Operations

Don't Let Credit Card Fees Take a Big Bite Out of Profits

LCT Staff
Posted on June 1, 2000

Question: When is a dollar not really a dollar?Answer: A dollar is not a dollar when a consumer pays for goods or services with his bank issued Visa or MasterCard. That “dollar” forked over by the consumer, may, in reality, be only 92 to 98 cents in the merchant’s bank account.

Profit margins are small in the limousine business. Smart operators realize that it is necessary to accept credit cards (and “travel” cards such as American Express and Diners Club). But smart operators must also do their homework and select a credit card processing firm that will allow them to retain as much of that dollar as possible. Rates charged by credit card processing firms can be extremely deceiving. A “great” rate of 1.7 percent can, in actuality, be four or even five percent after factoring in various set-up charges and per-transaction fees.

Although most large banks issue credit and debit cards with the MasterCard or Visa logo on them, separate companies do the card processing for a fee. A consortium of banks owns Visa and MasterCard. First Data, Payment Tech (First USA) and NOVA are the main card-processing providers. The industry is extremely competitive. Sales people who sell card-processing services are everywhere, but only recently have they “discovered” the limousine industry.

Our industry has always been defensive about its relationship with the credit card industry. Operators felt the card processing companies thumbed their collective noses at them because of a number of factors, such as the fact that:

  • Many operators are home-based.
  • A high number of limousine businesses close yearly.
  • The business still involves a large number of transactions done over the phone.
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