Shop charging for payment by card. Can they do this?

[Chopsie]

So it is a scam then, as the business doesn't pass this fee onto the customers does it?

 

I can understand small businesses imposing a minimum transaction level - if I take card for a 99p sale, I barely break even, but the number of people who want to use a card for such a small amount is so tiny, I can bear the brunt of this quite happily. If I ran a corner shop and had people paying for Mars Bars on switch, I'd actually be losing money every time they did. But to charge 50p for every card transaction... debit card sales cost me 20p (not including till roll, carrier bag - bit I''d use those on cash sales too) so I'd actually be making 30p more per sale if I levied a 50p surcharge...

[Ousetunes]

Debit card transactions are charged in pence, for example, 20p per transaction irrespective of how much the sale is for (20p for a £10 sale, 20p for a £10,000 sale). Credit cards are charged at a percentage of the sale, so for example 1.75% of a £10 sale 1.75% of £1,000. Various types of cards' rates differ: American Express take a far bigger commission than the likes of Visa.

 

Add to this, the rental of the terminal and what might appear to be penny pinching to the customer can add up to quite an overhead in running a business. When the economic climate is tough then who can blame the business for trying to claw back some of these expenses.

 

Also, the VAT content of these charges cannot be reclaimed by businesses so once again the government benefits whilst the rest of us try to make a living.

[Chopsie]

Add to this, the rental of the terminal and what might appear to be penny pinching to the customer can add up to quite an overhead in running a business. When the economic climate is tough then who can blame the business for trying to claw back some of these expenses.

 

Also, the VAT content of these charges cannot be reclaimed by businesses so once again the government benefits whilst the rest of us try to make a living.

 

Yes, but as I pointed out earlier, this is all accounted for in the mark-up on goods. And if you're VAT registered, you can claim back the VAT element on terminal rental (but not the transaction charges)

[deelightful3]

i couldnt believe it last week when a couple came into the shop and bought a 29p cup on credit card,at first i said i wasnt sure if i could take it she then turned to her partner and asked him if he had the money and he said no,so in the end i took it because there was no one around to ask but if the 50p charge had been in place i dont think she would have bothered do you

[Ousetunes]

Yes, but as I pointed out earlier, this is all accounted for in the mark-up on goods. And if you're VAT registered, you can claim back the VAT element on terminal rental (but not the transaction charges)

 

Correct. I am fully aware of this.

[Chopsie]

Also, the VAT content of these charges cannot be reclaimed by businesses so once again the government benefits whilst the rest of us try to make a living.

 

VAT isn't charged on the transaction fee, just the terminal rental - and if it was it could be reclaimed, so not sure what your point is???

[johnbradley]

Shops are charged a fee for processing card payments - anything from a flat fee of 20p to 2.5% of the transaction value (sometimes more depending on how good a deal they get from their card processing provider). That's why a lot of shops have minimum spend levels before you can pay on card. Personally I think it's bad customer service - the fact that there is a cost involved in processing transactions is accounted for in the markup on the goods you're buying. I don't charge customers for paying on card in my shop, nor do I impose a minimum spend for cards. It may reduce my profit margin drastically on small transactions, but I'd rather have happy customers... what is more irksome, is that the only place I've seen charging an admin fee was a large national retailer who can surely afford a few transaction fees?

 

In our shop we try our best to waive the surcharge...so on small transactions we rarely charge it. On the large ones though, we have to do it. 2% on £800 cannot be 'soaked up'...margins are already tight, and unfortunately there is no escaping this.

 

However, i totally disagree on your angle as to whether its poor service...to factor-in the 2% on all products, regardless of how the consumer is paying...that's poor customer service, as it is needlessly penalising those people who are paying via a different method.

 

We would rather treat all customer's fairly, and as a result, the surcharge is implemented on those customers who choose to use credit.

[Chopsie]

However, i totally disagree on your angle as to whether its poor service...to factor-in the 2% on all products, regardless of how the consumer is paying...that's poor customer service, as it is needlessly penalising those people who are paying via a different method.

 

We would rather treat all customer's fairly, and as a result, the surcharge is implemented on those customers who choose to use credit.

 

The point I was making is that there is a mark-up on goods and services to 1) make a profit and 2) account for the cost of sales. I don't increase all my prices by 2% 'just in case' someone pays by card, I just absorb it when the customers do. When I forecast the cost of setting up and running my own business, I factored in that some sales cost more than others. If I sell a £150 item, the cost for a visa sale is 2% - three whole pounds! So I make £3 less than if the customer paid cash. Times the transaction by 10, I'd still be keeping a decent chunk - can you honestly say that 2% on a large transaction is the difference between making a profit and not?

 

I choose to absorb this charge, other shops choose not, I guess it's all down to what you sell and the margins involved. Ultimately, it's up to you, I'm just voicing my opinion as both consumer and shop-owner.

[Ousetunes]

VAT isn't charged on the transaction fee, just the terminal rental - and if it was it could be reclaimed, so not sure what your point is???

 

But if you're going to add in your card handler's percentage then VAT is payable on the total balance received.

 

Thus, say someone makes a purchase of £100 and you add a card handling charge of 2%, that customer has paid you £102 inclusive of VAT. You pay VAT amount of £15.19 to HMRC.

 

However, you cannot claim back that VAT portion of the fee, 30 pence in this instance. That might not sound much, but times it by each company's card turnover in this country and that's a staggering amount the government is denying us claiming back.

 

Or am I missing something?

[Chopsie]

But if you're going to add in your card handler's percentage then VAT is payable on the total balance received.

 

Thus, say someone makes a purchase of £100 and you add a card handling charge of 2%, that customer has paid you £102 inclusive of VAT. You pay VAT amount of £15.19 to HMRC.

 

However, you cannot claim back that VAT portion of the fee, 30 pence in this instance. That might not sound much, but times it by each company's card turnover in this country and that's a staggering amount the government is denying us claiming back.

 

Or am I missing something?

 

OK, I see your point but as I don't charge a surcharge for card transactions I was just looking at it from a 'what I can claim VAT back on' point of view. Taxman always wins in the end though of course!