Charging customers service fee for credit card processing

[mickeysgal]

Is it acceptable for businesses (profit and non-profits) to charge a customer the service fee that is charged to them for credit card processing? In other words, if it costs the business 3% to run that card, can the business charge the customer the extra 3% to cover their service fee?

 

[rgf207]

Well I don't think that's allowed but I've seen it done. I know businesses are not allowed to have a minimum amount for credit cards but businesses do this all the time. They can actually lose their charging accounts with the credit card companies if they are reported.

 

[Kath2003]

It's done here. The train ticket company I've been using for the past 5 years just started charging me $1 a time to use my debit card - it's $5 for credit cards! Took my business elsewhere and now I save $1 a time.

 

[pr surfer]

It's not allowed and not ethical, but that doesn't stop some businesses from doing so.

 

[Kath2003]

It's not allowed and not ethical, but that doesn't stop some businesses from doing so.

How is it not ethical? If a company had to pay $3 extra shipping fee to get the goods, would it be unethical if the company were to charge the customer that $3? It's bad for business but there's always the choice of using cash or a debit card.

 

[Allison]

Actually, it is allowed in some cases.

If the company is using a third-party servicer who absorbs the credit card processing costs, that servicer is allowed to charge a convenience fee.

You will see this online when making payments for services and it allowed by Mastercard, Discover and American Express.

 

[mickeysgal]

How is it not ethical? If a company had to pay $3 extra shipping fee to get the goods, would it be unethical if the company were to charge the customer that $3? It's bad for business but there's always the choice of using cash or a debit card.

I'm not talking about shipping fees, I'm talking about the service charge that is charged to the merchant to run that card.

Merchants are charged a fee to take a charge card from a customer for payment for each and every transaction they run.

Specifically I would like to know if it is allowed by non-profit organizations to recoup that fee.

I'm working with a non-profit and we're considering using credit card processing and the assumption already is that we'll charge the customer the fee so that we, the non-profit, don't have to absorb that charge.

I'm just researching (DIS and otherwise) whether or not it is acceptable/within the rules/legal, etc.

 

[edcrbnsoul]

From MSNBC:

There is no federal regulation that prohibits a merchant from charging a fee for using a credit or debit card, although some states outlaw these surcharges.

According to Americans for Consumer Education and Competition (a group partially funded by Visa), states that prohibit all surcharges are: California, Colorado, Connecticut, Florida, Kansas, Maine, New York, Oklahoma, and Texas.


But even where a surcharge is legal, it’s generally a violation of Visa and MasterCard’s rules for a store to tack on a surcharge for their credit or debit cards. They define a surcharge as any fee that is charged for using the card that is not charged when another payment method is used. (Note: This rule does not apply when you pay your federal income tax with plastic.)

Here’s a heads up for anyone with a Discover card — merchants are allowed to pass along the cost of processing your transaction in the form of a surcharge. Discover dropped it’s “no surcharge” rule back in February, after negotiations with lawyers suing the major credit card companies. That federal antitrust suit was filed by a group of merchants who claim they are forced to raise prices because they cannot pass along the processing fees to cardholders. After agreeing to allow surcharges for its credit card and new debit card, Discover was dropped from that suit.

 

[Kath2003]

I'm not talking about shipping fees, I'm talking about the service charge that is charged to the merchant to run that card.

Merchants are charged a fee to take a charge card from a customer for payment for each and every transaction they run.

Specifically I would like to know if it is allowed by non-profit organizations to recoup that fee.

I'm working with a non-profit and we're considering using credit card processing and the assumption already is that we'll charge the customer the fee so that we, the non-profit, don't have to absorb that charge.

I'm just researching (DIS and otherwise) whether or not it is acceptable/within the rules/legal, etc.

Don't worry - my post wasn't aimed at you - it was aimed at the poster who said it was unethical but didn't specify whether he was talking about non-profit or profit organizations - just businesses.

 

[mickeysgal]

Don't worry - my post wasn't aimed at you - it was aimed at the poster who said it was unethical but didn't specify whether he was talking about non-profit or profit organizations - just businesses.

Oh, I know..

I was trying to clarify the question I was asking.

