Rant: Pay Pal Fees and discounts (not what you might think)

Hi guys,

I got a reasonable request in an e-mail this AM but it rubbed me the wrong way and prompted me to post here and try to explain my "take" and posibly get some enlightenment from some of you. I have encountered such a request a number of times in the past but this time I felt like venting a bit.

Pay Pal provides many of us a service and they have fee structures to allow them to charge for that service. I suspect they have a profitable program going and I am not interested in discussing whether their fees are reasonable or not.

For the most part, PayPal collects these fees from the seller and not the buyer. I believe they have rules for sellers not "passing" these fees on to the buyer. Credit Card companies also collect their fee from the seller with similar rules of not having the fee passed on to the buyer. I accept these rules and do consider the service provided by these institutions to be worth their fees, for the most part. As a buyer, I gain benefit of using these services without having to pay for them; the seller foots the bill.

When I establish a price for a good or service I am willing to offer, I do not inflate that price in consideration that there may be a fee involved in receiving payment for the good or service. If I elect to allow payment via one of these insititutions I do it in awareness of their fees and with acceptance that I am willing to pay them for this service rendered. This service fee is a cost of doing "business" but not a direct cost to be factored into the price of a particular good or service.

Now for the rant.

I quote a price on a good or service and again, I qoute this price independant of how I might receive payment. The buyer responds to my quote and knowing that PayPal is an option for payment, they ask me for a cash discount in lieu of using PayPal. Their logical position is that I net the same amount in either case so it should be no difference to me. Well it is a difference and in principle, it rubs me the wrong way!!

I have set a price. I am willing to pay Pay Pal their fee for the service of handling the transaction through their system. Why should I discount my efforts or goods to the customer? They are asking me to charge less than the price I came up with; taking a chisel to me. Is the customer providing me a service for this discount? Are they placing the funds into my bank account for me? If they send me hard cash or a check and I have to go to the bank to deposit it, is that doing me a favor worth the discount? :shrug:

Many companies doing business do offer cash or quick pay discounts and these are based on a value the company perceives in receiving payment sooner. This activity is typically not seen in the retail arena but then there are all types of marketing ploys where timeliness of payment is factored into a sale or price.

If I was one of those who ignored the rules and charged the customer a fee for payment via PayPal then certainly one would save the fee if they paid using a different method.

Simply put, the fees I pay PayPal as a seller are my choice and my business. The customer does not pay these fees nor do they offer me a direct deposit of the payment so I see no reason to pay the customer, via a discount, as a similar service has not been rendered.

Hell, there have been times payment was sent as a money order and with signature required. I have had to go stand in line at the PO to receive the payment and then take a trip to the bank to deposit it. I am not complaining here but obviously if time is money, PayPal's fees can be a deal considering some alternatives!!

Humm....... Perhaps I should come up with a price for a good or service and then add say 3% to that price and quote this inflated price as "the price". I could then offer a 3% discount for payment in hard currency (if I really needed to have the cash on hand) and then I could be realistic about the time required to deposit a check and charge a premium for payment via money order or personal check. :nana:

I told you it was a rant! If you ask me for a discount would it be reasonable if I countered with asking you to pay an additional premium?

Amen...

i still dont have paypal.

I don't understand what upsets you but it's your business, do what you want.

When I make a purchase of more than $100 I sometimes ask if they prefer a check or credit card. I figure they will do better taking the check if they know me. I don't ask for a discount though, and I never get one.

My brother had a retail store and he charged more if it was paid by credit card. Then the slimy thugs (sorry for being politically incorrect) passed a law making it illegal to charge more for customers paying by credit card.

So my brother put a big sign on the wall: "5% discount for cash".

The moral of that story is those we elect to government aren't just slimy and thuggish. They're stupid too.

Well I suppose many aren't that stupid but they know those that elect them are.

Come to think of it, that's what much of government is all about. The law forbidding charging more for credit cards makes those using credit cards happy, and the discount for cash makes those paying cash happy.

It's like P. T. Barnum said. "There's a sucker born every minute". To which I would add "And they all can vote."

I don't understand what upsets you but it's your business, do what you want.

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Obviously I either didn't communicate well or perhaps can't explain what upset me.

I consider a discount to be something that is ideally offered as opposed to requested or in some cases demanded. With an economy and a society based on discount we ultimately discount our "worth". I doubt I can explain that last statement without wasting way too much of everyone's time.

