Am I a horrible person for reporting my local pizzaria for charging an extra credit card fee?
January 2, 2009 2:40 PM   Subscribe

I just reported a local small business for adding a fee to my credit card for its usage. Am I a horrible person?

A local pizza place just started a fifty cent fee for using a credit card. This is in clear violation of their agreement with MasterCard so I reported it on the MC violation page but now I feel rather tool-like.

I want to support the small guy but:

1) They already charge a $1.50 delivery fee, which I am okay with
2) They will lose probably $30 a week from me if I stop going there since I won't use my card and don't carry cash.
3) That being said if they get smacked for it I may save them other lost customers who would get annoyed by the fee.
4) They have the option to just stop taking cards (for example they do not take Amex)

I feel like my actions may be justified but am having issues pitting the massive corporation against small mom-and-pop over my convenience. I am just sick of places making me buy more to hit a "minimum charge" or charging a fee. The way I bank pretty much means I rarely have cash (outside of emergency cash) so this hits me often.

So am I horrible or have I done them or society a favor?
posted by UMDirector to Work & Money (74 answers total) 5 users marked this as a favorite
 
You've done society a favour. Service fees and so called "minimum purchase" fees are a violation. Of course, you could suggest that they off a "cash discount" like many other businesses do.
posted by furtive at 2:45 PM on January 2, 2009 [2 favorites]


I just reported a local small business for adding a fee to my credit card for its usage. Am I a horrible person?

Sort of. Like everyone else, I find petty fees to be annoying, particularly when there are a bunch on the same transaction. But you do realize, don't you, that MasterCard charges them a fee for each credit card transaction? And it is generally a percentage of the sale, and so in many instances may amount to more than 50 cents, at which point they are in fact still losing margin on the sale, even with the fee?

In fact I would argue that MasterCard's ostensible prohibition on credit card fees (of which more later) is actually an effort by MasterCard to pull the wool over on your eyes, as a customer. If stores were allowed to transparently pass along their credit card processing costs to customers who use credit cards, then fewer people would do so, and MasterCard would lose business, even though the local business wouldn't care either way (assuming people chose to use cash instead, rather than choosing not to buy). This way, MasterCard gets to ensure that if they lose business, then the local store does too. If you want to take MasterCard's side on this, then fine, but understand that's what you're doing.

Furthermore, how are you so sure this is a "clear" violation of the store's agreement with MasterCard? Have you read the entire agreement? Are you an attorney? I have made several purchases recently where a credit card or debit card fee was added on to the price explicitly. While I suppose it's possible that these several merchants were all violating their card processing agreements, I have no evidence of that, and if it's a widespread practice, I might instead conclude that there are other rules that I'm not aware of. Again you seem eager to jump in line with MasterCard on this instead of giving your local guy the benefit of the doubt. Which seems a bit dickish to me, yeah, but I suppose it's your prerogative as a customer of both the pizza place and MasterCard.
posted by rkent at 2:50 PM on January 2, 2009 [10 favorites]


There's a cash price and a credit price. The credit price is always 50 cents more than the cash price.

I've seen quite a few gas stations that will have a cash price and a substantially higher credit price.
posted by whoda at 2:59 PM on January 2, 2009


Furthermore, how are you so sure this is a "clear" violation of the store's agreement with MasterCard? Have you read the entire agreement?Unless they've changed them very recently, all credit card companies explicitly disallow credit card usage fees charged to customers by any business with which they have an agreement to accept their cards, except in a small number of cases that do not include local pizza parlors. Is it an attempt by the credit card companies to hide their fees to the merchants? Of course it is. But the merchant is perfectly free not to take credit cards.
posted by Etrigan at 3:00 PM on January 2, 2009 [2 favorites]


I just reported a local small business for adding a fee to my credit card for its usage. Am I a horrible person?

Horrible? No. Bitchy and petty? Yes.

According to Mastercard's interchange rates, the pizza shop is probably paying 2.95% + $0.10. So, assuming that your pie costs $14, they're paying $0.41 + $0.10, for a total of $0.51. (A cent more than they're actually charging you, btw.)

That's money out of their pocket. Literally money they're losing for your convenience. So, like *many* establishments I know, they charge an extra fee to break even. And they don't do that on lots of transactions, as you can plainly see--anything over that $14 is going to start costing them money again.

If you're so unsympathetic to the pizza joint that you can't agree to help them break even on your convenience, pay with cash. Although, personally, if I ran the pizza shop, I'd blacklist you for this--$30/week be damned.
posted by Netzapper at 3:13 PM on January 2, 2009 [6 favorites]


If I disagree with the practices of some local business, I normally just stop going there. That's not horrible.

