Special Report: Credit or Debit?
From February 2005
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With little overhead and no additional labor costs, providing customers with the option of paying with plastic has proven to be a winner for consumers, who aren’t charged a fee most of the time, and business owners, who increase their profit with no overhead cost.
Although many retailers may be increasing their bottom lines, they’re also increasing their costs, shelling out thousands of dollars annually to their card-processing bank whenever a consumer chooses the swipe-and-sign method.
The advent of plastic has spawned a cottage industry within the financial and banking arenas. Clever marketing campaigns and advertising gimmicks have made their way into millions of mailboxes and nearly every major U.S. business publication.
Early last year, for example, Wells Fargo Bank enticed prospective customers to sign up for its Business Check Card by offering a “free” $10 gas card from a leading oil company if customers made five eligible purchases using a credit card requiring a signature to complete the transaction. One small problem, however: the recipient was required to sign a receipt on each transaction to qualify. PIN-based purchases didn’t count.
Who Provides the Card?
Who really provided the customer with the gas card? Not Wells Fargo. It was the business community, by paying higher credit-card fees because the lower, PIN-based transactions weren’t allowed.
“We encourage all of our customers to use whatever means is convenient, PIN-based or signature,” says Wells Fargo spokesperson Julie Campbell. “We try to make our products as convenient as possible for the customer.”
Yet Wells Fargo and other banks shrewdly tailor their advertisements with signature-based transactions in mind, and for good reason: The transactions are a gold mine. If the cardholder elects swipe and sign, the sale amount is “debited” from his or her checking account.
Continued...
Although many retailers may be increasing their bottom lines, they’re also increasing their costs, shelling out thousands of dollars annually to their card-processing bank whenever a consumer chooses the swipe-and-sign method.
The advent of plastic has spawned a cottage industry within the financial and banking arenas. Clever marketing campaigns and advertising gimmicks have made their way into millions of mailboxes and nearly every major U.S. business publication.
Early last year, for example, Wells Fargo Bank enticed prospective customers to sign up for its Business Check Card by offering a “free” $10 gas card from a leading oil company if customers made five eligible purchases using a credit card requiring a signature to complete the transaction. One small problem, however: the recipient was required to sign a receipt on each transaction to qualify. PIN-based purchases didn’t count.
Who Provides the Card?
Who really provided the customer with the gas card? Not Wells Fargo. It was the business community, by paying higher credit-card fees because the lower, PIN-based transactions weren’t allowed.
“We encourage all of our customers to use whatever means is convenient, PIN-based or signature,” says Wells Fargo spokesperson Julie Campbell. “We try to make our products as convenient as possible for the customer.”
Yet Wells Fargo and other banks shrewdly tailor their advertisements with signature-based transactions in mind, and for good reason: The transactions are a gold mine. If the cardholder elects swipe and sign, the sale amount is “debited” from his or her checking account.
Continued...
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Community Comments