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Summary: If you have a shop and you accept Credit/Debit cards like Visa, Mastercard, Maestro, American Express, etc., you have to pay a fee. Is there any way to keep accepting those cards without paying the fees?


I went to the shop and I bought an item which cost $1.20. I asked the seller and he confirmed that he has to pay $0.70 for that transaction. The seller also added that he bought the item for $0.60. This means he lost $0.10. He confirmed there is no way to avoid this. I'm not sure if this applies to online transactions as well.

Why should the fees be paid? I believe there are also good reasons to keep paying those fees:

  • Credit Card circuit provides fast transaction execution compared to... (is there any comparison alternative, maybe online payment alternative)?
  • Credit Card circuit checks during the transaction if the card is valid and has not been stolen.
  • ...
  • ...any other reason?
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    The fee is the price the merchant pays to have the credit card company process the transaction and send the merchant money. How would they get out of paying it?
    – Seth R
    May 24 at 16:15
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    Your seller is getting hosed. Stripe's fees are $0.30 + 2.9% (33 cents in your example), and they're on the high end. stripe.com/pricing
    – ceejayoz
    May 24 at 19:13
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    Can you clarify which country this is, whether the card was debit or credit, which network, contact or contactless?
    – jcaron
    May 24 at 20:30
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    "Why should the fees be paid?" -- why did you give the store $1.20? Because you wanted the item they were willing to sell to you for that price. This is no different. May 25 at 1:07
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    If you think this is bad, consider that Apple and Google have fees around 30% for purchases through their app stores, and Apple disallows apps from offering other payment methods (although they lost a lawsuit last year about this).
    – Barmar
    May 25 at 15:19

5 Answers 5

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Is there any way to keep accepting those cards without paying the fees?

No. You're receiving a service, why would you be receiving it for free?

He confirmed there is no way to scape to this.

That's incorrect. He can avoid these fees by not accepting credit cards for such a small charge. Cash is legal tender.

The credit card companies allow (after being sued numerously) merchants to set minimum transaction amounts below which merchants are not required to accept credit cards for payment. This is specifically to avoid cases where the fee is prohibitively high compared to the transaction amount.

The fees are usually structured with either fixed floor or with a fixed component. For example, 2% of the transaction, but no less than $0.50 (fixed floor), or $0.25+2% of the transaction (fixed component). Both make it significantly more expensive to accept credit cards for low amounts.

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    Why would merchants need to sue in order to be allowed to reject credit cards for transactions under a minimum amount? Couldn't they just set that as their store policy, kind of like how some stores have policies about unaccompanied minors and how many bad checks get you banned? May 24 at 15:56
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    @RobertColumbia Because the card network (e.g. VISA) would have a policy saying they're not allowed to do that, and saying if they violate the policy they will be disconnected from the network. The lawsuit would be to make the network let them do it without being disconnected.
    – user253751
    May 24 at 16:03
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    @RobertColumbia the networks have a lot of power over the merchants. This is de-facto a duopoly (VISA+Mastercard hold all the market, AMEX, Diners Club, Discovery, UnionPay, JCB - are all local and globally insignificant even combined together). There were multiple anti-trust lawsuits against both MC and VIsa, both in the US and the EU, due to various unfair policies including demanding the merchant accept their cards for all transactions or refuse accepting competitors' cards.
    – littleadv
    May 24 at 16:42
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    Worth noting also that it's not uncommon for businesses that deal with low-priced items to have a fee that offsets their loss on low-priced transactions. For example finding at the register: "A $0.50 processing fee will be added to any credit card transaction less than $5". It doesn't really avoid the fee which is what OP asked but technically allows the business to offset the loss which is kinda what looks like it spurred the question.
    – McAden
    May 24 at 19:50
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    @McAden In many countries adding fees for card transactions is illegal, and in general it is illegal anything that would change the price depending on the payment method (e.g. discount for cash). In some countries merchants cannot refuse to let the clients pay by cards if the amount is above a certain limit (e.g. in Italy the limit is currently 15€), some countries have laws such that some circuits waive fees for transactions below a certain amount (in Italy transactions "Pagobancomat" below 5€ cannot have processing fees attached) or there are caps on the amunt processor can charge.
    – GACy20
    May 27 at 7:38
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As to why merchants take credit cards, even with fees, the common answer answer is an increase in sales. A friend started taking credit cards and her business double or tripled in volume. As her cheapest item was $6.00 and the average item was $20 - $30, the fees did not kill the profit margin. The most expensive items were $1200 - $1400. It was not uncommon for people to buy $250 - $400 of stuff. For average retail, most people don't walk around with hundreds in cash.

Large volume cash shows tend to be at wholesale shows for vendors. One off transactions for hundreds or thousands of dollars, where you would not trust anything but physical currency (because checks and cards can be forged and the seller often eats those losses). Even then, once a business relationship is formed, things other than cash become allowed.

Today, many buyers expect to be able to pay with a credit card. The only major places than don't are MJ, tiny food vendors, and individuals (me buying something from a friend). Even the government will often take credit cards (but may upcharge you the 3% transaction fee).

EDIT: Just a note, this is how things work in America. Other countries have different standards and practices. The numbers listed in the original question looked like American Credit Card numbers, so the specific answer was based on that. Note, debit cards may (often do) have different processing fees. Point of the answer to was answer why a merchant would take Credit Cards. In the absence of a cheaper electronic payment system, it is usually good for business.