 

[Cindy B]

It depends on the type of business. Big retailers like any large store, can't charge for this "convenience". It does cost the business owner/operator to accept credit cards. Some credit card companies charge a fee to the business owner/operator for network usage fee, equipment fee and usage fees. It does cost the business owner money to accept credit cards. In some cases, it is thousands of dollars (or even tens of thousands) of dollars in credit card fees per billing cycle. It does cost the store money to accept credit cards and it can be very cost prohibitive.

That being said, some stores doe place a limit on credit card transactions. That is why you see a $10 minimum for credit cards in some stores. That is because with the fee that Visa/MC/AMX takes out that minimum sale becomes a boatload of fees and the merchant does not "make" any money.

As for things like private rentals-- I've seen many people charge more for credit card processing. It is the fee that Visa/MC/AMX charges the business owner for processing the transactions. It is up to the individual business owners to either to "eat" the fees or to ask the renter to pay them. Paying by credit card/debit card is a convenience.

I use that convenience most of the time, but if I need to pay a fee for that convenience, that is when I dust off my checkbook and write a check.

 

[disneyaggie]

I am a business owner and here is my perspective . . .

We never charge the customer when they use their credit card. I believe paying this small fee helps the business owner more than it does the customer, so why take advantage of the customer in that way? In all reality, it is a lot better for us, the business owner, to absorb a small fee as such, versus having people pay us with checks that may not clear the bank or possible collection issues (all which take a lot more time and money than a credit card usage fee).

In our company we provide private pay caregivers for all types of wonderful folks, with the majority being the elderly. Oftentimes it is their son, daughter or trustee who strokes us the check. Payment can take a bit longer if "mom" wants to see the bill first and then she "eventually" passes it along to the person who is responsible for payment when she remembers. And some checks really do get lost in the mail.

Even more important, when customers pay us with their credit card, it gives us "immediate" payment.

So I would not be happy with a company who penalizes me for using my credit card.

 

[DawnCt1]

American Express does not allow businesses to tack on a service fee nor do they allow them to set a limit on how much you can charge on the card. We bought a pick up truck one year; used $9K. I put the deposit on my card of $500 and prior to picking it up I told the salesman that we would be putting the balance on the Delta Amex card (double miles promotion). He attempted to get out of it but a call to Amex made it clear that we were correct. I agreed to only put an additional $5K on the card to mitigate any further loss for what we had gotten a very good deal for already but I could have charged the entire amount.

 

[Claire L]

I am finding more and more companies charge for using a credit card so am now using my debit card if I can.

Claire

 

[mickeysgal]

So I would not be happy with a company who penalizes me for using my credit card.

I certainly understand what you are saying. However, this being a non-profit organization, it may change the perspective a bit. We don't have the extra funds to cover the service fees, yet we want to give people the convenience of charging and us the convenience of getting a payment on the books.

I'm just trying to get to the bottom line of whether the Visa/MC/AmExp/Discover rules are being followed if we do charge the service fee back to the customer.

 

[KariC]

OP, we have looked at using the debit/credit option for a support group I'm in that is a 501c3 (mothers of twins), but have opted not to. Visa and MC rules state that you can't charge more than cash or check payers in order to recoup their fees. And, you can't have a minimum purchase. And, while I've heard of (and seen) businesses that do this, our club has decided we don't want to be walking that line so closely. So, we do cash or checks, as we don't want to use our members' fees/dues and others' donations to go toward paying fees when that money could be used for our community outreaches and other support type functions for our organization.

 

[sarahkaiserdse]

Just thought I would let you know most companies also get charged when a customer uses a debit card. The terminals are often set up with a per swipe fee of 30 cents then its 1.9% if the card is present, 2.9% if its a phone order and so on... but I know if we swipe a card we pay it is lower for a debit card then it is a credit card but the credit card companies are gonna get there money regardless.

 

[mickeysgal]

Just thought I would let you know most companies also get charged when a customer uses a debit card.

Thanks - thats another set of questions we'll have to ask/investigate.

 

[LimeGreenEd]

Most businesses cover their credit card fees by raising prices to all consumers. Our convenience store chain paid the credit card companies over six million dollars last year in fees so people could use credit or debit cards.

 

[powellrj]

It really annoys me that to pay for my property taxes or license plates on-line with a credit card they tack on an extra fee. Vectren also does it if you use your credit card to pay your gas bill. Its not a small fee, I think the Vectren one is like $5 extra and the property tax fee is like 1 or 2%.