The debate continues every day about credit card processing fees. Newbies want information on who is the “best” processor, when what they really mean is “cheapest”. Someone with something to sell always replies “check my page” or “text me and I’ll help you.” Then my favorite answer always comes up: “charge you a fee, that’s what I do.” Comments will also be flooded with “Square” and “Clover” followed by complaints from naysayers with each company.
ALL, and I mean all, companies have complaints about their operation. Customer service, late / slow deposits, hidden fees, frozen accounts, brokers, different fees, equipment fees, ongoing charges, etc., etc. Square has them, Clover has them, just like all other companies. Asking for my opinion or something else in a public forum like Facebook groups will only get you a limited response based on extremely limited experience. I have worked in this business since 1977 and have been taking credit cards since 1990. I started with Square in 2010 and with all that time in foodservice I have only used a total of 5 different processors. Each with its own problems and benefits.
You should also understand that there are two different types of processing companies. Square (PayPal Here, Intuit ToGo, etc.) are flat rate aggregators. Which means that the rate is exactly the same no matter which card is used and without merchant account is required. This makes the threshold to start a lot simpler for the average food vendor. Clover (and many other services) are merchant account processors. Which means they require a merchant account (which some people won’t qualify for), as well as possibly charging variable fees based on card type and brand. Comparing the two types of accounts is unfair, as they have completely different benefits and application requirements.
For a complete understanding of each type of processor and unbiased reviews, go to the Merchant Maverick website and check their reviews. Choose the processor that meets your financial needs and has fees and fees that your business can afford. Also understand what you need from the hardware they offer. Do you need a simple POS or one with a lot of inventory control, payroll functions, loyalty programs, etc.? Or do you just need to process credit cards?
Here’s what you need to know about accepting credit and debit cards. Keeping it simple for street vending.
Accepting cards is a MUST for street vending. Over 80% of ALL payroll is deposited directly. Street food vendors must be convenient not only in location, but also in payment options.
80% of consumers prefer to use debit / credit cards when making purchases. On the other hand, only 14% prefer cash. Not accepting cards scares away business.
- Processing fees are part of doing business as well as buying inventory, paying staff, buying gasoline, obtaining permits and licenses, and any other expenses in your business.
As a business owner, you have 4 options:
Do not accept letters. (Risk of driving away business)
Pass the fees on to your guests as a “convenience fee.” (They appear cheap and small-time)
Offer a “cash discount program.” (It looks like a gas station)
Do the math when setting the menu price. (Looks like a professional business person)
Let’s look at each of the options in detail.
Do not accept letters. I hope that from the statistics in numbers 1 and 2 above, you understand that taking cards is a necessary evil in street and event vending. In my 40 years of experience (through observation and real-time studies) credit card transactions are significantly faster than counting change. Yes, there may be internet problems, connection problems, etc. that appear from time to time. Cash has its own set of problems, such as breaking a hundred dollar bill early in the day, using a fake pen to check the bills, opening new rolls of coins, having to get more one or five bills, a lot of money in Cash on hand makes your business easier. robbery target. Are you already convinced to take cards? Since accepting cards is a food vendor MUST DO, let’s find out how best to handle those pesky fees.
Pass the fees on to your guests as a “convenience fee.” It seems smart, right? Not really. Charging a fee seems petty and cheap from a guest’s point of view and is illegal in 10 states. Where fees are legal they are capped at 4% as the merchant CANNOT BE EARNED by charging a fee. “Convenience fees” get too complicated when a debit card is presented instead of a credit card. Convenience fees are also frowned upon by credit card issuers and each has specific policies AGAINST these fees in most circumstances. Setting a minimum purchase also complicates things. Debit cards have different rules than credit cards. It is also against the credit card issuer’s rules to set a minimum fee for debit cards. Okay, okay, without charging additional fees, what should a provider consider?
Offer a cash discount program (CDP). This type of program is allowed and is in fact detailed in the card issuer’s policies. A prompt payment discount policy means that a supplier must list TWO different prices for each product. Like a gas station, it offers a discount for prompt payment. The pump will display a price marked “Credit” and a price marked “Cash”. Of course, the price of the credit is higher considering the processing fees. There are a number of companies that offer CDP processing, all of which promise “free” processing (for you). The end result of a legal CDP is to have a menu that clearly indicates the price in cash and on credit, as well as other notifications that explain and / or advise your guests about the two-tier pricing system. The problem with this system is guest confusion and overly complicated pricing structures. Street or event vending has a time limit. The faster you take and complete orders, the more money you make. But with CDP, the order-taking process is slowed down by lengthy explanations for a two-tier pricing system. As well as the complaints about having to pay more because the guest does not have available cash. In foodservice, every obstacle you place to a smooth order-taking process is magnified into negative review, incorrect word of mouth, or no regular guests when another food or service-related issue arises.
The simplest is:
Do the math when setting menu prices. What a concept! Just like pricing your menu to account for the price of food and propane, simply price your menu assuming EVERYONE will use a card. What ?! Can it really be that easy? Yes, it can.
Let’s look at a product everyone was scared of when Square raised rates to 10 ¢ + 2.6%. Soda.
Canned sodas are available at Sam’s Club for 32.05 ¢ each. Most people sell it for a dollar. When Square raised the price, people panicked and complained about the increase by a percentage base for the least expensive product they sell, a soft drink. That makes selling a soda on its own cost a vendor 44.65 ¢ when using a card. Can’t say how many posts complained 13% of charges, bla bla bla. However, if the soft drink company raised the price to 45 cents, the seller would either absorb the increase or raise its own prices.
When I price a menu, assume all will use a card. When Square added that 10 ¢ transaction fee, I only added 25 ¢ to some of my higher food cost items to make up for it. So that dollar soda became a $ 1.25 soda. It’s still cheaper than a convenience store and much cheaper than a vending machine.
Gross profit (which is sales minus cost of goods) would look like this:
Before: $ 1.00 – $ 0.3205 – $ 0.0275 = $ 0.6520 gross profit
After: $ 1.25 – $ 0.3205 – $ 0.10 – $ 0.0260 = $ 0.8035 profit
See what happens when someone pays in cash.
Cash: $ 1.25 – $ 0.3205 = $ 0.9295
Does it make any sense to use a cash discount program? Does it make any sense to add a surcharge (which is legally capped at 4% and cannot show a profit from that charge)? Does it make financial sense to simply refuse to accept cards?
If you are stumped, the answers are “NO”, “NO” and “NO”.
I can hear someone say, “I don’t deal with change, it slows me down.” Food service is a nickel and dime business. Charging even dollars disappeared with the turn of the century. The only people who charge by the dollar even are hobbyists or with math problems. Maybe it’s time to get out your elementary school addition and subtraction flashcards and learn how to deal with our nickel and dime business. Practice makes perfect and the more you practice, the faster you’ll get there.