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Comment by ensignavenger | Hacker News Reader

What I want to do is pass on the exact processing fee to my customers, then they can choose their payment method based on how much it is going to cost them. I might then choose to cover a portion of the fee for electronic transactions, because they mean I save money vs processing cash. But the customer would pay the excess.

I would need a system that can display to the customer what fee they would be charged with their selected payment method, and be given an option to switch to a less expensive payment method.

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It's already impossible in the USA to know what you're going to pay for something until you get to the checkout line. This just makes it worse.

Why not go even further? Itemize the marginal cost of maintaining your property's parking lot for those customers who visit your business by car? Charge customers a "store heating fee" in the winter? Customer support fee if they talk to anyone? Just as ridiculous. Processing credit cards is just one of many costs of doing business that you need to account for when you price your products.

I can give discounts to customers however I want to, thank you. As long as the customer knows what card they are going to use, they know exactly what the cost will be. I am all for posting sales tax rates as well as any transaction processing fees at the door, too, though.

No thanks, I’m just gonna go to the grocery store down the street where they don’t make me do linear algebra just to buy a box of Froot Loops.

I'm guessing you never eat at any restaurants either since calculating a percentage is about as hard as linear algebra for you?

Everything else being equal, given the choice between a restaurant that makes me calculate a tip and one that just puts a single price on the menu with no tip required or expected, I’m going for the simpler option. One less thing I have to worry about.

Besides, I honestly would be sort of annoyed that you insist on making your dissatisfaction with your credit card processor my problem as a customer. I have my own problems to worry about, don’t make my saving 1-4% on groceries vs. 2-3% cash back on my credit card another thing I have to deal with. I’ve stopped shopping at certain grocery stores over less.

You don't have to do the math, they do it for you

There's a local restaurant that has a 3% CC surcharge and a 10% cash discount. I like going there and paying cash.

> Itemize the marginal cost of maintaining your property's parking lot for those customers who visit your business by car

This isn't that uncommon, quite a few places in Europe do this actually.

Usually there's a barrier at the parking lot entrance. You get a ticket when entering, which you then have to put in a machine when leaving. The machine calculates your fee based on how long your car was parked. Modern systems are far more automated and use license plate readers instead.

Those parking lots are not owned by the stores. It's usually by the city or some other property investor.

If it happens to be a store-owned parking that charges per hour, it's to prevent abuse from drivers going to other stores nearby if it's in downtown. Charging for parking outside your store in a less dense district is equal to putting up a sign that you don't want customers.

> Why not go even further? Itemize the marginal cost of maintaining your property's parking lot for those customers who visit your business by car?

Aka... charge for parking? I mean? This is pretty common? I've always found it annoying that stores will validate parking for motorists but if I choose to take public transit or bikeshare, I don't get any corresponding debate.

They eliminates your ability to advertise prices honestly, without overwhelming your customers with detail that will distract them.

... So just like US sales tax already does? I'm not saying it's a good system, but I'm already paying some random amount on top of the sticker price for everything I buy, depending on what state, county, and city I'm in at the time.

I will clearly state which payment methods are free and which ones the customer will pay a conveniance fee or recieve a discount if they use. I will clearly show the customer at checkout what their total is with their chosen payment and shipping (if applicable) options would be, and give them the opportunity to change their selection. It is about customer choice and convenience. You are welcome to shop somewhere else that bundles these expenses into the price of the item and givea you no choice in avoiding them.

I can only speak for me, but if I have to do that much mental math to figure out the best options to pay or see a bunch of random (to me) fees and adjustments at checkout, I'm leaving and going somewhere else. It feels scammy even if your goals are noble.

If the sign said you pay 5% for AmEx, 4% for Visa and 0% for cash, you don't have to do any arithmetic to see which number is smaller.

What's the fee for counterfeit cash? Or illegally gained cash?

What's the fee for cash the requires quite a bit of change? What's the fee for cash that is composed of very small values (e.g. quarters and dimes for a tv)?

It's interesting that all of these complications are ignored entirely when pricing payment methods. Handling cash isn't free and carries risk.

> What's the fee for counterfeit cash? Or illegally gained cash?

What's the fee for credit card chargebacks from stolen cards, or chargeback fraud from customers who receive a product and then dispute the charge anyway?

> What's the fee for cash the requires quite a bit of change?

There are machines that count coins and issue exact change. If you do a lot of cash business, you buy one. For example, the self-checkout machines at Walmart do this.

