living underground in the real world

this post is about how much I hate my credit card processing company.

Just another day at the office.

I’ve needed to vent about this one for a while. Here goes:

Before I had the shop, I used my bank (ATM/credit) card all the time. Why fiddle with cash? Using my bank card means all my receipts go directly into my financial software (mint.com), and it kept everything so much cleaner, no receipts to enter into the computer later (why yes, 99% of what I buy is tax deductible) and no change to mess with. I had the meal delivery service going, and I often preferred my customers to pay with credit cards because it meant that I could actually get payment for their meals from them by processing their cards myself every week instead of hounding them for cash or running to the faraway bank to cash checks.

But with the shop everything has changed, and it’s made me realize something that all of you probably know but for some reason took me way too long to figure out: using credit cards is really, really awful for small businesses.  

Our credit card processor (authorize.net) takes, when all the many, many, many different fees are taken into account, about 3-6% of each transaction. Honestly it’s probably more, but I’m just too lazy to get a statement right now and figure it out. It’s a monthly fee, a yearly fee, a transaction flat rate, AND a transaction percentage. Plus a $20 monthly fee if I have transactions that need to be processed every month (like the Chocolate of the Month Club.).

Plus, whenever the government actually attempts to regulate these awful companies a bit more, they charge their account holders a fee to comply with the new regulations. For reals. A couple months ago my bill went down an incremental amount because of laws passed to stop the credit card companies from [here I would use the word “raping” if I believed in its use outside the realm of, you know, rape] small businesses like mine, and right next to the announcement of the reduction of charges was the announcement of “compliance fees” that added up to….the exact same amount of money.

PayPal is about the same, FYI.

Most of the bands I know use Square these days to do their merch, and with good reason—the processing charges are a lot less. We can’t switch to Square because our website runs through authorize.net and so does the app on the iPad we use as our cash register. We just need more functionality than Square offers right now. Jacob recently researched a bunch of different credit card processing systems, and it appears that they’re all mostly the same, fee-wise.

So we’re at where we’re at. And where we’re at is that when college kids ask if they can put one Drinking Chocolate on their credit card, I die a little inside. A Drinking Chocolate is our absolute most awful loss leader of all our loss leader items. A “loss leader” is supposed to be a product you don’t make a lot of money on but sell anyway because it lures people to you, or makes them buy other stuff, or whatever whatever whatever. (I know I’ve shared this little gem of a factoid before, but it’s like how if you [a vegan] go to a steakhouse, you’re helping them offset their loss leader—the steak. A steak isn’t usually marked up a much as it “should” be because it would cost too much, so when you go with your annoying aunt you never see to a steakhouse against your will and get a $15 garden salad, you’re paying an inflated price to make up money they lost from the loss leader. Moral: don’t go to steakhouses, vegans, and don’t hang out with those annoying aunts.)

In our case, a loss leader is usually some ludicrously fancy thing that costs us an insane amount of money to make so we can’t mark it up as much as we should. In the case of the Drinking Chocolate, once you factor in the almond milk, Mimiccreme whip, iSi whip chargers, marshmallows, sugar, 55 grams of ganache (A TON—see a photo of how much that is here), eco-cup, lid, arrrrgh, it comes out to $2.50 a glass. Which we sell for $5 and oh honey, you should see how people balk at the price.

None of the labor/mortgage/taxes/utilities/blah/blah/blah are factored into that, of course. We’re becoming famous for our Drinking Chocolates, and I love making them, but every time I do a little $2.50 sign goes off in my head, and I die a little. $2.50 Drinking Chocolates aren’t going to keep the lights on, particularly when we’re actually making only $2.37 on them when someone pays with a credit card.

Obviously, I don’t say anything to customers who use credit cards. Until a year ago, I was that customer! I just didn’t realize. But now I do, and I figured in case you didn’t either I’d write this little post. One more thing—rewards cards are where we really get screwed (that and American Express, but we get screwed so royally on AmEx that we, like every other sane business, don’t even take them.). If you can save your airline points card and whatnot for those rare trips you have to make to Target and the supermarket, every small business owner in the world will thank you.

PLEASE NOTE that if you’re a pal of mine and you come into the shop with a credit card, I won’t be all bitchy at you! I promise. I just had to vent a bit.

Onward!

 

13 Responses to “this post is about how much I hate my credit card processing company.”

  1. Louise

    A lot of small business here in Australia have minimum purchase amounts for you to use your card. I’m not sure if this is something that would work in your small town, but maybe it will condition people to remember to bring cash if they’re going to buy less than, say, $10 worth of products.

    Reply
  2. LizL

    Per the comment above: I would agree that a minimum purchase amount is nice (I mean, seriously, you kind of have to be a twat to pay for a $5 transaction with a cc, or, clearly: your bills are going to Daddy), but it it is not actually allowed here. Against credit card rules, or something…
    My question, is do debit cards charge the same fees?

    Reply
    • lagusta

      Yeah, it is against the “agreement” you sign with your processing company to have a minimum order requirement. Most businesses I know do it anyway though… Pretty sure debits charge slightly less, but I’ll check my statement and let you know for sure.

      Reply
  3. John

    If it’s any consolation, we stopped in a few weeks ago and had some of your spicy hot chocolate, and it was the best I ever had. Delicious stuff!

    Reply
  4. Zoe P.

    Thanks for posting this. It’s nice to know that the small effort I make to not use a cc impacts the small businesses I visit in a big way. 3-6% sounds like a lot to me.

    Reply
  5. Rebecca

    I always knew how evil and greedy credit/debit card companies were to businesses (and to individuals, in a very personal way), but I didn’t think about it terribly much and use my credit card all the time. I’m going to rethink this, especially on small purchases, especially because I dream of opening a vegan sweets shop one day and will eventually feel this pain, if I do. How do they get away with this!!!

    Reply
    • lagusta

      Aww, thanks! Actually, after this Square came out with an update that made it work a lot better for our business, so now we switched to Square and things are a lot better. Much cheaper for us. Phew!!

      Reply
      • Rebecca W.

        I didn’t realize how old this post was. Oops! But glad to hear the Square is working out for ya!

  6. Rebecca

    Also — the coffee shop I bake for has a $5 minimum charge for credit cards, which like you said above is probably against policy, but everything at the coffee shop is so expensive, it’s almost impossible not to spend that amount. And if I get a tea, I’ll even buy extra to get to that $5. It’s a pain in the ass, but it seems to be working for them as people buy more to get to that $5 (their clientele tends to have that kind of money). There’s another coffee shop in town that has a $5 minimum fee but that can include tips so maybe that’ll help increase tips for the employees, but that wouldn’t help your profits.

    Reply

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