PayPal Surcharge

I've done a lot of trading here on AudiogoN, either as a buyer or as a seller. Regarding Paypal as a method of payment, I'd like to stress to all those who think that the seller should eat this charge that it is much more advantageous if you're a buyer than if you're a seller. As a seller, you still have to wait 4-6 business days before you get the money into your bank account. That is about the same time a MO takes to make it to me. So as a seller being paid via Paypal I have to ship the items but still have to wait about a week before I have access to the funds. But as a buyer, it considerably speeds up the transaction. Moreover, as someone already said, it avoids the buyer the trouble of getting a MO (which is not free) and having to mail it (not free either). I don't mind paying the 3% fee when I'm buying stuff and decides to use Paypal for payment.

To repeat..All credit card transactions have a fee, usually around +/-3%. The store pays it (deducted from proceeds). Has nothing to do with Paypal. If you accept credit card payments, you are no different than a store.

If you were to try to set up your own credit card account directly with VISA and Mastercard, the fixed cost alone would be a lot more than just paying PayPal.

PayPal has created a way for all of us to get the benefits of credit cards on very small transactions, with no up front costs. What is the problem here?

I've never actually used PayPal, so my info's a bit shaky. It sounds reasonable that the reason for their "no surcharge" policy is because of certain credit card laws (and, undoubtedly, their iron-clad agreements with the credit card companies themselves). For example, the California Civil Code:

1748.1. (a) No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means. A retailer may, however, offer discounts for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.
(b) Any retailer who willfully violates this section by imposing a surcharge on a cardholder who elects to use a credit card and who fails to pay that amount to the cardholder within 30 days of a written demand by the cardholder of the retailer by certified mail, shall be liable to the cardholder for three times the amount at which actual damages are assessed. The cardholder shall also be entitled to recover reasonable attorney's fees and costs incurred in the action.
A cause of action under this section may be brought in small claims court, if it does not exceed the jurisdiction of that court, or in any other appropriate court.

Of course, there's more than one way to submit payment through PalPal, just as there's also more than one way to skin a cat ("add 3% for credit" v. "3% discount for cash"). That said, the way people now do it would seem to be proscribed by law and potentially exposes them to trebel damages -- at least for credit card transaction in CA (to say nothing of their agreement with PayPal). PayPal's unenforced (and likely unenforceable) agreement with users is pure CYA, likely more from the credit card companies than The Man. The credit card industry is closely watched and heavily regulated -- and if anyone has any doubt about how serious it is, just have a look at the $800 million verdict that came down from a CA court last month against Visa and Master Card for a "hidden" 1% surcharge for foreign currency transactions. Different law and different issues, but not so far removed....

All that aside, PayPal offers the market a valuable alternative. The more people know about how it works and how best to use it, the more valuable it will become. To me, this thread has been very valuable. As a buyer, I've always had a strong aversion to someone demanding that I incur additional costs for their convenience and protection, not my own, and I generally avoid making deals where that is required. Sometimes, though, it makes sense. And when it's to both parties benefit, at the least, seems you should split the cost. The more informed the market, the better it works. I've definitely learned something, cheers to that.

Wheee! Thanks Mezmo. From now on I will be offering 3% off for "cash" in case the buyer is in a state that prohibits surcharges. FYI, I can't find any similar language in the Oregon revised statutes, but I did find this table, a compendium of state comptrollers and how they deal with credit card fees on licensing apps:

http://www.nasact.org/techupdates/downloads/surveys/06_02-Ecommerce/Table13.pdf

A search for "credit card surcharge" turns up multiple instances of gripes about all types of surcharges, companies charging customers to use credit cards, etc.-- Seems like this is pretty state-dependent and not very well controlled.

A list of states that have codes against CC surcharges: California
Colorado
Connecticut
Florida
Kansas
Maine
Massachusetts
New York
Oklahoma
Texas.

That's per: http://www.gofso.com/Premium/LE/06_le_ic/fg/fg-merchants.html#C

Apparently the truth in lending act that expired in 1984 precluded credit card surcharges, but since its expiration it's been up to the states themselves.

I'll point out that PayPal charges a surcharge, so its quite ironic that the company that says "don't use surcharges" uses a surcharge.

PayPal should drop its 2.9% fee as its in violation of the same rule its trying to implement.