If you do a lot of retail shows, then you’ve probably learned by now that accepting credit cards is a great way to boost your sales. As less and less people carry cash in favor of debit or check cards, you’ll find customers appreciate the convenience of being able to shop their local craft fair without having to hit the ATM.
But there are costs associated with accepting credit cards that aren’t there when you accept cash. While those processing fees are nominal when compared to the costs of a lost sale, they must be factored into your pricing when calculating costs.
The other weekend, Tara and I walked the Art Star Craft Bazaar in Philly. I was extremely surprised when I went to make a purchase from one vendor only to learn that they were adding a 10% surcharge for paying by credit card. Since I’m not the cash carrying kind of girl, and since it was something I’ve had my eye on for a while now, I just accepted the charge.
But it got me thinking – as far as not good business practices go, charging extra for credit card payment is pretty high on my list. I understand that those credit card fees may be eating into already slim profit margins, but I think there are better ways to handle those extra costs.
My suggestion? Work those added costs into your pricing structure.
I wouldn’t have balked at a price that was a few dollars more (because I wouldn’t have known I was being charged extra). And my guess is that if you worked the cost of credit card processing into your prices, your customers wouldn’t notice either. (And if you’re an Etsy seller that’s transitioning into retail shows, you should have fees like that factored in – Etsy and PayPal fees are comparable to credit card processing fees.)
If you still want to reward customers who pay in cash (and thus alleviate your need to pay credit card fees) you can always offer a verbal discount for cash payment at a retail show. While this may effectively seem like the same thing as charging more for credit cards, the consumer will view it quite differently.
No one wants to be charged extra for a service that most places offer for free.
So, how do you make up for the added costs of credit card processing?
I absolutely agree. No customer wants to be surprised with an extra charge at check out, people hate airlines for that. I am a predominantly online biz and build in those fees into my price. It means I just make more at craft shows when people pay in cash! Thanks for all your crafty business thoughts.
Hey Megan,
This is my first time here! This is a great outlet to bounce ideas around.
To answer your question, I agree with adding the charge into the total cost. Put yourself in the shoes of the client. Do you want to be told that there are extra fees and then taxes on top of the original price? Most likely not. In my personal experience, at large scale fine craft shows, it is better to include all of the fees on the price tag. I lost clients when I first started because I was trying to be fair or honest with my pricing. Either way, the client has to pay these fees, so choose a way that will suit them.
As far as offering a cash discount, I don’t feel it is appropriate at large scale shows. When I offered this option, many clients seemed turned off. I think it would work at a smaller craft fair where it is more intimate and has a community feel to it. Those are my 2 cents!
Thanks,
farha
Such a great post and an interesting experience. No one wants extra charges tacked on to a sale, it’s much better customer service to include all fees in the price, as you said. A cash discount is a great idea, for cash, I often round down the number, mainly because I don’t like dealing with coins at shows, but shoppers always appreciate the gesture. Some shoppers are surprised that I have to charge sales tax, which fluctuates from state to state and would be challenging to work into the price of my goods.
10% seem excessive, for a credit card fee, since fees are usually more like 3 or 4%.
Ack! Elisa – I totally I agree. I was pretty floored when the girl told Megan 10% too. Seemed like the same kind of thing when people try to make money off the shipping charges – reduce the rate OR eliminate it! – and then factor it into your price. I would MUCH rather pay for it there.
It’s also worth noting that they’re probably not even allowed to charge an extra fee to credit card customers – most of the big credit card companies prohibit it in their merchant account contracts.
Excellent post- credit card fees are just another cost of doing business that should be factored in when determining pricing.
It’s definitely against most credit card contracts to charge extra for taking the card, just as most contracts do not allow you to have a minimum charge amount.
the problem with just adding it into your cost is if your item is under $5. I don’t think I could add much more to the cost of a bookmark or greeting card without someone balking at the price.
If you have mostly under $5 items, you should be offering discounts for people to buy multiples, which will increase your average sale. Even if you are still selling mostly single items, the increase in sales by taking credit cards will be worth the fees.
You could make a cute little sign saying that cards are gladly accepted, but cash is even better. Most customers, if they have the cash in their wallet, would prefer to pay cash if they know it helps you out.
Great post Megan! The biggest shows that i do each year take the money for me (plus take their commission…) so with the remaining shows that I’m in I’ve been able to eek by with accepting checks. For the occasional sale it’s just so hard to justify the cost of credit card processing. This is about to change as I’m finally biting the bullet and start paying for web access on a smart phone, and I’m going to get a square account. https://squareup.com/ This company looks like it’s just what I need for that occasional CC sale!
