Balancing your checkbook

The IRS is but one of many government entities who have their hand out. Obviously you don't own a small business.

Then you've simply never bought anything from a very competitive business that is based on a high volume low markup business plan. In other words, you're paying too much for stuff. Once you shave those markups down as much as possible, then absorbing card fees can become quite significant. I had a $12,000 bill for doing so one year, that was the last time I blindly absorbed them. If people can use a debit card, then they can pay with cash or a check and save the fees.

If you're using a simple solution and a phone to accept card transactions, then that means you're using Square or PayPal, which is around 3% in fees. This is not cheap and can greatly add up. The alternative to keep this fee down is to get your own card machine, but nowadays the yearly penetration tests alone make it so much of a hassle that many smaller businesses forego it altogether and require cash or check only. Even not so small places do this, look up Lamberts Cafe, huge popular restaurant that has like 4 locations in different states. They won't accept cards either. Some businesses can't even get a card machine because if their average transaction size is large enough and the business is small enough, then the underwriters get cold feet and view it as too high of a risk.

Also there are loopholes that shady people take advantage of. For example let's say you use your phone to accept a payment for a $5,000 sign that a guy is picking up in person. So he loads it up in Missouri then drives back to the west coast where he lives, then calls his card company and says he never received the sign, even though you took pictures of him loading it up. The thing is though, he used American Express on the back end of that payment, who from what I can tell, requires chargeback issues to be resolved through the court system. So now you're out $2,500 in materials and a whole bunch of time. By the time you go to the west coast for court, you'd be lucky to break even, so you just eat it.

The thing is, the above is an actual situation that happened to a customer of mine. You can bet that he was extremely skeptical about using his little phone app for payments afterwards. You could miss out on multiple card payments and still come out ahead compared to being burned real good one time.

 

Buying local has nothing to do with markups, you can be local with low markup. If anything it's often the opposite of what you are portraying. It's hard for the little guys to compete with the big national chains.

I'll give you a good example. I sell electronics on a small time basis and have to compete with a national chain. Several things are an issue here:

1. They are open nearly all the time and anybody can walk in any time and browse.

2. They get major hookups due to bulk purchases, they can buy stuff cheaper than I can.

3. They can negotiate with card companies and get rates down low.

4. Same situation with shipping, they can ship large items for next to nothing.

5. They can take risks that I can because one theft isn't exactly very devastating to them.

6. They have a finely tuned marketing machine that I simply can't compete with other than to try to beat their price and provide better service.


So the end result is that if I do get an order, I'm paying more for the product, paying more to ship, having to cover my bases and make sure it's a safe transaction rather than to let people blindly purchase on emotion, still having to beat the price of the major chains, and you want me to absorb overpriced card fees on top of that? If you really wanted to support local businesses you'd pay cash or write a check to minimize their card fees.

I know exactly what you're talking about, that's why I mentioned PayPal and Square. Those are the most popular solutions for this type of thing. My entire response was based on this. I have both but opt to use Square but it ain't cheap even with no monthly fees, I try to avoid it whenever possible. This stuff ain't free like consumers seem to think. Smallish transactions that are fairly rare works ok but any decent sized transaction on a regular basis and those fees really add up.