[lug] Credit - was: [Letting folks pay from the web.]

[George Sexton]

Here's some info, and my take on the credit card stuff.

Discount rate for rewards cards is 3-3.5%. Also, there are so many
variations of qualified and non-qualified, rewards/non-rewards, and
government that it's tough to tell.

Government cards are automatically non-qualified. IOW, if a government
agency pays with a credit card, you pay the maximum rate. The government
contract permits this as an incentive for the card-issuer. It's how they
make money for issuing cards to the government. For us, every transaction
with the government via credit card has a 1.5% "discount" or "tax" built in
to it.

As merchants, I don't mind paying the processors a fee for what they're
doing. What I do mind is giving a back-door discount to customers. I have a
price list, and I want people to pay it. The obvious argument against me her
is "well, just raise your prices". In a competitive market, that's not
always an option. So, we're stuck giving people a discount.

The really pathetic thing about rewards is that most people don't
efficiently use their rewards. So, under the guise of giving a small
"reward" to the customer, the reality is that the card issuers are making a
pile of money. 

Small merchants have zero negotiating power with the processors. You're
pretty much at their mercy.

If you do a little research on-line, you'll find that for many businesses
their merchant fees exceed their net profit. It's getting a little
ridiculous. What we have here is really a market failure. There is no
effective competition.


George Sexton
MH Software, Inc.
http://www.mhsoftware.com/
Voice: 303 438 9585