Great post — am just about to do my first show (!) and have signed on to accept VISA and MC. I like the idea of verbally offering a discount for cash payments. Thanks for the solid reminder to think broadly about pricing!
As usual, a good topic. As a retailer, merchant service charges are part of the cost of doing business. While most sales are transacted using cards, it is wonderful when a customer will ask if I’d prefer another card instead of AmEx. Your post is a perfect illustration of what sets apart amateur from professional sellers. My suggestion is that if you intend to go into business – do it. Don’t just dabble.
Well done.
DD@Fine Lines
I couldn’t agree more. And 10%??? Yeah… totally excessive since there’s no way the CC processing fees should be even half that.
I’ve also had a similar gripe lately with actual brick & mortar retailers – a local gelato place that I love has a $10 minimum to run a credit/debit card. I tried to call them out, since virtually every CC processor around doesn’t allow you to set a minimum purchase, but the person behind the counter wouldn’t budge. I emailed the owners but haven’t heard back yet.
I think you have to accept the fact that in this day and age you have to be prepared to take credit & debit cards, no matter how small the purchase. And yes, you should factor those costs in ahead of time, instead of potentially pushing away and angering potential customers. Now I have a grudge against that gelato place. I’ll probably buy from them again, because their product is really, really good, BUT at this point I’ve ranted to friends and co-workers and I think they’ve done more harm than good.
We have a coffee place down the road from us that has a $5 minimum on charges. Lots of times we can’t go there, if we just want a cup of coffee and don’t have any cash. I would say half the time we’re thinking about going there, we skip it because of this. I don’t hold a grudge, it’s just really inconvenient.
I have read this thread with interest. As I am just starting with craft shows, I was wondering what is the favoured method / company to use for receiving credit card purchases at shows. Most I have found seem to charge a monthly fee for this, and as I just do a market once a month, and the monthly fee can take a lot of profit away. The market is not in a Wifi spot, otherwise I could just use my online Paypal shop to action payments as I have all stock listed there too.
Does anyone know of a cc merchant that just charges on % sales ?
I understand that when starting a business, this is part of the integral costs, but I am sure I am not alone in wanting to keep margins to minimum until business picks up.
Thanks all for any hints.
Keep in mind that any processor who only charges a %, and not a monthly fee, will most likely charge a higher %. If you don’t sell a lot at your once a month show, it might be worth it, but you should crunch the numbers.
Susanna – at one point I had a merchant services account that I got through my bank. We set it up as a seasonal account, there was no monthly fee on the months I was using it, but if I didn’t use it, I would get charged. However, if I knew I wasn’t going to use it for a few months (like the winter when I wasn’t doing shows) I could have them turn the account off so I wouldn’t get charged.
For many companies, the fee is only around $30 a month, and while it may seem significant when you are just starting, it’s actually a relatively small business expense in the long run.
Susanna,
I started using http://www.Propay.com for my credit card charges after several local ladies in the craft show circuit recommended them to me and I love Propay.com! They charge a yearly fee of appx. $60 (for the plan I bought which accepts all 4 major cards), and then no monthly fees (that works out to $5 a month if you want to see it that way). Their processing fees are completely in line with standard, not inflated. You can process by phone and get automatic approval, but it takes an average of 5 minutes per transaction, and I’ve had some that took longer when my input wasn’t read correctly.
That’s why I bought their swiper processing card and that has made a HUGE difference in speed of transaction! Well worth the $150 investment ($50 annual service fee for the swiper + $100 for the swiper itself). I don’t get automatic approval – I have to get that when I get home and process the payments – but I’ve never had a problem and it’s no different from accepting checks with the possibility of them bouncing (never had that happen either). If you have a laptop and a wireless connection, you can do the transaction online and get instant approval.
The card swiper is fully encrypted so after you swipe and upload the info, you only see the last 4 digits of the card, the card holder’s name, and the expiration. That means you don’t have the liability of storing or disposing of the card number. Plus, because it’s encrypted, if the swiper gets lost or stolen, no one else can read the info either. Even better, you have to register your computer with Propay.com and upload the data from a registered computer, so a thief couldn’t process a payment from any computer except yours. Pretty smart, and it gives your clients much more confidence than the old carbon paper credit method.
I completely agree with you. I take credit cards at shows and it will never occur to me to charge extra if you pay with a cc.
I factor that on the pricing and the way I see it , the CC charges a sort of wash out with the cash sales so it is not a big deal. So far cash sales are a bigger amount for me.
