Thread: Credit card fees

How do you handle credit card fees when a client pays with a credit card. The service I use charges 2.75%, do you pass that fee on to the client, charge them a flat fee or eat the fee? Thanks!!

I just eat the fee and consider it a cost of doing business. I get check or cash for around 70% of my business.

I agree with Trent, but I only take about one per month. I figure eating $10-15 is better than not getting paid.

Cost of doing business.... It also saves me from driving to the bank and making a deposit!

Originally Posted by Tom Rees

How do you handle credit card fees when a client pays with a credit card. The service I use charges 2.75%, do you pass that fee on to the client, charge them a flat fee or eat the fee? Thanks!!

The cost of the inspection should have the credit card processing fee already built in to it. Charging a "surcharge" or "checkout fee" may be illegal in your state and typically not allowed on check cards and prepaid debit cards.

So unless you're up on all the laws in your area you may be better off giving a discount for cash. In my honest opinion, if you're concerned about 2.75% on your credit card transactions, you're not charging enough for your inspections.

Originally Posted by Ken Rowe

The cost of the inspection should have the credit card processing fee already built in to it. Charging a "surcharge" or "checkout fee" may be illegal in your state and typically not allowed on check cards and prepaid debit cards.

So unless you're up on all the laws in your area you may be better off giving a discount for cash. In my honest opinion, if you're concerned about 2.75% on your credit card transactions, you're not charging enough for your inspections.

The surcharge restrictions were a credit card thing then the Feds got involved with the new credit card rules that went int effect a year or two ago. You can now charge a fee to cover the processing cost if the merchant wants to do so, but most don't.

I get checks or cash for 98% of my inspections but I found in some instances credit cards came in handy, like when the clients forget their checkbook. I'm sure you have all had that happen. It beats following them to the bank, or as I have done on occasion, invoice them and then wait weeks for a check. I was just curious. I think it was Scott that recommended Square and I have been happy with them. I also like the fact that with Square I can send an out of town client an invoice and they can pay with credit card and I am paid before I even do the inspection. Very convenient, and yes I like the fact I don't have to go to the bank to make deposit.

I switched to the program Costco offers a couple years ago. Because I have a premium membership, they waive some of the fees. Their costs are pretty low.
I take credit cards for close to half my inspections, and have the costs built into my fee structure. When I get cash or checks its just an added bonus.
I have a lot of out of town clients, so it just makes sense to take credit cards. Many consumers want to earn points on their cards, so they like to use them for everything they can.

I use Square for most of my transactions and it can add up. I give them close to $300 a month, but I agree with the rest of the guys, it's the cost of business and my clients always thing it's so cool to swipe the card and sign on my iPhone.

Yeah 2.75% is peanuts. I have paid 11% and as much as 14% in the past before the iPhone swipe thing came out. At that time I was entering the numbers manually. There are hidden costs, as you will see if you study your statements.

Originally Posted by Paul Friesen

I use Square for most of my transactions and it can add up. I give them close to $300 a month, but I agree with the rest of the guys, it's the cost of business and my clients always thing it's so cool to swipe the card and sign on my iPhone.

Paying $300 per month for $11,000 worth of business is something most would do in the blink of an eye ... and I know you were not complaining about it, just pointing out the relationship $$$$ amount.

How much do you pay for gas to make that same $11,000? My guess it is that you pay more than that $300 a month ...

To my surprise, 90% of my clients pay with check, so to be fair to them (and me) I pass through the service fee. No client has complained when I explained it to them although one opted to drive home and get their checkbook during the inspection.

Originally Posted by Jerry Peck

Paying $300 per month for $11,000 worth of business is something most would do in the blink of an eye ... and I know you were not complaining about it, just pointing out the relationship $$$$ amount.

How much do you pay for gas to make that same $11,000? My guess it is that you pay more than that $300 a month ...

Hey Jerry, I drive a new ram sport. I'm closer to $400 a month.

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Originally Posted by Jerry Peck

Paying $300 per month for $11,000 worth of business is something most would do in the blink of an eye ... and I know you were not complaining about it, just pointing out the relationship $$$$ amount.

How much do you pay for gas to make that same $11,000? My guess it is that you pay more than that $300 a month ...

Hey Jerry, I drive a new ram sport. I'm closer to $400 a month.

Searching "low cost electronic payments", find this:
7 Low-Cost Services for Small Business Electronic Payments and Money Transfers - FastUpFront Small Business Blog

Then check out Dwolla.

Believe this study:
How much money can my business save?

