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Square to no longer return processing fees when buyers are issued a refund
- bombcar 4y agoDoes anyone know if the "real big" merchants like Walmart have to pay the fee? I assume they're so large they can sit on the processors and squeeze them (I know Costco does, they pay 0% fees in-store because Visa is so hungry to be their processor).
- jedberg 4y agoBased on this article it sounds like they pay enough to want a law to make it less: https://www.cnn.com/2022/09/20/business/credit-card-fees-visa-mastercard-retail/index.html https://www.cnn.com/2022/09/20/business/credit-card-fees-vis... Costco gets away with 0% because they offer exclusivity and because they cover some of the cost of the rewards programs. I guess Walmart et al did the math and figured they would lose too much business. The average Costco shopper makes over $100K a year, so getting another card just to shop there isn't a problem for most. Can't say the same for Walmart.
- bombcar 4y agoI was specifically wondering about the refund cost; I wonder if Walmart is eating the 1-3% on all refunds (I suspect the stores that DO eat it are the ones that really want to refund as store credit).
- ajaimk 4y agoWalmart pays a lot less than 1-3%
- DaiPlusPlus 4y ago> The average Costco shopper makes over $100K a year... While technically true, that statistic is misleading as it requires further qualification, namely that $100k figure only applies to shoppers in Costco's PNW area - not nationwide, and certainly not internationally.
- jedberg 4y agoNot sure why you think it PNW only. The number came from the CEO of AMEX, back when they were the exclusive credit card provider for Costco. He said, in 2015, that the average Costco card holder made $100K a year. So presumably that would be in all of the US. More recent attempts at analysis put the number closer to $125K these days for all their customers worldwide. Which makes sense, given inflation and the fact that they only build Costcos in more affluent areas and target business owners.
- bombcar 4y agoThere's a subtle difference between "average Costco shopper" and "average Costco card holder".
- halestock 4y agoIn general, the more volume a merchant has, the larger their discount. But it's usually negotiated with the processors/issuers.
- adrr 4y agoInterchange is refunded but settlement fees aren’t. Settlement is 25Bps or lower.
- gtk40 4y agoI work for a very well known retail brand and we've negotiated our average interchange fee to under 2%. I believe it is around 1.7% currently but it's been lower in the past.
- bastardoperator 4y agoI thought Walmart bought their own merchant bank/processor to avoid fees which sound like something walmart would do but I can't confirm, I know they're looking to expand on fintech services to consumers/business and that's difficult to do without some level of processing control.
- vinarun 4y agoit was only a matter of time given that Stripe has a penalty too
- CryptoBanker 4y agoI fail to see why there’s a penalty for a refund. A chargeback would be one thing, but a refund is a totally normal business process
- kevinsundar 4y agoIt costs Square money (card network costs) to refund a transaction. It's not a penalty, it's just costs associated with moving money. Even if the money is moving the other way, there's still a cost.
- xp84 4y agoDefinitely "The way it is" -- but it does seem greedy. All systems drift toward the greediest possible implementation, though, in the absence of competition or regulation mandating otherwise, of which we have neither.
- crazygringo 4y agoIt's not a penalty, it's just a cost of using the network. If you use the credit card network not just once but twice -- once to process a purchase and then yet again to refund it -- you're using that infrastructure. It makes sense you'd pay for its usage. If you drive to work on a toll road and then drive back home along the same toll road, you still have to pay the tolls even though you wound up in the same place at the end.
- jedberg 4y ago> If you drive to work on a toll road and then drive back home along the same toll road, you still have to pay the tolls even though you wound up in the same place at the end. Funny you should use that example. On toll roads you get charged in both directions, but I've never seen a toll bridge that had tolls in both directions. Usually the argument is that you really can't go any other way so the toll in one direction covers the cost of both trips. But I actually think you're right here -- most people won't make the "return trip" so it makes sense to only charge people twice that do.
- sparrish 4y agoThis is now pretty standard across the industry. PayPal made the same change last year.
- brianwawok 4y agoSadly users still expect refunds for any reason. Charging a 3% fee on a refund is a cause for a shtfit.
