Handling Charges?

[Mike Goetzke]

I've seen this popping up everywhere - free shipping but with handling fee. To me that's not free shipping. I see this on many larger tools and even got a 3% handling fee when I picked up a pizza last weekend.

 

[ChuckM]

Some businesses separate them, some don't differentiate the two.

Strictly speaking, shipping costs can be external (UPS, postal service, etc.) while handling (warehouse, admin) internal. When I buy online, I look at the total costs as the basis of comparisons. eBay purchases, for example, usually carry a shipping cost, but I still get some purchases from that source because the total costs are still lower, compared to, say, Amazon, which offers a lot of things with free shipping (subject to a min. order value).

In 2021, a very tiny number of local restaurants added a Covid-19 surcharge -- discreetly.

 

[Bob Marino]

  We recently had dinner at a local restaurant and I was surprised to see a "transaction fee" tagged on. This is the fee charged by the credit card companies to the merchant, who are now passing it on to the end customers, if they use a credit card (not cash) to pay the tab. Jeeeez.

 

[Bob D.]

  We recently had dinner at a local restaurant and I was surprised to see a "transaction fee" tagged on. This is the fee charged by the credit card companies to the merchant, who are now passing it on to the end customers, if they use a credit card (not cash) to pay the tab. Jeeeez.

NJ DMV started doing this a few years ago. Worse part is you can't complete all your registration renewals as a group, even if they are registered to the same person and address. So for us with four vehicles and two trailers we pay the transaction fee 6 times. Two of those vehicles come due at the same time as the trailers which are always in March. So could potentially get it down to three transactions. But the state has no interest in saving us money.

I wonder if the new digital currency the Fed is talking about creating will change any of that.

 

[semenza]

  We recently had dinner at a local restaurant and I was surprised to see a "transaction fee" tagged on. This is the fee charged by the credit card companies to the merchant, who are now passing it on to the end customers, if they use a credit card (not cash) to pay the tab. Jeeeez.

    Yeah, I have had that happen a few times over the years. I think that type of thing just irritates customers (it does me anyway). Just factor it into the cost of doing business and adjust prices accordingly.  I have had similar types of fees added on in other ways too.  Such as a fuel surcharge because I live a little further down the road. The CC fee taken out of my end, on top of a 40% commission at a consignment gallery because the customer of the gallery paid by CC. I know these are not all exactly the same but they ended up causing the same "anti-customer" effect with me.

    And yes, handling / packing charges. Isn't that part of the cost of doing business? Were the lights turned on while the employees were packing my order? Better add a an electricity fee.

    Yes the price would just be higher but I always feel like the business is trying to lure me in and trick me on the price. Makes me go elsewhere to buy. Net result business loses a customer.

Seth

 

[Crazyraceguy]

I would almost bet that they think they are doing you a favor by being "transparent" about the charges, rather than just building it into the normal overhead.

Back in the day, nearly every product advertised on TV always mentioned "plus shipping and handling".
Then you have the real BS thing of "buy this and get a second one free" (just pay separate processing)

I agree totally about the whole thing of charging extra for using a credit card. Most call it a "convenience charge", but who is actually benefitting from this "convenience"?
Certainly they are. They can skip the problems associated with cash, like mis-counting cash and having to make physical deposits, along with the security issues. Plus the sales they would lose if they didn't offer this (because people don't carry cash anymore)
I do remember gas stations giving a discount for cash, which equates to the same thing, but seemingly not as offensive?

Funny thing is that some Pizza places here in the US have always done "free delivery" and you just know that it is built into the price, nothing is free. BUT, they never gave you a discount if you walked in and picked it up yourself?

 

[mino]

I would almost bet that they think they are doing you a favor by being "transparent" about the charges, rather than just building it into the normal overhead.

Back in the day, nearly every product advertised on TV always mentioned "plus shipping and handling".
Then you have the real BS thing of "buy this and get a second one free" (just pay separate processing)

I agree totally about the whole thing of charging extra for using a credit card. Most call it a "convenience charge", but who is actually benefitting from this "convenience"?
Certainly they are. They can skip the problems associated with cash, like mis-counting cash and having to make physical deposits, along with the security issues. Plus the sales they would lose if they didn't offer this (because people don't carry cash anymore)
I do remember gas stations giving a discount for cash, which equates to the same thing, but seemingly not as offensive?

