I was literally just thinking of this and how there is one kind of near me that if you go in to buy a drink and don't buy more than $5 worth of stuff (if using a card) they add a quarter to your total for the credit card fee. They also have a tendency to make mistakes (not in your favor) when giving back change...but that is another story lol.
Credit Cards
- Thread starter chartman
- Start date
Who the hell sells something for a 1% profit margin, when expenses could be 3%? So you are losing 2% on every sale? That is not a profitable business.
The idea behind accepting CCs to transact in your store is so you can attract more customers. Not everyone carries and pays with cash. So you accommodate them, and write off the merchant fees as a business expense.
Exactly so. You want to give customers as many different ways to pay as possible, when you're running a business, and specifically you don't want your competitors offering ways to pay that you're not offering, and if it costs you 2% extra to do that, then you pay the 2% extra.
That was for illustrative purposes to show that "writing off" a cost doesn't magically make a cost go away. If 95% of your customers use credit cards and your merchant rate is 2%, then it costs you an additional 1.9% to sell your product. If you started out with a 10% profit margin, credit cards cut it to 8.1% If you start out with a 20% profit margin, credit cards cut it to 18.1%...... This is the same as any other cost to your business, it's part of your COGS. "Writing off" the merchant fee is no different than "writing off" the cost of your raw materials or inventory. If every merchant accepts credit cards so that it becomes a de facto requirement to do business and the thing you're selling isn't super elastic in the 2% price range, everyone will raise the price by 2%. This is just business 101.
Regardless of if you get that, you're still leaving money on the table if you don't pay for everything with a points or cash rebate credit card!
That's not what I said at all. Good grief!
Check back with me after you've run a business or two. You're going to be sorely disappointed when you realize what the term "write off" actually means, it will be akin to learning that the tooth fairy and Santa Claus don't exist!
Because carrying cash is very inconvenient compared to carrying and using a card! The only people I know who use cash are those that don't have enough self control to use a credit card, can't get one, or don't realize how stupid it is to carry a bunch of cash around. The only good reason to carry cash is to cover your tracks. Some people tip in cash because they know that cash tips are not going to get reported to the IRS. Over all, there are large advantages for the consumer to use a card for everything they can.
Not to beat a dead horse, but there is also an argument against using cash for some stores. The less they have to deal with cash, the faster they can process customers/fewer check out lanes they need, they eliminate counting errors, AND they eliminate the cost associated with dealing in cash. The money truck doesn't come by for free and driving to the bank to drop off cash and checks has a cost. Is it a 2% cost? Probably not, but still it is something.