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User Info Amazon Makes Money Exploiting Honest Merchants; entered at 2017-11-24 22:25:31
Posts: 905
Registered: 2012-12-05 Huntsville, AL
On the "plastic surcharge", that reminds me of something.

In 1978 I, a newly minted and certificated band director, took a job with the Fayette County (Alabama) Schools, for the purpose of establishing a band program in one of the tiny elementary and high schools. Economically, this was a very depressed area of the State, and musical instruments incurred significant costs to a lot of families. Of course, on the other hand, a whole lot of families had BankAmericard (now Visa) and MasterCharge accounts.

A music store owner in Huntsville, a native of Fayette, also had a shoestring store operation there. (For purposes of full disclosure I will tell you that this music store owner was the only reason I ever had a chance to interview for that job, and consider it likely that his connections in the good-old-boy setup there was the final deal breaker for my teaching contract.)

Music stores sell instruments, method books, stands, musicians' chairs, instrument lubricants, repair services, and the like, and, since he was originally a local many people in those schools gave their business to him, rather than Tuscaloosa Music (45 miles away) or Nuncie's in Birmingham (about 90 miles away). His repair services were very much more economical and convenient than they were in the bigger and more distant cities, and of course that became a big draw for his offerings.

Not to mention, he had at the same time I got my contract, hired a New York guy, a recent graduate of the State University of New York system, to manage the store, service the schools, and repair instruments (all jobs at which he was extremely good, almost a natural, I would say). We became close friends, as we were both "outsiders" in those towns, enjoyed a beer now and again (which we had to drive to Tuscaloosa County to buy, or to Mississippi), and pretty much tried to keep off the radar of the local, um, how to say it(?)--well, the Klan was there, and they didn't like uppity Yankees and "big-city" fellows getting any strange ideas...

How does "plastic" tie into this? (That's kind of where I started, you know.)

The owner offered an alternative to the charge cards, and allowed an 18% discount against purchases paid for in cash, or he would finance those purchases at a 1%/month "simple add-on" interest--if someone bought a $150 beginner drum kit (Ludwig "Satellite"), and agreed to pay it off in one year, then the finance charge would be 12% of the $150, or $18.

I noticed over a period of time that his local manager did often have to go out into maybe not the best part, or the safest part, of town or the county, to repossess instruments. (On one very cold, very windy, very dark night I went with him to repossess a flute or something from one of the town's big bootleggers. That was a most interesting exercise, resulting in the instrument being paid off on the spot. I still think I can feel all the firearms pointed sort-of-at-me that night.)

So I asked the owner why he didn't just refuse credit to his customers and let the credit card companies handle all the demand letters and repossessions and such, when handling it himself put him, his employee, and his business at risk. He then explained that BankAmericard and MasterCard imposed a 15%-18% surcharge on him at the point of sale, and that he didn't want to raise his prices in order to cover the difference, since him financing it at that 12% per annum simple add-on interest rate was much more profitable to his business, and cash on the barrel-head was even better.

His store in Huntsville is still in business, but he's in his mid-80s now and the business is managed by his younger daughter, so I don't know how such things are handled, but I would not be at all surprised to learn it's exactly the same now as then.

But this 3% surcharge/fee/whatever-it-is, except for the fact that it's still shameless raking from the top, doesn't seem nearly as bad as it was ~40 years ago. That doesn't make either of them right, not at all. And it's still financial******(or financial consensual sex, whichever) either way.

Now, of course, it occurs to me that, in order to offer that 18% discount (or the 6% annual discount, if you will), he was still forced to inflate his price list in a significant manner to enjoy the business of those customers who absolutely would in all circumstances use the credit card. In my mind that's the very best illustration of what should be illegal economic pressure I can imagine.

Last modified: 2017-11-24 22:36:01 by dennisglover
Reason: clarify 2% to 3% fee

2017-11-24 22:25:31