I assume that you earn a wage or salary. If I were to ask you to take a cut in that wage or salary, would that upset you? I assume I could give you reasons for such a request that would reduce your discomfort in a "cut" but I doubt you would be real receptive or embrace such a cut. I could be wrong.

If you ask me for a discount on something I have made or worked on, why are you asking for the discount? Am I asking too much? Is my work not worth what I ask? Should my loss be your gain and if yes, can you tell me why?

This might not make sense but if I am just selling a commodity that cost me x and I hope to sell for x + y then if someone offers me x + y - z I can take it as a business negotiation and decide if the offer is acceptable or not. On the other hand, if I am offering something that I created and assembled or a service that requires my time and abilities, a request for a discount can be viewed as a statement that my efforts are not worth the price I have asked. I take that personal. It's not about the money but what the money represents in this case. If that doesn't make sense then I guess I don't either!

The point above that I wanted to make is that I pay the Pay Pal fee and it is for services rendered by PayPal, on my behalf. This fee is for services rendered in regards to a transaction but this fee has not been added in as a cost on that transaction. If the cost was factored into the sale then if I don't incurr that cost it is only reasonable that I pass that savings on to the buyer. The point is that the cost is NOT factored into the selling price. It is an additional fee I am willing to pay for the processing of the payment and deposit into my bank account. If you buy something from me and can transfer the funds into my account in the same manner as PayPal does then I will be happy to consider paying you a similar fee; applied as a discount if that makes it easier.

In my particular case, as you explained, the amount I receive is the same if I make a discount for cash payment or receive payments via paypal. So I give the discount happily.
In some cases I provide an extra discount just for meeting my customer face to face, it makes me feel good and Im sure the other party appreciates it too.

Different story is a money order, I understand your rant here, cashing a MO is a lot of time wasted, you should charge a plus if the buyer chooses this method

My 0.02 (of peso)


Pablo

I could sort of see why someone might want to ask for a discount if they perceive that in the end Don will still get the same amount of money but I do not think it is proper to openly ask for a reduced price. I would not go into a any store and ask to pay less for an item if I used cash vs. credit card. We accept the prices of goods and services everyday and I don't think it should be any different with Don just because he does not have a store front.

Oddjob said:

I could sort of see why someone might want to ask for a discount if they perceive that in the end Don will still get the same amount of money but I do not think it is proper to openly ask for a reduced price. I would not go into a any store and ask to pay less for an item if I used cash vs. credit card. We accept the prices of goods and services everyday and I don't think it should be any different with Don just because he does not have a store front.

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OTOH I ask every time if I get a better price if I pay cash at local stores, discount usually (but not always) is around 5-10%

I can't see why this is not proper... the store owner/clerk always has the final word and if this is the difference between two stores with the same price I can always go to the other store...


Pablo

I guess I wouldn't see the harm in asking either. Paypal allows you 2 accounts. One that takes CC, and one that doesn't. If a person wants to ask for a reasonable discount that is ok, just as long as they don't expect it every time. There are times I can give a discount if they will use an E-check, or non CC funded payment. But that should happen in the back channels, not the public ones.

Don,

I think you are a victim of your own success The perception of you and your business is possibly different to the reality. I think most people wouldn't ask for a discount from a sole trader making handmade jewellry or maybe a handmade knife, but I think most people would ask when buying a new Chevy. In your case, especially as you have spoken about different entities helping in manufacture (such as the machine shop or Sandwich Shoppe), it seems this client may equate you more with General Motors than being a one man artisan. Depending on your perspective you may laugh or cry at that comparison.

Also you did not say how the client was going to get the money to you and costs involved. I can deposit to any account worldwide for A$20 (US$16) from my online account. If I was buying one light from you, I would just go with your system as any savings are small. If I was buying three, I would suggest a discount based on sharing the savings. Obviously that would be at your discretion, but I would not be embarressed to ask, as I would just consider it using the most cost effective solution and sharing the savings. I would also ask if I lived around the corner and had to walk around and pay cash, again thinking we could share the savings.

Lastly many nationalities have bargaining as a part of their life and would consider it bad form not to ask for a discount, especially for what is clearly a high value item in its field. This may be a case of different backgrounds viewing the same request differently.

I truly doubt the individual tried to or thought they would offend, especially as you are the sole source of supply for new product, more likely that because of the reputation your products enjoy considered you more esteemed manufacturer whilst you may consider yourself more of an inventor/artisan.

Hope the transaction is still a happy one for you.

I have a simple spin on this.

I work out a price for what I am selling, taking into account all sorts of things like relativities of currencies, fees etc. That's the price.