🙂
The person that accepted your credit card better get her fanny back home and re-read her Merchant Account Contract. Several years ago, someone from VISA came into my booth and made a purchase from me. I received a written review of the transaction from VISA. I rated 100% on the transaction. This was VISA, Not my Merchant Account Provider. I’ve never heard of a Merchant Account doing this test purchase. I am willing to bet the person that charged you extra to accept your credit card is in violation of their Merchant Account Contract. I am 100% sure they are in violation of the VISA portion of their contract. The VISA, MasterCard, Discover and American Express policies are online for everyone to read.
Did you know that if you lose your Merchant Account due to your actions, or lack of actions, it is very difficult, if not impossible, to get another Merchant Account Number? Ignorance is not an acceptable reason for a Merchant Account Policy violation. Why would anyone play a silly game with the rules when their Merchant Account could be at risk? That does not make good business sense to me – At All. I recommend that everyone who has a Merchant Account re-read the policies / rules. If you don’t have a copy of them, ask your Merchant Account Provider for a copy. Ignorance is no excuse for not knowing the rules / policies.
I am a handcrafted exhibitor. I do approximately 30 shows a year and I take credit cards. Every item I sell has my credit card fees factored into the sell price. I assume the shopper is going to purchase with a credit card. Over 75% of my purchases are made with a credit card. This works for me.
All the Best to you in the upcoming year!
Paula
Susanna,
I used to activate my PayPal Virtual Terminal account whenever I had a show and then cancel it when I was not doing shows. but I found that the $30 monthly charge was still pretty steep if I only had a couple of transactions. I then looked at Propay which is only an annual fee and then cc transaction charges- if you do a search through the etsy forums you should find a link to their special etsy pricing, if the offer is still available. I think it comes out at $60 annually. My current solution which I am incredibly happy with is with MerchantWare http://merchantwaresolutions.com/products-mobile.php – I use them to process cc’s through my website which is a Shopify store, and then I have a virtual terminal I can use from my computer and then I have the free app on my iPhone. I feel like I am covered for pretty much any scenario, plus they sent me one of the engraved plates with my business info for using with a knuckle-buster, which I’ll use for shows with no wifi. I think I pay $7 a month for it, which is special Shopify store pricing, and then the cc charges are on top of that- they seem pretty standard. The only hitch is that there is a fee charged if you don’t process over $25 in transactions a month, but hopefully that shouldn’t be a problem.
Good luck!
Hi helen!
Thanks for such detailed information on what you use for merchant. I am going to my first trunk show in June and considered not taking cards because of the fees for just one event. But I feel like if I don’t accept the credit card, then all of my efforts to make a great appearance at this show will be wasted.
jenelle perryfinalia.com
I agree- definitely something to factor into your costs.
But … you said that processing fees are 3-4%. I’m wondering how to find a credit card option that costs this little. It seemed like when I looked into taking a credit card at the local craft show I did, everyone wanted to charge me a lot up front for the machine itself, and then tack on the 3-4% to each sale.
So I guess my question is, what companies are reputable and relatively inexpensive for taking credit cards? Do most people take them through their laptop? What about shows with no internet connection? I’m at a loss! It seemed like when I googled to find a company, I got a lot of results of no-name companies that I wouldn’t necessarily trust.
Ack, just saw that someone else asked the same question that I just did. But any more suggestions for reputable companies – good for the occasional craft show – would be much appreciated!
BobbyOh my god, I have to say that I went to West Side Club for the first time, because my cuirtsioy about these bathhouses peaked. My reaction was exactly the same as Davey’s and Matt. I felt like I fell down the rabbit hole into some type of effed up wonderland. WSC has a huge age range on the weekends, but he majority are older people (I’m 24). All in all, I was certainly followed, groped and intentionally bumped into I think everyone knew I was fresh meat and wanted a taste. It actually pissed me off a lot by all the attention, but its true about all the action happens behind closed doors but people are very loud. After about an hour of aimless wandering and being gawked at I left. LOL What a crazy experience.
I totally agree! Thanks for addressing this Megan, it’s an interesting and good topic!
First of all, from being on the seller side of the table I cannot imagine having to tell someone that I appreciated their support & purchase and then in the same breath telling them they would have to pay extra for using their cards. That would be a huge turn off for me as a buyer as well. A lot of stores will have a limit for credit card sales, usually $5.00 which seems easily understandable for both sides. I provide bags & tissue paper at shows and would never think of charging people an extra $.50 to have their items bagged as it comes with the purchase as does a big smile and “thank you”.
