Are shops allowed to add a fee for paying by credit card instead of cash?

July 15, 2009 5:39 PM

Does it go against Visa / MasterCard / etc. policy for a retail store, such as a restaurant or coffee shop, to add a charge to your order if you use credit rather than paying by cash?

While it's incredibly common, I have heard that it goes against policy, and the store could actually risk punitive action from the credit card company if they were found out. True?

posted by wastelands to law & government (28 comments total)

This thread would be helpful to read.
posted by MaryDellamorte at 5:43 PM on July 15

The VISA merchant agreement explicitly forbids this:

Always treat Visa transactions like any other transaction; that is, you may not impose any surcharge on a Visa transaction. You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment.

You can read the whole thing here: http://usa.visa.com/download/merchants/rules_for_visa_merchants.pdf
posted by FishBike at 5:45 PM on July 15 [1 favorite has favorites]

Oops, I swear I searched previous questions, but I missed that one, Mary.

Also, thanks FishBike.
posted by wastelands at 5:50 PM on July 15

Seconding FishbBike, but I can understand why they do it. Restaurants tend to have very thin margins, and AFAIK credit cards take a percentage of the transaction as a fee. Some cards take a percentage that's high enough to wipe out the restaurant's margin.

This may have come up on the blue recently, but I really don't know. Might have been on the CBC.
posted by Decimask at 5:52 PM on July 15

To summarize the previous thread: Yes, it does, but at the same time you're still a wang if you report them for it.
Small businesses often can't afford to not have a credit card machine, yet at the same time they get a really raw deal from the CC companies, which gets a lot worse when customers make small purchases.
posted by dunkadunc at 5:52 PM on July 15

One way that some stores try to get around this is fairly common where I live: instead of charging a premium to let a customer use credit, they offer a 'cash discount' instead.

It's delightfully disingenuous and I kind of respect that.

(Though I wonder whether this would also go against their contract, given that anyone can see right through it)...
posted by astrochimp at 5:56 PM on July 15

I recently traveled in Morocco and Turkey, and the few places that accepted credit cards insisted on a massive (like, 18%) increase in price in order to use credit cards to pay for something. Even in London, my hotel said paying by credit card would cause the price to go up by 5%.

Is this also against policy if it's outside the US?
posted by np312 at 6:02 PM on July 15

The CC companies may not have the same kind of clout outside the US.
posted by Decimask at 6:12 PM on July 15

Is this also against policy if it's outside the US?

Not necessarily - it depends on the local agreement between the service provider and the business. For example, in Sweden, Visa doesn't allow extra fees, while MasterCard and Maestro allows a store to add a fee that covers their actual cost.

From what I can tell, it's similar here in Switzerland (except that pretty much everyone seems to have a Maestro or other online debit card, and at least the local restaurants will just laugh at you if you try to pay with Amex or Diners).
posted by effbot at 6:15 PM on July 15

You can report the merchant to mastercard via this handy dandy web form.
posted by yeoz at 6:21 PM on July 15

Just so you know, every time you run a debit card at a small business they will lose BOTH a percentage of the sale (1.2% for me) PLUS a flat fee of around $.40. Credit cards have no flat fee but lose a higher percent. Yes you heard me right, MERCHANTS HAVE TO PAY FOR YOUR DEBIT TRANSACTION.

Does your card get "miles"? Merchant pays it. Rewards points? Merchant pays it. Cash back? MERCHANT PAYS IT. In December I lost over $2000 to the merchant processor...the difference between me getting paid and not getting paid is that amount right there.

If your shopping at a small business and they charge you extra for a card transaction, either pay it willingly or bring cash. BREAK THE CHAINS THAT BIND YOU!!!If you report them to the credit card company, you A) really don't care about the success of your local business and B) you're a fucking douchebag.
posted by vito90 at 6:27 PM on July 15 [5 favorites has favorites]

[a few comments removed - can we stick to the main question?]
posted by jessamyn at 6:27 PM on July 15

The merchant is not getting robbed: the merchant may simply decide not to take Visa, or Mastercard, or whatever.

The merchant is paying a fee for the added business they get by accepting the card that they would not get otherwise. If the merchant would get the same business regardless... they wouldn't need to accept the card.

There's no "victim" here. It's a business decision. The merchant has decided that processing Visa or Mastercard or whatever is worth the fees.

If, as in the OP's example, it's only worth it if they charge a premium, then they're calculating that they will lose less business this way than by simply stopping support for the card.