- AlexandrB 4y agoWhy sadly? This is basic consumer protection stuff. It seems like currently this fee ends up being paid by the vendor or some middleman, but that seems like BS too. Visa/whoever should be returning the fee and folding it into their business model as the cost of doing business.
- Red_Leaves_Flyy 4y agoOur businesses should be doing more to prevent refunds. The sheer amount of trash every large company makes is sickening.
- crote 4y agoEven if you do everything you can to prevent it, you still incur refunds. It is simply impossible to get everything right 100% of the time - not in the least because people keep buying the wrong items. Things like cancelled or modified orders happen all the time, and you can't really do anything to prevent those.
- Red_Leaves_Flyy 4y agoAnd that sounds like the cost of doing business to me. For especially egregious cases the companies should reserve the right to charge customers for being stupid and wasteful.
- 4y ago
- DueDilligence 4y ago[dead]
- latchkey 4y agoThis will affect businesses that do 3rd party merchant services, like events. If the event is cancelled, refunds are issued. Who pays that fee? It would be up to the business to try to claw back funds from the promoter of the event... who is now bankrupt from not being able to do their event. It gets ugly fast.
- foobar1962 4y ago> If the event is cancelled, refunds are issued. Who pays that fee? Insurance. The promotor would have insurance to cover this. If the event was cancelled due to a performer cancelling, the performer's insurance will pay. All this puts up the price of insurance, which puts up the price of event tickets.
- latchkey 4y agoNot all events have performers. My site was for people who participate in local bike races. They can’t afford insurance like this. Again, events was just an example. This applies to all services like this.
- gowld 4y agoThose businesses don't get a refund on their electricity costs from cancelled sales.
- Red_Leaves_Flyy 4y agoPoor poor ticket master.
- MichaelZuo 4y agoIt's a genuine point, they did incur non-zero real costs to process the order then the refund. Low effort trolling doesn't help anyone.
- Red_Leaves_Flyy 4y ago
- jarym 4y agoI guess the days when refunds were frictionless so that consumers could purchase with confidence are gone? Refunds have always been a cost of doing business - it just seems the processors / card companies want to change the rules and have their cake and eat it now that cash is mostly dead.
- gowld 4y agoRefunds are still frictionless for consumers. It's vendors who have to maintain product quality and prevent fraud to avoid returns. It's not Square's job to make sure that a vendor's product is high-quality or that customers really want to keep the products they buy. Credit cards mostly work the same way. https://www.cardfellow.com/blog/credit-card-refund-fees https://www.cardfellow.com/blog/credit-card-refund-fees
- peanuty1 4y agoTo be fair, sometimes people return stuff for arbitrary reasons like changing their mind.
- crote 4y agoYes, and that's totally fine. That's part of doing business and stores already take that into account. However, the web shop I work at pays a 3% processing fee on returned payments initiated by us. It just makes no sense.
- Alupis 4y agoI don't know who your current processor is, but if you have any real volume, get off Square/Stripe if that's where you are at. Their rates are awful for volume sellers. Square approached us a few years back and could not comprehend why we weren't jumping at their offered 2.6% + $0.35... "but the AI!?!?" is all their sales people could come up with. We're well below 2% + $0.20 per transaction for all cards (including AMEX, believe it or not). Square/Stripe and the rest are great for being Turn-Key for new businesses. But for anyone with real volume, they are a joke.
- LatteLazy 4y agoDevils advocate: this penalises businesses with a LOT of refunds. Which is probably a good thing. Because they generate a lot of work for square and are doing something wrong commercially (misadvertising?). And SHOULD be discouraged...
- gowld 4y agoWhat work do they generate for Square? It's not really "Devil's" advocate to advicate for the current standard practice across the industry.
- LatteLazy 4y agoDealing with disputes usually requires a lot of human manual intervention and had a high rate of bad publicity.
- nerpderp82 4y agoRefunds, not disputes.
- Dayshine 4y agoHow is this going to work for businesses in the EU where customers are allowed to refund for no reason when buying things at a distance?
- kasey_junk 4y agoBusinesses will increase costs to cover it, just like they do now.
- Silhouette 4y agoHow will that help in the scenario the GP described? The businesses would still have to refund those higher charges.
