I am fed up with the fees and cost associated with credit cards. As a relatively new FFL, I discovered that the majority of financial institutions consider firearm sales “high risk” from a fraud standpoint. This apparently extends to anything remotely associated with firearms. Things like training, holsters, AR parts. I have started a quest to determine what makes something high risk and what constitutes fraud in the firearm industry.
Just so everyone understands, this translates to an interchange rate of 2-4% per purchase depending on the card type used that is added to the price of the purchase. Someone’s gotta pay. In addition, only a few credit card merchant service companies will handle the underwriting of a high risk business. This leads to low competition and high rates. We will pay an extra monthly fee to accept credit cards ($40-$80). This may not seem like a lot but it does add up over time and if you consider the low profit margin on the typical firearm purchase it hurts.
For example, if you want a Glock 19. Right now my cost is $440. I charge you $30 over cost for my “profit”. The total is $470. If you add in the credit card fee you get $18.80. You just wasted $19 bucks. Essentially handed me the money then set a $20 on fire just for dramatic panache.
As most of you know. Firearm sales are highly regulated by BATFE. Often the media suggests that people can just buy a gun online and have it shipped. Actually, they can’t. You can order a gun online and have it shipped to a federally licensed firearm dealer (FFL). They then must do a background check on the buyer to complete the transfer. Just the same as it you went to Cabelas and bought a new Glock there.
So what I’m having a tough time with is how can you use a fraudulent form of payment and pick up the merchandise. I suppose you can use a stolen credit card to purchase and then use your real identity to pick it up. Doesn’t seem very smart for a criminal. You could straw purchase but that leads to an analogous problem. Then how does this pertain to firearm accessories or things loosely associated with guns? That suggests anything purchased on Amazon.com would be “high risk”. You can buy holsters, AR parts on that site. Sure, they may pay a premium to the credit card companies and their underwriters to offer that service but where does it end. The Kitchenaid mixer can be fraudulently purchased as can the Olive Oil from those specialty places.
There should be somewhat of a distinction of the players here.
Credit card company (Visa/MC),
Merchant service (paperwork guys/middleman),
Internet gateway service (Authorize.net),
Underwriters of this (Bank).
They all get a slice of the pie but it is the underwriter that determines the risk and sets the conditions. Even the new companies that are designed for the small business like Paypal, Square, Swipe, Quicken etc won’t have anything to do with firearms.
Actually, chargebacks are perhaps the biggest reason for this “high risk” label. These are the online buyers who see the box has a tear in it or a scratch on the underside of the receiver. It could be someone trying out a fraudulent card to get a firearm or accessories, knowing the secondary market are pretty good for these items (pawn, craigslist etc). Delays in shipping or generally slow shipping, can result is a customer cancelling the order. Sometimes a large purchase will result in buyers regret and cancelling the order.
Sure these things can happen with any large purchase item any that is why I think there is a stigma associated with firearms that’s adds to these issues. I think…they think…we gun loving, toting, Cretans have an increased probability of beingless than honest. We are the high risk people and because of that we should pay a tax to cover the chargeback issue. It burns me a bit but that is the way it is. I don’t expect this will change anytime soon but it gives you an idea of why we are a cash only business for now. Truth be told, cash is the better way to go anyway. Why give the banks and credit card companies all those fees and interest anyway.