

With Credit Card Settlement, Will Ecommerce Software Need an Update? - callmeed
http://callmeed.posterous.com/with-credit-card-settlement-will-ecommerce-so

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mikey_p
Can't be any worse than the morass that is tax calculation. Even on the US
side it can be unbelievably complicated. Take a site I just wrapped up that
had nexus in 3 US states, 1 of those states has different sales tax that has
to be collected based on the county and town of the purchaser, and another
state had a requirement that different goods are taxed at different rates,
i.e. a jacket and a fur coat fall in two different categories and are taxed
differently.

Like all things web, we ended up using an API for these calculations, from
CyberSource in this case. There's no way a few fixed fees could be worse than
this mess.

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tzs
Most places using those software solutions are e-commerce only places, and
only accept credit cards. This will have pretty much no effect on them, as
they should already be taking into account those fees when they set their
prices.

The merchants affected by this are those that accept both cash and credit
cards for products sold through a given sales channel. Generally, that will be
the brick and mortar shops. They'll now be able to advertise the cash price
for the item, and tack on a credit card fee at the cash register.

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dangrossman
This shouldn't change anything on the web where only payment methods with
transaction fees were accepted all along. Why would you want to break out the
fee into another line-item?

In the offline world, this settlement only offers a new label for an existing
practice. Cash discounts were already legal, and a credit surcharge is just a
cash discount by another name. I don't expect anyone that wasn't interested in
advertising cash discounts to want to start advertising a credit surcharge.
That sounds much more offensive to customers that want to give you their money
but also want to use their credit card.

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michaelt
> Why would you want to break out the fee into another line-item?

It's not unusual in things like concert ticketing to have a headline price of,
say, $30 then when you get to the checkout there's an extra $10 in processing
fees and delivery charges. I assume companies think this makes them more money
than being up front about the total cost.

> Cash discounts were already legal, and a credit surcharge is just a cash
> discount by another name.

In one case the customer pays less than the advertised price, in the other
case more.

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SwellJoe
I hadn't heard about this.

I'm kinda hoping this means American Express will have to fall into line with
the other providers on pricing. I'm tempted to enable an AmEx penalty, since
it costs more to process AmEx than Visa and Mastercard...that'd probably mean
many customers would choose another card, even though it's probably our most
popular payment choice right now (I'm pretty sure small business owners have
AmEx cards at a higher rate than the average consumer, though I'm not entirely
sure why).

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gergles
I'll echo what Dan said for their consumer accounts as well. I always get
excellent, fast, friendly, competent, empowered customer service any time at
all I have the slightest problem with a transaction on my American Express
cards. So, I use them for everything.

I imagine their higher discount rate helps fund that customer service center,
but if I saw a place charging more for Amex cards, I wouldn't shop there; I'd
just go somewhere else. Amex customers are (at least, statistically,) more
affluent and have a higher propensity to spend; you pay more for being able to
access those people.

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lukeschlather
Why advertise a rate at all? Just show your price and have a line item for
credit processing fees right after tax.

Anyway, it seems a little backwards that the merchant is paying the processing
fee, since you're the one who's getting the great customer service.

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dangrossman
You have to think of credit card fees as part of your customer acquisition
cost. You should be willing to pay more if the customer is worth more to you.
People and businesses with Amex cards are more affluent than average, so you
are willing to pay Amex more to acquire them than you'd pay Visa or
MasterCard. That's why Amex can and does charge you more, not because they're
simply passing through costs. If that was the case, more businesses would
choose not to accept Amex; many of those where customer acquisition isn't an
issue already don't (like utilities).

Amex has more affluent customers, on average, because they don't give cards to
people with poor credit, and most of their cards have a significant annual
fee. Their customers are those who can afford to pay extra for more benefits,
which happens to correlate highly with overall affluence.

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toomuchtodo
Agreed.

I have a Platinum American Express. I pay $495/year for my card, plus
$175/year for three additional cards on the same account. I spend anywhere
between $350K-$500K/year on the card (both personal and business-reimbursed
expenses).

Are my charges more expensive for you as a business to process? Probably. I'm
also more likely to spend _a lot_ more with you than your average customer.

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michaelt
Would such big spenders quibble over a little 1% surcharge?

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toomuchtodo
Honestly? I probably wouldn't. I'm in the minority though. Think how many
Green charge card, OPEN card, regular consumer Amex credit card, and corporate
card customers withe Amex there are out there. Would they quibble over an
additional 1%? Or would they shop elsewhere with someone who absorbs the cost?

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JSadowski
While it may no longer be a requirement of Visa or Mastercard that merchants
not pass on fees on to consumers, I believe that there are laws on the books
in several states (California included) that would still preclude this.

<http://law.onecle.com/california/civil/1748.1.html>

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tzs
Note that this only applies customers who elect to use a credit card in lieu
of cash or check or similar. For online transactions where credit cards are
the only payment method accepted, that section does not apply.

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gergles
While a reading of the letter of the law seems to indicate that you would be
correct and would be able to pass on/differentiate charges ("The customer
CAN'T 'elect' to use a credit card because we don't take anything else! Suck
on that, legislature!"), my reading is that the "intent of the legislature"^
clause would almost certainly preclude you from charging credit card
surcharges and that a customer who sued you for doing so would win.

^"It is the intent of the Legislature to promote the effective operation of
the free market and protect consumers from deceptive price increases for goods
and services by prohibiting credit card surcharges[...]"

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tzs
What about section (c)? That pretty clearly indicates the legislature probably
intended my reading.

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nickzoic
I'm working on this for a client at the moment.

The tricky bit is that the credit-card processing itself is being done by a
third party gateway. We pass a request to the third party to go collect a
payment for $X and let us know when that is approved. The user's credit card
number never actually passes through our system, which is a great way to avoid
dealing with PCI-DSS.

But the card number isn't known at the time we pass $X to the gateway. So
there's no way to apply a different surcharge percentage to different types of
card.

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dangrossman
If you have a traditional merchant account, there's no way you know what the
fee will be beforehand anyway. Passing on the actual fee to the customer is
impossible. The interchange rate for a basic card is different from the
interchange rate for a rewards card, for a hotel card, for a signature card,
for a business card, etc. There are hundreds of different classifications and
no way to know which a card is until after you've charged it.

The fee tables are 100+ pages long.

<http://ctlr.msu.edu/download/cashiers/VisaICApr12.pdf>

[http://www.mastercard.com/us/merchant/pdf/MasterCard_Interch...](http://www.mastercard.com/us/merchant/pdf/MasterCard_Interchange_Rates_and_Criteria.pdf)

If you're not dealing with a merchant account, but a 3rd party processor, then
you're almost always paying a flat fee regardless of card type. So why would
you need to pass on different rates?

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coopdog
I can't help but think this is a great opportunity for bitcoin, pay online
with bitcoin for a 1-2% discount. Makes more sense than ever

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ltcoleman
Next, the government will start to put into place laws that force retailers to
display information about the fees to consumers. I'm all for fixing this old
system, but I agree with the poster that this will have far reaching
implications.

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Dobbs
While I get screwed a bit for almost exclusively using debit over cash I am
very excited to see the holdouts of "cash only" start accepting cards under
this ruling.

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cpayne
I can't see what the fuss is. Australia has had this in place for years...

