20% surcharge on funny money
I read a post somewhere else on here that a dancer's champange court costs the customer $440 when using a credit card and she gets $200, which is exactly what our club does. $200 for the champagne and $200 for the girl (if he's paying cash). Whenever he uses his credit card to pay a dancer, there's always 20% tacked on, so it'd be an additional $40 (because they only add teh surcharge to the dancer's portion. The same is true for "couch bucks"...always 20% for credit card.
Why is this? It this to bypass the cash advance fee? is the club taking advantage of the customer or is there really a 20% fee to the club? or is it both?
Re: 20% surcharge on funny money
It is by all right's illegal to add a surcharge ( penalty ) to bearer's of credit card's, they are a hastle for the business owner. Machine's to process them and monthly charge's not to mention the credit card company almost alway's charge's a percentage off the top of each transaction. The way most businesses have found to recoop these fee's and of coarse the fact that it take's some time before the money accually get's deposited into there account's, is to offer a "CASH DISCOUNT" to those that pay with hard, cold cash.
In God We Trust ..... all other's get to pay a surcharge.
Re: 20% surcharge on funny money
But they only pay the 20% when it goes to the dancer. Anytime a guy pays the club directly (as he would with a bar tab) there is no charge. Consequently, if a guy goes in the champagne court and pays the dancer $200 and pays the house portion with a credit card, there is no surcharge. It only happens when the charge he incurs equalsinto actual cash for the dancer. Further, strip clubs are the only bars that do this.
So with that said, your explanation of machine fees doesn't make sense.
Re: 20% surcharge on funny money
I know from my pay website that businesses such as your club have a "merchant account" which allows them to make credit card charges using a service company. There is a processing fee associated with every credit card charge processed for the club. Actual fees can vary, but are generally in the 3 to 5% ballpark for a business which has its own "merchant account". However, processing fees for credit card transactions performed for persons who do not have a "merchant account", like pay websites for example, do run in the 20% ballpark. This higher charge is based on a long list of justifications, i.e. no actual business property as collateral, higher probability of fraudulent charges etc. In order to apply for a "merchant account", a business generally needs to legally exist as a business, it needs a storefront (with property and a physical address), it needs a business accounting history or a new business plan which is professionally prepared, it needs to make an annual "subscription" payment to the processing service which is somewhere in the $750 ballpark, and it needs the approval of a local commercial bank to open and maintain the "merchant account" itself.
It appears that what your club is doing is acting as a credit card processing service on your behalf using their "merchant account", and charging you the same percentage as if you had used a credit card service directly without the club acting as "middleman". Is this a scam which generates income for the club ? yup! Could you do any better by carrying your own credit card machine and directly accepting a customer's credit card using an independent processing service to transfer the money without a "merchant account" of your own? nope!
My club really sucks in this aspect
My club charges the customer 10% and the dancer 10%. It seems unreasonable to me. For a $20 dance on a credit card, they charge the customer $2 to put it on the card and the take $2 out of our money before we get it. So it really adds up. Is this right?
Re: 20% surcharge on funny money
It's worse at mine. For a guy to buy a voucher worth $20, he pays $24. And if he uses it for a dance, we have to pay $5 on it. Sometimes guys will buy these to use as tips, and in which case we don't have to pay any additional. RIP OFF!
Re: 20% surcharge on funny money
A club manager friend of mine explained this on another forum I thought I would cut & paste it for it's relevence:
the reason that the high profile gentleman's bars use Script, Chips, or Funny Money, when a customer wants a cash advance on his credit card to pay a dancer is as follows. It is against the rules of all the credit companies to give a cash advance if you are not a financial institution (when you get a cash advance from a retail store, you don't get charged interest on that money for 30 days). The credit card companies came to the high volume gentlemen's clubs and told them, if they continued to give out such large amounts of cash then they would loose the right to accept credit cards all together. So the clubs have to sell something to a customer if that customer wants to use his credit card. Food and Drink are no problem, but cash for dancers was a special problem, so Script, Chips, or Funny Money was invented and that is what the customer buys. Of course the club wants a profit on what it sells, some clubs charge it all to the customer, some clubs charge it all to the dancer, and some clubs split the charge between the customer and the dancer. I know that in my clubs the dancers would tell the customer that they lost money on Chips and the customer usually paid them more to cover the charges.
Maybe this sheds some light on the subject?
Re: 20% surcharge on funny money
yes, but it still is a cash advance type thing....and the credit card companies don't get a cut of the surcharge, or do they?
Re: 20% surcharge on funny money
"yes, but it still is a cash advance type thing....and the credit card companies don't get a cut of the surcharge, or do they?"