Accepting credit cards has increased my sales and this alone makes it worth it, although adding a small increase in overall prices (without publicizing it) would also do the trick. One thing that I keep learning as I do shows is that a happy customer is one of the best investments you can make in your business. The further you can go to make them feel appreciated and satisfied the better off you and the rest of the handmade marketplace will be.
Thanks again for such an interesting post! I am an avid reader of your blog & appreciate all of the great information on here.
–Megan Winn
The Binding Bee
I’m with you 100% – I think it leaves customers with a bad taste in their mouth when you throw on these extra charges, you are way better off just building the fees into the cost of the item. Also, to add on to this concept, I think people should openly display the cost of their items. I learned this the hard way when I purchased an item at a recent show. The price wasn’t displayed and I had a concept in my mind of what I thought it would cost…I told the gal selling that I wanted to buy it and she rang me up. The price turned out to be 300% higher (no kidding) than what I thought it would be and I had already built a buffer in my mind of the item being higher than my initial impression. It was way out of my price range & I was too shocked to say I wanted to return it because I felt embarrassed & I was still in shock thinking of the opportunity cost of my purchase. Now I know that I will never buy unless I’ve seen or asked for the price first! Lesson learned!
If I don’t have cash I will actively go to a place that I know takes CC over one that doesn’t or charges a fee (I am thinking coffee shops and small restaurants esp). Some of my favorite places charge the fee for CC’s and I would buy more from them if they didn’t.
Thank you for creating such a lovely space : )
I’d like to invite you to win a piece of my fine art through a giveaway on my blog.
http://walterhelenaphotography.blogspot.com/2010/05/whp-giveaway-two-of-twelve-clouds.html
I wish you all my best.
WHP
Thank you for this timely post on credit cards. It hurts see such a high percentage go to the credit card companies. And a tacked on price is TACKY!
Its almost like when people charge for their product in their shipping cost. I read a blog that stated that shipping fees should include the price of the packaging, gas, labels, ribbon, etc. and the actual shipping cost. I don’t agree with that either. I want my product to be a certain price and I want to pay for the actual shipping cost, not your tissue paper and ribbon. Maybe we could have your thoughts on that Megan.
Thanks! Jenelle @ perryfinalia.com
The money for packaging has to come from somewhere. Either the price of the product is higher to account for the time and materials to properly package and mail them, or the shipping cost reflects handling charges as well as postage. This is hardly uncommon, many “regular” businesses charge shipping and handling. I’m often surprised at how many crafters don’t factor in the time and materials it takes to ship things, you can lose a lot of money and time if you’re not factoring that into your price one way or another. Bubble wrap and tape aren’t free.
Thanks to all, especially Helen, that is just the type of experience I was hoping to tap into. Much appreciated.
For me, most of my work is done directly or online, through Paypal, so market stalls are more an experiment currently rather than a way of gathering mainstream orders.
I also thank Megan for such a great website and blog about these things.
Susanna
YourFusionArt
i have to agree with paula, it is my understanding that it is illegal to charge a surcharge for a credit card versus cash. that vendor is in violation of the terms set back visa, mastercard, etc. hopefully they read this blog and change their transaction habits before they really have a problem on their hands.
This is not a good reason to tack on an extra cost – in fact there is NO good reason as it turns off buyers, but I think people do it to encourage you to use cash so they can make more money from the transaction.
I was interested to hear that this practice may actually violate terms of service with with the card processor. It seems fundamentally wrong (maybe illegal?) to accept more than one kind of payment but to charge differently based on the form of payment.
I agree, it doesn’t seem right to add the 10% to the total price. Actually if you read your merchant agreement you signed, it says under no circumstances you should add a percentage on top of the price for cc sales. It is against the rules for most merchants, I actually thing for all.
the small discount for cash payment seems fair. As long as a tax inspector doesn’t think you are doing that to avoid paying taxes. This could be a 2 way street.
Best is to add all fees to your prices.
forget bad business practice, where I’m from, this is illegal. As a business person, you had better know (and follow) the laws of your state.
This is illegal. If you accept CC, it is against your Merchant Agreement to charge a fee to cover the costs of processing the cards.
Besides, it’s worth the time not going to the bank to deposit the cash. Time is more valuable than a fee. You can also negotiate for a better fee structure.
I would tell the vendor charging the surcharge that it’s illegal and maybe they’ll drop the charge. 🙂 They can permanently lose their business with Visa/MC if they are caught charging extra, or offering a ‘cash discount’.
