Are businesses allowed to charge more of a fee for credit cards?

[MoniqueU]

I may have this wrong but I thought the merchant agreement with Visa, Mastercard, Amex etc prohibited them for charging a convience fee or a higher price to customers that use credit? I don't think this applies to debit card tranactions though. I can see where it is costly to a company but most peple I know nowadays don't have a wad of cash in their pocket and use the visa or mastercard designated debit cards swiped as credit. I have ran into a few places that set a minimum purchase for credit and I don't think that is against rules but I think charging a fee or a blatantly higher price is. I go to a nail salon that charges me a dollar to use my debit visa as credit. I know this before I go in there and yes i could get the cash but I am never sure what all I am going to have done and also don't like to take out more from my acount then I actually need as that money goes POOF. I have thought about complaining to Visa but that might be a bad idea if they decide cash only if they get busted. It does tick me off though. i understand small mom and pop stores are barely scraping by nowadays but how about a tax credit for chargesi incurred by businesses that accept credit or credit debit cards? Small business run a hell of alot of our economy and employ millions of people, lets give tax breaks where they will help the most.

Am I wrong about the fees?

 

[NHdisneylover]

The way I have always understood it is that businesses cannot charge a fee for using credit cards but they can offer a discount for paying cash. It is really just a technicality and all depends on how you phrase things.

So the way I understand it, your salon needs to have a set price that is $1 higher than what they really want to charge for the fees and offer a $1 "discount" to those who pay cash, rather than the other way around. It sounds like how they have it phrased at this time is in violation but it would be easy for them to rephrase things, not make any essential change to what cash vs. credit customers pay now, and no longer be in violation.

 

[kwitcherkicken99]

From what I remember from a business class I took a [few] years ago...

Businesses are charged a certain amount for each electronic transaction. If it's a smaller business, they sometimes pass that fee on to the customer.

Do I think it's right? No, but it's allowed.

A local corner store charges an additional $0.75 if your purchase is under $5.00 and it's perfectly legal.

 

[DrCavin]

The state of Ohio charges 3% if you pay your taxes, purchase motor vehicle plates, & even hunting/fishing licenses.

 

[Geoff_M]

Depending on the type of transaction (swiped card in hand, or just a card number and expiration given by the customer), the type of card (AmEx charges the more than VISA/MC), credit vs. debit, and the merchant services provider used... the business is losing around 3-5% of the price of the sale to card fees.

As part of the merchant services agreement, retailers are normally prohibited from adding a surcharge to a sale for using a credit/debit card. The card issuers demand that the perception be maintained that there's no penalty for using their card. However, as pointed out, that doesn't prevent retailers from offering a cash discount. It's semantics, but it's rewarding someone for using cash vs. penalizing someone for using a credit card.

 

[bicker]

As Geoff points out, what you're concerned about businesses indeed are allowed to do: They can offer a lower price for using cash. And many businesses have sound reasons for doing so. There is no "right to low prices" that is being violated.

This falls into the same category with all manner of things that consumers might wish they didn't have to pay more for, but the reality is that we have total control over how much we're charged for the vast majority of things: If you don't like paying more, then do without the purchase entirely.

 

[mill4023]

A local corner store charges an additional $0.75 if your purchase is under $5.00 and it's perfectly legal.

Of course it's legal.
It's not a violation of the law, but it's definitely a violation of the merchant agreement that the store has with the credit card companies. Probably unlikely, but the store could be fined and/or lose their ability to accept credit cards if Visa, MC, etc. wanted to enforce their rules.

Visa and MC specifically prohibit merchants from setting minimum purchase limits or adding surcharges for credit card transactions. Amex prohibits merchants from applying different rules for Amex transactions vs Visa/MC transactions. So if a store accepts Amex and Visa/MC, they cannot set minimum purchase amounts or charge surcharges for any of them.

As others said, they can probably get away with charging cc customers more if they call it a cash discount. But in 99% of the cases I've seen, the store lists it specifically as a credit card surcharge. The problem is that the CC companies don't seem to care about enforcing their rules, so stores continue to violate them.

The same thing is true about requiring ID on a CC purchase. That is another clear violation of the merchant agreement, but lots of stores do it anyway and the CC companies don't seem to care.

 

[kwitcherkicken99]

Of course it's legal.
It's not a violation of the law, but it's definitely a violation of the merchant agreement that the store has with the credit card companies. Probably unlikely, but the store could be fined and/or lose their ability to accept credit cards if Visa, MC, etc. wanted to enforce their rules.

It was only an issue for me one time... I haven't been back since.

 

[DawnCt1]

Depending on the type of transaction (swiped card in hand, or just a card number and expiration given by the customer), the type of card (AmEx charges the more than VISA/MC), credit vs. debit, and the merchant services provider used... the business is losing around 3-5% of the price of the sale to card fees.

As part of the merchant services agreement, retailers are normally prohibited from adding a surcharge to a sale for using a credit/debit card. The card issuers demand that the perception be maintained that there's no penalty for using their card. However, as pointed out, that doesn't prevent retailers from offering a cash discount. It's semantics, but it's rewarding someone for using cash vs. penalizing someone for using a credit card.

