Credit Cards Mixed Blessing for Boston Cabdrivers

Since the city of Boston mandated that cabdrivers accept credit card payments, there has been a huge surge in the use of credit cards to pay for cab fares. Having cab drivers accept credit card payments is definitely a convenience for cab riders, and also benefits cab companies as ridership goes up. Cab drivers are busier than ever, collecting more money and driving more miles. However, the flip side of the coin is that some drivers are actually experiencing lower incomes because of the fees they are paying out for processing the credit card payments.

Frequency of Credit Card Use

According to the website www.Boston.com, one out of every four cab riders pays their fare with a credit card. Taxi meters are racking up more miles and more cab fares than the periods prior to credit card payment acceptance. While business is up, the costs are eating away at the profits.

Credit Card Processing Fees

For each credit card payment that a cab driver processes, the driver pays a five to six percent credit card processing fee. Some cab drivers are also paying a $1.50 transaction fee to withdraw cash from the merchant account where the credit card payments are deposited. On a $20 cab fare, the cab driver may be paying as much as $2.70 in fees, which of course, is coming out of his own pockets at the end of the day.

Increased Operating Costs

Add this to the soaring gas prices and some cab drivers find themselves in the perfect storm. These drivers are paying for credit card processing fees and paying out more at the gas pump. In Boston, gas prices are upwards of $4 per gallon. When taking all of these factors into consideration, cab drivers claim that they are barely taking home minimum wage.

Boston launched its program to accept credit cards in cabs in the middle of 2009 when the recession was at its height. Its 1825 licensed taxis all had card processors installed to make it more convenient for riders, particularly business users. But it was not the first big city to institute credit card processors in cabs. New York mandated the practice a few years prior to Boston. New York cab drivers also resisted at first, but later came to find it beneficial to them and their incomes. It’s possible that Boston cab drivers too will see the benefit in it after getting over the initial hurdle.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.