Junk-food amortization
July 22nd, 2005 | by mbhunter |On our trip to Vermont and New Hampshire a few weeks ago, we stopped at a rest area that had some vending machines. I had never seen this before — a soda machine that takes credit cards as payment!
From a consumer perspective, you’re paying BIG TIME for this convenience — the prices were high, even for vending machines. Almost movie-concession-stand ridiculous. But it’s so easy — you don’t have to mess with the bill changer that never seems happy with the bills that you feed it. Just swipe the stripe!
Now, from a business perspective, things aren’t quite as cut and dried. Do they make that much more money with the credit cards than without?
There are lots of costs with accepting credit cards. There’s a per transaction fee, somewhere between 20 and 40 cents plus a percentage of the purchase amount. There’s probably a monthly fee. There are the extra costs of purchasing the readers, installing them, and maintaining them. They bump up the prices of the items to cover these fees, but this means fewer sales.
However, they did mark up the prices quite a bit to cover these costs. And the per transaction fee is only charged once for multiple items purchased at once. What’s more, people tend to spend more with credit cards than they do with cash, because they don’t “see the money leaving their wallet” as clearly, and frankly, they don’t even need to have the money. If the customer instead paid cash, then the vending machine owner pockets what would have been eaten up in transaction fees.
I can see this credit card vending thing working best on interstates, concert venues, and other places where the vending machines are the only game in town. If there’s competition, the inflated prices, though necessary to avoid losses, would scare away too many people to make it worth it.
(By the way, if you patronize these machines, please at least pay off the balance! Amortizing a Milky Way is stupid.)
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