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Merchant Account Fees & Credit Cards

May 11th, 2007 · 1 Comment

There’s a coffee shop in our office complex where they don’t accept credit cards for less than $3. I have been going there every single day and he declined to give me coffee on my card. I was really eager to try out my citi credit card, to find out if I’d get 3% or 1% cashback at that coffee shop – the one I visit most frequently. The usual lady wasn’t around, so I waited for her to come back and asked her what the deal was with the $3 minimum anyways.

Turns out, credit card services have the cake, eat it, and then sell it. They charge you and me and call it “APR” and then they charge the merchants. Dealers sign up for merchant accounts. These services charge fees so the dealers can accept cards and get the money after these fees are deducted. Some merchant services providers don’t charge some of these fees components, like application fees, but there are some charges associated with all of them.

So the lady was telling me that for a sale of $3, after deducting her credit card charges, and he cost, and the pay for the folks that work for her, she actually could be making a loss. Wow!

From the outside it always seems like everyone else is making easy money. Not so, not at all so. Some credit cards give you cash back on purchases, I should really try and find out how they manage to make a profit after this – but my guess is, they just wait till you miss a payment and then they make money off of you – after all, since it’s really not easy to make money, everyone will have bad patches. I suppose they want you have their card when you hit your rough patch. The citi credit card that I picked up the other day is one such – lets see if I can keep myself on the positive side with citi!