Funny thing is that some Pizza places here in the US have always done "free delivery" and you just know that it is built into the price, nothing is free. BUT, they never gave you a discount if you walked in and picked it up yourself?

Credit card charges are actually fair. This is the money that is charged BY THE BANK. It is the same money which some then "give back" as bonuses for paying by credit cards.

A shop which has them explicit *actually gives you the option of NOT paying the bank, instead od hiding the charge. Otherwise, they would have to include those costs into all orders. This way they allow the customer to make a choice.

Not sure how in US, but in Europe debit cards are much more common (almost no fees there) as well as direct bank transfers  being fast and cheap ($0.01 per $1000 payment style cheap).
I see noting bad with the shop being transparent and allowing me (and them) to save some buck by choosing the most cost-effective and/or convenient payment method.

What is dirty though is handling charges calculated as a percentage of item cost. That means those are no "handling" charges, but an actual hidden price increase. Handling charges per order, or per weight are OK in my view as they realistically reflect the costs incurred.

There are shops which sell at a very low markup (in the 5% range) and they can do that only because the have you pay explicitly for their mantime processing the order. This is then like a discount, as when you by 2-3 items, the S&H handling is usually the same. The other option, common over here, is that beyond a certain value the shipping is free. That is basically the same thing, just done in a different way.

Then lastly, there are establishments which DO NOT target individual consumers, but businesses. As they sell weird stuff, often consumers will be bothering them with asking for 1 piece of this and that. Specifying a signifficant shipping&handling charge is way to both allow special orders for those who REALLY need that thing. And at same discourage people ordering individual items.

I buy from one such company - it is a manufacturer of various boxes itself and they firstly have separate "by pallet load" and "by piece" prices with about 20% difference and also have a $25 flat S&H charge for each online order.

I like that system - they are not a retail establishment, but when I need some of their specialist stuff which may be difficult to come by, I have the option to pay for their time messing with my miniscule order.

It is much better compared to a local sheet goods specialist store where they will refuse to sell to you (at any price) if you are not a registered business. This is a big problem for me for example. Lots of the stuff they sell CANNOT be bought anywhere else in retail so I have to ask a local cabinetmaker to buy me a sheet of veneered plywood (and pay him bout $100 for his effort) ... Now THAT is a pain.

 

[Crazyraceguy]

mino, I totally get what you are saying about specialty items or "other than case quantity" products.
Paying extra to get something that is not normally available is perfectly acceptable. If you don't want to pay extra, you don't want it bad enough, simple. Kind of like the Festool NAINA mess. I get the electrical incompatibility part, but why on so many other accessories?

But most of what I read here was normal retail or on-line/mail order. The pizza shop example from the original post is especially bad. They can't sell the thing without "handling" it and the percentage bit is even more offensive. A more expensive pizza takes more handling? Reminds me of the American system of tipping servers. Why should a waitress get a bigger tip for bringing me a $30 steak versus a $8 hamburger? Same amount of work on their part either way.

Personally, I see this as a way for these places to overcharge to regain some of their losses because of the shut-downs.

 

[semenza]

Funny thing is that some Pizza places here in the US have always done "free delivery" and you just know that it is built into the price, nothing is free. BUT, they never gave you a discount if you walked in and picked it up yourself?

    I can tell you first hand what the Free delivery deal is on pizza. Way back when, I worked at one of the largest pizza chains in the USA. During the time I was there the carry out / pick it up yourself lower price disappeared. I am not sure if this stemmed from a law suit or the company accountants or a consumer watch dog. But I do know Why it disappeared .......  You can't discount, IOW charge less for pick up / carry out and also claim and advertise FREE delivery. That clearly means you are charging for delivery, which means it is NOT Free!  Ooops.

Seth

 

[Packard]

  We recently had dinner at a local restaurant and I was surprised to see a "transaction fee" tagged on. This is the fee charged by the credit card companies to the merchant, who are now passing it on to the end customers, if they use a credit card (not cash) to pay the tab. Jeeeez.