Last Updated: Nov 19, 2013 11:09AM CST

Let’s say your business sells laptops for $1,000 each. If you sold 100 laptops each month, you’d make $1.2 million in revenue each year ($1,000 x 100 laptops x 12 months).

Here’s how much you’d pay in transaction fees using different payment options:

• Square = $33,000
• PayPal = $35,160
• Stripe = $35,160
• Average Merchant Account = $41,160
• Dwolla = $300
  

As a weatherization general contractor, until now I have been paid almost 100% by check, customers reliably and soon-enough responding to emailed pdf invoice.

I think credit card fees are monstrously unfair, earning outrageous income for wealthy investors, taken from the poor (those who must pay in cash). I very reluctantly use a credit card, and honor a merchant with fuller payment for goods. I give up on wishing for cash-payment discounts, rather than in surrender to the greedy investors.

I have not yet tried to secure a payment using Dwolla. When I do, I know I will lose only 25 cents in a transaction, which is apparently the fair transaction-processor cost. Isn't that in line with what banks charged to process a check? I'm so disappointed PayPal would not challenge the credit card scam, allowing no-fee transactions for a payor who keeps some minimum balance in deposit at PayPal. They could suddenly ruin the credit card companies/ thieves, taking all of their business and still making good transaction income. I call PayPal once a year, and they don't understand the better vision.

Here is the content of an email message from Dwolla, that followed a friendly phone conversation a few minutes ago:

Thanks for your call earlier today and we'd love to help you out with encouraging and educating others on what Dwolla is! The first thing to note is Dwolla is a payment network that allows any business or person to send, request and accept money. We're not like those other big payment companies that rely on plastic cards and charge hefty fees. Instead, we’ve built our own network that securely connects to your bank account and allows you to move money for just $0.25 per transaction, or free for transactions $10 or less.

When someone makes a payment to you they can either create a full Dwolla account and link their bank account or checkout with Dwolla Direct (guest). Dwolla Direct is a simpler, faster, and secure way of paying with Dwolla for users who do not currently have a full Dwolla account.Dwolla | Dwolla Direct

I think another great piece is actually the press our CEO, Ben Milne has as he's truly a disruptor and is looking to change the way we move money within the industry. Checkout some great interviews of Ben below:

Video of Ben and transforminghttps://www.youtube.com/watch?v=BFeSgN1cQhg
All other press articles/videos: Dwolla In The News

Also I would encourage you to learn more about Dwolla with a few links below (if you want to use this):

https://www.dwolla.com/about
https://www.dwolla.com/fees
https://www.dwolla.com/security

Please let us know if this is helpful or if you have any followup questions, Phillip!

I joined Dwolla just now, inspired by this conversation. I will next send a Dwolla Request to a customer as a better way to invoice. My friend/ customer will happily join Dwolla too. The total cost of the transaction and revenue of Dwolla will be twenty five cents, deducted from my Dwolla balance.

I will learn now whether I can use Dwolla for an amazon.com purchase. Probably not. They are behind the curve now.

Let us all get this rolling!

I give client's the option and if they want to use a CC, I pass the fee onto them. Most don't complain and I retain some of my margin. If you look at all the costs we have (see the cost of doing business calculator) CC fees are just something else that shrinks our take home. Have you ever seen what the break down of fees from the title company? They even charge for copies and document delivery costs.....


//Rick

Here is more from Dwolla, hot off the press:

Phillip,

Sorry if some of the interview links we're cut off. Here's a few of them that are great in understanding Dwolla:

Full interview with Ben Milne: https://www.youtube.com/watch?v=BFeSgN1cQhg
NPR coverage: Company Aims To Go Beyond Credit Cards | Here & Now


Hope this helps!

I use PayPal swiper onsite with iPhone, 2.7% fee for onsite swipes. Works great, I have a PayPal debit card, when I swipe a transaction the money is immediately available with PayPal debit card. Can also email invoices if needed.

Originally Posted by Tom Rees

I get checks or cash for 98% of my inspections

I'm 100% cash or check. Hasn't caused any lost any business yet. Until that becomes an issue I don't plan on making any changes.

Originally Posted by Eric Barker

I'm 100% cash or check. Hasn't caused any lost any business yet. Until that becomes an issue I don't plan on making any changes.

I

Me too Eric. I could probably count the number of inspections I've lost in 11.5 years of business from not accepting credit cards on one hand. I have no desire or need to offer CC payment as an option.

As for people who forget their check book, I tell them to just mail me a check and I don't hold the report over their head either. They still get their report the next day. And I always get paid.

