Question about costs for accepting Credit/Debit cards

Does anyone know the costs for a business to start accepting these or know websites I can look at that will give me a breakdown of the costs?  Thanks

There are both pros & cons in accepting CC payments, in the restaurant industry.
 
In the current times we live, it is more of the "norm" for patrons to pay by CC or Debit for their meals. So, it is a negative or inconvenience in not accepting such payments. Travelers, business expense accounts, and individuals who do not carry much cash, are very accustomed to the system.
 
The cons are that it only really works, when your transactions are large enough to justify the cost for the service. If you have small totals, it will work againt you, in a big way. There are plently of times when the system is down, and in the full-service restaurant industry, you provide service (food & drink) first, before payment transactions. Also, if there is a disputed charge (from a stolen CC) you become part of the investigation/process, at times. 
  
As far as the cost? It depends on your system, level of transactions,  fee/structure and provider. They vary, and there are pros and cons to many of the systems/providers. It all depends on what you gain from personal experience, and what system/fee structure "fits" for your individual business needs.

Thank you for the reply CCinNJ.  My mother owns a small restaurant in NJ.  I was debating whether she should add credit/debit or not, but if she gets small payments it could do more harm than good.

I'll do a shameless plug and show you her restaurant.  It is

nannyskitchen.110mb.com

You're welcome Matt!!
 
Here is the deal, before someone chimes in with the proposal of setting a minimum.
 
If you accept Visa or Mastercard, you are obligated to accept that card, no matter the total of the transaction. Very often (especially noticed in NJ/NYC) you will see a sign "$12.00 minimum for CC payments". That is in breach of the guidelines of the agreement/contract with Visa & Mastercard.
 
You may set a minimum required purchase amount for American Express or Discover, ONLY if they were the only cards accepted. If you accept American Express (Visa and/or Mastercard) you cannot set a minimum. It has to be an overall policy.
 
So, if a patron buys an item for $1.00, you must accept a CC payment (for a loss) and  if you decline, you are in a position to be reported, and may well get an enforcement letter from the CC company.
 
If Mom is a small business operator, you should consider this, before taking the plunge. Trust me, before you say "people would really never go that far, about reporting such a matter" I will tell you different. I have been called in to resolve issues with restaurants that had their priviliges suspended, over such matter. 
 
This is the reason you never see a minimum requirement at a fast food establishment, or big retailer.

I am a firm believer that MOST businesses should give their customers as many options to pay them as possible.  This helps to build sales and is a part of customer service.  There was a time, when I traveled extensively for business.  I rarely patronized restaurants that did not accept credit cards because there was a delay from the time I incurred my expenses and when I received my expense reimbursement  With that said, CC charges must be figured into your margin, and your average ticket price and overall volume must justify these charges.  CC fees are negotiable, but not in a traditional sense of negotiating a lower rate.  There are trade offs when you start looking at total fees. 
 
For example.  You can pay a discount rate anywhere from 1.5% to 3.5% of the total transaction to your credit card provider.  There are other fees to consider as well.  You may pay a statement fee of $20-$35 per month.  You may also pay .10-.25 cents per transaction.  If you negotiate to reduce your statement fee or your per transaction fee, your discount rate goes up.  If you were selling an item with a high average ticket, you would want to lower your discount rate and increase your statement fee and transaction fee. 

i do not accept CC or Debit cards.  you are correct with regards to building them into your margins but with small ticket items the margin is thin already in my opinion.  have i lost business by not accepting them, maybe but i will tell you in my area there many restaurants that don't.    i would think its more important in high tourist/population areas where everyday there is a brand new base of customers to sway.    
 
also a consideration is time.   at the cash register during lunch i will have a line of customer ordering and paying.   adding another element that would slow down flow is a concern.

Put up a sign, "No credit cards accepted for purchases under $10.00" or whatever amount your comfortable with. Many people travel with little cash these days. If you have enough customers you may think of putting in your own ATM.

