New rules come into force today on the application of surcharges for processing payments made by a card. The RBA website has background to the creation of rules relating to surcharge here. It’s worth newsagents checking out the Visa press release here. Visa’s new rules apply from today.
It’s also worth reading what change.org is saying and doing about this in terms of Jetstar.
Newsagents who apply a surcharge to any card payment transaction need to look carefully at how they calculate and apply the surcharge.
What do other agents do with Lottos and Phone charge purchased with credit cards. Our margins are so low now on these products and more and more people are using cards . A good few customers come in only for Lotto or phone re-cahrge. I am happy to pay charges on all other purchases but would like to be able to recover costs on Lotto and Phone products when purchased serperately. If they buy higher margin items with it then I would not charge. How can we do this?
My view on surcharges is it always erk’s me when a retailer does it to me so I wont do it. Yes its annoying when someone puts a $20 dollar phone recharge on a card, but my response is to smile and thank them. If its really affecting your bottom line that much build it into your margin.
I tend to agree with Steve. More and more people are coming in even for just a scratchy and expecting to eftpos it. It is a bit annoying but as steve said you have to suck it up and look at the big picture. Our local fish and chip shop charges 80c per eftpos transaction regardless of card or amount. Many times when I have been in there I have observed customers ordering sizeable amounts and then walking out and leaving it because they don’t have cash.
I have a Woolworths and a Big W both sides of me and they do not charge.
I do not want to offer a service that paints the wrong picture to my customers.
I like Steve would say build the charge into your product pricing.
Although I do not offer payment with credit for Lotto but I have been thinking of allowing its use.
Only because I am not under pressure from others selling it have I not allowed it to be used so far.
We charge 1% if for lotto products using credit. (No complaints). Have a seperate selection for this when subtotal. If they are making other purchases we don’t apply the fee. Also have 15c surcharge purchasers under $5.00. So many customers ask is there a minimum so we decided it’s this or refuse eftpos for small purchases but that pisses customers of more than the surcharge. When you have customers buying just a newspaper or packet of gum it’s not worth it for us when they use card. We lose too much to the bank with their charges, when we bank a cheque (for home delivery customer) we pay $1, so there’s most of profit gone when you are banking cheques under $10.
As for woollies not charging, customers who complain are usually the customers that shop there before they shop with us.
We charge 1% on all credit card purchases on low margin product.
We tell the customer beforehand that it is what the bank charges us and it equates to x cents. On a sat lotto amount that would be 16c on a $15.80 quickpick. When the customer hears the cents amount they don’t worry about it. They tell us most newsagents don’t allow lotto on credit.
Some do change from credit to savings / cheque account as a result. My argument is how they pay shouldn’t affect my margins, if they want frequent flyer points they can have them but they should pay for them not me.
On Lotto and phone credit you can’t build into your margin. The margin is what it is. For gifts and higher selling margins we don’t charge.
Same thing for cash out. We charge 20c and let them know. We have an atm in the centre that charges $2.50 for cash withdrawals and let them know that as well. When they do the math they put the cash withdrawal through us. It also means that the cash we have on hand is settled into our bank that night.
We have halved our merchant fees and haven’t seen loss of trade.
The key is to be open, honest and upfront about how they pay. We have also thought about placing a sign on the wall along the lines “We welcome visa/mastercard payments. A 1% surcharge applies which covers the cost our bank charges for the use of a credit card”. Or something along those lines.
On most telephone and utility bills a surcharge message is displayed for using credit cards so its an education thing.
Steve, can you tell me how to build eftpos fees into recharge and lotto margins or even mags, newspapers as rrp are fixed not by us but by the suppliers at low margins?
i like what tyro are proposing, ie letting the terminal add the exact fee and displaying it for the customer to see, i will consider using this when it is set up. merchant fees are costing me $500+ a month and growing as more customers use only cards.
