Credit card surcharges - any advice?
System
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I wonder if someone in a similar situation could advise me?
Amongst other duties, I am responsible for invoicing and credit control for my company. Back in January this year, we decided to get a new credit card machine which was rarely used in the first few months.
However, the retail side of our business has recently increased many times over with credit card payments now being quite common. Some of these payments can be for fairly large amounts - the highest so far was just over £9,000 in one transaction.
Because of this, I am now a little concerned over the 2.5% fees charged back to us by the card companies for the privilege of customers using their cards. The fee for the large job above was well over £200, which essentially is the entire profit from some of our other jobs lost.
(Funny how so many cards are now interest free for the consumer and anything but free to us poor retailers!)
I've spoken to my directors and we feel it would be unfair to blanket increase our prices as a contingency reaction. They also feel that retail customers may not accept a fee, although I think people are now becoming more aware of these charges and is kind of off-set by the interest not being charged anymore, at least not in the short term.
And what are the accounting entries? For example, say a job costs £400 + VAT at £70.00, totalling £470.00. He wishes to pay by credit card, so we add the 2.5% surcharge, making the new total £481.75. Where do we put the extra £11.75 surcharge to? We can't debit the bank account and debit the P&L too as an expense! Sorry, if I'm being dumb, but where would the £11.75 credit entry go to?
Bring back the cheque I say! Getting rid of it not only reduces freedom of choice but also reduces our own profits while increasing those of the card issuers and banks!
Grrrrrrr................!!! :evil: :evil: :evil:
Regards,
Robert
Amongst other duties, I am responsible for invoicing and credit control for my company. Back in January this year, we decided to get a new credit card machine which was rarely used in the first few months.
However, the retail side of our business has recently increased many times over with credit card payments now being quite common. Some of these payments can be for fairly large amounts - the highest so far was just over £9,000 in one transaction.
Because of this, I am now a little concerned over the 2.5% fees charged back to us by the card companies for the privilege of customers using their cards. The fee for the large job above was well over £200, which essentially is the entire profit from some of our other jobs lost.
(Funny how so many cards are now interest free for the consumer and anything but free to us poor retailers!)
I've spoken to my directors and we feel it would be unfair to blanket increase our prices as a contingency reaction. They also feel that retail customers may not accept a fee, although I think people are now becoming more aware of these charges and is kind of off-set by the interest not being charged anymore, at least not in the short term.
And what are the accounting entries? For example, say a job costs £400 + VAT at £70.00, totalling £470.00. He wishes to pay by credit card, so we add the 2.5% surcharge, making the new total £481.75. Where do we put the extra £11.75 surcharge to? We can't debit the bank account and debit the P&L too as an expense! Sorry, if I'm being dumb, but where would the £11.75 credit entry go to?
Bring back the cheque I say! Getting rid of it not only reduces freedom of choice but also reduces our own profits while increasing those of the card issuers and banks!
Grrrrrrr................!!! :evil: :evil: :evil:
Regards,
Robert
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Comments
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Re:Credit card surcharges - any advice?
Try negotiating with the card machine provider for a flat fee - then you know where you will stand and can adjust your charges accordingly.
Also dont lose sight of the downside of having a cheque - inputting details; adding them all up; walking to the bank; waiting 3 days to clear; it might bounce :shock: and the bank charges involved with banking each cheque - I know it's not as much as the machine but about 60p each say.
A little food for thought!
Claudia
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Re:Credit card surcharges - any advice?
Hi
I think you may have problems charging your customers the credit card fee. A few years ago I worked for a travel company and we did just that and despite it apparently being the norm in the travel industry, customers really didnt like it.
Neil0 -
Re:Credit card surcharges - any advice?
Re the example credit card charge of £11.75.....
When you receive funds in from the customer put the 'charge' into a separate 'charge' acccount on the nominal (dr bank, cr nominal) then when the charges come through, dr the charge account, cr bank.
That's assuming that the customer pays the charge (as Neil's post).
Apologies for any spelling mistakes, F7 doesn't work on this site and I've just bought a new keyboard. Looks really funky but oh boy, some of the keys are in different places!!
Sharon0 -
Re:Credit card surcharges - any advice?
I agree the charge of 2.5% is very expensive.
We use Barclaycard and we are charged 1.06%. This is based on our turnover. However there is one particular card we refuse to accept, I don't know if I should say who but it ends in ....Express as their fees are so expensive. Perhaps you could negotiate with your card people better rates and determine which cards are too expensive to accept. We have found that everyone has had an alternitive card in their wallet and we have not lost any business because of this policy.
Anne Marie0 -
Re:Credit card surcharges - any advice?
Hi,
Just reading your credit card charges there is extrememly a high charge - I only get a charge of approx 200 for about 100 transactions - The one I found Best is streamline Nat west. The other is fsb which is low charges too. The thin I do with the surcharge is add a nominal to income account and an expense account for charges to This will contra especially on amex.
Caz0 -
Re:Credit card surcharges - any advice?
Hi
Another issue that may affect the charge rate is the industry you operate in or that way in which goods/services are sold.
When you buy something on a credit card, the card issuer has certain obligations of protection , i.e. if you buy a faulty item the card issue may be able to get you a refund etc. Some industries are considered more 'risky' than others and may attract a higer fee.
Neil0