I know that I have aborted a purchase at the last moment because the store did not take the card I wished to use. But I have also said "What? Oh, no thanks then." at the register when an extra fee was added.

So they're all cost-benefit decisions. There are probably consumer protection laws about hiding the fee from you, of course.
posted by rokusan at 6:44 PM on July 15 [1 favorite has favorites]

If your shopping at a small business and they charge you extra for a card transaction, either pay it willingly or bring cash.

No offense but, (c) shop elsewhere.

I don't go back to those stores, and it might help to realize that this is a much "softer" way of discouraging business. I would prefer that they either take the card or don't, not take it and then punish me for it. It's a personal thing, maybe, but customers have a wide selection of stores out there, and eventually the ones that serve them best will win out.

So if the OP wishes to discourage this practice at shops, it might be kinder to just refuse the purchase at that point, and not return.
posted by rokusan at 6:53 PM on July 15

A local shop I know has a price on an item. If you pay with cash, you can get a discount. If certain businesses are worried about the CC fee, they should enforce this discount.

And yeah, I do understand that they have to pay for ever CC transaction. BUT I also understand that they are able to have a LOT more customers because they accept credit cards.
posted by hal_c_on at 6:54 PM on July 15

No offense but, (c) shop elsewhere.

Yes! Of course this is an legitimate option.

And as I have told probably about 5 or 6 customers who absolutely raise a ruckus and threatened to report me, I would appreciate it if you did take your business elsewhere. You don't care about my welfare. Sure you can say it's not personal, it's business, to which I say business to me is personal and it IS about our relationship.

There have been suggestions above that the merchant should simply raise their price to reflect the added cost of accepting cards. That's bullshit. Not truthful, lacks transparency. I raise prices when they get raised on me, and make sure everyone knows well in advance increases are coming. I also offer both a cash and CHECK discount.

Land sakes! In this day and age siding with the credit card company over your local merchant. You must have rooted for the lions over the Christians in a previous life.
posted by vito90 at 7:08 PM on July 15

It's true, and don't let people (ahem, vito90) bully you into giving them extra money that they've agreed not to charge you.

As rokusan points out, this is a business decision. If accepting credit cards was killing a small business, they would stop doing it (or they would go out of business for being stupid). Fact is, small businesses take credit cards (in spite of the cost) because they bring in enough extra business to more than off-set the cost of merchant fees.

If the only way they're able to do that is by breaking their merchant agreements, fuck 'em. I would prefer my businesses to have a little integrity.

When you carry a credit card, especially if you pay a fee for the convenience, you have a right to expect the parties on the other side of the credit card to hold up their end of the bargain.

Because of that, I say report them AND shop somewhere else. No business, small or otherwise, has a right to your hard-earned cash.
posted by toomuchpete at 7:08 PM on July 15 [1 favorite has favorites]

I would love to know the rules (ccc agreements) on this from other countries in which I spend money. Specifically, the UK, Canada and Mexico. Anyone?
posted by rokusan at 7:13 PM on July 15

Totally against their agreements. You can dispute the charge or at least report them if you want. I don't care that the fees are pretty awful for them. Mom and pop can set prices that cover costs of doing business.
posted by floam at 7:27 PM on July 15

Oh, and just to let you all know how much of an asshole I am:

When I say you can dispute the charges, I really do mean that you can. I've done it literally dozens of times through the little web interface my credit card company provides (wouldn't be worth it if I actually had to call them up). I simply say I was billed the incorrect amount due to a bogus fee that violates merchant agreements, dispute the $0.25 - $0.50, and have had 100% sucess with my HSBC Mastercard and a Visa card through Chase. I've recovered approximately thirteen dollars since January 2008.

I've so far (no way to really prove this, though) given myself credit for abolishing credit card fees at a local chinese restaurant and Chevron station. I was a repeat customer that just kept on disputing.

</asshole>

I've had zero success calling out the stores. I called Chevron's corporate number and sent a number of emails, they thanked me for the information and stressed that it's against their policy, but nothing ever got done. I also fill out Visa's and MCs complaint forms for violations but I have no real way to gauge if that's helped.
posted by floam at 7:34 PM on July 15 [5 favorites has favorites]

[seriously, this needs to go to metatalk if people want to fight about credit card companies, thanks]
posted by jessamyn at 8:19 PM on July 15 [1 favorite has favorites]

Wow. I can't believe people are siding with the CC companies.

The credit card company is saving me the 50 cent (or whatever fee); the merchant who violates his agreement and charges a fee anyway is charging me extra money for a benefit he, the merchant, gets, namely the ability to get people with credit cards to patronize his business.