I know you are stuck with set margins on a lot of products like lotto and phone recharge, I wear the cost of eftpos and refuse to add a surcharge or set a minimum transaction. My monthly eftpos fees equate to about 3% of my monthly Lotto commission so I don’t consider it an overly large cost to bare for the goodwill it generates. My comment about adding the cost into my margins if it was too much to carry is just what I would do in preference to adding a surcharge and there are lots of products were I do set the margin and I take all my costs into account in setting them. At the end of the day eftpos may suck most of the profit out of a low value low margin product but I doubt I ever go backwards and there are hopefully other higher margin products making up the difference.
It’s also worth reading the readers’ comments on the Fairfax and News sites. The market is not on the side of the retailers on this issue. There is a strong anti retailer sentiment coming through from consumers. Small businesses are not exempted. If we want to adapt to the expectations of the market we need to rethink our position on EFTPOS. The focus needs to be on the relationship and costs between the retailer and the EFTPOS service provider. We might be getting screwed by the banks but trying to recover it from customers is a mugs game. They hate us for it and aren’t even aware of the evilness of the banks’ role.
The other option is to price an EFTPOS cost into goods where we can and offer a benefit for cash.
Our recent increase in stationery prices has not hurt sales.
As a customer rather than a newsagent, I do feel somewhat ripped off when I’m charged a surcharge for paying by credit card. I’m aware that banks charge fees for processing credit card payments, but to my mind, my paying by cash creates costs for a retailer also. These costs might include labour involved in counting cash, taking the cash to the bank and security systems required by any business to reduce the risk of theft of cash. I figure that these costs – while these costs may be less visible to a business than a straight charge by the bank, they’re nevertheless real.
Mark discount’s for cash is a great concept and good marketing.
The Good Guys (Your Mate Gerry Harvey’s competition) have built an entire brand around “Pay Less Pay Cash”.
I never pay a surcharge. I find another way of paying. If I can’t find another way then I go somewhere else.
I can’t justify charging a surcharge to my customers if I am not prepared to pay one myself.
Merchant service fees are a cost of doing business. All tender types, EFTPOS, cash, cheques, etc have a cost to them, so I can’t understand why people get worked up over merchant service fees.
big business dont think twice about applying a surcharge, and were quite happy to overcharge to make a profit on it, why does small business feel so guilty about it.
At my newsagency software company we have a surcharge for card use but not for direct deposits. My thinking is that anyone can do a bank transfer. Card use is about delaying the actual payment or accruing points. With our software support fees not going up in four years we take a user pays approach when people choose a payment option that costs me money.
In my newsagency we don’t charge any fees. We address the cost in our margin model.
Last time I booked flights for my family from Canberra to Melb I was charged a $68.00 fee for paying by credit card. ($8.50 per person per flight)
I`m with Megan on this one. All transactions have a cost attached to them and in my store we just absorb them. I think too that this isnt a one size fits all problem and each store needs to do what it needs to do. I wont be looking like the all too greedy merchant and introducing fees. We offer cash out with every purchase as we get that transaction free. We did introduce a minimum purchase but we use that at our own discretion. I first read this post earlier today and my first thoughts were “a surcharge hey…I wonder weather I should look at doing that” and then a Lady bought a $50.00 Teddy Bear off me and I thought “that covered my Eftpos fees for a while”. I think my good margin items will cover a lot of my everyday costs and EFTPOS fees just happen to be one of those costs.
Cheers
Al
I think this example illustrates the greatest weakness this channel has and that is inconsistency of practice and procedures from one store to another.
I’m not saying one person is right and the other is wrong. But if we look at the likes of Nightowl, 7 eleven, mcdonalds, good guys, reject shop etc there is a consistency when the customer walks in they know what they are getting into. Not so our channel.
Wouldn’t it be good if our associations nutted this out and as part of us being members issued guidelines that we all agreed to follow as part of signing up. Just like any other group from CPA to a drug cartel.
As a group and channel with one consistent voice and message we would be an awesome force.
If a supplier treated one store unfairly then as a group we would act. Yes it may hurt our bottom line but that supplier would think twice about how they treated us individually from country agents to city ones. Our associations need to do more work in this area.