- suzakus 4y agoI think the scenario is that in the case of normal purchases, your profits need to be higher to cover these fees on any returns.
- Eisenstein 4y agoEveryone pays more for everything the retailer sells until their revenue and costs ratios match roughly as they did before, with variation depending on competition intensity and elasticity of the products sold.
- dylan604 4y agoEveryone else that bought something at the higher prices covers the fees when the much smaller number of people request the refund. So it is essentially crowd funded
- crote 4y agoRaised prices. The company I work for alrady has to pay a 3% charge on payment returns. Take 3% of the product price, multiply by the expected rate of return, and add that as a hidden fee to the new product price.
- yashg 4y agoPaypal and Stripe have been doing this for a while.
- deleted 4y ago[deleted]
- nikolay 4y agoWell, they launched as a PayPal alternative, but now they are copying all the negative features. Anyway, we've stopped using Square long ago given their obscene policies. One such policy is charging $70 per month for "team access"! That's absolutely crazy to put a basic feature under a greedy paywall! So, basically, they force people to share logins! Add the rate hikes, now this! Sorry, but there are alternatives such as SumUp, Stripe Terminal, Clover, QuickBooks, etc. In fact, if you want the lowest swipe rates, go with QuickBooks!
- cwkoss 4y agoSounds like the real villains are the credit card companies who have the market power to enforce fees on cancelled payments. They are so entrenched no one is even questioning their position anymore. Visa and Mastercard are massive drains on our economy - it's ridiculous how unquestioningly their 3% tax on commerce is accepted.
- rileymat2 4y agoI don't know enough about the topic to analyze whether 3% is high or low, but I don't think it makes sense for them to refund the fee in the case of refunds. They have provided the same service, same costs. So I would hardly call them villains for that aspect.
- Marsymars 4y agoIf your baseline is “same service, same costs”, then the fees from Visa/MC should be a fixed amount rather than a %.
- pcarolan 4y agoIn Australia, this is regulated and they can charge no more than 1.5%. https://www.accc.gov.au/consumers/pricing/card-surcharges https://www.accc.gov.au/consumers/pricing/card-surcharges This could be changed overnight with 1 piece of legislation.
- SQueeeeeL 4y agoThe American system is too deeply tied to capital to have a policy that actually helps citizens and small businesses get passed. The second a government official proposed something like this, the espionage arms of the credit card corporations would come down so hard on them and arrange for them to fail their next appointment (through "lobbying")
- unglaublich 4y agoCC companies are genius. They charge companies 3% -> companies embed that 3% in their prices -> customers get a 1% refund from CC companies. - If you do NOT use a CC, you effectively pay _more for CC users_ (3%!). - CC companies make the customer feel like they have a benefit, while in fact, they are net payers too (2%). - They have access to all (private) data of the customer, which is extremely powerful in this age and time.
- charles_f 4y agoI guess this will get back to the consumer, either by having to shell out these fees, or by merchants refusing to refund altogether. The one thing I am wondering is whether PayPal and stripe will follow
- caleblloyd 4y agoI learned the hard way in March 2020 that PayPal doesn't do this anymore either. I was helping an organization raise money for a Charitable 5k when COVID shut everything down. This was when everyone thought the world was ending still so we didn't think to change it to a virtual 5K. Refunded all payments on a couple thousand dollars and was out around 4% in processing fees.
- ashwagary 4y agoIt seems any victim of a decent sized "card testing" attack will pay a heavy price. They just removed their last incentive to protect against this kind of fraud by forwarding all the costs to their clients.
- computing 4y agoUh, if only there existed a neutral, owned-by-no-one, decentralized monetary network with instant low-cost transfers and finality. Too bad this sort of stuff is out of science fiction. EDIT: aaaand I'm being downvoted :) At least leave a comment.
- napsternxg 4y agoWhy cant US have something like UPI [1], which significantly reduced reliance of credit card companies and extra payment traaction fees in India. Is there some regulation holding this back or no state or federal government has tried it yet. [1] https://en.wikipedia.org/wiki/Unified_Payments_Interface https://en.wikipedia.org/wiki/Unified_Payments_Interface