The merchant made a decision: that the additional business he does by accepting credit cards is worth the cost of credit card processing; he's acting in bad faith if he benefits from that, but then passes along the cost to me. And all the moreso when if his additional fee is in small print or disclosed only after I've made my order.

Would you be OK if the merchant decided to charge an extra fee to customers who saw his ad on TV, but not for customers who heard of his store by word of mouth, because "TV ads are expensive"? Ads and credit card processing are costs of doing business, not costs that should be passed along to certain classes of customer.
posted by orthogonality at 8:25 PM on July 15 [4 favorites has favorites]

As has been covered, it's against their agreement with the credit card company. However, for tiny little mom-and-pops like the ancient bodega in my old neighborhood, I don't mind. I considered the fee they charged a convenience fee for not having to go get cash out of a machine.

I wasn't going to shoot myself in the foot and have the extremely close store with the delicious Lebanese food no longer take credit cards and have to continually scrounge up cash to use there.

As for vito90: Land sakes! In this day and age siding with the credit card company over your local merchant. You must have rooted for the lions over the Christians in a previous life.

I would root for the lions now, too.
posted by crankylex at 8:47 PM on July 15 [1 favorite has favorites]

I believe I have also seen on Consumerist that it goes against their agreements to post a sign that says "no credit cards for orders below x amount." I've had one pizza place try to pull this on my friend when I was with her and I told them it goes against their merchant agreement, and they let us pay with a card. It was a pretty high amount - like $35 - and just 2 of us eating would never be able to spend that much at that restaurant.

My favorite Chinese restaurant, where I've been going for so long that I can walk in the door and they can serve me without asking for my order, has a sign to this effect. I once had to put an amount less than the minimum on a credit card and they never said a word. I guess it pays to be a regular and a generous tipper (since it is my favorite place).

Consumerist definitely has a lot of posts on this issue, including the "cash discount" especially taking place at gas stations.
posted by IndigoRain at 10:34 PM on July 15

In Australia the law changed a few years ago to explicitly permit stores to charge up to (I think) 3% fees for a credit-card transaction as long as the customer is warned beforehand, despite this being explicitly against the VISA merchant conditions.

The surcharges were really popular when the law changed but have become a lot less common, presumably the "shop elsewhere" effect so most places don't do it but low-margin, high-cost operations (eg computer resellers) commonly have the surcharge.
posted by polyglot at 11:46 PM on July 15

I simply refuse to do business with businesses that charge a fee for me to use my credit/debit card. Same goes for businesses that have a "minimum charge amount" fee.

Why?

It's bad for business. It's never good to alienate and/or abuse your customer base.

If you as a business owner decide to accept credit/debit cards, you also agree to accept the terms laid out by the companies for those cards. It seems a good number of merchants think it is totally acceptable to violate the TOS of their agreements with the CC companies. So they go ahead and charge their fees. But they want it both ways - lots of customers (many with credit/debit cards) plus no responsibility to pay for the service they are getting from the CC companies. They're effectively passing the "cost of doing business" on to the customer, which, in this case, is explicitly forbidden (though, admittedly, laxly enforced) by the CC companies. Again, bad business.

If businesses aren't interested in paying the CC companie processing fees, they shouldn't choose to accept credit/debit cards. Period. End of story.

I find cash only businesses frustrating since I rarely ever carry cash but, I have say, I would much rather do business with a cash only merchant and deal with the inconvenience than support a merchant who charges credit/debit fees. No contest.
posted by karizma at 1:37 AM on July 16 [3 favorites has favorites]

I would love to know the rules (ccc agreements) on this from other countries in which I spend money. Specifically, the UK, Canada and Mexico. Anyone?

The Canadian rules are very similar to the American ones. In fact, the mastercard form linked above ends up being the one they ask Canadians to use, even though it doesn't properly accept Canadian addresses. (This might have since changed -- there may be a local form now.)

I run into a lot of places here, especially smaller ethnic restaurants and off-brand convenience stores that ask for a fee for credit card use, and generally speaking, I don't kick up a fuss about it, and just pay the fee, but the occasional place where it's been a surprise, or they've been particular dickheads about it, I report.
posted by jacquilynne at 7:04 AM on July 16

The 7-11 near my house has a petition on the counter and a small sign asking people to support their efforts to lower the merchant fees charged by the credit card companies. It is amazing how many people have signed it. It must be 300 or more two-sided pages full of signatures and has been there only a couple weeks.
posted by bz at 7:45 AM on July 16