From Saturday the 13th of January 2018 it was no longer legal for a business to charge for accepting payment via credit cards, debit cards, Apple Pay, Android Pay, Paypal or any other medium. We must now treat all payment methods the same.
These rules apply to any UK company selling to UK customers.
But how will this affect us and other small businesses and what are our options? Does this mean we need to take a hit and absorb the costs? Can we charge for accepting payments at all? Here we will detail all the options available to us and what we here at Minty Slippers have decided.
We still accept credit cards but only by special request. We opted instead to accept Barclays Pingit.
HOW A BUSINESS WORKS
This might seem strange me having to say this but I know that so many of our friends in business get this bit wrong. As a business the cost of your product must include all of your overheads. Things like rent, the cost of replacing your gear, the cost of charging our little army of batteries for every shoot, insurance, the sticky tape used to attach microphones and any admin costs including the cost of accepting payments.
At the moment, to keep our pricing as low as possible, we assume that our customers will pay via bank transfer. While Barclays does charge for this, it is only around £1.20 per transaction. For each credit card transaction this fee can vary from £26 to over £70 and over the year this can equate to thousands of pounds!
So, that stick of gum you buy from Tescos includes the cost of the building, staff, electricity, staff training, thefts, insurance and… the credit card processing fee.
HOW MANY PAY BY CARD?
Our preferred method until now has been direct bank transfer. When a customer books or is sent details from our system on how to pay their balance, we offer bank transfer as a payment method. We have always offered card as an option but this option requires the customer to get in touch and request this, and we always added on a fee to cover our costs (no more). In a year, around 2 clients would opt to pay by card.
At the start of 2018, we made a change as an experiment. We kept the credit card fee but made paying by card easier. Now customers could simply click a button on their invoice to pay by card. What we found amazed us. Almost 100% of clients paid by card. Even with the fees. It would appear the convenience of card payments won out. Logging into your bank account to make a one time payment seems to be a little cumbersome. What we now know is that if we were to accept cards and not raise our prices we would have to accept a potential hit of thousands of pounds a year. This resulted in a serious chat that myself and Julie need to have about how we handle our payment options going forwards.
So as a small business ,what can we possibly do and what have others done? The law simply states that you cannot penalise someone for their chosen payment method. But you can treat all methods the same. Online Takeaway chain ‘Just Eat’ has chosen to apply their 50p card processing fee to all transactions, even if you opt to pay by cash. Many local councils have removed the ability to pay by card completely while others have simply increased their prices to compensate. Very few have decided to simply accept the hit.
So what can you do if your business model is currently such that you dont account for credit card charges in your pricing?
OPTION 1 – ACCEPT CARDS AND TAKE THE HIT
Not my personal favourite. Only do this one if your business is making enough profit that you can accommodate this. Bear in mind that our findings were that 100% of clients would opt to pay by card if they could.
OPTION 2 – CHARGE FOR ALL TRANSACTIONS
This option is perfectly legal, but not our preferred option. We decided against this as it seemed a little mean to stick this stealth tax on top. We love it that the price we send to our clients on their quote or our price list is the price they pay. No hidden taxes or travel on top. One of the most common questions we get is ‘What other costs are on top of your quote?’ as so many of our clients have had quotes from others to only find that later there is a bevvy of additional costs on top. Don’t you hate it when you goto buy a plane ticket that looks like a good price only to have it double at the end of your lengthy checkout? If your need to apply the cost to all transactions then simply build it into your pricing. Which brings me onto…
OPTION 3 – RAISE YOUR PRICES
Put your prices up to accommodate the new, forced charges. Figure out what cards are going to cost you and build this into your overheads. Again, we opted against this option as we know we can offer you a better price if we accept other methods. We also have a very nice price which if it were to increase would mean us crossing over a mental barrier that many have when they see a price. The chances are when we have our next pricing review later this year we will naturally go over that threshold and then can add the cost of cards into our pricing, but not just yet.
OPTION 3 – FLOUT THE LAW
Let me say this now. DON’T DO THIS! While your clients may accept you charge for cards you just need one of them or a competitor to report you to trading standards and then you are likely to be in for a fine.
OPTION 4 – ACCEPT CARDS, TAKE A HIT BUT ADJUST YOUR COSTS
One option which we seriously considered was how to accept the convenience of cards but reduce costs elsewhere to allow us to absorb the hit. We came up with all sorts of options but the main one was to change to digital only. Remove ALL physical media from delivery. However this would have made us a little less competitive as 30% of our clients still want a physical copy.
OPTION 5 – ACCEPT A NEW PAYMENT METHOD (this is our option)
So we went with option 5. We will still accept cards but only by special request and we will then accept the hit with no change to the customers selected package . However, we wanted to make paying by bank transfer as easy, if not easier than paying by card. So we’ve now introduced Barclays Pingit as a payment method. With the Pingit app, which anyone can use even if you are not a Barclays customer you can pay us using our mobile number, shortcode or the QR code. All of which the customer will find on their invoice. So from now on, to pay us, you simply scan the code with your phone and enter an amount, that’s it! As a business it’s actually better than a bank transfer as you and we are protected against fraud, it’s easy and has ZERO COSTS!
What have you decided to do for your business? Sound off in the comments below.