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One more year of pay-by-card gouging at the local …

By Masquara - 19 September 2016 16

Cups of different sizes on cafe

My local cafe charges a flat fee of 50c to pay by card (EFTPOS or pay wave) no matter how small the purchase. So that’s 12.5 per cent surcharge on my $4.00 coffee.

I heard on the radio that the ACCC have clamped down on this ripoff so paid by card rather than cash this morning … only to still be charged the 50c!

It turns out that only large businesses had the deadline to drop the charge to about ONE per cent, and businesses that hire fewer than 50 people have a further year to comply.

So, for another year this cafe is allowed to hoik an unearned 50c a sale – about 46c a customer on top of their bank’s charge. It’s a very busy place, so this is quite an extra “earner” – possibly fully $750 a day. Must say, I haven’t seen this practice at most cafes – it’s pretty brazen!

What’s Your opinion?


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16 Responses to
One more year of pay-by-card gouging at the local …
devils_advocate 10:58 am 20 Sep 16

ashasmashya said :

I completely disagree with this. Sure, EFTPOS costs a business to hire – but looking at the costs of how much per month verse card turnover, its a bit outrageous a cafe can charge 50cents per card transaction. Even on the highest plan with Commbank, where a business has a monthly card turnover of up to $12 000, it would cost $150 to hire. The cafe commented on in this story would only have to sell 300 coffees via card to recoup the cost – not to mention any food etc. It’s really a bit outrageous.

Why not encoroporate these costs into your prices elsewhere, or charge a small percentage of the cost under a certain price. I know 80 20 in Braddon charges a 1.5% (off the top of my head) surcharge for card payments under $10 – something I am happy to pay because I know it costs businesses to have EFTPOS. In the 80 20 example, at most you are only getting charged 15 cents!

*Sigh*. You’ve basically answered your own question. It takes them 300 coffees just to recover the eftpos costs. So what your essentially arguing is that they should give their first 300 coffees per month away for free, just so credit card customers can avoid having to carry cash. Those 300 coffees would still need paid staff to make them, and use expensive capital such as the coffee machine etc. Plus, they’re not doing these coffees as a charity, they *may* be trying to get some form of profit.

Or, they may not be trying to get a profit on the coffees. Why? Coffee is nearly a perfectly competitive market. It relies on freely available commodities (labour, beans, milk) and low entry/exit costs, and near perfect information about who does good coffee. In a perfectly competitive market, there are no economic profits. Sale price is at (or even below) the avoidable cost of production. The coffees might just be a way of getting people in the door to sell pastries or meals (aka loss leading).

That being the case, they can’t afford to incur additional losses especially for people that ONLY buy a coffee and walk out.

Now, neither of us has precise information about this particular businesses’ cost structures or pricing strategies. Ditto, the ACCC would have to take into account a wider definition of the per-transaction cost – they would need to at least look at the average costs of providing the service.

But then there’s also the fairness/cross subsidy argument – why should people paying through cash subsidise those who choose to pay by card? It’s not fair.

dungfungus 7:43 am 20 Sep 16

I am a Rabbit™ said :

ashasmashya said :

Why not encoroporate these costs into your prices elsewhere, or charge a small percentage of the cost under a certain price.

When it comes to the cafe sector the real reason they don’t want you using credit cards is because it’s nigh impossible to avoid it showing up when they get audited. The credit card fees charged to consumers are supposed to be a deterrent because eftpos transactions leave a paper trail. The profit margins can easily absorb the cost, but the surcharges have never been about that.

This doesn’t make sense as without using eftpos, surcharges cannot be raised.

And if you mean they want you to pay by cash well this only works is only if the cafe accepts cash.

Didn’t someone already say that some cafes now don’t accept cash?

Ian 11:30 pm 19 Sep 16

I hate these charges. And they all seem to disregard the fact that dealing in cash has a cost. It’s not free. So presumably when you charge a surcharge for cards you should be also applying a reduction for the cash handling costs avoided.

Masquara 9:34 pm 19 Sep 16

I am a Rabbit™ said :

ashasmashya said :

Why not encoroporate these costs into your prices elsewhere, or charge a small percentage of the cost under a certain price.

When it comes to the cafe sector the real reason they don’t want you using credit cards is because it’s nigh impossible to avoid it showing up when they get audited. The credit card fees charged to consumers are supposed to be a deterrent because eftpos transactions leave a paper trail. The profit margins can easily absorb the cost, but the surcharges have never been about that.

That is a really interesting point! Thanks for putting it.

I am a Rabbit™ 6:20 pm 19 Sep 16

ashasmashya said :

Why not encoroporate these costs into your prices elsewhere, or charge a small percentage of the cost under a certain price.

When it comes to the cafe sector the real reason they don’t want you using credit cards is because it’s nigh impossible to avoid it showing up when they get audited. The credit card fees charged to consumers are supposed to be a deterrent because eftpos transactions leave a paper trail. The profit margins can easily absorb the cost, but the surcharges have never been about that.

Masquara 5:57 pm 19 Sep 16

ashasmashya said :

I completely disagree with this. Sure, EFTPOS costs a business to hire – but looking at the costs of how much per month verse card turnover, its a bit outrageous a cafe can charge 50cents per card transaction. Even on the highest plan with Commbank, where a business has a monthly card turnover of up to $12 000, it would cost $150 to hire. The cafe commented on in this story would only have to sell 300 coffees via card to recoup the cost – not to mention any food etc. It’s really a bit outrageous.