Before I took credit cards I lost at least one job because I didn't.
However, I have had some collection issues when someone forgot their checkbook.
With so many out of town clients, I would play hell trying to collect checks,etc.. Its far easier for me, and my clients that I take credit cards.
When I started taking credit cards I raised my prices about $15 per inspection to cover the costs. For the ones that use credit cards, I don't lose anything, for the ones that pay by check or cash, I make a little extra. Taking credit cards has taken nothing out of my bottom line. In fact, it has added to it.

I have never asked a client to pay extra to cover fees. I know that I would not like it if someone tacked on an extra fee because I wanted to use my credit card.

I have had clients ask me, and I tell them that it does cost me extra to take credit cards, but I do it for the convenience of my clients. Once in a while they will write me a check, but when I tell them it makes no difference to me, they pull out the plastic, because its easier for them, and they may want the points. A $400 purchase is a good one when you are counting points. They don't know they are paying the fees anyway.

If I was never asked if I took credit cards, or never had a problem collecting checks, then I may not take credit cards. But, with out of town clients, credit cards is the easiest way to get paid.

I specify in my confirmation email sent before the inspection that I charge a flat $10 fee to help cover credit card or paypal fees. It's not been a problem with clients, and I think evens out for me with the 3.5% Square charges me to process cards.

Anyone who charges more for credit cards ... do you give an equal discount for cash?

Not "cash or check" ... I'm talking about "cash" cash - you know ... greenbacks - no having to deposit a check or be concerned if a check is going to bounce, etc. That should be worth something to you.

Most clients pay by check. Once in a while someone will pay with plastic. Usually out of towners or investors. The service fee is minimal per job. I wouldn't even consider asking a client to pay a surcharge. Smells like bad greedy business to me. Smells like someone concentrating on the wrong end of business. I don't like dealing with people who chase every penny like its the end of the world.
Will I get rich or go broke by loosing the service fee or asking for a surcharge? NO. Sure I could extrapolate the numbers over a 12 month or 3 year period and make it into a big amount of lost money. Seems like a big fat waste of time to me. You can multiply anything over a long enough time or occurrence period to make it seem relevant. We see examples of that all the time. Doesn't mean it is exactly relevant. Granted if you are Apple or Mobil those pennies are huge.
I prefer to look at the per job cost and how it relates to income and customer relations. Beyond that my time not having to process a check is worth the less than $10 service fee.

Originally Posted by Markus Keller

Most clients pay by check. Once in a while someone will pay with plastic. Usually out of towners or investors. The service fee is minimal per job. I wouldn't even consider asking a client to pay a surcharge. Smells like bad greedy business to me. Smells like someone concentrating on the wrong end of business. I don't like dealing with people who chase every penny like its the end of the world.
Will I get rich or go broke by loosing the service fee or asking for a surcharge? NO. Sure I could extrapolate the numbers over a 12 month or 3 year period and make it into a big amount of lost money. Seems like a big fat waste of time to me. You can multiply anything over a long enough time or occurrence period to make it seem relevant. We see examples of that all the time. Doesn't mean it is exactly relevant. Granted if you are Apple or Mobil those pennies are huge.
I prefer to look at the per job cost and how it relates to income and customer relations. Beyond that my time not having to process a check is worth the less than $10 service fee.

If you don't value your time, then why should anyone else?

KISS - Keep It Simple S____ (Fill in your choice, Saint, Stupid, etc.)

Charge enough to cover your fees and time to process. If you lose a bit on one process, you make it up on the next. An additional fee is just not cool... and not needed. If you are operating on that thin of a margin, you have more problems than card fees.
I take more cards than ever, quick and easy.
I use Square since I do not like being locked into a contract and it always works for me.
I tell my clients: cash, check or credit card, your choice. I do many inspections for investors and out of town clients and taking a card over the phone is simple and immediate.

Originally Posted by Jim Luttrall

If you are operating on that thin of a margin, you have more problems than card fees.

Completely agree with that.

When I did inspections I my typical drive was 1-1/2 hours up or down the Florida Turnpike or I-95 EACH WAY ... of course, though, I didn't worry about the small stuff like that either, not with the market I had.

Originally Posted by Phillip Norman

Searching "low cost electronic payments", find this:
7 Low-Cost Services for Small Business Electronic Payments and Money Transfers - FastUpFront Small Business Blog

Then check out Dwolla.

Not to throw cold water on your comments, I would never use Dwolla or any service similar to it. Smart phones are not as secure as you think, and are the big-time target of hackers. If you check the news, a few days ago they had to patch the phones again, but some problems not addressed still remain.

If a vendor offered to swipe my card on his phone I would have to assume it was secure. However, if he said that I had to get an account somewhere (Dwolla) just to pay him (or asked for more cash because it's a credit card transaction)----I think that I would use another vendor.