That "comfortable" amount better be for whatever the least expensive item amount on the menu, or risk a ton of headaches for violation of contract terms...with Visa & Mastercard.
 

Visa USA
Consumer Relations
P.O. Box 8999
San Francisco, CA 94128
 
MasterCard International
Public Relations
2000 Purchase Street
Purchase, NY 10577
 
American Express
Customer Service
PO Box 297812
Ft. Lauderdale, Fl 33329-7812
1-800-297-1234 (U.S.) 336-393-1111
(collect) 8:00 a.m. to 12:00 a.m., EST

These are the numbers/addresses for consumers to call/write to report the name & location of merchants in violation of the policy. If in doubt...contact them directly. They will tell you the same thing. You cannot set a minimum. They are in business to ensure that their cardholders are free to use their card at any/every establishment that accepts their card...without any minimum purchase total.

CCinNJ is absolutely correct about the minimums and violating  company card policy. One of my brothers works for American Express and merchant compliance is part of of his job. At Amex they take this pretty seriously.

As for deciding whether or no to take credit cards, that is up to the restaurant owmer but I know that I personally don't patronzie establishments that don't accept credit cards. My reasoning is threefold. 1) I don't like to carry cash with me, 2) I llike having the credit card bill for my records either for my expense accoutn or for my own personal accounting, and 3) perhaps I am just too cynical but in my town we have a 10% (!!!) tax on food --the state tax + a local option tax -- and when an establishment only takes cash I wonder how much of the tax actually makes it to the state and local coffers.

I am certainly more pro than con, about accepting Credit & Debit. Most of my clients are big ticket, and while the occasional buster may look to order a club soda with no ice, and pay with a CC, it is a cost of doing busines.
 
There are not too many times, where it bites you, if your tickets make up for it, overall.
 
It is just the little business guys/gals that run into BIG headaches, if they have chips, soda, gum,  candy, or many other $1.00 or less items. 
 
People also squeeze every penny onto the CC for whatever point promotions they offer. Airline miles, and such.

I agree w/ CC. I owned a pet store that had many small ticket items. It was not a problem for me. But.. my small ticket items all had a 100% or larger mark up. And not often would someone buy something for $1 and pay w/ a card.

Oh, swiping a card is almost as fast as taking cash, maybe faster?
Joe

It really is ridiculous to be paying so much for your credit card processing.  They always have a bunch of made up charges like compliance fees, surcharges, and annual fees.  There is no reason to pay any of these.  They are all made up charges.  There is a good chance that there are other bogus fees as well on your current bill.  If you are sick and tired of not being able to decipher all of the fabricated charges on your current merchant account, then it's time for you to change companies.  It is much easier to do than you might think.  You do not need any new equipment and you can use the same machines you already have.  It does not matter if you own the equipment or even if you are leasing it.  All you will do is type in a few codes and you will instantly be saving money.  There are no set up fees, it is absolutely free to switch over.  Our rates are lower, and there are no made up charges.  When you find out how much extra money you have been paying to your current merchant service provider for no reason, it is definitely a no brainer.  Even if you are in a contract that has a huge cancellation fee, we still save you so much money that it's worth it to pay the fee.  In fact, if you do not save money with us over your current service provider, we will give you $500.00!

A compliance fee?  For what?  It's against the law for any company not to be compliant, you are already compliant, so why are you paying a fee for that?  Annual fees?  Again, what costs are an unnecessary annual fee covering?  Surcharges?  Come on now, they do not pay for anything.
Call Kevin at 323-667-6892 and I'll give you an estimate so you can find out how much you can save by switching to our company.  For further research, go to www.imaxbancard.com

As I posted in the other thread on this same topic, "From the fine print on the website listed above, I see that Imax is a division of Wells Fargo Bank, if anyone is interested."

Do some research.  What % of her customers ask to pay with plastic?  Pay some one to ask anyone that turns away at the door when they do not see a Visa logo, why they turned away.

Unfortunately, merchants have given too much power to the credit card companies.  I see those minimum signs all over the place and I do not fault merchants for doing that.