The credit card processing company usually gets a set percentage of every transaction. Thus the larger the transaction, the larger their charge, although it is usually the same percentage. For example, if their fee is 2.5% then on a $100 transaction the credit card processor gets $2.50 if the transaction goes to $120 then they get $3.00. Sometimes there are certain penalties for small transactions and certain rewards for a retailer with a large transaction volume. But, most of the transactions are at the fixed percentage. Thus, indirectly the processor gets a cut of the surcharge.
Re: 20% surcharge on funny money
A credit card processing company charging a 2.5% fee only happens IF the business the charge is being processed for has a Merchant Account. When the same credit card processing company processes a charge for an individual without a Merchant Account, the processing fee jumps to 20% or so. This is based on many factors such as the total expected dollar volume of credit card charges through the year, the risk of fraudulent charge and refund claims, transaction reporting requirements now required under the Terrorist anti-money laundering law etc. Yes, the club probably receives $97 from a $100 credit card transaction, and earns $17 in profit when paying the dancer $80. But if the dancer carried her own card crunching machine and had the charged processed directly, she would still only receive $80 from the processing company - UNLESS she also has a registered business, with an actual storefront and business address, plus records of profitable business activity, plus a $500+ application fee in order to apply for a Merchant Account at a local commercial bank so that she could also get her credit card charges processed at a 2.5% fee (which is what the club has).
Also, if the whole truth be known, the club has to show the $100 credit card transaction on their books, and as a result the club has to pay tax on that $100 as club income. If the customer had paid the dancer directly in cash, the club would not have to show any of that money as income. Thus the $17 profit the club kept on the transaction basically cover the additional income tax they have to pay.
Re: 20% surcharge on funny money
"Also, if the whole truth be known, the club has to show the $100 credit card transaction on their books, and as a result the club has to pay tax on that $100 as club income. If the customer had paid the dancer directly in cash, the club would not have to show any of that money as income. Thus the $17 profit the club kept on the transaction basically cover the additional income tax they have to pay. "
Ahhh, so that is how they justify charging the dancer as well as the customer? I guess that makes some sort of sense.
"I know that in my clubs the dancers would tell the customer that they lost money on Chips and the customer usually paid them more to cover the charges. "
We would get fired for doing this if it was found out. Plus I feel bad for the customer already having to pay extra for using a credit card.
Re: 20% surcharge on funny money
melonie, you make an EXCELLENT point that the club has to show the credit card transactions as income and pay tax on them. the extra 20% basically covers their tax burden for each transaction. These clubs would make FAR LESS profit if they had to report everything to the irs and pay tax on it.
Re: 20% surcharge on funny money
you better believe it, Ryan! This is exactly the reason that the new California law has California dance clubs scrambling to avoid having to report every $ in private dance money that the clubs must now collect through the cash register instead of customers paying it to the dancers as club income.
Re: 20% surcharge on funny money
In the Texas clubs the 20% makes sense. The customers in Houston pay $25 per dance when using a credit card and that way we get the full $20 per dance as if we were paid in cash.
Melonie's point of the club having to show the money they give us off the tabs as their income is reality. But what most dancers are not realizing is that these clubs are not reporting the money they pay us off the tabs to the IRS which saves them lots of paperwork but realistically is doing us a huge favor. The IRS has no record of our dance income financed by the clubs merchant account, and we still get our full $20 per dance!
Re: 20% surcharge on funny money
you would think it would make more sense to have the customers get a cash advance on their credit-card through an atm in the club. then the club could not have to pay tax on it because who can say for sure if they spent that money in the club. this would be good for the club as well as the girls.
This way the club doesn't have to report that cash as income, and the girls don't have to pay a 20% surcharge.
my girlfriend has to pay a 20% surcharge on funny money as well, so i know it is a pain in the ass, because i have to hear it from her. also her club doesn't let you get rid of the funny money until she has $100, which is also a little annoying for her because she doesn't get it all that much, so she has to hold onto it sometimes until it adds up to 100.
Re: 20% surcharge on funny money
Ryan, the problem with ATM's is that most credit cards nowadays impose daily limits of $100-$500. And many people don't remember the pin #'s on all their major credit cards.
where I've worked we could either cash in our dance tickets at the end of the night or the next day.
Some guys run 4 figure tabs. The ATM doesn't work for that.
The main thing is that the club doesn't report our dance tab money to the IRS which none I've worked at do.
I've never worked with the funny money and I can imagine it would be a pain in the ass having to hold on to it for maybe a week or 2 if it is not disbursed that often. Has she thought about pooling her money with another girls chips in order to take advantage of the hundred dollar minimum and cash out the same night?