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Credit Card Payments And Fees

 
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Old 10-13-2010, 01:00 PM   #1
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Credit Card Payments And Fees


I've read some of the stuff here on credit cards and PayPal. I recently had a customer ask me about paying with a CC and I had to tell them no. I still got the job but it started me thinking about letting customers use them to pay.

I looked into using Paypal. I have a personal acct but signed up for a business acct and integrated it into Quickbooks.

What I am not sure how to go about doing is charging the processing fees. In the past I gave estimates based on check or cash payments. Now when I give these estimates, how do I incorporate the language for collecting the processing fee (2.5 to 2.9%) for CC payments?

I don't want to include the added cost initially if they are paying by check. When do you bring this up, before signing or after?

Please let me know how you guys are using this method and what does and doesn't work.
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Old 10-13-2010, 01:24 PM   #2
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Re: Credit Card Payments And Fees


At the bottom of proposals and state on contracts:

"credit card customers add XX% processing/handling fee."

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Old 10-13-2010, 03:46 PM   #3
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Re: Credit Card Payments And Fees


Most major credit cards and some states do not allow merchants to pass the processing fee to the consumer. There are businesses that still do it, but it takes some legal work around (like demonstrating excessive burden to process the fees, etc).

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Though there are no Federal laws prohibiting surcharge on credit card use, the following states prohibit merchants from adding surcharges to any credit card transactions.
California Colorado Connecticut Florida Kansas Maine Massachusetts New York Oklahoma Texas
VISA/MC prohibits the practice completely and AMEX does not allow discrimination of their card holders, meaning if a merchant accepts VISA/MC they cannot charge surcharge for using AMEX card.
Exceptions would be government agencies such as Rev and Tax, Motor Vehicles, etc. that are not permitted to pay the bank fees.
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Old 10-13-2010, 03:47 PM   #4
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Re: Credit Card Payments And Fees


Quote:
Originally Posted by y.painting View Post
Most major credit cards and some states do not allow merchants to pass the processing fee to the consumer.
"XX% discount for cash customers"
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Old 10-13-2010, 03:52 PM   #5
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Re: Credit Card Payments And Fees


Quote:
Originally Posted by bert0168 View Post
I've read some of the stuff here on credit cards and PayPal. I recently had a customer ask me about paying with a CC and I had to tell them no. I still got the job but it started me thinking about letting customers use them to pay.

I looked into using Paypal. I have a personal acct but signed up for a business acct and integrated it into Quickbooks.

What I am not sure how to go about doing is charging the processing fees. In the past I gave estimates based on check or cash payments. Now when I give these estimates, how do I incorporate the language for collecting the processing fee (2.5 to 2.9%) for CC payments?

I don't want to include the added cost initially if they are paying by check. When do you bring this up, before signing or after?

Please let me know how you guys are using this method and what does and doesn't work.
Better than half of my money comes in via credit cards anymore. I don't charge extra for taking them, but when I started taking CCs I raised my prices 2% and if pushed hard enough, I'll give a 2% discount for cash or check, but I don't advertise that.

Sometimes, a customer will wait 30 days to pay by check, but will pay now by CC. I've never had a charge back on a CC, but I have taken a few bad checks.
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Old 10-13-2010, 04:00 PM   #6
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Re: Credit Card Payments And Fees


Quote:
Originally Posted by A. Spruce View Post
"XX% discount for cash customers"
Yup, that's one way around it and how I've seen it done by some folks locally.

I also just checked PayPal terms of service and they seem to have a clause against something like that, though:

Quote:
4.5 No Surcharges. You agree that you will not impose a surcharge or any other fee for accepting PayPal as a payment method. You may charge a handling fee in connection with the sale of goods or services, as long as the handling fee does not operate as a surcharge and is not higher than the handling fee you charge for non-PayPal transactions.
Not really sure how enforceable that is, but I certainly would recommend having an attorney do the wording on your contract for the "extra fee" thing just for safety...sure don't want your merchant account shut down if an over zealous HO feels its their duty to call PayPal about the fee.
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Old 10-13-2010, 05:44 PM   #7
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Re: Credit Card Payments And Fees


Thanks for all the good info.

I wasn't aware of the restrictions on collecting the fees but 2.5% on a 7K bill comes to 175. Do a bunch of these and it's gonna eat up any profit if there isn't a means to work that into the price.

I'll have to work on some wording for my estimates and proposals to figure that out If I go the CC route.

I'm still interested to know how guys are offsetting the processing costs, it's got to be large if they take card payments regularly.
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Old 10-13-2010, 05:51 PM   #8
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Re: Credit Card Payments And Fees


It is against the merchant agreements to charge more for a credit card purchase. Well you can but you can not advertise it or say it. You can not do it or face some legal troubles. If you have not yet got into trouble...you will. You can say discount for cash. I know I know that makes no sense. Remember about 20 years ago when Exxon charged more for credit cards? Even this conglomerate got into trouble then they went to cash discount advertising and that made it legal.

My average sale is less then $10,000. I find that maybe 5 out of every 10 purchases do people use their card. What I most often hear is they get those airline miles. One large purchase like a new kitchen and they have enough miles to take a free plane trip anywhere in the USA.

Yes taking credit cards increase your sales.
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Old 10-13-2010, 06:07 PM   #9
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Re: Credit Card Payments And Fees


We're set up with paypal and we tell clients we charge a 3% convenience fee for credit card charges. After mentioning the 3%, most folks pass on using the card.

