Teachers, I need your input!

I just got Square for my Android last month. So far I'm really loving the program. It's going to make next year's tax records SO much easier. My students' parents are happy to see a credit card option as well.

However, here's the problem. There is a 2.5% fee for credit card usage. I almost never pass the full fee onto the customer; sometimes I will take half of it, sometimes I will take all of it. What would you do? I want to have a consistent, reasonable way of taking credit cards.

Costco's a full percentage point lower. I've also found other lower rate processors. You might want to look around a bit before committing.

PS Here's a review of square. And here's a site with many company reviews. Will be curious what you end up with.

So far it looks like Square is still the winner. I've picked several reviews to read at random and they are a little frightening.

I've never had a request to use a credit card. Are you guys seeing otherwise?

I have a couple of students who would probably appreciate using credit cards. I'd rather piggy bank on another merchant, though. I have a good relationship with our local music store, so perhaps I should approach them. BTW, check this review.

Hi Minaku,

I use SquareUp with one of my families who prefers to use AMEX for payments. It works very well. I don't pass the 2.5% fee on to them, but treat it as a cost of doing business (it's less than what I pay for 3rd party billing, so feels like getting paid a little extra).

Just found this interesting article on dealing with these fees, and in what circumstances you may pass the cost on the customer. It looks a little complicated, actually!

Here is the link: http://www.merchantcouncil.org/merchant-account/operation/pass-fee-customer.php

Here in California, it's illegal to tack-on the processing fees for credit cards. Check the laws where you are.

Kurt

I started taking credit cards through my Paypal acct last summer. I have a link on my website that parents click and it directs them to the site, where they make payment. I don't accept credit cards in my studio.

At first I was pretty happy with the service until one parent filed a 'reverse-charge' on me. Because she had paid with a cc, Paypal immediately refunded the money to her, taking it from my acct. I was floored. The student had attended a week-long music camp. I couldn't get in touch with the parent to find out what the problem was so I had PP start an investigation. I had to send them documentation that the service was provided, that the parent did indeed sign up for the class, the student did attend, etc.. After all that, PP (or the cc... not sure) denied me my payment. What a waste.

I'm still not sure if the whole ordeal was bad for me because of Paypal or because of accepting credit cards.

Anyhow, not sure I want to continue to offer credit cards, if it's so easy for a parent to get a refund.

Any thoughts?

I do not accept any credit card at all. I think it is too complicated for my small business and also cutting my income.
Everyone is happy to pay with checks or cash in my studio.

Because of PayPal. Happily, PayPal has now been rapped on the knuckles and forbidden to do this in the UK. But they'll still take a 10% cut of your fees (in the UK, anyway). In the UK, PayPal's terms of business, like those of most credit card companies, prohibit vendors passing on the fees to their customers, but this practice is legal in the UK.

Having said that, I've yet to meet a private music teacher in the UK who accepts credit card payments. In fact, most small businesses of any kind either do not accept them, or apply a surcharge.

But 'passing the fees' to the customer can be seen in another way: I assuming I want to earn 10$ from a product/service I will just charge 10$+VAT+credit card handling fee and get it over, without giving any details on what I charge and how I handle it. How on earth can this be illegal? (Not to mention that I have to consider that in that amount tax is also included).

Any credit card company can "reverse charge" in response to a customer complaint. In fact it is not uncommon for a dissatisfied customer to try and get PayPal to reverse the charges, PayPal refuses so the customer goes to the credit card company and has the reversed from that end. The credit-card company virtually always "sides" with the buyer, occasionally PayPal will actually take the seller's side.

I take it that eventually you did, through the documentation and so forth, get your money after all. Being jerked around by customers who have paid with a credit card is part of accepting credit cards. It will happen from time to time.

Nikolas,

The act that is forbidden by most credit card companies is charging two different prices depending on whether a credit card is used. If you price all lessons at $31, knowing that credit card fees will leave you a net of $30 that is entirely up to your pricing discretion. If you price them at "$30 cash, $31 credit card" that violates the terms of certain credit-card-acceptance contracts. Then again, there are ways of accepting credit cards without those restrictions. Just be sure to read the fine print.

As a consumer, having "add-ons" and such rather than one fixed and easy to understand price is a turn-off. You may find that giving the impression of nickel and dimeing the client causes more ill-will than it's worth just for a 2.5% difference...

But BP has this separate pricing all over Florida (cash is always lower than credit per gallon of fuel purchased), so its obviously not based on the credit company but probably rather state law. If BP can do this regardless of credit card utilized, then obviously its not illegal.

In my state they do the same thing. There may be laws in other states concerning it but I was talking about the fine print of the agreement you sign when you make arrangements to accept credit cards. The credit card company typically makes that part of their terms and conditions.

