was the lack of signage to indicate the charge! That is clearly a warranted a complaint. You complaint has appeared to be the very imposition of such a charge.

The margins ARE important, as it is the low margins that make taking a card under certain circumstances unviable. They cannot necessarily raise prices to "accommodate" card fees, as the business is very price sensitive

To draw my contribution to a close, I will merely say that I can fully understand the imposition of, say, a 50p charge for small transactions, but that they should, and in my experience are, clearly indicated. In addition, I would not really be prepared to discuss specific financial information with a customer, either.

 

[Psl]

Fair enough, PSL, but nowhere, as far as I can see, have you previously mentioned that your gripe was the lack of signage to indicate the charge! That is clearly a warranted a complaint. You complaint has appeared to be the very imposition of such a charge.

The margins ARE important, as it is the low margins that make taking a card under certain circumstances unviable. They cannot necessarily raise prices to "accommodate" card fees, as the business is very price sensitive

To draw my contribution to a close, I will merely say that I can fully understand the imposition of, say, a 50p charge for small transactions, but that they should, and in my experience are, clearly indicated. In addition, I would not really be prepared to discuss specific financial information with a customer, either.

If a retailer deems that certain products cannot be paid for by debit card transactions due to the tight margins on the said product, then that is their decision. If they, the retailers, wish to charge a 'transaction fee' that is also fine, but don't 'load' the charge because you see it as a profit opportunity and then refuse to discuss it when asked about it.

As I have aid, my complaint has been about the 'loading' of such charges and the refusal of the retailers to explain this charge and 'loading'. My gripe was never about signage indicating any debit card processing charges, I merely mentioned signage in my last post as part of my reply.

I have already stated my opinion re low ticket items and debit card charges and I understand that such prices cannot accommodate these debit card transaction fees.

I fully agree that it is at the discretion of the retailer to discuss any specific financial information but if I ask about debit card transaction charges I would expect an answer, and in the absence of answer, it is then my prerogative to either continue with the transaction or not. And as a consumer I also have the right to enquire about such charges via other sources and mediums.

 

[LMDServicesUK]

Guys

A general observation re this discussion, whilst there is no (as far as I am aware) Legal Position on this, I believe that the OFT (as was) position on it was that it was OK to charge an admin fee if you paid by Credit card (as you were using credit to purchase an item so that has to be funded..).

Whereas a Debit card is the equiv of a cash transaction plus other benefits to the Merchant ( lower bank charges, direct to Bank account without needing a visit to the Bank etc.

The advice I give all my Merchants is that they RESERVE the right to charge an admin fee for CC transactions, as they are offering a form of Credit facility..

This should be very clearly displayed / advised at the PoS as per PSL's earlier posts.

However they should NOT charge for Debit card transactions as the processing costs are very low, however if they are being hit with lots of low value transactions either impose a Min spend notice or get a terminal capable of taking Contactless Payments AND ensure that their Processor also offers discounted fees for Contactless transactions..

More than happy to debate this on Forum or you can PM if you want to find out what you can get out there re Contactless terms..

 

[Christine Hough]

and my point is, that based on the fees outlined here, 20p and 30p per transaction, it's bang out of order to add more money to the fee.

You do realise that a garage charges more for parts than they pay. There is a factor for the trouble they go to to get the part and facilitate the service. I really do not see why a shop cannot also factor in a charge for a service they provide. There are overheads such a telephone calls and card reader hire in addition to the processing fees.

The important thing is that they tell you the charge and you can opt to use the facility and pay, or decide not to, get cash or go elsewhere. There is still a choice and maybe the longer more people use cas the longer we will have that choice.

 

[SwindonSteve]

Cash is King. If it's under £1k and in store, I pay cash and get a receipt.

Never had a problem.

As an edit:

If you haven't factored in these charges into your pricing structure from day one and adjusted accordingly to achieve your margin, you have a problem.

 

[promdressers]

Guys

A general observation re this discussion, whilst there is no (as far as I am aware) Legal Position on this, I believe that the OFT (as was) position on it was that it was OK to charge an admin fee if you paid by Credit card (as you were using credit to purchase an item so that has to be funded..).

Whereas a Debit card is the equiv of a cash transaction plus other benefits to the Merchant ( lower bank charges, direct to Bank account without needing a visit to the Bank etc.

The advice I give all my Merchants is that they RESERVE the right to charge an admin fee for CC transactions, as they are offering a form of Credit facility..

This should be very clearly displayed / advised at the PoS as per PSL's earlier posts.

However they should NOT charge for Debit card transactions as the processing costs are very low, however if they are being hit with lots of low value transactions either impose a Min spend notice or get a terminal capable of taking Contactless Payments AND ensure that their Processor also offers discounted fees for Contactless transactions..

More than happy to debate this on Forum or you can PM if you want to find out what you can get out there re Contactless terms..

I will renter the debate as this is a new angle! I was vaguely aware of this, but had forgotten about it. How, then, are Ryanair still charging 2% for DC's?

With regard to "factoring in" the costs, (Swindon Steve) that is perfectly plausible for the likes of RA, as they CANNOT practically take cash. They DO use the card facility to ramp up their profits. But you cannot factor in card costs to £3 purchases. Even in my old business, where the unit sale was high, we could not raise prices to accommodate the CC charges, as we are all in a competitive market - and not all folk pay by card. In fact, before we closed 2 years ago, the percentage of clients paying by CC plummeted since the recession. Thankfully.

 

[Psl]

Guys

A general observation re this discussion, whilst there is no (as far as I am aware) Legal Position on this, I believe that the OFT (as was) position on it was that it was OK to charge an admin fee if you paid by Credit card (as you were using credit to purchase an item so that has to be funded..).

Whereas a Debit card is the equiv of a cash transaction plus other benefits to the Merchant ( lower bank charges, direct to Bank account without needing a visit to the Bank etc.

The advice I give all my Merchants is that they RESERVE the right to charge an admin fee for CC transactions, as they are offering a form of Credit facility..

This should be very clearly displayed / advised at the PoS as per PSL's earlier posts.

However they should NOT charge for Debit card transactions as the processing costs are very low, however if they are being hit with lots of low value transactions either impose a Min spend notice or get a terminal capable of taking Contactless Payments AND ensure that their Processor also offers discounted fees for Contactless transactions..

More than happy to debate this on Forum or you can PM if you want to find out what you can get out there re Contactless terms..

Interesting, thanks.