Some credit cards forbid this practice.  I don't know how they can enforce it, or if they still forbid it.  But in the past it was certainly the "rules of the road". 

Our company charges 5% extra for credit card purchases.  With the average net profit (not gross) of 18 to 30%, a 5% hit is a killer .

 

[mino]

Some credit cards forbid this practice.  I don't know how they can enforce it, or if they still forbid it.  But in the past it was certainly the "rules of the road".

Our company charges 5% extra for credit card purchases.  With the average net profit (not gross) of 18 to 30%, a 5% hit is a killer .

There are usually multiple contracts available with a CC company.

This is because, in most places, it is illegal for them to *mandate* including the transaction costs into the price. This comes from "significant market position" anti-monopoly rules and such.

So what they do is the next best thing:
They have a "general offer" available which is, say, 4% and has no strings attached. They must have this offer /they do not want you to take it, but they must offer it/ to be able to to legally do their "main seller one" per below.

Then, they will have another offer or several, where their "advantage offer" will ask, say, only 2.5% BUT they will condition it on not charging extra from the customers explicitly and hiding the charge instead.

Depending on the type of the business, they are betting on most businesses to pick the "advantage" deal and thus "hide" from the customers the exorbitant charges. This also has an economy-of-scale effect. The more establishements hide the charges, the more it becomes "expected" and the more people will complain to those which take up the "generic" option and expose them.

For some businesses this does not work out - they would lose more on the bigger quantity of 2.5% deals as their customers are willing to pay via bank transfer or other, so they stick to the "general" offer still.

Of course, there are other, mainly sales psychology, reasons at play here. But the main one is that a business which accepts the restriction of not exposing the charges will get a better deal/rate.

 

[Packard]

Back in about 1972, I was a salesman covering New England, New York and New Jersey. 

I took a customer and his wife out to dinner.  Our company provided us with Diners' Club credit cards.  When I went to pay the bill, the restaurant manager said, "We don't take Diners' Club cards.  Do you have a business card?  We will invoice your company."

I asked about that and they said that they had less than 1% failure to pay, which was far better than the 4% fee that the credit card company charged. 

They paid much lower rates on American Express where they had a lot of transactions.  I don't think Mastercard and Visa were available back then.  I could be wrong.

 

[squall_line]

mino,

In the US, debit fees are usually lower than credit card fees.  ACH/transfers are usually pretty low as well, or at least they're usually fixed instead of sliding/percentage-based.

I don't know if this is the case in the EU or not, but in the US a debit card is tied directly to your bank account and has minimal protection for the account holder.  So even though a stolen card may be backed by the major card carrier as far as fraud reversal is concerned, if someone steals a debit card and racks up a $10k spending spree, the account holder is out $10k in actual hard cash until the fraud is investigated and closed out.  If someone steals a credit card and racks up $10k, the cardholder isn't out anything immediately, and can usually have their credit limit restored within a day.

Debit cards have daily transaction limits to help stem the bleeding for these sorts of things, but even then an individual with next month's rent in their checking account can lose that money in the blink of an eye to a fraudster and then be out on the street a couple of weeks later.

 

[Packard]

There has to be many ways of approaching this. 

Our company rarely uses credit card transactions.  It is mostly by large corporations where the buyer does not want to generate an actual purchase order because it takes too long to do so.  Our typical card transactions are in the $2,000.00 to $5,000.00 range.  Most of these companies have regulations as to the maximum size transaction that can be done on the credit card. 

But I buy coffee at Barnes & Noble using my credit card.  The total transaction (including tax) comes to $2.07.  They cannot be paying a minimum price for the transaction and 4% is just 8¢ and that would not make sense either. 

Back in the 1970s my parents used a credit card primarily for the "float".  They always paid the balance off in full each month so the credit card company would not charge them any fees. 

So the credit card company withdrew their card from my parents.  My mom was very upset.  She said, "They set how we are to use the card and how we are to pay.  And if we do exactly what they ask, they take away the card."

Shortly after that the practice of withdrawing cards because the customer pays on time all the time became illegal.  Instead there is an annual fee. 