I haven’t worked a show yet, so I’m not sure what I’ll do (I’m looking in to the cube for my iPhone). Online, we use Dharma Merchant Services. They have a one page list of fees and that includes every possible charge. It’s very refreshing! The company we used before never told us about mid qualified and non qualified rates, and we had no idea that rewards cards cost us more. It’s a racket.
I run my small little business in South Africa, where bank charges are extortionate, as is insurance! We recently got a card machine at our little shop, and I’ve noticed the following:
a) People subconsciously shop more when they see the VISA sign. I know it sounds absurd but we really have seen a difference.
b) The cost of depositing cash at the bank is pretty high here, so it is not necessarily a lot cheaper to take cash. Also, a card machine cuts down on my time documenting the petti cash, and stops me from having to send staff members to the bank, which puts them at risk of being robbed, and costs me money in salaries.
c) The cost of insurance to have large amounts of cash on site is also really big. We cut that cost significantly by having a card machine.
d) We’re a small little shop in some shipping containers at an arts and craft centre. Having a card machine just makes us seem a little bit more serious and professional than the shipping containers might suggest. This is important when dealing with potential wholesale clients.
So there’s my thoughts on why the card machine charges may not be as different to taking cash as we initially think they are.
I’m really, really enjoying this blog. Found you recently via Design Sponge. It’s great advise and a great community, thanks.
Hello, everyone. I came across this trail of conversations and have attempted to follow each as best I can. This is a very lively conversation and I write to contribute to it from over 19 years experience in the Credit Card Processing industry.
First , a comment on the occurrence that created this whole conversation. When someone uses a credit card as a form of payment, It is not legal, according to the rules and regulations of the various card associations (Visa, MasterCard, American Express and Discover), to add a % to any purchase made. Now, let’s be real here, there are some merchants doing this. However, if any of the card associations become aware of a merchant doing this, they are subject to their credit card processing acceptance being terminated. In being terminated they will be placed on a terminated merchant file and thus cannot process with any processor afterwards.
Also, it is not legal to have a minimum dollar purchase. Again, let’s be real, there are merchants doing this. Again they are subject to being terminated and being placed on a terminated merchant file.
Now, I would like to make a simple 10,000 foot over view of the credit card industry. There are 3 parts to the Industry: 1) The issuers of Credit Cards, whether they be Visa, MasterCard, American Express or Discover. 2) The Associations themselves of Visa, MasterCard, American Express and Discover. Visa and MasterCard do not issue or process credit cards. They are Associations that certify banking institutions to issues cards. Until recently American Express and Discover did their own issuing and processing. However, due to a lawsuit several years ago that went all the way to the Supreme Court, American Express and Discover broke the “monopoly” that Visa and MasterCard had for issuing and processing cards through the banks. Now American Express and Discover can and do issue cards through certified banks with Discover having some of banks doing the processing as well. American Express still processes their issued cards “in-house”. 3) The third piece to the Credit Card industry is the processing or the acquiring side. This is who the merchant contracts with to accept credit cards as a form of payment.
WHO MAKES THE MONEY? Roughly 80-85% of all monies paid by the merchant for accepting credit cards as a form of payment go to the bank who issued the credit card. 5% goes to the Associations for dues and assessments. The balance of 10-15% goes to the processor. For the merchant the irony in all of this is the most important part of this course of action is the processor. They receive a very small percentage of the dollars paid by the merchant for the processing of credit cards. Yet, the processor is responsible for: 1) Quickly processing the card, checking the line of credit available on the card, insuring there is sufficient credit available to pay for the purchase and approving the transaction for the merchant to accept as a form of payment; 2) Insuring the monies captured through the various transactions during the day are properly stored; 3) The effective “batching” out of the monies at the end of the day; 4) Reconciliation of all monies batched out with each and every credit card issuing bank; and 5) Effective posting to the penny of all monies via the Federal Reserve to the merchant’s ACH account. This is no small task and I never ceased to be amazed at how well the system works for millions of transactions a day with very, very few mis-takes.
With all of this being said about who makes the money, it is very important to get the best pricing for the merchant. The best pricing is cost plus. I will not go into the 10,000 foot view on this. If anyone has a further desire to explore this, I can be reached at bhearon@epmnetwork.com.
Also, there is PCI Compliance, effective the end of this month. Merchants not compliant are subject to fines and fees from $25 to $65,000 for non-compliance. Again for further information do not hesitate to contact me at bhearon@epmnetwork.com.
I operate as a consultant in the industry and I am pleased to provide anyone with whatever information is needed to effectively take advantage of the use of credit cards.
Best to all,
Bill Hearon
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