|
Hello All, Long time no speak! I recently returned from a month long trip, that was partially meant to provide inspiration and motivation. (Time will tell if it worked :) ). In recent news, businesses will now be able to impose a surcharge to customers who pay by credit card. In the past, Visa and Mastercard specifically prohibited businesses from doing this (this was a standard clause in their agreements) If you were found in violation , your ability to accept credit cards could be revoked. This condition has now, however, been overturned as a result of a class action lawsuit that was filed in Canada (It is interesting to note that the prohibition still remains in place in Quebec). The cost of accepting credit cards can be significant to small businesses. Whether you use Stripe, Paypal or another payment processor, many small businesses are charged approximately 3% per transaction for the privilege. Those with more volume can reduce their costs, but it it is still more expensive than debit cards or cheques. As we come closer to a cashless society (accelerated by the pandemic) businesses often have no choice as other forms of payment (cheque, wire transfer etc.) are untenable. Additionally, credit card issuers, who are very invested in having people use their credit cards, have heaped on the benefits often seen in the form of cash back bonuses or travel rewards. The first major business to announce that they will be implementing a surcharge is Telus (a telephone company). This will almost certainly result in customers switching to another form of payment. Depending on what their competitors do, it might also result in customers leaving Telus and deciding to go with another service that does allow credit card payments. And herein lies the problem. According to CFIB, 1 in 5 business are considering levying a surcharge. This would allow them to better absorb the costs in an economy where everything is becoming more expensive and is directly impacting business profits. The downside is that by increasing your prices, you risk losing customers, especially if you are in a competitive business. Customer purchase decisions are often based on price concerns, but also there is an element of goodwill which can be fragile. The perception that a business is charging more without an accompanying increase in value could have an impact on the customers decision to buy from you. If there is a readily available alternative, that does have a surcharge, many customers will choose them. Consequently, in deciding whether you want to increase your prices for customers who pay via credit card should be evaluated carefully. And while there is a specific reason to do it, the customer mostly only cares about the value that is being provided rather than the business reasons for the increase.
|