I have no knowledge about the specifics of CC agreements, but, I would use an optional minimum sign, cleverly written to have almost the same effect as a mandatory minimum sign.

Personally, I'm glad to see cash becoming more popular these days as consumers dig out of the credit card debt mess that they got themselves into with the help of the banks.

I fault the merchants that do that. It is in violation of the contract they agreed to sign...to accept Credit/Debit. If a vendor breaks a rule you must follow or establishes a policy that is in violation of a contract when you comply (like it or not)...I am pretty sure they would be faulted.

If I had a B & M place I'd definitely take cards. I'd think almost every ticket there would be more than any minimum I'd have unless someone came in only for a soda. Since we only do fairs & festivals, most people don't expect you to take cards and have ready cash. I'd think most people wouldn't be expecting a hotdog cart to take them either.

Pros and Cons from my perspective.

Pros:
     1.  More payment options mean more customers.  Period.
     2.  With IP enabled credit card machines, swiping a card with 2-3 second authorization times will often be FASTER than accepting cash.  If you have a business with long lines, you may pick up even more customers by accepting credit cards since you will decrease your service time.  (If your business is classified as small ticket or QSR, you will not need signatures on charges less than $25 which also keeps things fast.)
     3.  It gives you a bit more credibility, though I'm not sure how that translates into customer loyalty.
     4.  If you are at a fair/event where most people only accept cash, you may get even MORE business if people know that you accept credit cards when they do not.
     5.  For restaurants with higher check averages, this isn't even a question.  You must accept credit cards.

Cons:
     1.  With low average ticket prices, the fee for accepting that card is high relative to the check.
     2.  The processor, your equipment, or SOMETHING will have issues on occasion.  It may only be two or three times a yeara, but on those 2-3 days things are chaotic and frantic.  (We write down numbers, tickets, expiration dates when this happens and run the cards later when the system is back up.  For customers who are wary about us doing this, I just ring in their lunch and give them their receipt and ask that they just remember to let us swipe their card for that charge the next time they come in.  Since I have lots of regulars this two pronged approach seems to work well.)
     3.  There are a LOT of scummy merchant services firms out there and it's easy to get sucked into a bad contract that you thought was going to be great but isn't.  If you are NEW and asking whether or not you should accept credit cards, do LOTS of homework and whatever you do DO NOT sign up for an equipment lease program.  While I'm sure there is a good plan or two out there, many of the merchant service scams revolve around signing you up for a monthly equipment lease that is multi-year and non-cancelable at a ridiculous rate.  You sign that contract, they sell the expensive lease to a third party, and when you find that you are paying too much and want to cancel, they refer you to the other company thought bought your lease from them and that company will NOT be friendly or sympathetic to your concerns.  I think the best way to check out any merchant service provider is to type in their name and the word "SCAM" or "FRAUD" into google and see what pops up.  But I digress.
     4.  Every month, you get your merchant service statements and choke back tears at how much money you are spending on accepting credit cards.  It's easy to get frustrated and say, I'm just not going to accept them.  Or I'm going to implement a minimum charge policy.  Or I'm going to implement a $.25 surcharge when people pay with credit card.  Etc. Etc.  Those things sound good from the "reduce my costs" standpoint, but your customers will experience a drop in good will and some will just stop coming because they like using credit cards (for rewards points or because they don't carry cash).
     5.  If your customers frequent you often (more than once per week), if they look at their credit card statement and see a charge from your restaurant everyday, it puts their lunchtime habit in a new light.  It's no longer $7 - $10 to have lunch with you.  It's $140 - $200 a month.  Or $1,680 - $2,400 a year.  That's when customers say things like, I'm gonna try bringing my lunch to work.

