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Galen says it's not greed, and that restaurant owners have a right to open up a place to make money. Personally, I think it's a question of ethics. To me it seems greedy. The same greed that was malignant in the bay area, california where I used to live.

Downtown Alexandria. Relatively rich part of town. Small family owned sandwhich shop. I'd estimate near 90% of it's business comes from the businesses that surround it.

They do not take a credit card or debit cards of any type.

They only take cash.

They have a small mini-atm in the corner which charges $2/withdrawl.

They operate the ATM themselves, I've watched them open it up and put money in it. It's so small and cheap looking that my guess is they outright own it.

Do the math.

Credit cards cost a fraction of a percentage of each transaction. For high dollar items that adds up. For a $6 sandwhich, it's pennys. Debit cards cost roughly 35 cents per transaction. It's becomming as common to not have a landline at home as it is to not carry cash-- I almost never have cash on me ever.

If every 4th customer withdraws cash from the ATM, they would have to up the price of their products by 75 cents to exceed the potential profit they get from the ATM vs. if they offered credit cards or debit cards. If they offered both of the latter, the ATM in theory would get near-zero business. I doubt any customer would agree to pay a $2 surcharge on that $6 sandwhich, but most seem to ignore the $2 fee that comes with getting $20.
All of the sandwhich shops within walking distance refuse to take credit cards.

The question remains how much of that $2 goes to the sandwhich shop. I had a friend who used to lease ATM's to these sorts of locations, and in that case the place got a cut, something like 50 cents. It was sizeable, and competition to draw a contract with my friend was in the amount of money they got. This was at a Sports Bar in michigan. I maintained the computes for the owner who was also a friend of mine, and I remember one time the ATM went down on a friday night and he was furious. I asked why and he said "You don't want to know how much money we make from that thing evey night." ...
So, maybe it's not greed. But to me it's a question of ethics. And this -convenient- little trap operating under the pretense of poverty with such slim profit margins as to excuse a lack of credit card + debit card acceptance is ridiculous.

The proof is in the pudding: Were I the owner of such an establishment, would I change any aspect of this? Only in maximizing the amount gained from each ATM transaction, of course.
Businesses have a right to make money, but in doing so they may not rip people off or commit fraud. The latter is easy to expose. The former? What exactly is being "ripped off" ? That's a matter of opinion, and it is in a businesses best interest to try and get that price to rise. It is in the customers best interest to get that price to lower.

The prices are rising. Here's a publication from six years ago demonstrating as such.

http://www.bankrate.com/brm/news/atm/19991020.asp

The only thing that will slow this trend is being aware of it and not putting up with it.
To me, Galen's desire to ignore it is exactly why it's growing.

This class action lawsuit is certainly interesting: http://money.cnn.com/2004/08/19/pf/atm_fees/

Of course this problem also is rampant in other parts of the world, except their governments are stepping in to halt it.

http://www.choice.com.au/viewPressRelease.aspx?id=102015&catId=100497&tid=100010&p=1

Ours however step in and support it. And pass laws that prevent states from banning the fees. http://www.stopatmfees.com/latest.htm

Opinions?

- Keman

Comments

( 9 comments — Leave a comment )
wolffit
Jun. 10th, 2005 06:49 pm (UTC)
1) They put money in it. That doesn't mean that they own it, or that they get to keep any significant portion of the ATM fee. Don't make assumptions just to support your argument.

2) Credit card transactions cost appx. 2.4% plus 30 cents, per transaction, not a fraction of a percent.

3) Not having a land line at home is far from common. Not carrying cash is far from common.

4) "All of the sandwhich shops within walking distance refuse to take credit cards." Sure. But not all of them have ATMs. This one does. Most of them don't. Are they colluding to give this one more money?

5) I'll assume your mention of fraud had nothing to do with the actual discussion at hand, so next time just leave it out. Unless you're accusing the sandwich shop of committing fraud, that comment has no place in this discussion.

6) The class action lawsuit was from 2004. Any updates on it? Has it proceeded? Did it get dismissed?

As an aside, your claim to me over IM that my argument supported monopolies is spurious. An argument that a small sandwich shop shouldn't have to take credit cards if it doesn't want to, does not equate to supporting monopolistic and anti-competitive business practices. In fact, their decision to not take credit cards makes it unable to compete with those places that do. Today, I walked a little bit further and bought lunch somewhere that took plastic, because I had no cash on me.

wolffit
Jun. 10th, 2005 08:42 pm (UTC)
1. Nice straw man. My assumptions are based on prior factual information regarding money collected per transaction. Since that was with a leased expensive machine, it's can be logical to conclude that a small self-operated machine is not only owned, but grants an even larger portion of the fee.

Next time you're at the shop, why not ask the owner how much of the $2 fee they actually get?

2. The fee can actually very, doing a quick search showed there are services that reduce the transaction fee to 20 cents per transaction + 2%. For a $6 meal that is a mere 32 cents.

While you are right in that it's not a fraction of a percent, you still don't disprove the fact that it is illogical to offer cards and eat this fee, nor raise the price of the food by 32 cents to cover this fee.. when by not offering cards, -everyone- must use cash and there is a very high likelyhood of people not having cash on them. We were there that one day and they had to refill the cash in it. It was a stack of at least $500 in 20's, and two people who ordered after we did used it out of the 4 or so that came.

#3: The trends are both growing.