Clive, the opportunity for that was lost 10 to 15 years ago. Only around 33% of newsagents are in an associations. Associations have no mechanism of discipline. McDonalds offers the same menu in every store. Newsagents don’t.
We don’t charge a surcharge but we do have a $10 minimum for use of a card. All of the local businesses are similar. One cafe in town recently introduced a 50c fee on any card payments. This encouraged more cash sales. Great! I hear you say, but now they have to send a paid employee 200m up the road to us to bank the cash at the post office, sometimes twice a day at around 15 mins average round trip. Its costing them $10 a day in wages, way more than the eftpos fees would have been. 🙂
EFTPOS is fast becoming the normal method of payment. In the eyes of an ever increasing group of consumers, imposing a surcharge on EFTPOS is like putting a fee on cash payments.
Over the past 3 years EFTPOS payments in our store have increased from 37% of turnover in 2011 to 42% in 2012 and are tracking at 45% this year. I would not be surprised to see this pass the 50% mark next year. We’re also seeing many more customers using contactless payment – plenty of them just don’t carry any cash at all.
most of the comments above are speculation.
sure, alot of customers dont like paying a surcharge, but there is also alot of customers who dont care.
the dollar has been devalued in many different ways, not having to sign or pin for transactions under $40. driving miles to save 2c for petrol, but spending $4 on a bottle of water? etc.
customers pay surcharges, they do it already with bills, airlines, bank fees, taxi’s, late payments.
if coles and woolies had to pay merchant fees (and they dont) on EFTPOS they would pass them on.
we cannot incorporate merchant fees into prices for products that come with a RP already
the new tyro system will make it much more transparent, and if handle correctly i dont think will cause a negative response, i will educate customers that it is not my fee but the banks fee and the trminal screen will clearly show that. besides how many people happily pay a $2 atm fee to withdraw $20?
Those asserting that they can’t incorporate merchant fees into products with a set price fail to understand that they can incorporate it into their overall pricing structure. Not all your products have a set price – adjust the price if those that you do have control over.
Every newsagent already does this with wages, electricity, rent and every other expense they incur. Why are EFTPOS fees any different. Would you ever consider charging a fee for printing a receipt? How about one for helping the little old lady to her car? What about a rubber band surcharge when you have to roll project cardboard? Or a put away fee for a monthly magazine? All these things incur a cost that you incorporate into you overall pricing structure. EFTPOS fees should be no different.
fair points jarryd
Hiding the charge in the markup is no different to adding it on to the fixed rrp, You are still recovering your costs either way. Being upfront will not and has not lost many customers. If it has then you are not offering them a good enough reason to buy from you to start with. The $2 ATM charge is a perfect example, most people are too lazy to find another teller so pay the fee and the banks are making multi billion $$$ profits. I have also seen multi nationals charge for bags no matter the spend.
Maybe hiding is the wrong work. We have not adjusted prices for EFTPOS fee recovery. No, we adjusted markup as part of a process to chase a target GP and along the way we have reaffirmed that we will not impose an EFTPOS fee.
By charging a fee you are giving the customer a reason not to buy from you.
Hiding the charge in the markup is VERY different. The consumer isn’t standing at your POS saying to themselves – We’ll they’re charging me a fee so they’re probably not building that costing into their other products. They’re standing there thinking that they’re being penalised or ripped off. The way in which the price is presented affects the way in which consumers respond to it.
Some customers won’t mind, but there are plenty that will. It may not affect every buying decision they make, but it sits in their mind as a negative experience they had at your store.
I would hazard a guess that cash withdrawals from ATMs have declined significantly since the fees were introduced.
I agree totally Jarryd. My decision to not have a surcharge is total based on my own attitudes as a customer before I became a retailer. One of my local servo’s charged a fee on eftpos so I would only shop there if I had cash and had to, Now they have dropped the fee no problem(and if you think newsagents get stuck with low margin products try selling fuel). I’ll also search out my own banks ATM rather than pay a fee. ATM in the local Supermarket costs $2.50 so I do cash out through EFTPOS thanks. I figure if I have these attitudes a lot of other people must as well and I don’t want them having that attitude towards my business.