The customer pays with a card and earns points toward a trip. Your business receives the payment after the cost of processing it. The same purchase looks different depending on which side of the counter you are standing.
I see both sides of this in my own work. I use credit cards for points, and when somebody pays me for consulting or coaching with a card, I pay to accept that payment. That is part of what I look at in the credit-card episode of The Observation Room.
Card issuers receive interchange revenue when people make purchases, as well as interest and other fees. Rewards are an expense within that system. The Federal Reserve’s research on credit-card profitability separates the payment side from the borrowing side. It is useful because collecting a payment and lending money are different activities, even when the customer uses the same card.
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If you own a business, start with your own processing statement. What did you pay to accept card payments, and how does that compare with your card sales? Look at the total cost, including any other charges in the agreement. An advertised rate may not tell you what the entire arrangement costs.
That information belongs beside your other costs when you look at what a sale leaves available. It also gives you a clearer question to ask your provider. You do not have to assume every provider or every card costs the same.
I’m interested in the difference between a benefit that is easy to see and a cost that is easy to miss. A customer can tell you about the points they earned. The business needs to be able to explain what accepting that payment cost it.
If you have looked closely at your processing statement, bring that experience to the community. What was clear, and what did you have to ask somebody to explain? Please keep customer information and private account details out of the discussion.
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This is general business education. Review your specific processing agreement and any proposed changes with the appropriate professionals.
Michelle