One other thing I heard about using cards - set up a separate bank account for receiving money from credit cards. That way if someone disputes a charge and the processing company deducts it from your account, there is no money for them to take as the only money in this account is from credit card transactions and is immediately transferred out.
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Old 10-13-2010, 07:40 PM   #10
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Re: Credit Card Payments And Fees


IDK, I'm still on the fence about it.

What about the potential chargeback? On a $500 purchase it probably wouldn't matter initially but start getting into the 5K to 10K and up range then I think I'm going to have a problem.

My thought is that these CC companies are there for the consumer, not the merchant and don't hesitate to pull that money back then make you fight for it for months.

I like the idea of the increased sales potential and accept the processing fee issues but this may be the thing that scares me from using it.
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Old 10-13-2010, 08:10 PM   #11
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Re: Credit Card Payments And Fees


Not sure what you are worried about. Over 70% of our clients pay by cc. Only had one that even tried and successfully got a portion of the charge back. And to be honest they were in the right and I was in the wrong. It was in our start up phase and we totally under-bid the job. I had to walk away. Man - that still kills me thinking about it.

The only other bad experience I had was after completion of a job I got the card number and it was declined. But, I always get paid after competion of the work so, I don't see this example as negative towards cc's. These folks would have given me a bad check. I just filed a small claims against them yesterday. Probably won't get paid but I can't just let it go.

To put it into perspective though - my average job is less then 2 grand.
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Old 10-13-2010, 08:32 PM   #12
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Re: Credit Card Payments And Fees


CC's are becoming the standard in construction work. Accept it as part of your business model and move on.

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Old 10-13-2010, 08:49 PM   #13
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Re: Credit Card Payments And Fees


In my opinion accepting CC's makes you look established and professional.
I pay around $56.00 a month and then the transaction fee per sale.
I got my CC service through my bank.
Ps. On some jobs I do cringe when they pull out a credit card though.
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Old 10-13-2010, 08:59 PM   #14
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Re: Credit Card Payments And Fees


Quote:
Originally Posted by Sir Mixalot View Post
In my opinion accepting CC's makes you look established and professional.
I pay around $56.00 a month and then the transaction fee per sale.
I got my CC service through my bank.
Ps. On some jobs I do cringe when they pull out a credit card though.
I've had a few testimonials that actually stated they were pleased that we accepted cc's. Don't get me wrong, the fact that we accepted cc's wasn't the overidding factor but they did mention it.

Here is a lil hint - make sure you get their zip code. I don't know the specifics but there is something out there called PCI. If you don't have the zip when you key in the cc digits you'll get charged an additional fee (PCI). Just a heads up.

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Old 10-13-2010, 09:13 PM   #15
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Re: Credit Card Payments And Fees


I think people tend to spend more because of it don't you think? For plumbing people will spend 300 on a faucet instead of 150 just because of the CC.

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Old 10-13-2010, 09:25 PM   #16
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Re: Credit Card Payments And Fees


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I think people tend to spend more because of it don't you think? For plumbing people will spend 300 on a faucet instead of 150 just because of the CC.

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Old 10-13-2010, 09:26 PM   #17
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Re: Credit Card Payments And Fees


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I think people tend to spend more because of it don't you think? For plumbing people will spend 300 on a faucet instead of 150 just because of the CC.

Mike
IDK. Maybe in the past the answer would be yes. Now - I think it is 50 / 50. I've had some potential clients almost get offended that we mentioned cc's as an option / benifit for going with us. Overall it is definitly worth it though. The potential clients that state "we don't need to use cc's" are some of our best customers. They know how to manage their money and are proud of that fact (old school). Sorry, I couldn't resist!
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Old 10-13-2010, 09:57 PM   #18
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Re: Credit Card Payments And Fees


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Originally Posted by Fresh Coat View Post
IDK. Maybe in the past the answer would be yes. Now - I think it is 50 / 50. I've had some potential clients almost get offended that we mentioned cc's as an option / benifit for going with us. Overall it is definitly worth it though. The potential clients that state "we don't need to use cc's" are some of our best customers. They know how to manage their money and are proud of that fact (old school). Sorry, I couldn't resist!
Alright, I'll give you that one.

It seems to me that your geographic location has something to do with it also. My main location of business is pretty beaten up because of the recession so CC's are more popular.

12 miles away is one of the highest percapita incomes in the country. Here I find most people don't use them for plumbing.

Just my observation anyhow.

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Old 10-14-2010, 05:26 AM   #19
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Re: Credit Card Payments And Fees


Real good info. I didn't know about the zip code and didn't think to see if I could get the service thru my bank. I definitely agree on the seeming more professional.

As I gather this info, I keep coming up with questions.

For those that are accepting CC'c, who provides that service? Do you get it thru your bank, the CC co's, Paypal? I'm still concerned about the rates. I've only seen the PP rates (2 -3%) which seem high but do these other places with lower rates tack on fees.
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Old 10-14-2010, 05:36 AM   #20
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Re: Credit Card Payments And Fees


For the guys that accept CCs, how do you process them? Meaning do you have a wireless device that you swipe in the field, or do you have them fill out an authorization form and then use a machine back in the office?

Bert - try looking for a local or even national merchant processor for your best rates. Paypals rates are high and terms of service are poor, banks make everything convenient but their rates are not as good as a direct merchant processor. Most processors are middle men, meaning they mark up the rates, but if you can find a direct processor, they'll have the best rates.

Also when signing up, get them to give you the card scanning device for free. Many processors want you to pay a monthly fee to rent the equipment for the length of your contract which ends up being 2-3x's the cost of the actual machine over the life of the contract.

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