Presumably certain companies (like gas companies) can negotiate terms more to their liking. An individual who signs up for a PayPal merchant account so he can accept $100 payments for music lessons has to take it or leave it. And I'm pretty sure "it" involves not being able to pass on the credit card/PayPal fee (at least it did when I signed up years ago).

Of course state or national laws may supersede that contract stuff and add their own layer of complication...

dd: Yes, Paypal is nice when it works, but when it doesn't it's almost always a guarantee you'll not get your money. I've heard enough horror stories about it.

I've used Square Up, and I really like them except that their fee to run a credit card without being able to swipe it costs more than Paypal's fees. Still, both are cheaper than having a merchant account which charges you a minimum $10 or $15 monthly fee whether you use it or not in addition to having the same % fee that Paypal or Square Up does.

I've seen too many people have trouble with Paypal to go with Paypal. Square is secure and I'll take that 2.5% in fees if it means one less trip out to the bank. I am THE WORST at depositing checks. I have checks from last month still sitting in my wallet. I will pay 2.5% for all the days I should have had money in my checking and didn't put it there.

I think customers would have a very hard time disputing that they paid for a service with Square, as they have to sign for the charges. I always send a receipt.

I think the easiest option is just for me to continue charging what I've been charging and for me to absorb the cost. The only "loss" I would take (I put loss in quotes because I am on good terms with the family) is on one student; she gets my old rate because she was my very first student ever in my private studio. Everyone else gets the new rate, often with the traveling surcharge tacked on since I am at their houses.

I would think the loss is worth absorbing just not to annoy the customers who do choose the credit card option. Much the same idea as continuing to offer the old rate to your long-standing students.

Then again, if someone's already cutting their fees to the absolute minimum even a couple dollars a month could seem hard to swallow...

Right, and I think depending on your state, it may be illegal to charge those costs to the customer unless it's across the board for no matter how they pay for it.

I'm only sad because I do not adjust for inflation, so my rate this year will still be the same rate next year, and the year after next, and presumably will stay the same unless I get more education... or if I get impatient after 5 years.

No, dumdumdiddle said that in the end she still did not get her money.

I used to work for a company that sold dance videos, music CDs, and offered dance tours to Argentina. For the videos and CDs they accepted credit cards. But not for the dance tours, precisely to avoid the problems if someone reversed the charges on such a big-ticket item.


Why not?

I get upset when people raise their rates, don't you? I feel bad asking for more money year after year when my hourly fee is already high, in the $50 range.

Whether or not it's 'illegal,' other than gas stations I've never heard of any kind of merchant or professional asking the customer to pick up any part of the credit card fee. I think it would be a big mistake to even consider doing any such thing. If you don't want to lose the 2.5 or whatever percent, don't accept credit cards.

I personally do not do business with the gas stations that have that sort of dual pricing. In their case it is a quite transparent attempt to induce customers to walk into their "convenience" store and buy some alcohol and tobacco while they're fueling up. Rather disgusting places in most cases, anyway.

It's not always an attempt to induce customers into the store, as the two cash-discount places I frequent most have full-service pumping and take the cash at the car window.

I have seen cash discount signs other places than gas stations, but right now I can't think of where!

Minaku, I accept rising prices as a fact of life.

Depends where you are. It's entirely legal, and commonplace, in the UK. Even governmental agencies often charge extra for credit card transactions. Whether the extra change is a match for what it actually costs the vendor to accept cards, I don't know. UK airlines are in the mire over this at the moment -- they have a reputation for blaming credit card companies for imposing huge surcharges.

Personally I'm in favour of vendors passing on their credit card costs to buyers. In practice vendors aren't going to take the hit themselves, and if they can't charge card users specifically, they'll just raise prices across the board. That means that those of us who prefer not to use credit cards end up paying for other people to use them.

I was commenting with reference to the U.S.
I realized it could be different elsewhere, but I mean, Minaku is in Atlanta!

Nope, even with the signed registration form of the parent, proof of email confirmation, and attendance records, PP sided with the buyer. Now I have to go to a collection agency or file in small claims.

I think you are right when you say that businesses will put up with the occasional person who files a claim and wants a refund because they understand that's the cost of doing business; they are getting MORE business by offering credit cards as a payment method than not. I know I enrolled more kids in my summer music camps because parents could pay easily online with their cc. The problem is that in our line of business (lessons) we don't generate the kinds of totals that a retail store might. So when one person files a reverse charge, well.... that's my grocery budget for two weeks.

I think it's less a matter of the law than policies held by the credit card companies. I know my coin dealer hubby says that the credit card companies do not allow him to offer cash discounts as part of their agreement with him.

While I was working out at the gym the other morning, I saw an ad for some smart phone app that would allow people to make payments to each other through their smartphones. I gather all that was required is that you know the other person's email address, and somehow the money gets deposited into their checking account. I wasn't paying close attention to it, but I remember thinking that it was neat.

Paypal: This incident scared me:
Paypal incident