My advice is to:
     -  accept credit cards
     -  do not post minimums
     -  place a simple sign in a conspicuous area that says that accepting credit cards is expensive for you and cash payment is appreciated to help you keep your prices as low as possible
     -  since this is the most painful for small ticket restaurants, i think it's critical to buffer in $0.25 - $.30 somewhere in your pricing ($.15 on drinks and $.15 on each entre item?) to account for the cost of accepting credit cards.  When you see your statement, understand that you've budgeted that cost into your pricing.  (That only helps a little emotionally by the way because you are always going to view that as money you wish you didn't have to spend).  Since some of your customers pay cash, this has the result of raising prices on them to help subsidize the cost of accepting credit cards.

For anyone looking to see what a reasonable cost for accepting credit cards is:
    -  Amex  $.14 + 3.5%.  It was $.09 + 3.5% but I think I just saw an email from Amex stating that they were raising that by $.05.  If you do not have a lot of business customer traffic I would seriously think about NOT accepting Amex.  Odds are good that if your customer has an Amex, they probably have V/MC as well.  I am located in a downtown area, so I DO accept Amex.
    -  Visa/MC  $.09 + (1.65% - 2%).  The variation in the percent rate (also called the discount rate) depends on whether they are using a reward card of some type.
    -  Discover $.09 + 3.00%'ish.  More expensive than V/MC, but less than Amex.  I don't get many of these transactions anyway since Discover isn't a very common card.  Since lots of places don't accept DISCOVER, I do hoping to get the business of people that like using that card.
    -  My merchant statement has a $7.95/month fee for service, support, and paper statements.  (I tried asking for an electronic statement instead to save the $7.95 but this was not an option.)  Amex has a similar fee of $4.95 per month for paper statements which you CAN turn avoid if you get your statement electronically.

I bought a new Omni 3750 (which could process IP transactions) for about $300.  I also paid about $50 for a 3 or 5 year service plan - overnight replacement of the equipment didn't work for any reason at any time.  I had to use that service plan once so it paid for itself.

About 60% of my customers pay with credit card.  I sent an email to my customers a few months back stating that we were considering adding a $.25 surcharge to orders paid for with credit card so we could continue offering low prices.  The news was not received well by some and I never ended up implementing that change.  Instead, we just raised our prices and nobody said a word.  While we would have been able to explain to anyone that asked why the $.25 surcharge would have better for them, the customer would have to care enough to ask (and not be so upset that they walk away without telling you that your new policy made them mad).  Raising prices ended up being just easier.  Incidentally, some of those customers now pay MORE for their lunch than they were paying before than they would have had to pay if I just charged them $.25 more.  But they seem to be fine with that.  I chalk it up to people not wanting to feel like that are being nickel and dimed on little charges.

If anyone has a merchant processing company that they use that has more aggressive pricing, please send me a private message.  The big pain for us small-ticket restaurants is the flat charge of $.09 or $.14 per transaction.  $.09 of a $7.00 order is 1.3% of the sale.  Add in the 1.65% additional charge and you are looking at 3% of sales to accept Visa (the most common card and least expensive card to accept).  Since restaurants hope/expect to have Net Income be about 15% of sales, giving up 3% of sales is like giving up 20% of your profit to credit card companies.  This is why no matter how you adjust or build in your credit card costs, you will always resent paying it.  (Makes me think I'm in the wrong business!)

Like anything else, the benefits of increasing sales and profits by accepting credit and debit cards do not come without some risks. Sure, one disadvantage is that you have to pay a percentage of the sales that are paid to you with a credit or debit card in rates and fees.
 
 
 

Man skips out on $425 bar tab
By Staff reports
THE STATE JOURNAL-REGISTER
Posted Apr 14, 2011 @ 07:06 AM
   A local bar employee complained to police that a patron ran up $425 worth of drinks and gratuities on a stolen debit card.
An employee of The Office, 1919 W. Iles Ave., told police a man showed up at the bar with a group about 4 p.m. Saturday and stayed until about 1 a.m. Sunday. They had 85 assorted drinks. At the end of the night, the bill came to $425. Workers ran the debit card he gave them, but it came back with insufficient funds for the total. When they went to track him down, they found he and his group had left.
Police found the owner of the card, who did not match the description the bar workers gave of the patron. He told police the last time he saw the card was April 5.