Pay Pal charges me a fee when I sell stuff. My bank doesn't. However, with Pay Pal transactions I have a lot less work to do because when the transaction comes through the system sends me a message and I go and approve the transaction. When money goes to my bank account I have to keep going into the account and checking. This takes time and effort and more diligence in tracking transactions as I insist on pre-payment before sending things to people (once bitten twice shy!)

The people I have told this story when they asked for a discount have been very reasonable about it. In all the transactions none have said they'll go elsewhere but that is always their prerogative.

Cheers

Peter

You're right, maybe "proper" is not the right word. I suppose it depends on how it is brought up and asked. I know people who have run their own businesses and some don't mind these kinds of questions and others do.
:shrug:

PEU said:

OTOH I ask every time if I get a better price if I pay cash at local stores, discount usually (but not always) is around 5-10%

I can't see why this is not proper... the store owner/clerk always has the final word and if this is the difference between two stores with the same price I can always go to the other store...


Pablo

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Hi guys,
Thanks for the comments and perceptions.

I admit that there are special considerations and circumstances in the request this AM that prompted me to rant. However I wanted to make this rant on a position I felt justified making in general terms and not specific to a particular situation. It boils down to the simple fact that by choice, I pay Pay Pal a transaction fee for a service they render and a service I find real value in. Granted this service does the buyer no good but then they haven't paid for it. Although they see no gain from this service, I am not willing to discount it or my price because of it.

Glen C,
You bring up some good points and of course the "size" of the transaction can in and of itself have bearing given that the PayPal fee is a percentage that is constant across the scale.

I believe the individual this AM had offending me in asking for a $4 discount as the furthest thing from their mind and I did not take their request as a personal afront; beyond that which I have tried to explain here. Instead of keeping my position private and trying to explain it in a PM to them, I figured I would share it here with you all. :nana:

This is NOT a jeer towards the individual who prompted me to post. I wanted to explain my position as a seller as well as a buyer as it relates to Pay Pal, to not only them (I provided a link to this thread), but to anyone else who might find interest in the topic; for what ever reason.

And ultimately in my defense as many are my witness:

After all that...I still say "Well Said" DON and what a "GREAT LIGHT" you provided me with !
Thanks for the MULE
GRIFF

Interesting thoughts and comments.

I've always considered most transactions open for negotiations. Obviously, I won't ask the the checker at the grocery for a discount for cash, but I will ask the independent garage man to "share" his savings on a large transaction if I pay cash. I don't expect the full 3 to 6% a card transaction would cost him, but I don't think a couple of points is unreasonable. If I'm actively bargining for something, such as at a pawn shop, I'll make it known that I'm willing to pay cash as a bargaining point.

In the real estate business, a seller financed deal will generally result in a greater negotiated purchase price, for several reasons, one being that the cost of the mortgage to the buyer is considerably less when he's not paying the upfront charges for a commercial mortgage. Again, I see nothing wrong with the buyer and seller sharing the savings.

I won't use paypal (or ebay) for personal reasons, so there are several CPF sellers I don't do business with. I miss a few deals that way, but it's my choice, just as it's their choice not to do business under my terms.

BTW, my banks, Wells Fargo or Frost, accept money orders for deposit just like checks.

People who ask for a cash discount usually do so in the belief that it is saving the seller some money. It used to be that cash meant just that, cash, not a check or money order. They want to save themselves some money and as long as the seller receives the same money in the end - what is the harm?

Ok - now that I wrote that - checks and money orders have a cost associated with them - some banks charge a transaction fee, then there is the time involved and cost to go to and from the bank.

By the way - I think paypal has rules about separate accounts for cash and credit.

Discounts are very common in business dealings. There are a lot of way to figure - every thing from a gross monthly sales amount, to quantity discounts, to package deals discounts, to professional discounts, competative sales discounts, closeout discounts, and lots more...

(Buy an auto part as an individual, the price you pay is very different that what a repair shop pays, and the more the repair shop buys, the greater the discount.)

Cash will always have more value than C/C transactions beyond the fees there are no records so you are free from uncle Sam's share. If i had the choice i would rather get paid CASH but thats just me.

Well I'm sure Don wouldn't have a problem giving a discount if the buyer got him/herself to Maui and handed him CASH... that would be a different story, I guess... :thinking:

We're planning a trip there next year. I'll check it out and report back.

BIGIRON said:

We're planning a trip there next year. I'll check it out and report back.

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Cool! We'll be waiting for the report! :twothumbs