The largest denomination still issued for US cash is $100, so no cash transaction will require more change than this, and some merchants don't accept large bills for small transactions.

> What's the fee for cash that is composed of very small values (e.g. quarters and dimes for a tv)?

How often do you think that actually happens?

Also, how are costs like this to be avoided unless you stop accepting cash whatsoever, and thereby lose business? Just eating the credit card fees instead of passing them on isn't going to stop someone with a jug full of nickels from wanting to spend them.

> Handling cash isn't free and carries risk.

Nothing is free. How about the time value of money for the time it takes for the credit card companies to pay you, as opposed to cash which you can immediately spend or deposit and begin collecting interest on?

The issue is that credit card companies have the usual set of costs and then on top of that charge significant transaction fees and shift the cost of various types of fraud to the merchant even though they're the ones who designed the system that makes it easy to carry out.

Or just make your prices have the credit card fees built in just like normal businesses. Your system is a ton of work for very little benefit to anyone and it’s probably lowering your revenue and it’s as annoying as places that charge for takeout containers — missing the point that takeout containers encourage people to buy more food.

It’s an unsophisticated approach to business. That’s why it’s common in mom and pop places — mom didn’t go to business school and pop is tripping over dollars to save a nickle — they see the “expense” but they can’t see the revenue that aren’t getting.

There is a reason most small restaurants fail — they don’t know how to be more profitable. So they start to add on these little fees when they begin to struggle and don’t realize that they’re making the problem worse. In other words, most people that start restaurants don’t know what they’re doing in the back office even if they’re great in the kitchen. Restaurants fail for many reasons, but not controlling costs is the biggest — however, they’re naïvely choosing to control the wrong costs.

One of my good friends owns a chain of 30 Tex-Mex restaurants in Texas. After several burglaries of the safe at several locations, they went cashless at some locations. The cashless locations, without exception, saw sales increase by over 12%. He quickly made all of his stores cashless and sales increased among all stores. My anecdote isn’t data — but there is plenty of data out there.

The credit card surcharge scheme is endemic among small business owners who actually haven’t done the math. Or, more accurately, they’re doing the wrong math.

Credit card users spend more than cash users. So you make up for the “savings” with lower sales volume. And credit card users that have to pay higher prices will go elsewhere. Or, if they pull out cash, they’ll spend less of it.

https://www.nature.com/articles/s41598-021-83488-3

> Your system is a ton of work for very little benefit to anyone

It has the obvious benefit of discouraging people from increasing your costs with rewards cards. Keep in mind that businesses often have net margins in the vicinity of 5% of revenue. Paying 3% of revenue or more to the credit card company is heinous.

And what work is there to do? The calculation is done by a computer. If your attitude is "just price in the cost" well then there you go, you can pay the true cost of the card you have without even looking at the alternatives. Whereas if you want to get the lowest price then you have to figure out which card has the lowest price. Removing your option to do this is not going to save you money, it's just going to cause you to pay the higher price at all times, which you still have the choice to do.

> they see the “expense” but they can’t see the revenue that aren’t getting.

Increasing sales by e.g. 15% while decreasing net profit by up to 60% is often not a fantastic business decision.

> Credit card users spend more than cash users.

Which is why you accept them but provide a discount for the people who don't use them and thereby don't expose you to their fees.

> And credit card users that have to pay higher prices will go elsewhere.

But they're not higher prices. Restaurant A charges however much to everyone. Restaurant B charges exactly the same amount to people who use credit cards and a few percent less to people who pay cash. The people who insist on using credit cards can go to either place and pay the same amount, anyone willing to pay cash can get a discount at Restaurant B.

Extra fees of any kind just really, really annoy people. This is true at restaurants but also plenty of other industries. In the majority of cases, the loss of business from patrons who avoid your establishment due to the extra fees outweighs the revenue generated by the fee. Of course, you are welcome to test out your theories, but you're unlikely to find many people who predict they will be successful.

I'd like to believe this is true but in my metropolitan area, it's quite common to see e.g. a covid recovery fee, inflation recovery fee, iniative 82 service fee, and autograt when you are checking out. It's extremely bad for price transparency but the practice seems very popular among merchants who are betting that customers will still show up as long as the menu prices appear low.

And do you go to these restaurants just as often as you did in the past? Or have you reduced your patronage?