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    This is a very American answer. In Germany, almost all shops accept girocard, but many do not accept credit cards. The fees for girocard are about 1/10th compared to the fees for VISA/MasterCard. Credit card payments are very rare in Germany (I use mine exclusively for rental cars), so the only reason to accept them is for foreign visitors from countries where banks do not interact with girocard.
    – gerrit
    May 25 at 7:36
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    @gerrit. Isn’t girocard just a debit card? The question and this answer seem to me to just use the phrase credit card but really seem to draw a distinction between paying by a card versus paying with hard currency (paper and coins). In the US debit fees are also lower than credit fees generally, though may still be higher than girocard fees I’m not sure. And a lot of people here just call everything a credit card.
    – quid
    May 25 at 14:32
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    I find alot of places use credit card to just mean anything from visa/mastercard, even if you got a debit card from visa/mastercard.
    – Rob
    May 25 at 14:37
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    @Barmar This is not in the US, this is in (some) shops in EU countries that don't want to pay the visa/mastercard fees so they say "no credit cards" but they really mean no visa/mastercard cards.
    – Rob
    May 25 at 15:36
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    @Rob actually debit cards don't work on the same networks. Debit card transactions are handled through different networks (some owned by Visa or MC, but not all, and in fact there's much more competition there). They ride essentially the same networks as ATM, and you can see many different network logos on ATM machines in the US, not just Visa or MC or their ATM brands (like cirrus or maestro). Girocard is indeed a similar type of card.
    – littleadv
    May 25 at 17:36
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Is there any way to keep accepting those cards without paying the fees?

I think there might be some special rules/discounts if you're operating a non-profit 501(c)(3) but that doesn't apply to your scenario.

He confirmed there is no way to avoid this. I'm not sure if this applies to online transactions as well.

Yes, this applies to online sales as well. Accepting credit card payments means that you're paying for a service. Do you eat a satisfactory dinner at a restaurant and then think of ways to not pay? Of course not, you chose to have this service provided to you.

WHY SHOULD THE FEES BE PAYED?

Because the merchant chose to accept credit card payments at their business.


So, how do you mitigate the pain of credit card payment fees for low-value items as a merchant?

  • Raise your base sale price to account for the transaction fee
    • That $1.20 could have costed $2 instead
  • Do not accept credit cards below a certain threshold
    • Small shops/restaurants often impose a $20 minimum purchase if paying by credit card
  • Offer 2 prices: cash price and credit card price
    • Gas stations have implemented this tactic in my area for many years now; it's usually a $0.10/gallon difference but I suspect they will raise it fairly soon
    • A local restaurant which I frequent tacks on a 3% credit card processing fee if paying with a credit card

Most places tend to take the gamble that high-value transactions outweigh the occasional low-value sale. It's called "the cost of doing business".

Gas stations and convenience stores in less affluent neighborhoods might opt to not accept credit card at all if their transactions are usually less than $20.

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    The card minimum really depends on the store. I know of many local stores that have either a $5 or $10 minimum rather than $20. It really depends on what they sell and whatever agreements they have with the payment processor.
    – phyrfox
    May 25 at 19:19
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    Some of mitigations listed may not be available. In the UK, differential pricing is actually illegal. May 26 at 8:18
  • @AndrewLeach Can you provide a source? The closest thing I can find is that it's illegal to apply differential pricing based on a protected class like sex, race, religion, etc... I don't believe payment method is a protected class. Some businesses might get around this anyways by listing a single price and offering a discount if paying with cash.
    – MonkeyZeus
    May 26 at 10:44
  • @MonkeyZeus It's Consumer Protection legislation. See gov.uk/government/publications/payment-surcharges and Sections 12-13 of the guidance document there. May 26 at 12:07
  • @AndrewLeach So 13.3 bullet point #2 tells me that everything I described is legal?
    – MonkeyZeus
    May 26 at 12:31
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Only for regular customers.

The shop owner might issue his own customer cards. Payment is done via debit charge at the end of the day/week/month. The shop owner will need to have his own infrastructure to collect the payment data for his "premium customers" and will have to offer an incentive for his "premium customers", typically some discount. Note that while cash discounts are illegal in some places, giving a discount to "premium customers" is legal.

Obviously, this won't work for non-regular customers, so the shop owner will have to accept the regular plastic money, but the incentive will convince the "premium customers" to stay with the shop's "premium card".

Note that there debit charge fees as well; they are however usually cheaper than what the credit card companies charge. Plus, it's also possible to charge the customer at the end a month (for the cumulated sum of the individual purchases in that month) to reduce the fees even further - at the cost of having to wait up to a month for the money.

After all, the shop owner will need to calculate whether this could a be a working solution. If there are enough reliable regular customers, this will work.

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Is there a way to bypass POS Credit Card processing fees?

No: if you want to accept cards for payment you will need to pay a fee for that service.

But there could / should be different providers on the market with different fee structures. Searching might reveal providers with lower price per transaction or lower total cost (depending what else a package of services might include).

I see an unhealthy effect of the fee structure and increased use of cards in chains of shops around where I live - they tend to stop selling goods with a unit price below a certain price level. Not selling single "something", as example, only selling double packs or sixpacks or similar.

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  • When downvoting, it would help me to make better answers in the future if I could get some kind of explanation.
    – ghellquist
    Jun 5 at 8:21

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