It used to be simple:
- buyer hands the money to the merchant.
- merchant verifies monetary value. If monetary value is valid then merchant gives buyer the item. Otherwise, tells them to piss off/get bent.
- buyer walks away with item
But major credit/debit card processors (visa, mc, amex) had to insert their hands into the pockets of every buyer and merchant to get their 3-5% cut on each transaction.
Now it’s a much more complicated process that happens more “seamlessly”:
- buyer presents debit or credit card
- merchant checks if debit or credit card is accepted by their payment processor —> if not accepted, tell buyer present diff card or “get bent”
- merchant swipes/taps/keys-in card information and attempts to process the transaction. A decision is typically reached within less than <1 second —> if declined, try again. If further declined, tell buyer card declined. Buyer insists it’s good and to run it again. Merchant runs it again, it’s successfully processed (wtf?). If not, tell buyer to get bent.
- buyer walks away with the item
In the background, in order to accept debit and credit cards the merchant had to sign a deal with the devil and pick one of the many payment processors. Merchant could have gone with his bank’s processor but turns out the merchant doesn’t have the right paperwork or lacks the revenue to qualify for a “premium” account. So the merchant looks elsewhere and finds a promising payment processor elsewhere but fails to read the fine print. In addition to the 3-5% fee charged by the major CC networks, the processor will take a 5 cent transaction fee to process, in addition to a 1 cent “inter network” processing fee. ALSO, the “free” equipment that’s provided to your business has a $50 month maintenance fee in perpetuity. On the flip side, if you transact 100K per month, they will cut the transaction fees by 25%, oh how generous!
Oh did I forget to mention that some cards have “premium” fees? So if a buyer presents a “black card”, the merchant is then charged by the bank issuing the card another fee. Sometimes it’s included in the payment processing terms but this is YMMV. So as a consumer, if you ever wonder why the small business takes “visa” but not your “chase ultra sapphire pearl max black” card with visa logo. That’s why.
Unfortunately, it doesn’t end there.
(2 days later) buyer that bought that item actually stole/cloned the credit card and the actual credit card owner initiated a dispute.
Merchant has now been charged a $25 dispute fee and is now in the resolution process. If bank and/or credit card processor rules in consumers favor, merchant loses $25 in addition to the cost of the item(s).
At the end of the day, merchants get fucked. Merchants pass on costs to consumers/buyers. Buyers get fucked with increased cost of goods.
Only winners are the useless middlemen.