Shame on the bar for letting someone run a $425 tab! Holy cow, I find that unbelievable. That's why I like the hot dog biz... pay when you order.

I notice a few smaller mom and pop places just put a atm machine in.
 
If anyone asks you can say that we have a cash machine for your convenience.  You get the whole fee if you own the machine or you get a % if someone else owns it.
 
Just a thought
 
Al

This is ONLY if you have an iPhone. As they say there's an app for that.
I use Square for my CC/Debit. I absolutely love the service!!!!!!!
This is a company from one of the developers of AOL.
As of last month they dropped the transaction fee on me. (Dont know if it was a reward or system wide). I pay 2.85% PERIOD, no monthly fee, no other fees of any kind. Even the reader is FREE, but you may have to wait a while due to backlog. I waited about 3-4 months. Transfer arrives next day. No printer needed since you can email or text their receipt. Also for your protection you can add a photo of the customer that is stored with your receipt on the Square server should there be a problem.
 
www.squareup.com

Couple corrections to what roadkillgrill said about Square... it isn't just for iPhone. You can also use it on most Android phones, ipads, Android tablets, and even ipod touches if you have WiFi available. Also, square was started by the founder of Twitter, not AOL. And, I agree, its fantastic. Totally revolutionized my business.

have you guys taken any customer pics yet ?...what was the reaction you got ?

This past sat. I tried to use square but it kept saying check you network  settings; never would go thru, I tried it a second time as a mock transaction and it went thru on my daughters card we rang up a 2.00 sale  it went thru fine i got a mess. on my puter when I got home that the sale went thru, that was sat and nothing appears on my statement (i can view online) yet maybe because of the w/e any

@stubby77, I forgot, my bad. See what happens when you get old!!! lol and I didnt know they added Andriod. Thank You for correcting. @BackAlley, my customers thinks it's cool which is fine for me. @Buck, First couple of weeks were buggy, but after that it was fine and anything on Fri & Sat are posted Monday+/-. If can set it for email updates, I have mine setup for forward via txt. This way I know it posted before they even get their order.

i think im going to stick with my "old school" system for the time being.... it prints a receipt right then and there to show it went through, its a hand held cellular unit (4g)...might be 3g.... but ive never had a problem with service, and its nice being able to run cards out in the middle of the parking lot with no wires attached
 
best thing is, i never have to touch the customers card, they swipe it, and then punch in their pin#  while i am holding unit with an outstretched arm, it prints 2 receipts, both showing the signature from built in signing pad and stylus, one for them, and one for me 
i think between that and a simple cash box i should be fine.... besides i already have the machine so i might as well use it
a lot of the places i plan on working wont have access to wifi, does the square work through the phone otherwise ??
 
i forgot to add that its 19 bucks a month for the cell service, but i can also use it as a phone by plugging a headset into the side (great for customer service issues on the spot)

Square works on cellular, as long as there is is a signal in these back woods.
 
Who,what & How much do you use. Like the idea of a headset over cellular for local vendors placing orders at events without giving my number out. Like that very much, it'd be worth $19. Wireless Printer?

yep, uses the standard small heat transfer register rolls.....
heres a pic of unit comparable to mine...

i'll have to dig it out of storage to give you the particulars...
the merchant service was through wachovia banks merchant services
if i remember right, it was 2.25% for swipes, and 3% for manual inputs...... best thing was, if i was in an area that didnt have service, machine would save transactions and then run them at end of day right before batch report

If you've had that unit for more than a couple years, you'll need to make sure it is compliant with the new PCI-DSS (Payment Card Industry Data Security Standards). I know a bunch of store owners who have had to drop a bunch of money buying new terminals the last couple of years because of the new rules. I also know one woman who bought a used terminal off eBay to use on her second register, and a week later had her processing get deactivated at the merchant provide end because their system detected the non-PCI unit and thought they had a breach. Brought her business to a screeching halt for several days to straighten it all out (and in the end she had to junk the new unit she just bought.)