October 6, 2010
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Question:
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Ken,
Regarding the credit card surcharge... I had a customer whose account was about to be terminated due to nonpayment, per a notice I sent. The customer called near the deadline and asked if I could take a credit card. I said no, but I can take a PayPal payment. (As you know, a PayPal payment can have several possible sources of funding. The actual source is not revealed to the recipient.) The amount was under $500. I remembered from a while ago that I could transfer up to $500 a month from my PayPal account to my bank account without a fee, but beyond that I would need to sign up for a commercial account with a monthly fee. Since I only do a few eBay sales a year, I skipped the commercial Account.
The payment came through fine, but the cash transfer to my bank account was unexpectedly assessed a fee of not quite 3%.
First of all, I have no way to ascertain the customer's source of funds, although it was likely a card. Second, since I expected the transfer to be free all the way through and PayPal policy has evidently changed, I did not notify the customer there would be any surcharge.
I realize it would be bad policy to surprise the subscriber, but since the fee was a surprise to me, and I only offered the payment option as a convenience to him, I think I could legitimately assess it on the subscriber's next statement by only posting the actual proceeds against his balance. If he complains, my response would be that I only received X in actual proceeds from his payment. The worst outcome should be I'd have to post the difference (the fee amount) as a credit. Maybe you can tell me if that would only be a business decision or a matter of legality?
For future reference, what is my situation if I want to tack this 3% handling fee (or whatever fee I might decide) onto the subscriber's balance the next time? I would certainly want to notify the next payer.
BTW, next time, unless I really need the cash, I'll leave it in my PayPal account and just spend it on deductible purchases to avoid the fee.
Ben Stung
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Answer:
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First of all, I can tell you that if you don't accept credit cards, you should. A bird in the hand is better than two in the bush - I'd rather get paid now than later, even if it does cost a percentage or two. [Yes, Amex could be 4%.] You could add the processing fee to your charges, though you may want to figure it in advance.
Unless your contract with the subscriber permits you to invoice for the processing fees, and I am sure it doesn't, you can't do it - it's a bad business policy in my opinion. According to Tom Aronica of PCI Professionals, the practice violates merchant account agreements even if it doesn't violate laws. He also advised that Paypal may very well be more costly and less helpful. Give him a call if you have additional questions regarding credit cards. He can be reached at 800 617 9980 ext 3201
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Comments on checking credit
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Treat a potential client's credit like they are applying for a credit card. If you don't like their credit, then tell them that money will be expected upon completion or even half down. Thankfully, we haven't had to deal with that much but I can imagine telling the customer that there are several different payment options one of which is 1/2 down to begin the work and then the rest upon completion...That's how custom guitars are made...I would know. : )
Chris
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Isn't credit checking like the "preapproved for credit card" junkmail? What does it tell you? Computer-generated credit score number? Even good, honest people lose job and good, honest companies over hundred years old are forced to close due to cheap junk sold by fly-by-night competitors. On the other hand, when someone provides you with page full of credit references, is that a good customer, or someone deep in debt? Don't rely on statistics. Statistics say that you love to pay tax since you never failed to pay on time.
Dusan
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Comment on Contract Renewals
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To Gene,
If you have 1,000 accounts on three year contracts instead of one year contracts, using your metric, puts you at 7 renewals a week. That alone helps dramatically. I'm not sure why renewal visits take three hours. Talk a little about changes in home and new needs to check for upsells, check on customer satisfaction, get signatures, ask for referrals, shake hands and go. Some planning ahead on appointment setting avoids unnecessary travel time since it's no shock to anyone when the contracts are coming due. A good CRM software program will help with that.
Suzanne
Service Security Technologies, Inc.