I will clearly state which payment methods are free and which ones the customer will pay a conveniance fee or recieve a discount if they use. I will clearly show the customer at checkout what their total is with their chosen payment and shipping (if applicable) options would be, and give them the opportunity to change their selection. It is about customer choice and convenience. You are welcome to shop somewhere else that bundles these expenses into the price of the item and givea you no choice in avoiding them.
I can only speak for me, but if I have to do that much mental math to figure out the best options to pay or see a bunch of random (to me) fees and adjustments at checkout, I'm leaving and going somewhere else. It feels scammy even if your goals are noble.
What's the fee for counterfeit cash? Or illegally gained cash?
What's the fee for cash the requires quite a bit of change? What's the fee for cash that is composed of very small values (e.g. quarters and dimes for a tv)?
It's interesting that all of these complications are ignored entirely when pricing payment methods. Handling cash isn't free and carries risk.
> What's the fee for counterfeit cash? Or illegally gained cash?
What's the fee for credit card chargebacks from stolen cards, or chargeback fraud from customers who receive a product and then dispute the charge anyway?
> What's the fee for cash the requires quite a bit of change?
There are machines that count coins and issue exact change. If you do a lot of cash business, you buy one. For example, the self-checkout machines at Walmart do this.
The largest denomination still issued for US cash is $100, so no cash transaction will require more change than this, and some merchants don't accept large bills for small transactions.
> What's the fee for cash that is composed of very small values (e.g. quarters and dimes for a tv)?
How often do you think that actually happens?
Also, how are costs like this to be avoided unless you stop accepting cash whatsoever, and thereby lose business? Just eating the credit card fees instead of passing them on isn't going to stop someone with a jug full of nickels from wanting to spend them.
> Handling cash isn't free and carries risk.
Nothing is free. How about the time value of money for the time it takes for the credit card companies to pay you, as opposed to cash which you can immediately spend or deposit and begin collecting interest on?
The issue is that credit card companies have the usual set of costs and then on top of that charge significant transaction fees and shift the cost of various types of fraud to the merchant even though they're the ones who designed the system that makes it easy to carry out.
Or just make your prices have the credit card fees built in just like normal businesses. Your system is a ton of work for very little benefit to anyone and it’s probably lowering your revenue and it’s as annoying as places that charge for takeout containers — missing the point that takeout containers encourage people to buy more food.
It’s an unsophisticated approach to business. That’s why it’s common in mom and pop places — mom didn’t go to business school and pop is tripping over dollars to save a nickle — they see the “expense” but they can’t see the revenue that aren’t getting.
There is a reason most small restaurants fail — they don’t know how to be more profitable. So they start to add on these little fees when they begin to struggle and don’t realize that they’re making the problem worse. In other words, most people that start restaurants don’t know what they’re doing in the back office even if they’re great in the kitchen. Restaurants fail for many reasons, but not controlling costs is the biggest — however, they’re naïvely choosing to control the wrong costs.
One of my good friends owns a chain of 30 Tex-Mex restaurants in Texas. After several burglaries of the safe at several locations, they went cashless at some locations. The cashless locations, without exception, saw sales increase by over 12%. He quickly made all of his stores cashless and sales increased among all stores. My anecdote isn’t data — but there is plenty of data out there.
The credit card surcharge scheme is endemic among small business owners who actually haven’t done the math. Or, more accurately, they’re doing the wrong math.
Credit card users spend more than cash users. So you make up for the “savings” with lower sales volume. And credit card users that have to pay higher prices will go elsewhere. Or, if they pull out cash, they’ll spend less of it.
> Your system is a ton of work for very little benefit to anyone
It has the obvious benefit of discouraging people from increasing your costs with rewards cards. Keep in mind that businesses often have net margins in the vicinity of 5% of revenue. Paying 3% of revenue or more to the credit card company is heinous.
And what work is there to do? The calculation is done by a computer. If your attitude is "just price in the cost" well then there you go, you can pay the true cost of the card you have without even looking at the alternatives. Whereas if you want to get the lowest price then you have to figure out which card has the lowest price. Removing your option to do this is not going to save you money, it's just going to cause you to pay the higher price at all times, which you still have the choice to do.
> they see the “expense” but they can’t see the revenue that aren’t getting.
Increasing sales by e.g. 15% while decreasing net profit by up to 60% is often not a fantastic business decision.
> Credit card users spend more than cash users.
Which is why you accept them but provide a discount for the people who don't use them and thereby don't expose you to their fees.
> And credit card users that have to pay higher prices will go elsewhere.
But they're not higher prices. Restaurant A charges however much to everyone. Restaurant B charges exactly the same amount to people who use credit cards and a few percent less to people who pay cash. The people who insist on using credit cards can go to either place and pay the same amount, anyone willing to pay cash can get a discount at Restaurant B.
Extra fees of any kind just really, really annoy people. This is true at restaurants but also plenty of other industries. In the majority of cases, the loss of business from patrons who avoid your establishment due to the extra fees outweighs the revenue generated by the fee. Of course, you are welcome to test out your theories, but you're unlikely to find many people who predict they will be successful.
The only real question here is if it's to your advantage to advertise a lower price and then tack on a credit card processing fee or advertise a higher price and then provide a discount for cash/bank transfers.
The first gives you a lower advertised price but then irks customers when they find out about the extra charge. The second gives you a higher advertised price, which could be worse depending on the nature of the business.
But the proposed alternative where you charge the same to everybody and incorporate it into the advertised price requires you to use the higher advertised price, which has no advantage over the second option regardless of whether or not the second option is better than the first.
Restaurants, which is what your post is about, rarely advertise specific prices. Part of that is because a restaurant bill is comprised of multiple components -- entree, appetizer, dessert, beverage, "extras". Another part is that menus typically have dozens of options, another is that prices change often, and another is that many restaurants are local businesses with limited or no advertising budget. And a huge one is that restaurants that do promote low prices are often considered low quality as well.
In other words your point is pretty much moot because nobody is choosing a restaurant based on, veal parmigiana costs $25 at Villa Roma and $24.50 at Sicily Palace. But they very much might remember that Sicily Palace charges a credit card fee and boycott it in favor of somewhere else.
I'd like to believe this is true but in my metropolitan area, it's quite common to see e.g. a covid recovery fee, inflation recovery fee, iniative 82 service fee, and autograt when you are checking out. It's extremely bad for price transparency but the practice seems very popular among merchants who are betting that customers will still show up as long as the menu prices appear low.
Overall, I eat out less, but "drink out" more and never get more than one drink at the establishment. I can't claim to be able to uniquely isolate any of my behavior to fees because a lot has changed in my life. Before covid I was a student and now an FTE, I was shy and lonely and now I have an active social life, I lived in a very big city and now live in a big city, but I can tell you I get an ick about going out, and when I'm proposing to go out I am mindful of costs and fees and propose places that I consider to be cheaper and more forthright about pricing.
I'm curious if banning cash is profitable because when the business is at capacity, the no cash business filters out thriftier consumers, and not because an individual (who has both cash and credit) spends more when they are told cash is not accepted.
