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CNBC: The Costco Craze: Inside the Warehouse Giant

Discussion in 'Now Playing - TV Show Talk' started by cwerdna, Apr 13, 2012.

  1. markb

    markb Member

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    Jul 24, 2002
    San Diego
    My understanding is that PIN-based debit card transaction fees are a lot less than credit card transaction fees.
     
  2. mattack

    mattack Active Member

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    Apr 9, 2001
    sunnyvale
    No, I'm talking about Costco. My mom had/has a business membership.
     
  3. Rob Helmerichs

    Rob Helmerichs I am Groot! TCF Club

    38,420
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    Oct 17, 2000
    Minneapolis
    That's interesting. Sam's Club has that here (early entrance for Business members), but Costco doesn't.
     
  4. Frylock

    Frylock Live Long and Tivo!

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    Feb 13, 2002
    Round Rock, TX
    That's correct. The debit fee is much, much less, and they take much less risk of not getting the money.
     
  5. pmyers

    pmyers Active Member

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    Jan 4, 2001
    Gilbert, AZ
    When I upgraded my membership to Executive I asked them if that got me in an hour early and was told that they used to do that but now they just open the store up an hour early to everybody (basically just extending their hours of operation by 1 hour).
     
  6. midas

    midas I heard that

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    Jun 1, 2000
    Montgomery,...
    I found a few things interesting.

    I always assumed they put the heavy squeeze on their vendors. But it was interesting to see them squeeze on higher quality as well as just the price.

    I was happy to hear that their employees are reasonably well paid. I also think that's one of the reasons they have such short hours.

    Interesting to hear about the square packaging. I realized that it would save on shelf space, but never thought about the savings on shipping costs.

    I wonder about the 1 in 10 figures regarding people refusing to buy something due to quantity. I've balked at a number of things due to size, and specifically the Advil they talked about. Just no way I'd use it all before it expired.

    Loved the comment about how it costs them a fortune to make the place look cheap.
     
  7. Flop

    Flop Member

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    Dec 2, 2005
    Oklahoma
    Typically, PIN based transactions will be a set amount per transaction. This is why many business used to (still do?) charge you 25 cents or 49 cents or whatever the surcharge was for you to use a debit card with a PIN. The fee for running the transaction as a credit card (no PIN) is a percentage based upon the sale total.

    For small sales, it is cheaper for the business to process credit cards, but at some point it becomes cheaper for the business to process debit transactions using a PIN. I'd imagine the vast majority of sales at Costco exceed the tipping point where it is costlier to pay a % for a credit card than the fixed fee for the debit transaction.

    This is also why I always tip for service with cash. I had friends in college that worked as waiters and the restaurant would take the credit card fee percentage out of any tips left on a credit card.
     
  8. sieglinde

    sieglinde New Member

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    Sebastopol, CA
    I made the mistake of buying the Advil but I don't worry about using the expired Advil. I use it so seldom.
     
  9. pmyers

    pmyers Active Member

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    Jan 4, 2001
    Gilbert, AZ
    I don't think I'd go through that 6 pack of toothpaste in my life! lol
     
  10. markb

    markb Member

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    Jul 24, 2002
    San Diego
    I think it's typically a flat fee plus a percentage. So merchants lose money on small transactions whether they take debit or credit.
     
  11. Idearat

    Idearat New Member

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    Nov 26, 2000
    Gilroy
    It's a small fee. From a NYT article:

    The new fee schedule includes three parts: a maximum interchange fee of 21 cents; a 1 cent addition that is allowed if the bank issuing the debit card develops a fraud-prevention program; and a variable charge of 5 basis points, or five one-hundredths of a percentage point, of the value of the transaction to recover a portion of fraud losses.

    For the average debit card transaction of about $38, that variable fee would be roughly 2 cents, which would produce an upper limit, on average, of 24 cents a transaction.​

    What this thread got me thinking about though was using a credit card as a debit card that some people have mentioned for using at Costco. My only knowledge of using a PIN with my credit card would be if I used it at an ATM for a cash advance. Getting cash advances I thought meant fees to me, a single charge plus a percentage. I've never used a credit card in this manner at Costco, so I don't know what it would look like on my statement.

    Costco does do a booming business in cash though. It's one place you'll still see prominent pneumatic tubes going from the registers up towards the ceiling and ending up in a back room. Once cash on hand gets high they send the excess to the back room via the tubes.
     
  12. jay_man2

    jay_man2 jay_man-also

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    Northern...
    I complained about their toilet paper. Several years ago I bought my first pack, thinking I was getting a lifetime supply. It only lasted 4 years! :p
     
  13. sushikitten

    sushikitten 143 down, ??? to go! TCF Club

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    Jan 27, 2005
    DC-ish Suburbia
    That was really interesting...I could easily have watched another hour. The toy stuff really intrigued me. I never would have imagined all that went on behind the scenes.

    We have that bear and it's awesome. We couldn't pass it up at $30. :)

    I hate not living in a city with a Costco. We used to be 10 minutes from one...now we're an hour. It's been two months since I've been there and I'm going through withdrawal so we might go this weekend. :)
     
  14. WO312

    WO312 Active Member

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    Jan 24, 2003
    Finger...
    You talking about the one here in Wilmington?? I live 10 minutes away and I love it. :D

    We eat lunch there a couple of times a week on average. Sometimes the samples are enough, or else the hot dogs, or both.

    I find it strange to have both a Sam's and a Costco in a relatively small city, but I love it. Sam's was here first - I think Costco wanted to rain on their parade. ;)
     
  15. pmyers

    pmyers Active Member

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    Jan 4, 2001
    Gilbert, AZ
    I also found it interesting when they said that they basically break even on the sales and where they make the majority of their money is straight off the membership fees.
     
  16. DUDE_NJX

    DUDE_NJX Active Member

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    Feb 12, 2003
    Supposedly it's true for Sam's, as well.
     
  17. Flop

    Flop Member

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    Dec 2, 2005
    Oklahoma
    Correct, they get charged for every transaction regardless of credit or debit, but since debit is a fixed fee and credit has a percentage component, at some sales total it becomes cheaper to the business to use debit vs credit. I know when my dad had a small business before retiring, the tipping point was somewhere around $20 or $25. If the sale was less than that he would try to run debit cards as a credit card. Over that amount he would request they be run as debit cards. My point was that the vast majority of Costco's sales are all going to exceed that tipping point, so it is cheaper for them as a business to only take debit cards.
     
  18. changk

    changk Member

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    Feb 20, 2002
    Corvallis, OR
    They accepted Discover Card (rather than AmEx) a few years back. I was surprised when I heard they switched; I would've thought Discover would've given them a better deal than AmEx. I guess not <g>
     
  19. sushikitten

    sushikitten 143 down, ??? to go! TCF Club

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    Jan 27, 2005
    DC-ish Suburbia
    Yep. And we'll be there tomorrow after we hit the children's museum in the morning. :)
     
  20. mattack

    mattack Active Member

    20,750
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    Apr 9, 2001
    sunnyvale
    I think some of you may be talking about the _new_ charges.. I've only seen a headline (or maybe it was even the scrolling headlines on CNN) so far, but supposedly the banks dramatically lowered debit fees in the past day or two...?
     

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