Does this make any sense: It costs us a lot more, for small transactions, to process an ATM / debit card with the pin pad than a credit card. Bank of America charges a flat 60 cents per ATM card / PIN pad transaction in our stores but charges 10 cents plus 2% on credit cards. So, on a typical $5 convenience store purchase, BofA charges $0.60 or 12% to process a ATM / debit card but $0.20 or 4% for the credit card.
I understand the difference between value- and cost-based pricing, but in an economy of scale transaction processing business with a lot of competitors, I would think debit would be cheaper to process, even without the credit risk issues.
Customers give me feedback that I am a neanderthal for not accepting ATM cards with a pin pad at the registers. This is the reason. Its cheaper for me to provide an ATM and then have them pay cash - that way they pay the fee, not me. Also, their fee is lower. Even if they only take out $20 and pay a $1.50 fee, they are still only paying 7.5% vs. the 12% typical I would be paying. If anyone knows a company that offers a better deal, the comment section is wide open!
Update: A couple of notes based on the comments. First, I do indeed understand that prices are not cost-based. The notion that pricing should be cost-based is one of the worst economic misconceptions held by the average person (behind the commerce is zero-sum myth). When prices don't make sense to me, I don't run to the government asking for Senate hearings so corporations can "justify" their pricing, I just don't buy from them.
Second, to another commenter's point, most card processing agreements and some state laws prevent merchants from passing card processing fees onto consumers in a discriminatory way - ie they can be built into the general pricing but you can't charge one person one price and another a different price for the same item based on what kind of payment they use.