belfert
Shoreview, MN, USA
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JALLEN4 wrote:This credit/debit card thing has really become quite the topic. A person goes to Walmart to make a purchase and essentially puts them in a position of being that persons bank by asking for cash back with their card. Walmart pays the credit card company to process the transaction and is forced to keep on hand additional cash to accommodate these transactions. The public ultimately pays for this expense whether they pay with cash or credit.
Walmart offers the option to give back cash on a debit transaction. I do not believe they are required to do this.
Debit card transaction fees are not a percentage like credit card transaction fees. It costs Walmart little or nothing additional to give cash back on a debit card transaction.
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JALLEN4
Florida
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belfert wrote:JALLEN4 wrote:This credit/debit card thing has really become quite the topic. A person goes to Walmart to make a purchase and essentially puts them in a position of being that persons bank by asking for cash back with their card. Walmart pays the credit card company to process the transaction and is forced to keep on hand additional cash to accommodate these transactions. The public ultimately pays for this expense whether they pay with cash or credit.
Walmart offers the option to give back cash on a debit transaction. I do not believe they are required to do this.
Debit card transaction fees are not a percentage like credit card transaction fees. It costs Walmart little or nothing additional to give cash back on a debit card transaction.
It is true that debit card fees are generally a fixed amount to the merchant. What people fail to realize is the overall cost to a company like Walmart to handle these transactions.
You must consider that Walmart handles millions of these transactions daily at hundreds of stores and thousands of individual check out lanes. Even a minimal fee on each transaction represents millions of dollars in a years time. In addition there is the added cost of man hours required to process these transactions on the back end, accounting of these transactions, and the on hand working capital tied up to accommodate these transactions.
It is estimated that for a company like Walmart, the total cost of handling credit/debit cards can be as much as 5-10% added expense on gross sales when you factor in fees, fraud, and labor. Everyone who shops at Walmart ultimately pays for this expense in the form of necessary additional mark-up on goods purchased.
It is easy to understand the appeal of the simplicity of use of credit/debit cards. Now, it also has the added bonus of airline miles, cash back, etc to many preferred card holders. But, at the end of the day, somewhere in the realm of 10% has been taken out of a persons yearly purchasing power. That is a fact few understand and most care not to understand. Don't even begin to think that it costs Walmart virtually nothing to hand you cash from your debit card!
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msmith1199
Central, CA
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5% to 10% cost to Walmart on gross sales? I'd have to see where that figure comes from. Walmart's gross sales are around $400 billion a year. 10% would be $40 billion just on credit card and debit card related expenses. It does cost them to use and process credit cards, but I don't think the total expense just for handling them is that much. But what you can be assured of is if Walmart didn't take credit or debit cards their gross sales would probably shrink by hundreds of billions.
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belfert
Shoreview, MN, USA
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JALLEN4 wrote:
It is estimated that for a company like Walmart, the total cost of handling credit/debit cards can be as much as 5-10% added expense on gross sales when you factor in fees, fraud, and labor. Everyone who shops at Walmart ultimately pays for this expense in the form of necessary additional mark-up on goods purchased.
I'm virtually certain it doesn't cost Walmart anything close to 10% to process a credit card or debit card. Even a small business can process credit cards for less than 3%. Walmart probably pays less than 2% based on the volume of credit cards they process. Walmart is estimated to be able to run their stores on a gross margin of under 10%. How can credit cards cost them anywhere close to 10% of sales if they can run the whole operation on under 10%?
If I walk into Walmart and buy $50 worth of goods and use my debit card to pay it costs Walmart little or nothing additional to give me back $20 cash. Walmart already paid the debit fee on my $50 worth of goods I bought.
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JALLEN4
Florida
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belfert wrote:JALLEN4 wrote:
It is estimated that for a company like Walmart, the total cost of handling credit/debit cards can be as much as 5-10% added expense on gross sales when you factor in fees, fraud, and labor. Everyone who shops at Walmart ultimately pays for this expense in the form of necessary additional mark-up on goods purchased.
I'm virtually certain it doesn't cost Walmart anything close to 10% to process a credit card or debit card. Even a small business can process credit cards for less than 3%. Walmart probably pays less than 2% based on the volume of credit cards they process. Walmart is estimated to be able to run their stores on a gross margin of under 10%. How can credit cards cost them anywhere close to 10% of sales if they can run the whole operation on under 10%?