My impression would be this: The "standard" for credit card is swipe. Anything other than that raises my suspicion. "Who are they? Are they secure?" No, I don't think that I would like to pay that way.

Did I mention that every customer then needs to have a smart phone? Google the credit card market.... see what is going on. For example, the next version of the credit-card is called "chip & pin" and requires a two step verification process. A chip in the phone talks to the card reader as well as additional information provided by the customer at time of purchase---pin. This "new-technology" that really hasn't been implemented by all banks----has already been comprised.
In situations like this, even thought I would loose points, I would pay by invoice/check (only because we get the bank to send it out and there is no postage charge .

But, this decision rests upon you and your marketplace. Does it like to pay by check or by credit card?

I am so happy to be back in this conversation. I don't believe I mislead by mentioning dwolla. I am only after an alternative to mailing of checks. I don't think anything physical need be involved with the small-rate commerce of a service business. Let us reject cards for this of course for insecurity in swiping anywhere. Let us reject cards as strongly for their immoral taxation, taking that 3% of transactions instantly for doing almost nothing, from the 99%, and passing it up to the 1%. Dwolla proves that a per-transaction cost of 25 cents, regardless of transaction amount, is all that is needed; all higher amounts are that reverse-Robin Hood tax. And, who pays the tax, really? If the more-affluent who are allowed credit get money back for using their cards, the net of money stolen from merchants is paid by the poor who don't have credit. It is a morality, regressiveness thing. We have so little opportunity to publicly exhibit our morality. I take every opportunity. I use a credit card rarely and with revulsion, as a strike against the gamblers of Wall-Street "banking." (The enemy is not the local bank or credit union, and my not-playing does not hurt them.) I won't buy gas at BP/ Arco because of monstrous immorality in the Gulf spill, and think that those who still will do business with BP are mindless. If I could associate a service station with fracked oil, I would further limit my options. Don't we all have strong urges to act for good over evil? Each of us can make a difference.

So, we should patiently look for the success of Dwolla. It isn't yet working for me. After I enrolled in support of this conversation, I sent a first invoice to a favorite, friendly customer. A modest $200 amount. Yet, six bucks for evil if we played with cards. He would not go along, sending a check instead. My action also included placing $100 on deposit at Dwolla for impending online purchases. So, what might I buy, persisting to support Dwolla? I won't shop at any Walmart, are you surprised? Best Buy, maybe. They have too little online merchant participation. If I don't draw from the $100 deposit in three months, I will withdraw it. Little tyrant me, I have told Dwolla so.

If you accept credit cards, the right thing then, always, is to offer a 3% discount for cash or check payment.

Originally Posted by Jerry Peck

Anyone who charges more for credit cards ... do you give an equal discount for cash?

Not "cash or check" ... I'm talking about "cash" cash - you know ... greenbacks - no having to deposit a check or be concerned if a check is going to bounce, etc. That should be worth something to you.

Cash costs more than checks. I never leave my office to deposit checks, but I have to go to the bank to deposit cash. I should charge more for cash.

If you charge the same for check as cards, you are costing yourself money or ripping off the clients that pay with check.......or both. If you use the argument that "I make up the credit charge with the next client that pays with check" that just means that your clients are numbers to you. That reminds me of a mechanic that told me that he had put in twice the hours on my vehicle than the book allowed him to charge and he'd have to make up the loss with getting some other jobs done in less than the book time. Good for me, but was that fair to his other clients?

Truly, I can see both sides of this argument. I really don't know that there is a right or wrong. But it damn sure isn't about running a thin margin. It's about finding for yourself, that balance of treating yourself and your clients fairly. And in the big picture of our business, this a minor disagreement.

Originally Posted by Lon Henderson

If you charge the same for check as cards, you are costing yourself money or ripping off the clients that pay with check.......or both. If you use the argument that "I make up the credit charge with the next client that pays with check" that just means that your clients are numbers to you.

I'd really be interested to know how you charge your clients for inspections. Using your theory, if you charged a flat fee for the size or purchase price of the house you'd be "ripping off" some clients whose inspection took less time than others.

Using your theory, charging the client per minute of your time would be the only way none of your clients would ever be "ripped off". Using your theory I can only assume you also charge your clients for each follow up phone call they make to you. Otherwise, you are "costing yourself money".

Originally Posted by Ken Rowe

I'd really be interested to know how you charge your clients for inspections. Using your theory, if you charged a flat fee for the size or purchase price of the house you'd be "ripping off" some clients whose inspection took less time than others.