As Geoff points out, what you're concerned about businesses indeed are allowed to do: They can offer a lower price for using cash. And many businesses have sound reasons for doing so. There is no "right to low prices" that is being violated.

This falls into the same category with all manner of things that consumers might wish they didn't have to pay more for, but the reality is that we have total control over how much we're charged for the vast majority of things: If you don't like paying more, then do without the purchase entirely.

One of my DS's graduated from a Westfield state University. I could pay his tuition with my Amex card which was wonderful; all those miles.
Another son went to Central Ct. State University. They did not take Amex but I used another card for which I got points. Whether I paid with cash, check or charge, it was all the same.
I now have one son attending UConn. There is a 3% charge for tuition payments if paid for with a credit card, so of course, I pay on line from our checking account.
How is it that state "entities" can bypass the usual consumer rules of no "upcharge for using your card". I do not get a discount from UConn for paying cash.

 

[FireDancer]

As others have pointed out the merchant agreement does prohibit the merchant from charging a fee for using the card. It is also against the agreement to have a minimum for credit card purchases. They can not (at least with Visa because those are the cards we offer here) tell you there is a minimum amount for a purchase via a Visa credit card.

A merchant is also supposed to refuse a card that isn't signed. That means if you right "check ID" on the back not only do they not have to ask for ID but they can hand the card back to you and let you know they do not have to take it.

Of course many merchants ignore these things but they are in at least the Visa merchant agreement.

 

[mill4023]

Yep. Technically, writing "See ID" or something similar on your card makes it invalid and merchants shouldn't really let you use it at all.

The only time they are allowed to require ID is if the card isn't signed at all. And in that case, they are supposed to check your ID, watch you sign the card, then run the transaction. They aren't supposed to run the card when it hasn't been signed, because it's not a valid card.

 

[bunny]

Of course it's legal.
The same thing is true about requiring ID on a CC purchase. That is another clear violation of the merchant agreement, but lots of stores do it anyway and the CC companies don't seem to care.

We were at Disneyland last week and they require photo ID there to use a credit card.

 

[mill4023]

We were at Disneyland last week and they require photo ID there to use a credit card.

Doesn't surprise me. Lots of companies violate their merchant agreements.

Considering the amount of revenue Visa/MC makes from merchant fees on CC transactions at Disney parks, I'm guessing they have no desire to start a fight with Disney and they will just let it slide.

 

[DawnCt1]

As others have pointed out the merchant agreement does prohibit the merchant from charging a fee for using the card. It is also against the agreement to have a minimum for credit card purchases.
.

And with American Express, and probably with the rest of them, its against the merchant agreement to have a maximum. We bought a used pick up truck one year and the dealer would only let me charge the $500 deposit. I called Amex and they called him. He agreed to allow the entire amount to go on the charge. I knew some of that charge would come out of his commission so I paid for some with a check.

 

[DrCavin]

I was waiting in line to rent a car & the rental agency refused the guy in front of me from using his credit card because it was not signed. He was a little miffed!!! I quickly signed mine before getting waited on

 

[Disnydad]

We were at Disneyland last week and they require photo ID there to use a credit card.

When we were at Disneyland in 2004 I had to show my drivers license whenever I used my credit card. Have also been asked a couple of times at the WoD store at DTD.

Yep. Technically, writing "See ID" or something similar on your card makes it invalid and merchants shouldn't really let you use it at all.

The only time they are allowed to require ID is if the card isn't signed at all. And in that case, they are supposed to check your ID, watch you sign the card, then run the transaction. They aren't supposed to run the card when it hasn't been signed, because it's not a valid card.

Yep, we got a notice about this too. Boiled down to only accept if it it signed.

 

[JodiR]

Isn't giving a cash discount or paying the credit card transaction fee (3%) the same? How is the retailer winning by offering a discount? They are losing something either way.

 

[bicker]

Isn't giving a cash discount or paying the credit card transaction fee (3%) the same?

No.

 

[mamacatnv]

My salon is all renters, I would adjust the tip accordingly.

My salon charges $.75 and they have a sign that states you want to use your card, no problem but it will cost you $.75. Meanwhile several of the girls no longer take checks, they want cash.

I look at it this way - cash can be a pain, especially if I just hit the ATM and all I have are 20's. My former nail chick was famous for not having much change and in my eyes at least this helped her in the tip dept. when clients who would just "round up" to their nearest 5, 10 or 20 depending on the cost because nail chick didn't have 1's for change. She also would not take checks. The hair chick, same salon is the owner and also a friend of mine, she takes my checks!

Then they added the visa/mc machine and started charging. I use my card, pay my charges plus tip less $.75.

 

[JodiR]

No.

I own a retail store and have never thought of giving a cash discount. On a $25 transaction, I would pay approx. $.75 in credit card fees.

So in order not to loose (or be even) I would need to give a $.50 cash discount. Otherwise accepting cards would be no different. Am I thinking this through correctly?