25 April 2007
The great credit card rip off
Although it is as a consumer faced with notices such as "use a credit card and you will be charged a minimum £4.95 surcharge" which prompts me to write this, let me give some background in my experience.
During the height of the dot com boom I was an e-commerce consultant. When the market peaked in early 2000 I was in the middle of gaining e-commerce accreditation for the Scottish Tourist Board's project Ossian. Scottish Tourism employs about 8% of the Scottish workforce, and the industry is worth approx £4.5 billion to the Scottish economy. Following my stint there, through three separate e-commerce platforms I went on to be Project Manager for the tesco.com grocery site, the world's most successful online grocer. I won't bore you with further figures, you can read them here. So I have a bit of an inside perspective on the whole credit card transaction fee nonsense. These days, I'm currently self employed and doing quite well.
visitscotland.com when I was there only took 10% of the value of a booking for automated sales (via the web). Therefore for a typical £40 online booking for a night in a cheap hotel, the actual value visitscotland.com would process would be £4. The remainder was paid direct to the establishment. No credit card fee was charged by visitscotland.com. Indeed if you compare this £4 charge it isn't that far off the core price of some Easyjet flights if you book far enough ahead. Yet, Easyjet charge a minimum credit card fee of £4.95 for an online booking - a fee that visitscotland.com, also in the travel business, managed to do entirely without. If it wasn't for the government taxes, the credit card fee would be pretty much doubling the cost of some Easyjet flights. Visitscotland.com incidentally did charge a 2.5% credit card fee for self catering bookings via the contact centre after pressure from the industry, however for serviced accommodation bookings there was no fee yet both bookings were going through the same payment gateway (SecureTrading). Apart from putting the Self Catering industry in a bad light (see bank of Self Catering Ltd), it is inconsistent that a £500 hotel booking should have no charge but a £500 self catering booking had a 2.5% fee, yet the payment for the latter was often taken several months in advance.
When I was in Skye last year, the local shop Ragamuffin had a £50 minimum for a credit card transaction. This would have been bad enough in the middle of Edinburgh where their other shop is, surrounded by banks and cashpoint machines and alternative methods of payment. However, in my case I was in Armadale, Skye. Approximately 40 minutes round trip by car (if you have one) to the nearest town (Broadford) where there is a cash machine. So cash was at a premium as I didn't fancy spending my holiday driving up and down taking money out and clearly there were some things such as ice creams that I genuinely needed cash for. Like many people, I don't ordinarily carry a cheque book either as so few places accept them now, however you can see from this list (PDF) that for a business paying in more than one cheque at a time, the additional cost is a mere 25p per cheque. This 25p is a charge I would happily pay if the alternative is a 40 minute car journey. 25p is also a lot more reasonable than the £4.95 easyjet credit card charge - bearing in mind that cheques are a manual payment and credit cards are automated it certainly makes me question how reasonable a credit card charge should be. I also don't accept the concept of a "minimum fee" for a credit card transaction as the fees for credit cards are usually either a flat fee per month or a fixed percentage per transaction, meaning that 100 £1 transactions would cost the merchant the same as 1 £100 transaction in fees.
Let's now look at the actual charges merchants pay that they use to justify these "minimum transaction amounts", "credit card fees" and so on.
Here is a selection of popular e-commerce payment solutions. At the high end, it's 3.8% per transaction but 1.5%-2.5% is more typical and as the article shows, for a flat fee of £20 per month you can get away with no transaction charges at all. Indeed this can be as low as £10 for a lower volume mail order set up. For the top end, Tesco uses Commidea. Commidea also caters for the smaller retailer and like Protx charges no fees per transaction, just a low monthly fee. So with either system it doesn't matter how much the customer spends. Indeed, I would like to put small amounts on my card to keep all my business spending in one place. JD Wetherspoon's in Belfast however wouldn't let me put £4.99 for a meal on my business card due to their £5 minimum card fee. Perhaps they are with the wrong payment system?
