The True Cost of Credit

For just about anything you want to get off your chest about credit cards.
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The True Cost of Credit

Postby Cucumber » Wed Feb 18, 2009 3:07 am

Now you can know how much are credit card processing fees costing stores! Has anyone here seen this site - truecostofcredit? It allows you to find out how much your credit card is charging the merchant in processing fees. I'm not talking about some generic calculator that spits out an approximate number. This thing actually bases it on the first 6 digits of your credit card number to identify the bank and card and how much they charge in processing fees.

It's a pretty spiffy tool. :D The True Cost of Credit | What does your card cost?

Here's what it said about my Amex card.....

American Express cards typically cost businesses about 0.77% more than Visa, Mastercard and Discover cards. Unlike Visa and Mastercard, where the rates for each transaction are set according to a set of rules called Interchange, American Express negotiates their rates on a business-by-business basis, which results in some large retailers (Costco, Trader Joe's) getting much lower rates than their smaller competitors. Check out this blog article for more information on American Express Discount Rates.

Here were examples it gave for that card and the fees involved.....

(1) A pack of gum at a convenience store: $1.50

Credit Card Fees: $0.37 (24.8%)

Percent: 3.500% Per-Item: $0.32

The average convenience store paid $52,064 last year in credit card processing fees (details) - 2.25 times the average earnings of such a store.

(2)Jill's Sandwich Shop: $7.00
Credit Card Fees: $0.52 (7.4%)

Percent: 3.500% Per-Item: $0.27

(3) Tank of Gasoline at a fueling station: $30.00
Credit Card Fees: $1.22 (4.1%)

Percent: 3.500% Per-Item: $0.17

The average gas station paid $52,064 last year in credit card processing fees, 2.25 times the average earnings of such a store.
A typical sandwich shop like a Jimmy Johns pays about $10,000 each year in credit card processing fees (details) - enough to pay a sandwichmaker for 4 months!

It gave a few other examples too....
Stop talking crap about him!

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Postby DGenerateKane » Wed Feb 18, 2009 3:52 pm

Yeah I found it while I was researching a new credit card. My boss isn't happy with how much she pays per month and is thinking of dropping it completly.

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Postby fffresh » Wed Feb 18, 2009 11:14 pm

It's the small purchases, not the large ones, that are killing merchants with credit card processing fees. What needs to happen urgently is not reform for higher dollar purchases but for the small businesses which must endure hefty charges for things such as the pack of gum in the example above.

What is causing smaller purchases to be more costly as a percentage is the flat fee for using a card, typically 20 to 35 cents. Then add in the 3% fee and you are looking at a large amount in terms of being a percentage of the purchase.

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Postby Mogul of Pineapples » Fri Feb 20, 2009 12:56 pm

It looks like the cheapest the American Express merchant rate goes down to is 3.5% on the Amex Simply Cash business card I entered. Business cards I know run an average 1% higher than standard. That can shave quite a bit off the company's bottom line if their profit margin is only 10 to 15% like at Best Buy or Costco. That would be 1/3 to 1/4 of their profit paid out in credit card fees.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
American Express: Blue Cash, Simply Cash Bank of America: WorldPoints Platinum Plus Chase: Amazon, British Airways, Cash Plus Rewards, Freedom, Ink Cash Citi: Thank You Premier, Dividend Platinum Select Discover: More
Primary Everyday Card: American Express Blue Cash
Primary Travel Card: Chase Sapphire Preferred

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