"The decision to cut the cord is equally split between cost saving and lifestyle issues: 35 percent said cost while 32 percent said they don't need one because they're hardly ever at home," says Barrabee. What's more, an additional 18 percent of 18- to 24-year-olds expect to cut the cord in the next five years." http://tinyurl.com/bd5bs

"60 percent of respondents to a recent MasterCard survey said they use cash less often today than they did five years ago." http://tinyurl.com/8xucz

4. Nice red herring you got there. I'm not going to bother to respond if you're not willing to put together a sound argument.

5. Ripping off someone isn't illegal. Fraud is. The differentiation between the two is subjective, and ripping off to a great extent is a form of fraud. I'm simply laying out the concept that the boundary between the two is in a state of flux and that if public opinion pushes back, more rip-offs can be considered fraud and made illegal.

The conversation over IM and my claim was as follows:

You: "well, you seem convinced that you know why someone you've never even talked to is doing something. There's no point in arguing with you about it. Even if you ARE right.. so what? Even if they're doing it because of greed.. so what? They're in business to make money. They're in business to make as much money as they can. That's why people start their own businesses. They didn't start a restaurant because they had a burning desire to feed the hard working businessmen of old town alexandria."

Me: Yes but there is this concept hon, known as business ethics. Your justification supports monopolys. Do you support monopolys?

You went to lunch at that point.

There is nothing spurious about this, my point is that the very justification you're using could also be used to justify why a monopoly should be legal. Since the premise of this argument is specifically about BUSINESS ETHICS there is nothing spurious of the sort and your defense for this establishment are weak and full of fallacies.

- Keman
(Deleted comment)
wolffit
Jun. 10th, 2005 09:00 pm (UTC)
I don't really like having cash. It's completely unprotected from loss. Unless I carry around pocketchange, it's an inexact method of payment that results in pocketchange being generated. No money is exactly lost in this manner, but galen has over $250 in change sitting at the house. That's a lot of change, and to me a pain to try and work with. Anything paid for in cash doesn't have the benefits that a credit card often forces the merchants to comply with. Paying for things with cash also leaves no paper trail, so I have to either follow up with my own accounting seperately or forfeit exact details of my spending habits. My preferences would be that I hold up my hand and the item is paid for electronically. No shuffling of coins or paper. A credit card is close to that. The new cards coming out are very close to that.

As for justification of fees ... if you read up on how the fees work, it's actually more than $2, there's a double-charge, and it's far far above and beyond what it actually costs. The majority of that price is profit. Not maintanence. This gets back to the difference between a business operating for no profit, for a profit, and to rip off the customer. The latter two are not carved in stone. That's the magic of business ethics.

- Keman
hydra_velsen
Jun. 10th, 2005 07:49 pm (UTC)
Actually I really like cash. I like how it feels and everyone will take it. Sure a bank, department store, or big business chain will take credit but if you want to get a coke and chips at a mom and pop store in the middle of nowhere, a credit card wont do you much good. Sure I carry my card, but its not my only means of making a purchase. I like having something physical to spend I suppose.

And yes if I owned an ATM machine I'd set the fee to about $2. That seems like about the most people will pay for cash-on-the-spot. I've seen it as high as $4 in bars, but it might work there since people's inhibitions are down.
wolffit
Jun. 10th, 2005 07:54 pm (UTC)
I've bought a bottle of Pepsi at 7-11 and paid with my American Express card.
kwik
Jun. 10th, 2005 10:36 pm (UTC)
So some extra thoughts to consider.
My family runs a small business.
Visa/MC charge them:
$0.29 per transaction + 2.3%-4.3% of the total, + $0.35 per day you use the machine (batch charge).

no matter how you look at it. We as the consumers, lose. By using plastic, Visa/MC make money off us. That money either comes from the business, or from our pockets if they buffer the prices for it. In exchange for that, we have all the money in our bank accounts (and then some) at our disposal, and limited liability in the event of theft. If you run a balance on the card...they make more money still from you.

If anything should be questioned here, it shouldn't be the shop owner... it should be the credit card company.

dogcandy
Jun. 11th, 2005 01:08 am (UTC)
The fee is often set by the bussiness, they negociate a charge that fits how much money goes through and if they don't accept then that card is dropped. University of Alaska dropped Discover, Sam's Club in Alaska dropped mastercard and visa.

Bussinesses often up the price of the product they sell to make up for it should it dig into them, they keep track of how much money is lost/gained by the use of cards. Just like Safeway tracks people with their Safeway card credit cards keep track of people and where they buy things, how much they spend.

Really to get a service it has to be paid for. In the end the consumer ends up paying for the credit card company which is very much a loan company on demand. They are completely supported by the people that use them, ya think the stores foot that? They just up their prices to keep their profits reasonable and their consumers pay for the use of plastic, yeah, even the ones who don't use plastic.
firedhusky
Jun. 11th, 2005 09:41 pm (UTC)
Whatever it is, 2 bucks per transaction is TOO MUCH. way too much.

An ATM in a bussines, is not only a convenience but it does atract people that were not going to go into the bussines to go in (to use the atm).

I, never carry cash myself, so i can agree with tou that 2 bucks is too much.

Sure can see the point of not ofering credit cards to your customers, but chargin 2 bucks per transaction is too much.

IF you really want to do something about it, just keep 10 bucks in your wallet so when you go to their store, you dont need the atm :) and don`t give them the pleasure of leting them take your 2 bucks

*paw waves*

FDH


( 9 comments — Leave a comment )

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