Special Report: Credit or Debit?
From February 2005
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Companies such as Universal Business Services show merchants how to offer a “surcharge debit program” using a PIN-based system that ultimately eliminates all PIN-based debit/check card fees.
The web, through which 93 percent of all consumer internet purchases are made with credit cards, has become a major player in fee-based transactions.
According to comScore Networks, a global information provider that studies consumer-spending behavior, online holiday sales in November-December 2004 topped $15.1 billion. Nearly all these sales were consummated with credit cards that command up to 3 percent per sale by the various banks that issue them. However, if merchants employ a customized program, the rate may be reduced by as much as 50 percent.
Says Spray, “One of the biggest mistakes a retailer will make is asking customers, ‘credit or debit?’ To you as the customer, it makes no difference. Money from the transaction for that particular card would always come out of your checking account. But it does make a difference because the merchant is assessed a higher, open-ended fee if the cardholder elects to swipe and sign.”
Three-Option Solution
Not all merchants are absorbing the costs of PIN-based debits, however. ARCO Petroleum routinely charges 35 cents per debit transaction at nearly all of its gas stations in California.
Many fast-food restaurants in Sacramento charge debit customers anywhere between 39 cents to 79 cents per order — fees gladly paid by most customers for the convenience.
By and large, high-volume businesses, such as restaurants and grocery stores, stand to save the most by moving to a three-option solution. One for check cards, one for credit cards and one for PIN-based debit options. “Their savings would be in the hundreds, perhaps thousands of dollars each month,” contends Spray.
Americans love using credit and debit cards, but how long the relatively cheap cost of debit will last is uncertain, at best. For now, businesses can sidestep the hefty fees with little or no overhead if they train their employees to pose the “right” — PIN-based payment — choice to their customers.
The web, through which 93 percent of all consumer internet purchases are made with credit cards, has become a major player in fee-based transactions.
According to comScore Networks, a global information provider that studies consumer-spending behavior, online holiday sales in November-December 2004 topped $15.1 billion. Nearly all these sales were consummated with credit cards that command up to 3 percent per sale by the various banks that issue them. However, if merchants employ a customized program, the rate may be reduced by as much as 50 percent.
Says Spray, “One of the biggest mistakes a retailer will make is asking customers, ‘credit or debit?’ To you as the customer, it makes no difference. Money from the transaction for that particular card would always come out of your checking account. But it does make a difference because the merchant is assessed a higher, open-ended fee if the cardholder elects to swipe and sign.”
Three-Option Solution
Not all merchants are absorbing the costs of PIN-based debits, however. ARCO Petroleum routinely charges 35 cents per debit transaction at nearly all of its gas stations in California.
Many fast-food restaurants in Sacramento charge debit customers anywhere between 39 cents to 79 cents per order — fees gladly paid by most customers for the convenience.
By and large, high-volume businesses, such as restaurants and grocery stores, stand to save the most by moving to a three-option solution. One for check cards, one for credit cards and one for PIN-based debit options. “Their savings would be in the hundreds, perhaps thousands of dollars each month,” contends Spray.
Americans love using credit and debit cards, but how long the relatively cheap cost of debit will last is uncertain, at best. For now, businesses can sidestep the hefty fees with little or no overhead if they train their employees to pose the “right” — PIN-based payment — choice to their customers.
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