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

[FireDancer]

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?

Let's say you have an item for sale with a price tag of $25 and you have to pay a 50 cent processing fee. You would be able to charge someone paying cash only $24.50 but could not charge someone paying with a credit card $25.50. The net difference is still 50 cents but one is a reward as opposed to a penalty and one is against the agreement you signed with the card issues to become a merchant.

 

[cm8]

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.

:

 

[bicker]

Am I thinking this through correctly?

Not quite.... You asked "Isn't giving a cash discount or paying the credit card transaction fee (3%) the same?" because of the discussion that the former was permitted and the latter was prohibited. So you asked a legal question and then tried to answer it without relying on legal principles, switching your thinking to strictly financial principles.

The two aren't the same. The clearest indicator of this is that the cash discount is permitted, while the debit/credit/gift card surcharge is not.

 

[mill4023]

Not quite.... You asked "Isn't giving a cash discount or paying the credit card transaction fee (3%) the same?" because of the discussion that the former was permitted and the latter was prohibited. So you asked a legal question and then tried to answer it without relying on legal principles, switching your thinking to strictly financial principles.

The two aren't the same. The clearest indicator of this is that the cash discount is permitted, while the debit/credit/gift card surcharge is not.

No, they aren't EXACTLY the same in every single respect, because as you pointed out, one is prohibited and one is not.

But in terms of what the poster meant when asking the question, yes, they are the same.
A cash discount and a credit card surcharge have the same end result. No matter how you phrase it, what it boils down to is that the store is charging a higher price for credit card sales than they are for cash sales.

 

[mill4023]

Let's say you have an item for sale with a price tag of $25 and you have to pay a 50 cent processing fee. You would be able to charge someone paying cash only $24.50 but could not charge someone paying with a credit card $25.50. The net difference is still 50 cents but one is a reward as opposed to a penalty and one is against the agreement you signed with the card issues to become a merchant.

Good explanation. I would change the example slightly to show how a cash discount and a credit card surcharge would end up being the exact same thing.

You've got an item that you want to make $25 on. So you don't want to lower the price for cash customers, but you can't charge a surcharge for CC customers to cover the fee. All you have to do is raise the price tag price to $25.50, then offer a cash discount of $25.

List price: $25, CC surcharge of .50, not allowed
List price: $25.50, cash discount of .50, allowed.

But in terms of how much everyone is paying, both cases are exactly the same.

 

[bicker]

No matter how you phrase it, what it boils down to is...

The issue is very clearly outlined in the thread topic: "Are businesses allowed to charge more of a fee for credit cards?" The answer to that is in black-and-white: No they can't charge more for using a credit card. However, they can charge less for using cash. Denying the difference reduces the discussion to absurdity. The result is the same, but the mechanism is different. And this is a critical distinction vis a vis the topic of this thread.

 

[georgina]

It's going to get weirder soon - an agreement this month with Mastercard and Visa and 7 state attorneys general will make it easier for merchants to offer discounts depending on which Visa you use. Rewards cards charge merchants more, so the store can charge you less for using certain credit cards. American Express did not sign off on the agreement.

 

[tvguy]

Asking for ID doesn't bother me, even if it violates the merchants agreement with the credit card company, because if helps protect ME from credit card fraud. Yes, a fraudulent purchase will EVENTUALLY be removed from your card, but if just showing my driver's license when I use my credit card will save me that work, no problem.

What I have noticed is more and more places not taking credit cards at all. My daughter spend her freshman year of college at a California State University campus, and they have stopped taking credit cards. Several other colleges have done this because they believe credit card companies should reduce the percentage fee as the amount of the charge increases.

And I have also noticed a number of small businesses going to cash and carry only. The common denominator seems to be, they are all businesses known for exceptional quality and exceptional service. I guess if your product or service is good enough, you can dictate how your customers pay you will out losing business.

 

[mill4023]

The issue is very clearly outlined in the thread topic: "Are businesses allowed to charge more of a fee for credit cards?" The answer to that is in black-and-white: No they can't charge more for using a credit card. However, they can charge less for using cash. Denying the difference reduces the discussion to absurdity. The result is the same, but the mechanism is different. And this is a critical distinction vis a vis the topic of this thread.

I'm not denying the difference. I'm pointing out that the difference is solely in the wording. In terms of what it means to consumers, it is EXACTLY the same.
I think it was fairly obvious that this is what the poster was talking about.

 

[bicker]

I'm not denying the difference.

Great! No problem then.