 

[mino]

mino,

In the US, debit fees are usually lower than credit card fees.  ACH/transfers are usually pretty low as well, or at least they're usually fixed instead of sliding/percentage-based.
...

Same in Europe. I was referring to (true) credit cards which do have the significant charges in several % range.

These are indeed much less used in Europe, almost everything is debit-based here. But I understand using CCs is common in the US for historical reasons. I guess that in the non-online time, when cards became so prevalent in US, the CC benefits were truly worth the charges to the merchants. I cannot actually imagine a workable debit system in an offline world...

 

[Paul_HKI]

A few points regarding the discussion.  In the EU, it's outright illegal to apply a card payment surcharge for ANY transactions, online and cardholder present type payments.  Credit or debit card, doesn't matter.

If you're a business in the EU and have merchant services from your bank, giving you Visa/Mastercard payment processing services, you'll pay approximately half what a comparable business in the USA would pay.  Think in the 1.3-1.8% range.  To get anything close to that from your processor in the US, you'd probably need a couple of hundred K contracted minimum per month to get that rate.

Amex on the other hand, you pay more in the EU for processing.  Some literature says otherwise, but that's false and misleading. 

If you're receiving or sending payments intra-EU via bank transfers, you typically won't pay anything for the transactions, if you use the SEPA means.  It's basically like a pan-EU ACH standard. 

So Visa/Mastercard/Electron etc., or direct EU bank transfers, pretty affordable all things considered.

 

[mino]

A few points regarding the discussion.  In the EU, it's outright illegal to apply a card payment surcharge for ANY transactions, online and cardholder present type payments.  Credit or debit card, doesn't matter.
...

I would like you to cite the law on this. This the first time I see this stated as such.

Given most cards are online debit here, with pretty low charges, and even on CCs the charges are lower it is certainly common/normal for card payments to be "free".

That said, I cannot imagine any justification for a specific form of payment being non-chargeable. The only scenario is if the state wants to establish an absolute totalitarian control over society - THEN you would want to make such a mandate. So I can imagine such laws in SWE or UK. Possibly DK.

But it is certainly not the case in CZ. I do not believe it is in DE either and I am pretty sure there is no EMU-wide directive on this either. But happy to learn more.

 

[Paul_HKI]

https://europa.eu/youreurope/busine...ayments/electronic-cash-payments/index_en.htm

 

[mino]

https://europa.eu/youreurope/busine...ayments/electronic-cash-payments/index_en.htm

Thanks.
Was not aware ECB vent evil already in this thing. But this is not for this forum..

I could swear I saw various charges for payment methods just last year in a DE eshop and certainly is not unseen by some obscure mom&pop CZ eshops but CZ is not in the Euro area. Guess my memory does not serve me as well as I thought.

 

[Paul_HKI]

https://europa.eu/youreurope/business/finance-funding/making-receiving-payments/electronic-cash-payments/index_en.htm

Thanks.
Was not aware ECB vent evil already in this thing. But this is not for this forum..

I could swear I saw various charges for payment methods just last year in a DE eshop and certainly is not unseen by some obscure mom&pop CZ eshops but CZ is not in the Euro area. Guess my memory does not serve me as well as I thought.

Last time I was in my own 'home' country in Europe, the owner of a rural filling station tried to refuse to take my debit card for payment, as the transaction would have been less than €10.  Also totally illegal, but he didn't seem to know, or didn't care.

It's one of those things that I guess we all become accustomed to and when we find that payment/charging practices differ elsewhere, it really helps shine a light on the good and bad of our own ways of doing things.

For example, here in Finland you get a weird look from hospitality staff when you try to tip them.  It's just not the done thing to tip staff when they're educated and paid a living wage in a country with very good social and welfare supports for those who are down on their luck.

In the US, I wouldn't think of not carrying cash in my pocket and actively thinking about tipping, as it would be so easy to forget it's not just a common practice, but something the person who has been doing their job in looking after you is actually dependent on that tip in many cases just to make ends meet.

On the original topic though, I'm in agreement with anyone who finds the additional of handling charges and other hidden fees like that to be very much objectionable.  It's dishonest.  Plain and simple.