We started accepting credit cards at our auctions around 1993.
At that time, we used a Verifone 330 credit card swiper, a DC power supply, a Motorola bag phone and a long antenna.
We were the first (and for years, the only) auctioneers in our market offering credit card acceptance at all our auctions.
We accepted credit cards at onsite auctions, even when there was no phone service at the location. Twice, reporters with The Columbus Dispatch contacted us about our innovative payment options for our auction attendees.
Despite offering this convenience, it was messy. We had to use multiple cords, connecting all the components. The antenna had to be positioned carefully to allow enough service for the processing. We only had to press 11 keys in sequence to settle the machine after the auction …
We thought this was messy then. However, credit card (and debit card) processing today is far more widespread, much easier to run a card and much more complicated to manage.
What’s messy now includes the current laws regarding surcharging. For instance, laws governing charging a buyer a 3% convenience fee to use a credit card to recover the cost of processing.
Here’s a list of the complicated, messy system that exists today in the United States concerning credit card acceptance:
Surcharges can only amount to what the merchant is actually (on average) charging you. Limited to a 4% maximum.
You must notify merchant at least 30 days prior of intent to surcharge.
You must give notice to customers — point-of-sale/point-of-entry signs and/or other disclosures are required.
You can surcharge credit cards, but not debit cards nor prepaid cards.
You can’t surcharge in some states, but you can in others.
You must charge the same surcharge on all types of cards (Visa, Mastercard, Discover, American Express, etc.)
Legislation is in process in many states to limit surcharging. You may be in a state in which you can surcharge today, but not tomorrow.
If you operate in multiple states, then you have to have consistent policies — so it’s likely you can’t surcharge anywhere if you operate in even one state where you can’t surcharge.
Even in a state where surcharging is “prohibited,” there are a variety of exceptions, limits and/or other allowances.
In other words, it’s a mess.
However, most have concluded that regardless of location of the auction, the auctioneer can charge a buyer’s premium to “everyone,” and then discount that buyer’s premium (or waive it altogether) for cash payments.
Of course, this is the same as surcharging the credit card user, but currently a work-around to an otherwise prohibited surcharge — at least at the moment.
Several credit card analysts are arguing that this “work-around” is just as illegal as the surcharge is illegal, since both result in the same surcharge for the credit card user. Look for more discussion on this issue, and possible additional regulations.
In our opinion, credit card processing is otherwise a mess as well. How much is any auctioneer actually being charged (percent, other fees, different fees on different cards and card types, manual rates versus swiped rates, different rates if zip code and/or CVV is verified, etc.)
Additionally, there are credit card chargebacks, which we discussed in more detail here: http://mikebrandlyauctioneer.wordpress.com/2012/12/08/auctioneers-and-credit-card-chargebacks/
What is our recommendation? First, we tell auctioneers that accepting credit cards and debit cards is virtually a must. We think there’s little doubt accepting them realizes the seller more net proceeds.
We also tell auctioneers that the best policy amidst all this confusing and constantly changing regulation is to charge all buyers the same regardless if they pay cash, write a check, or pay with credit card or debit card. Additional costs for providing such service should be included in seller commissions or fixed buyer’s premiums (currently, both unregulated.)
We also recommend all auctioneers keep abreast of this issue, as changes are inevitable; we’ll endeavor to do the same.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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