Said cafe (it’s a bar as well) would have a card turnover of more like $100,000 a month. It’s serious cash-grab gouging on the small transactions. I pay cash there (other than my experiment the other day) – but anyone new to the place and buying a take-away gets an unpleasant surprise!

creative_canberran 5:29 pm 19 Sep 16

$4 for coffee? The best places in town went up to $4.50 over a year ago so you’re still better off… assuming it’s edible. But seriously what drives me up the wall is people complaining about small surcharges. You’re buying a $4 cup of coffee which is 50-70% margin. If you wanted to save time and money you’d drink instant, drink less, or invest in your espresso machine. What’s another 50c for convenience?

ashasmashya 4:16 pm 19 Sep 16

devils_advocate said :

You are only counting the incremental cost of using the machine. Small businesses usually pay a quite high fixed cost for eftpos services, and they have a relatively small client base over which to recoup that cost.
The fixed part of the eftpos cost for the business is also avoidable in the sense that they could, if they wanted, not offer electronic payment at all.
For small businesses, they are offering customers an additional service by allowing them to pay by credit card. The alternative is that customers would have to go to the nearest ATM and probably be slugged a $2.50 withdrawal fee. It wouldn’t be hard for customers to predict their weekly or even fortnightly coffee consumption costs and carry that amount of cash around to save on the fee.

I completely disagree with this. Sure, EFTPOS costs a business to hire – but looking at the costs of how much per month verse card turnover, its a bit outrageous a cafe can charge 50cents per card transaction. Even on the highest plan with Commbank, where a business has a monthly card turnover of up to $12 000, it would cost $150 to hire. The cafe commented on in this story would only have to sell 300 coffees via card to recoup the cost – not to mention any food etc. It’s really a bit outrageous.

Why not encoroporate these costs into your prices elsewhere, or charge a small percentage of the cost under a certain price. I know 80 20 in Braddon charges a 1.5% (off the top of my head) surcharge for card payments under $10 – something I am happy to pay because I know it costs businesses to have EFTPOS. In the 80 20 example, at most you are only getting charged 15 cents!

madelini 3:08 pm 19 Sep 16

If you are so wedded to this cafe, why not carry cash? A couple of $2 coins floating around isn’t that much of an impediment.

Deref 1:02 pm 19 Sep 16

It’s a nice little earner for the gougers. Easily fixed by large fines for anyone doing it, but that ain’t gonna happen.

dungfungus 12:37 pm 19 Sep 16

devils_advocate said :

You are only counting the incremental cost of using the machine. Small businesses usually pay a quite high fixed cost for eftpos services, and they have a relatively small client base over which to recoup that cost.
The fixed part of the eftpos cost for the business is also avoidable in the sense that they could, if they wanted, not offer electronic payment at all.
For small businesses, they are offering customers an additional service by allowing them to pay by credit card. The alternative is that customers would have to go to the nearest ATM and probably be slugged a $2.50 withdrawal fee. It wouldn’t be hard for customers to predict their weekly or even fortnightly coffee consumption costs and carry that amount of cash around to save on the fee.

Good comment d_a.

Bear in mind that most people in Canberra have never risked a dollar of their own so they are not aware of the costs that are incurred in running a business.

The populist ACCC should direct their resources elsewhere but it’s easier to attack the sitting ducks aka small businesses, isn’t it?

Looks like grim times ahead for all of Canberra’s homeless and the beggars around the malls now that few people are carry cash to give them a handout.

devils_advocate 12:08 pm 19 Sep 16

You are only counting the incremental cost of using the machine. Small businesses usually pay a quite high fixed cost for eftpos services, and they have a relatively small client base over which to recoup that cost.
The fixed part of the eftpos cost for the business is also avoidable in the sense that they could, if they wanted, not offer electronic payment at all.
For small businesses, they are offering customers an additional service by allowing them to pay by credit card. The alternative is that customers would have to go to the nearest ATM and probably be slugged a $2.50 withdrawal fee. It wouldn’t be hard for customers to predict their weekly or even fortnightly coffee consumption costs and carry that amount of cash around to save on the fee.

Maya123 11:42 am 19 Sep 16

Which cafe is that? Name and shame; ie warn others to stay away.

rommeldog56 11:22 am 19 Sep 16

If u think the 50 cent charge is a rip off, and it may well be that, then tell them so and don’t go back.

Charlotte Harper 11:15 am 19 Sep 16

This drives me up the wall. I never carry cash and use Paypass where possible, so am constantly being hit with these fees.

If the problem is bank charges, I highly recommend they all ditch the banks and use Paypal Here. Cost of use is minimal and I never passed it on to customers when selling books to them because, why would I, I’m in the business of making customers happy, not annoyed.

Am a huge fan of the concept favoured by The Hutch in Braddon. They don’t take cash at all. It’s pay by card only, which I imagine saves them a huge amount of time and hassle dealing with a cash register, banking the money etc, and makes it so much easier for customers.

Now that all the parking meters around town accept cards, the only time I need cash is at stalls at community events and fetes eg the sausage sizzle at soccer, the cake stall on election day. Must remember to get some cash on the morning of October 15, come to think of it …

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