Clearly there is a lot of variation in card charges to retailers (merchants) but a simple bit of shopping around can round these up into one simple, fixed fee. Nowhere have I seen any card processing company that charges a minimum card fee of £4.95, so there appears to be no justification for Easyjet's excessive charges.
So consumers, if you feel that "minimum credit card transaction value" or "credit card surcharge" or the like are annoying you, just vote with your feet and shop elsewhere and give the retailer a copy of this posting. After all, if the retailer chooses a more cost effective payment method, not only will we hopefully see minimum fees and surcharges disappear but retailers themselves will move to more cost effective solutions and make more money generally.
23 April 2007
Bank of Self Catering Ltd
When I stay in a hotel, guest house, B&B etc I can book ahead of time and pay no credit card fee. A small deposit (typically 10%) may be payable in advance, but not usually. Then you pay the balance once you have had your stay. Typically my bill would come to a few hundred pounds.
When I stay in a self catering establishment however, they demand 20% non returnable deposit immediately (even though my stay might not be for another 12 months), then take the entire balance approx 3 weeks before I begin my stay. Then after having had the nerve to take all my money up front, in advance and sit on the deposit for nearly a year (earning interest on it) they then have the nerve to charge me a credit card fee as well! It's like "bank of Self Catering Ltd". This is if you are lucky enough to find somewhere to stay and don't mind the 7 night minimum stay either.... (hint: CenterParcs do 3 and 4 night stays self catering, try offering that to a self catering place. Not!)
Am I the only one who thinks this is a total rip off?
Credit card charges. Just say NO.
22 April 2007
Which is great news for the SNP, but lousy news for the BBC. So lousy, they don't cover it.
The main story on the BBC Scotland election site is "Labour attacks SNP". Well so what, they do that every day. Is that news?
Meanwhile, the most comprehensive poll since the start of the campaign gets no mention whatsoever.
19 April 2007
The month that changed the UK
2nd May: the 10th anniversary of Labour coming to power. This will intentionally be a low key affair given their unpopularity in the polls.
3rd May: Scotland goes to the polls. The SNP are widely tipped to win and significant steps towards Scotland becoming an independent country, ending 300 years of union will ensue. Like Wales, the SNP are proposing abolishing prescription charges. How long will England remain socially and politically behind the rest of the former UK?
Labour are expected to lose control of the Scottish and Welsh parliaments and do badly in the English council elections, all on 3rd May with their support approaching a 20 year low.
Tony Blair is expected to resign shortly after the polls, realising that the disastrous showing of Labour UK wide and the loss of devolved control in Scotland and Wales is largely down to continued resentment over Iraq, cash for honours sleaze and it is time for a fresh start. Sources indicate 31st May as the favoured date, but in practice a poor showing in the polls would bring this forward significantly.
Prime minister in waiting Gordon Brown has his own problems to deal with though. On 10th May, the Bank of England raises interest rates again. Normally set on the first
Thursday of the month, the Bank of England which was allegedly set free from political control is curiously meeting on the 10th, rather than the day most of the UK goes to the polls. Higher than expected inflation and a strong pound will hit the manufacturing sector and the balance of payments. The economic joy ride that Gordon Brown has enjoyed is coming to an end and the Tories are riding high in the English polls. Whilst the Dow Jones is now at an all time high, the FTSE100 is still some way off the level reached in 1999.
8th May: The devolution picture completes. With the Scottish and Welsh results in a few days ago, today see the Northern Ireland assembly assumes full powers and a nationalist party, Sinn Fein, sharing power. A struggling Labour government has at most three years to recover from a disastrous showing in the polls. Behind the scenes the Labour government has to discourage prominent Labour MPs from Scotland for seeking election to English constituencies as the SNP seeks to hold an independence poll in 2010 and remove Scottish MPs from Westminster. The UK looks to be on course for a SNP government in Scotland confronting a Conservative government in Westminster from 2010 elected almost entirely from English constituencies.
