Thursday, October 25, 2007

Credit Cards - When Not To Use Them

Lately we've been having a number of people want to use credit cards for small purchases. VERY small purchases like 50 cents, or $1 or $2. So, I thought I would take a moment to explain to everyone listening when you should NOT use a credit card, since not everyone might understand.

DON'T use a credit card for a $1 purchase, or a $4 purchase. If possible DON'T use a card for a purchase under $10! Why?

Let me start with the basics - every time a store swipes a credit card they are charged a fee. That fee can range, and usually is higher for debit/check card swipes than for regular credit cards and is often around 30 cents. Then, the company that processes the transaction (basically takes the information from your machine and translates it, taking the money from person A and putting it into the designated account of business B) also takes a percentage of the total sale that can range from less than 1% to over 3%, sometimes even higher. Large chains often can get the best deals, where small single-store businesses like mine tend to pay higher rates.

So lets say that on that $1 purchase I have 50 cents cost and 50 cents profit. Then someone uses a credit card. I pay 2% - so that's 2 cents, and then the 30 cent swipe fee, so now my profit is down to a mere 18 cents. YIKES!!

If you like the small business you shop at, be it a coffee house, comic book store, game store, book store or candy store, help them stay in business by maintaining profits and cutting costs. All you have to do is either make a purchase over $10 when paying with a credit card and/or use cash when making purchases of $10 or less. Just swing by your bank or ATM before you stop, or make a larger purchase. It REALLY does help the business you are buying from.

While it is technically not allowed by Mastercard/Visa, many small businesses will refuse a credit card for purchase under a certain dollar amount. Nothing makes me crazier than someone buying one pack of cards or one comic book and then whipping out a credit card. Well, nothing except if I see that they've got plenty of cash in the wallet as they take that credit card out, then I'm even crazier.

I know that we're a very "cash free" society these days. People can, and do, pay for almost anything with a plastic card. It is easier than running to the bank and picking up cash all of the time. But, on the other hand, think of how much less you spend if you restrict yourself to using cash. I try to carry some cash, but do often resort to using the card - it is easy and it is there. So I understand why people do it. But, I want to help people understand the impact that can have on a small business. Keep it in mind the next time you head out to buy your favorite comic or cup of coffee or sandwich. And PLEASE try not to use a credit card or debit card or check card to pay for those small purchases at your favorite small businesses. Doing so hurts them more than it helps them.


Elayne said...

My husband drives me nuts when he uses his credit card to buy stuff under $10. He explains it's because he needs the receipts for tax purposes (it's usually comics or something in Staples) but I fail to understand why he just can't keep the cash receipt, since I'm the one who files it all anyway...

eric said...

The more we use our cards for small purchases, the more we cut the profit margins of the stores we love. Then the store, which is so special to us, either has to raise prices or go out of business. I want to say NO THANKS to each of those options.

On the other hand, I know where I'm using the $5's and $10's that accumulate! I'll probably be in later this week to pick up a pack of cards with this $5 bill that I scrounged.