Credit card Fees just doubled. @ Arizona Response Systems, LLC

Credit card Fees just doubled.
A typical discount rate - that is, the fee charged by the Credit Card Issuing Bank, for running the transaction, is around 3%. Really high volume places may see it as low 2.65%, and new vendors with no credit history may pay 4%. An additional or included small portion of this may go to theCredit Card Processing Company. This is the the company that interfaces between the vendor and the card holder.

A typical Credit Card Processing Company will also charge an administrative fee - this is usually independent of the amount of the transaction. It is a monthly fee to cover the cost of mailing statements, billing, and security compliance. This may be around 0.5% and since it includes flat rates, per items, and variable rates, the lower the transaction total, the higher the relative percentage is.

The terminal (physical or virtual) that the vendor uses to swipe the card, is often rented. Virtual terminals, such as what I use - a secure on-line server - will charge a monthly rate and a per item fee..

So lets do a breakdown.

I run a $1000 in credit card sales.

Card Issuing bank
$30.00 (3%)

Processor
$ 0.10 per item fee
$ 7.50 statement fee (flat rate)
$ 7.00 Network fee (flat rate)
$20.00 Security fee (flat rate)
$0.19 transaction amount fee (.019%)

Terminal
$15.00 monthly fee (flat rate)
$ 0.30 ($0.30 per transaction fee)

Total Fees on a single $1000 charge in a month = $80.09 or 8.01%

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Now the fixed rate fees become a smaller portion of the total fees when the dollar amount increases. Lets run the same numbers on 5 x $1000 sales.

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I run a $5000 in credit card sales.

Card Issuing bank
$150.00 (3%)

Processor
$ 0.50 per item fee
$ 7.50 statement fee (flat rate)
$ 7.00 Network fee (flat rate)
$20.00 Security fee (flat rate)
$0.95 transaction amount fee (.019%)

Terminal
$15.00 monthly fee (flat rate)
$ 1.50 ($0.30 per transaction fee)

Total Fees on $5000 charge in a month = $202.45 or 4.05

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I charge 4% for customers choosing to use electronic payment. Depending on the volume of transactions, I end up paying a percent or more on top of that for the "privilege" of allowing them to use a charge card.

***And now for the point of this post****

Visa and Mastercard have now assigned an additional 3% "Risk Assessment Fee" to anyone in the gun industry. This is set by the card issuing bank and varies from 2.19% to 3.1% but the median amount is around 3%.

That's right - if you buy from a gun store, the gun store now pays an additional 3% to take your card. The reason given is the high amount of fraud and chargebacks made starting with the panic-buying after Sandy Hook School Shooting. I pointed out to the credit card processor, that the panic has ended . . . when will the surcharge end? And she agreed with me, like a tax, it is unlikely to ever go away.

I pointed out to her that I have no chargebacks, and it is irrational to levy a surcharge on me for what another vendor may or may not have done, but she pointed out the decision is made by the customer's card-issuing bank and not by the processor.

I pointed out that many customers accept the 4% fee as "worth" the convenience of using the credit card, but I suspect at 7%, they will not use the credit card, in which case neither they, nor the card issuing bank, will get a penny.

Anyway, I understand that if there is an increase in fraud, the credit card issuing bank must cover their losses - and if that is truly the reason, then it is the industry's own fault.

I now must charge 7% for you to use a credit card, because I sure the heck ain't paying it for you.
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T. Mark Graham
Master Gunsmith
Arizona Response Systems, LLC

 

Cut the credit cards....use cash at every opportunity, deny them the chance to charge you or the vendor these fee's as much as you possibly can.