Such a prospect not only favours the SNP but also sees Plaid Cymru and Sinn Fein increase in popularity.
The UK, heading for part of one island (England and Wales) and part of another island (Northern Ireland) needs a clear rethink of its structure as the nationalist movements in Northern Ireland and Wales look to Scotland and the previous negative arguments levelled at Scottish independence fail to hold much ground as Scotland heads towards being a sovereign nation.
From the end of April to the end of May, it will be an interesting month with reprocussions for years to come.
15 April 2007
Scotland says no to ID cards (an unwanted, expensive invasion of privacy)
Scotland says no to Trident
Scotland says no to the Iraq war
Scotland says no to people who deny this country the opportunity to express in a single issue referendum how we should govern ourselves.
Scotland says no to prescription charges, a tax on the sick
Scotland says no to the council tax, apart from a concession system for certain groups, it has no element of ability to pay.
Scotland says no to the negative culture of "Scotland isn't good enough to make it as a country"
Don't give Scotland another 4 years' Labour and ignoring Scotland's wishes.
It's time to say yes.
SNP. It's time.
05 April 2007
The nine billion pound question
Why is it that I can take out money from an entire banking network, including from other bank groups, 24 hours a day, 7 days a week and the money is debited immediately from my account irrespective of whether it is a banking day or not? I have access to my cash immediately, regardless of how the banking network works behind the scenes.
Yet, when I receive a cheque and want to pay it into a branch of the same banking group in the same country they can't tell me how long it will take to clear and it is well over two weeks before I can guarantee to access my money?
Here is the issue:
On 2nd April I received a cheque which I went to pay into a branch of the Royal Bank of Scotland group. I bank with the Royal Bank of Scotland, (that's the company making nine billion pounds profit by the way).
The said branch was with the Ulster Bank, who proudly display the Royal Bank of Scotland logo as their corporate logo.
Ulster bank wouldn't accept my pay in because despite the RBS group having 9 billion pounds profit, their IT systems are not fully joined up and they need a preprinted credit slip to pay something in. Long gone are the flexible days of fill in your own slip, also there are none of those flexible cash machines that accepted pay ins - no instead you have to carry a massive pay in book (this is for a business account where the pay in slips are bigger than a standard account). Never mind the fact that irrespective of who I want to pay online I can just send money direct to any bank on the BACS network. Never mind that when I ran e-commerce systems I know that all you have to do is send the details of the account code, name and sort code to debit. No, when you actually go into a real bank you get a substandard service where despite 9 billion in profits you need a special bit of paper to pay money into your own account.
So, there being no branches able to take my money I had to rely on the good old Bank Giro Credit system known as the Post Office to physically post my cheque to the bank. Three days later the first class letter, posted in Belfast arrived at my bank. So, then I phone up and they say that it takes between 3 and 6 days before the cheque will clear and that even when it appears as cleared funds online, the cheque might still bounce and I would be liable for any charges if I took out money based on the cheque having cleared. This counter starts the banking day after the cheque is paid in. The cheque arrives on 5th April and the next banking day (thanks to Easter) is 10th April. I have no doubt that if I wanted to take money out on the 6th, 7th, 8th and 9th that I would have access to my money right away, so why do pay ins have to take a holiday?
6 banking days after the 10th is the 18th. 16 days to fully credit my account. Taking money out takes less than 16 seconds to authorise.
How much money is actually needed to solve this problem and why do none of the banks consider it a priority? Is it really such a leap of the imagination to treat a cheque like a debit card, authorise the amount in real time and credit the account with the same zesty speed that I can take money out?
Said bank might even make more money if people actually got a speedy service from it and then it gained customers as a result. In the meantime, I'm going to scan in a preprined pay in slip, shrink it to a sensible size and store it on the net so I can print a decent sized one when I need it.
Funny how the people paid millions to run said bank haven't come up with a real solution yet.