If I walk into Walmart and buy $50 worth of goods and use my debit card to pay it costs Walmart little or nothing additional to give me back $20 cash. Walmart already paid the debit fee on my $50 worth of goods I bought.
First, please read again what I wrote. My statement was based on the overall cost of credit card transactions to a company and the range I gave was 5-10%, not a flat ten percent that everyone is jumping to.
Credit card fees to the merchant are very complex and are not solely based on the simplistic discount fee that credit card companies spend millions a year trying to make you believe. The simplistic discount fee could well be anywhere from 1.8% to as much as 5.5% to the merchant, depending on their individual business profile and credit card use history. Walmart's may even be less.
Different credit cards have different interchange fees. When you use basic cards that have no premiums attached, there is a lower fee. Use a card that has higher premiums attached such as cash back and double mileage, the merchant pays a higher fee. All those fringe benefit costs need to come from somewhere. As well, different sized transactions will often have a different fee structure.
As well as the actual cost to the merchant for the use of the card, there are additional costs incurred. Supervising and accounting for these fees for a company like Walmart is a daunting task in its self and requires salaries to personnel. Fraud is a source of cost that often comes back to the merchant in the form of a charge back. Transactions disputed by the user also carry very healthy fees to the merchant regardless of final outcome.
It is a complicated process that few care to thoroughly review and most people simply accept the 2% fee theory and move on. There are books written about the topic and finding the true cost as well as hundreds of thousands of Internet pages available discussing the process. When all costs of using credit cards are tallied, the result is very surprising.
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marielw824
Swan Valley, ID
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Jallen4 ... oh ... boo hoo for poor walmart. THE biggest department store ever. I will NEVER cry for them because they pay for us to use debit cards and carry 'extra' cash so we can get cash back.
NO ONE should pay for decency and service. This whole economy that crashed was built on 'service' this elusive, intangible thing that people started charging for what ... 30 odd years ago. And the house of cards finally fell.
There was a time when you could get your car filled by an attendant ... and that attendant would wash your windshield and check your oil and tires, etc... at NO CHARGE ... THAT's SERVICE. Yes, I'm old!
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JALLEN4
Florida
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I am certainly not crying for Walmart! I am "crying" for you and me. Mastercard Inc. made $562 million net last quarter as just one credit card company. Net after all expenses! That is not based on interest charged but simply fees charged for the use of a Mastercard.
The credit card industry as a whole collects well over a 100 billion dollars yearly for card usage. That money is paid by every consumer in the form of higher prices whether we use a credit card regularly or never use a card.
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Sportsman2505qss
Winter Springs, Fl USA
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It also cost to handle cash and checks. The bank I worked for many years ago had A Walmart account. We would have to close down two tellers to work the night drop bags. A manager from Walmart at that time had to be at the bank when the bags were done. All money had to be counted in front of them. They wanted us to add the checks up too but the bank put it's foot down on that. We charged them for the time it took us to work their bags,for each strap of money that was in the bag and the proof department charged them for the checks they deposited. We also charged them for each roll of coin they bought and strap money. They bought ones. I know we charged 5 cents for rolled coins each. I really think it's cheaper for them and every other large company to take the plastic. Walmart got a deal as they were so large. I also met Sam Walton. He came into the bank. He had overalls on with a plaid shirt. No airs about him at all. He cashed a check. We were all shown his picture before hand so we knew when he came in but he waited in my line like all other customers.
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Hammerhead
Moon Base 5
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It also costs money for an armored car service to transport large amounts of cash from the store to the bank.
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Doug4.7
Hartselle, AL, USA
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JALLEN4 wrote:The credit card industry as a whole collects well over a 100 billion dollars yearly for card usage. That money is paid by every consumer in the form of higher prices whether we use a credit card regularly or never use a card. And I use THEIR cash to my fullest advantage. I do almost NOTHING in cash anymore. Even my bills are on credit card. I more or less get a FREE (to me) loan from them each and every month for SEVERAL thousand dollars, and to add insult to injury, they PAY ME 1-5% to use THEIR money. Others may be losing, but I'm making out like a bandit. I even put my work expenses on the CC getting even more money from the banks. Last month I took a rather expensive work trip to Japan and am just now getting the rebates for that trip. My wife & I will have some nice evenings out on the banks's money (and their rebates to me).
I do not long for a cash society.
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