Using your theory, charging the client per minute of your time would be the only way none of your clients would ever be "ripped off". Using your theory I can only assume you also charge your clients for each follow up phone call they make to you. Otherwise, you are "costing yourself money".

Almost a nice try at justifying yourself, but it turns out to be just clever.

Cash costs more?

Cash goes into the wallet, how does that cost more?

Originally Posted by Jerry Peck

Cash costs more?

Cash goes into the wallet, how does that cost more?

Cash goes to the bank like checks if you're doing honest bookkeeping. The only difference is that I have to drive cash to the bank. So far, the bank hasn't offered a cash reader for me to deposit it from my office. I play it straight with the IRS.

Originally Posted by Lon Henderson

Almost a nice try at justifying yourself, but it turns out to be just clever.

I'm not trying to be clever or justify anything. Your claiming that I'm ripping people off by charging the same price, cash, check or credit card.

Please share with us how you price your inspections in a way that all your clients pay exactly the same amount for the time, effort and expense you have into each individual inspection. Unless you're charging by the minute, plus mileage and expenses, you can't.

I charge by the finished square footage of the house. Period. I don't charge more or less for cash, check or credit card. I don't charge more for the age of the home. The price doesn't change if it's 1 mile or 40 miles from my house. The price doesn't change if it's winter and the roof is covered in snow. The price doesn't change if there are multiple heating sources. Some inspections for the same price take longer than others. I don't force people to hire me and I give them the price up front before I even book the inspection. HOW IS THIS RIPPING PEOPLE OFF?

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Originally Posted by Lon Henderson

Cash goes to the bank like checks if you're doing honest bookkeeping. The only difference is that I have to drive cash to the bank. So far, the bank hasn't offered a cash reader for me to deposit it from my office. I play it straight with the IRS.

Now you're generalizing that those of us who take cash and put it in our office safe instead of the bank are cheating the IRS? You do realize that you don't have to make a bank deposit to claim the income, right?

Originally Posted by Lon Henderson

Cash goes to the bank like checks if you're doing honest bookkeeping.

I didn't know who would but I knew someone would take the the bait ... hook, line, and sinker ... you took it.

So, there is something wrong with taking cash? I used to carry around $2,000-3,000 in my wallet all the time, sometimes even more, especially when someone would pay $3,500 cash for their inspection.

You mean all those years that I took cash, entered the cash into my "I play it straight with the IRS" books, spend the cash on expenses, entered those expenses in my "I play it straight with the IRS" ... was wrong or somehow illegal?

Please explain how that is so.

My accountant never said it was wrong or somehow illegal - are you saying that you know something she and her company did not know? They were all CPA's and were all properly licensed.

As far as I know, the IRS does not control where you place your money, as long as you report accurately. When I get cash, I usually keep it in an envelope on my desk, then use it when I make certain purchases for the business. Its all about record keeping, and keeping accurate books.

Ripping people off? Its a pretty basic business practice to know what The Cost Of Doing Business is. For instance, my E&O costs me about $4.50 per inspection. I know how much I paid in credit card fees last year, so I have a basic idea of the cost per inspection. Same goes for CPA fees, office expenses, tools, software, etc. I look at it all at the end of the year to determine if I am charging enough to keep on track.

If I make a change during the year (I recently added something that adds about $4.00 per inspection), I adjust my prices to compensate for the new "cost of doing business". With most things the cost is averaged over the expected number of inspections, and I look at my prices at the end of the year.

However, some are a direct cost per inspection, so it doesn't matter how many I do per year, its still $4.00. When that happens, I adjust my prices across the board.

Originally Posted by Jerry Peck

I didn't know who would but I knew someone would take the the bait ... hook, line, and sinker ... you took it.

Please explain how that is so.

My accountant never said it was wrong or somehow illegal - are you saying that you know something she and her company did not know? They were all CPA's and were all properly licensed.

You don't fish much, or you'd know that I just tugged on your line.

You are usually so precise, so I'm mildly amused to see that you totally missed what I said. You can book cash without a visit to a bank. I never said otherwise or even indicated otherwise. I never care to walk around with thousands in my pocket. (and never understood those who do, but each to their own) So, getting paid in cash requires a trip to the bank for me. Since I knew you were trying to bait me into saying something about pocketing cash payments so you could attempt a blindside ambush about disclosing it to the IRS, I beat you to that.

The fact is, I can't even remember the last time I was paid in cash. It's been a very long time ago.

I am surprised at what threads will catch fire here. However, I've been guilty of throwing gasoline on this one, so I have to share in the blame. But this is it for me. I'll catch you guys on another thread that is more interesting and substantive.

I get paid cash a fair amount of the time, usually 2 -3 times a month.