Accepting payments via cash/check vs. debit/credit

[Medlin Software, Dennis]

At risk of derailing, why use a check? A check costs the vet $ to process and is not likely resulting in a discount. Cash is not likely getting a discount either. So why not use a CC with a rebate/miles? I have asked our vet, and they simply and honestly upcharge all to cover their payment intake fees, with no discounts. For vets, they also take a "medical" charge card, which they pay a large fee to accept, which is where I thought I could pry out a discount for "not" using.

[TexTaxToo]

Unfortunately, many professionals and small businesses are starting to add a surcharge for credit cards.  For example, my dentist adds 3% - another small business I use adds 3.5% - this more than offsets most rewards, so checks may make a comeback.  Surcharges used to be illegal, but the national prohibition went away in 1984, and some state prohibitions have been found unconstitutional - New York started allowing surcharges this year.

Now the tax question - is the surcharge by the dentist a deductible medical expense or does it have to be backed out?

[Medlin Software, Dennis]

I ponder my cost of getting paid at least twice a year. My overall CC expense was 2.55% for 2023, but it takes work to keep it there (online merchant). In person processing, the fee is as low as 1.99% via a processor nearly anyone can use. There is no reason to pay that high of a surcharge for in person swipes. AmEx is the highest, which is why so many do not take it. Discover is next highest. I suspect there may even be cheaper than 1.99 for in person swipes.

For me, I get less than 50 checks a year now, compared to all checks 40 years ago. I find 2.55% is fine for me not having to open envelopes, look at the checks for issues, stamp checks, and go to the bank. Those I get now I mobile deposit and I have the funds the same day.

If I see a surcharge, I go elsewhere if I can - and ask why they choose it. It is lazy, and sometimes profitable to surcharge. A 3.5% surcharge, if it is their real cost, shows they are not caring what they pay, and are passing along the laziness to their customer (assuming they are not adding to their profit on purpose). Exceptions for a new business with bad or no credit owners, who are stuck with a high cost/no credit merchant account, or one where they roll in the costs of hardware and processing (say a paypal, applepay, or square types).

A dentist or other medical pro, I can see a surcharge for CareCredit "cards", as they pay a high fee to take them (what I was alluding to in my earlier reply). But a surcharge from a dentist for any card is a non starter for me.

[Sara EA]

Don't the cc companies base swipe fees on volume?  Small business pay more, so I understand why some of them charge that fee to the customer.  We had a service person at our home this week, and I asked if he preferred check or card.  He said check.  We always try to use cash when we patronize small local businesses because they get to keep all the money.  I send checks to charities because many of the online donation sites charge upwards of 5% for cards, money the charities can put to better use than Visa or Mastercard.

That said, although our tax office is a small business we saved a fortune in time and expenses when we began accepting credit and debit cards.  Prior to that, many clients "forgot" their checkbooks so we billed them, often multiple times.  Our office manager used to spend a good half day a month printing and folding bills, stuffing envelopes, standing in line at the post office.  The card fees were worth it.

CT gas stations got around the no surcharge rule by offering cash discounts.

[mcb39]

I have never accepted credit cards and I have never had a complaint.  They will either write a check or go and get the cash.  As a result, the cash gets recorded as income and goes in the safe.  That, in turn, is our spending money for the year so that we don't have to pay credit card fees. (A penny saved is a penny earned)

[kathyc2]

Depends on how you look at the surcharge.  Personally, I'd pay by check and take the 3.5% discount. 

[Medlin Software, Dennis]

The price a merchant pays is negotiable. But the big players all have relatively common rates. Anything not based on interchange + fees means the person using the service is new/low credit, risky business (many chargebacks), or is naive. The other case is pure lazy. Meaning use something really easy for the merchant, bump their prices, and let the consumer pay (paypal, square, etc.)

The customer pays the fee. Even rewards (since the merchant pays more to cover the reward). The card issuers are in business to make a profit and are good at it.

There is value in not dealing with cash and checks.

There is value to the customer to be paying for the "protection" of the card agreement, and when cash or check is not an option, getting a rebate via reward.

There is risk to the merchant as contesting a chargeback can cost more than the profit on the transaction.

There is value not using checks, since anyone can print a check with your information on it, we can all be Frank Abagnale Jr. if we so desire.

Cards often offer additional "insurance" and "benefits" for the user.

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A good example is coming up for me. Booking a trip 18 months out. While I have CFAR coverage, using a charge card provides extra protection and travel insurance, which I then do not have to pay for separately. The company offer a 3.3% discount for cash, but it would cost me more to pay for the travel benefits I get through the card.

 

COVID also showed another benefit. Those who were able to use their CC receipts to prove income and get benefits, versus those who were taking cash and maybe not always reporting their income.

Some may prefer to pay by card to make sure the merchant is not skimming cash or claiming no receipt of payment.

[kathyc2]

To each their own.

Vast majority of my clients pay with check at time of pick-up. A few pay cash, and like MCB I keep that in safe for items I pay cash for and to have emergency money in the case of wide spread internet outage.  A few others pay with CC and while I don't show a separate line item, I do charge them a little more to cover the fees. 

If I had a storefront practice, I'd want CC payment, but since I know my clients very minute risk of being stiffed.  I only remember one over 27 years that check bounced and wasn't made good.

 

[jklcpa]

My method is much like that of kathyc2 except that all payments are deposited into the bank including the cash. I hardly ever get cash anyway and very few pay by credit or debit, even from the younger ones, and since I've known a large percentage of the clients for my entire working career and some since childhood being in a small town, I'd venture a guess that they don't feel the need for the "insurance".

[Randall]

I mostly get paid by check, some cash.  I deposit it all.  I've had some ask if I take cc.  I did get one of those Square devices to plug into my phone.  But it's so rare, it would take me an hour to figure it out.  Usually clients understand and pay by check.  One younger client says it's the only check he writes each year.  Ha.

 

[Medlin Software, Dennis]

The one check a year I was making (literally printing on blank stock), I no longer have to. I talked to the person (a service person, inspecting our backflow device annually) and gave them some tips. They now use a postcard mailing service I shared with them (rather than doing it themselves, and the service is cheaper than what they were spending), and they now have CC payments via Costco/Elavon, which has no monthly fee, and competitive rates. Did not even raise process, as they likely spend less overall on handling payments (well, his spouse does, and she is happier!) We talked about him setting up a prepay system too, to avoid having do leave a bill (handwritten on one of those old-time books) and to avoid dealing with collection issues.