Overall, I eat out less, but "drink out" more and never get more than one drink at the establishment. I can't claim to be able to uniquely isolate any of my behavior to fees because a lot has changed in my life. Before covid I was a student and now an FTE, I was shy and lonely and now I have an active social life, I lived in a very big city and now live in a big city, but I can tell you I get an ick about going out, and when I'm proposing to go out I am mindful of costs and fees and propose places that I consider to be cheaper and more forthright about pricing.

The only real question here is if it's to your advantage to advertise a lower price and then tack on a credit card processing fee or advertise a higher price and then provide a discount for cash/bank transfers.

The first gives you a lower advertised price but then irks customers when they find out about the extra charge. The second gives you a higher advertised price, which could be worse depending on the nature of the business.

But the proposed alternative where you charge the same to everybody and incorporate it into the advertised price requires you to use the higher advertised price, which has no advantage over the second option regardless of whether or not the second option is better than the first.

Restaurants, which is what your post is about, rarely advertise specific prices. Part of that is because a restaurant bill is comprised of multiple components -- entree, appetizer, dessert, beverage, "extras". Another part is that menus typically have dozens of options, another is that prices change often, and another is that many restaurants are local businesses with limited or no advertising budget. And a huge one is that restaurants that do promote low prices are often considered low quality as well.

In other words your point is pretty much moot because nobody is choosing a restaurant based on, veal parmigiana costs $25 at Villa Roma and $24.50 at Sicily Palace. But they very much might remember that Sicily Palace charges a credit card fee and boycott it in favor of somewhere else.

I'm curious if banning cash is profitable because when the business is at capacity, the no cash business filters out thriftier consumers, and not because an individual (who has both cash and credit) spends more when they are told cash is not accepted.

No payment methods are free...

Do you actually want to do that? When a customer wants to make a purchase, I think it is best to get the hell out of their way and not go stand between their wallet and your wallet, blocking their money and yapping about fees or some other completely unimportant stuff.

Can't you just print up a sign for this?

I've seen signs that say stuff like "Prices listed are for cash, 3% surcharge for credit cards."

How many different fee tiers are you as a retailer really trying to charge?

Ahhh yeees, the Ryanair strategy. Everyone's absolute favorite airline.

How do i know you are being transparent with the surcharge? What if you add 2% for a card payment when your actual overhead is only 1%. I suspect this is the reason why EU made these type of schemes illegal many years back. It just creates bad incentives for stores to add random fees everywhere.

How do you even calculate the processing fee of cash on a single transaction? A lot of comment here seem to assume cash is free, when in fact you need a safe, take time to go to the bank, security transfers, counting it, and so on.

I think there's some technical reason you can't do this, because even gas stations don't. They just have a separate cash/credit price.

That just seems like an irrational amount of energy to spend on 1-3%. I guess you’d get a lot of payments nerds?

Some donation platforms do this! They show and add on the processing fee for VISA/MC and Amex separately, and Amex is a little higher.

Do they account for the different interchange rates on different classes of cards within a processing network? Not every merchant will want to be that granular, but I think it is worth it for big ticket items.

I don't think most merchants have the option to be that granular. I believe that most payment processors only provide a simplified view of interchange rates (and other fees) to all but very large merchants.

For example Braintree is 2.59% + $0.49/transaction, plus 1% if non-USD and 1% if the card was issued outside the US.

They used to split transactions into two tiers, based on how much the actual interchange and other fees were, and you monthly bill as a merchant would show charges for each tier. Within each tier the charge to the merchant was a fixed percentage and a fixed transaction fee. There was no good way for the merchant to know ahead of time which tier a given charge would fall under, although they could guess that a high rewards card was more likely to fall into the higher fee tier.

They should A/B test this. My theory is that this creates some amount of friction. I was all set to donate $100, but now I have to go find my debit card or figure out some bank transfer nonsense and by the time I get back (if I get back) my motivation to donate has diminished.

Donation platforms ought to do some analytics on this. If I’m giving money, I want it to be simple without requiring me to second guess.

If a donation platform takes Apple Pay, the friction is even less. I don’t want to fill out your stupid long form, create a password, share my address or whatever.

But, I’m one person — this might be an interesting Masters thesis topic to study the behavioral economics of donation platforms.

What I've personally seen is a checkbox, you put in your donation amount and then you can check/uncheck "cover processing fees."

Found an example - https://donorbox.org/nonprofit-blog/donors-to-cover-processi...

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