Have you been wondering if you could use your credit card for a purchase at an auction? More and more auctioneers are having to face the decision as to whether they will allow credit cards at their auctions.
There are expenses to the auctioneer who allows credit purchases. Many old timers still use the “cash and carry” method. But times are a changing and as you know, technology is changing, particularly with internet purchases.
Most credit card purchases at an auction have been for personal property and not real property like a house. However, I have seen some auctioneer allow credit cards at a real estate auction as a binder or down payment. Then the purchaser has 24 hours to complete the Terms and Conditions as to what is required of the high bidder.
I found it very interesting to read that internet purchases have outpaced retail malls, that is brick and mortar outlets. I can’t remember when I was at a mall shopping if you don’t count Lowes and Tractor Supply and these are not located in a mall area.
But how will the use or non-use of credit cards affect auctions sales? What many buyers do not understand, whether you are using your credit card in a restaurant or to get your car repaired, is that the merchant is charged a fee on top of his/her other expenses (software, scanning/swipe machine, internet hook up, etc.) to make available credit card purchases.
When an auctioneer sells something, he usually gets paid through a buyer’s premium. Sometime through a seller’s premium or a combination of the two. If that buyer’s premium is 10% and if the buyer uses a credit card for the purchase, the merchant will charge a fee to the auctioneer. That fee can be 2 to 3 % or more of the purchase price.
Some auctioneers are now charging a surcharge fee to credit card buyers, to put them on the same level as cash or check purchasers. However, this can pose a problem.
Mike Brandly, auctioneer in Ohio, recently wrote an interesting article about the dilemma the auctioneer faces when using a surcharge fee:
- 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.
As Mike says, “It’s a mess.” When an item is purchased at auction, it’s “what you see is what you get.” Most auctioneers and sellers will disclosure at auction any known deficiencies. And the key is “known.” There are no guarantees unless the seller provides one and this is rare.
But with a credit card purchase, a dissatisfied buyer can come back to you with a “chargeback” on his/her credit card purchase. Talk about things getting messy… . especially if an item was shipped.
As Mike pointed out, … ” it’s important to note that we have several parties involved in this transaction: The seller, the buyer, the auctioneer, the credit card company, the credit card processor, the online auction software vendor and the shipping company.”
If the buyer made an internet purchase without the buyer being actually present at the auction (and having his/her credit card swiped) or some sort of signed delivery confirmation, the buyer can claim he/she didn’t receive the item — even if he did.
This is an evolving issue with many auctioneers who are currently accepting credit card purchases at their auction. If you are charged a surcharge for purchasing an item at an auction by credit card, we hope you will now understand why.