But reporting? If I were truly sick of their ways, I'd go and complain at their desk (that's about 50% horrible but gives them the chance to be the same to me).
And what rkent said at the beginning.

[I sometimes post snide remarks about the local food store on my food blog. That's pretty horrible (70-85%), but it feels so good]
posted by Namlit at 3:14 PM on January 2, 2009


The only person you're hurting is people who use cash. If MC comes down on the place they'll just raise their prices for EVERYONE to account for the CC fees. They'll make a little bit more on the cash sales.

You're probably not going to make your pizza any cheaper, though, they'll just change what they call the price you're paying.
posted by toomuchpete at 3:18 PM on January 2, 2009 [1 favorite]


I think your conscience is telling you something. I've worked at stores where we didn't have a minimum fee, even though we should have- and tourists would come in and buy a small coffee with their credit cards even though they had cash.
With the deal we had, we were losing money just so those toolbags could get their coffee.

Don't get me started on the people who tried buying 89c bottles of water with a $100 travelers check.
posted by dunkadunc at 3:22 PM on January 2, 2009 [1 favorite]


[I sometimes post snide remarks about the local food store on my food blog. That's pretty horrible (70-85%), but it feels so good]

Not sure I get why this is horrible. If in your opinion there are problems with the store people should know. Local businesses should only be supported if they're worth supporting.
posted by Lentrohamsanin at 3:22 PM on January 2, 2009


Good for you. These folks have an agreement with MasterCard, they need to follow it.
posted by orthogonality at 3:23 PM on January 2, 2009 [1 favorite]


Also, try paying with a debit card. Most banks do not charge any per-transaction fee on debit transactions, and many businesses will pass that on to you.

...charged to customers by any business with which they have an agreement to accept their cards, except in a small number of cases that do not include local pizza parlors. Is it an attempt by the credit card companies to hide their fees to the merchants? Of course it is. But the merchant is perfectly free not to take credit cards.

And lots of my friends smoke marijuana, despite its illegality. I don't turn them in, because I think the laws are wrong and I like them more than I like the district attorney. The question wasn't whether or not he was "legally" justified to report the business, it was whether or not he should feel like a tool. The answer isn't clear (being subjective and all), but he should be aware that he's playing enforcer for Mastercard while simultaneously ensuring that the pizza joint will lose money on (nearly) every future transaction.

The best result one could hope for at this point is that the pizza joint raises its prices all around in an attempt to cover the overhead. The worst is that Mastercard decides the violations are so egregious that they sue the local shop and wind up owning it. None of this helps anybody but Mastercard.
posted by Netzapper at 3:24 PM on January 2, 2009 [1 favorite]


I'm always sympathetic to the plight of small businesses regarding credit cards. Yes, they sign on to the system from the get-go. But the fees on minute transactions--those under a dollar or two, say--added to competition with other shops that restrains price increases makes life difficult. Not surprisingly, WalMart is largely free of these anxieties.

So, whenever I'm paying a bill under five dollars, I try to ask: "Is it okay if I use my credit card?"

If the answer's no, I return the card to my wallet and pony up the cash.
posted by Gordion Knott at 3:29 PM on January 2, 2009


Supposedly best practice for a business is to raise the price for everyone to cover the cost of their fees. I probably would have tried to work the fee out with management before reporting them - if you're a regular, sometimes they'll give you a break. But yes, small businesses for the most part struggle, even really popular ones, so you may have started more trouble than your pizza place can afford. Or not. You'll just have to see.
posted by medea42 at 3:29 PM on January 2, 2009


I want to support the small guy but:

But you don't. There's a cost associated with lack of economies of scale. Buying local is frequently more expensive. It sucks that the place charged an extra fifty cents which they are likely not allowed to do. So, yeah, you're not at all horrible but at some level there's solving the problem and there's teaching someone a lesson. You seemed to want ot do both as a result of your exasperation over the state of your finacial affairs generally. It's a legitimate choice to not carry cash, but this also has downsides and you've hit on one. If it were me, I'd talk to the small business owner (one of the great things about patronizing a small business!) and see what their response was. If it's "fuck you dude, we're charging what we want" then dropping a dime on him might be justified. As it is, you basically end-ran a way of potentially solving the stated problem in favor of ratting the guy out. That's sort of lame, in my personal ethical opinion and I don't think I'm that far from your general perspective as you've stated it here.

Bigger business are often more convenient, they don't do silly service charges like this one, and they're also slowly taking the local out of many many places in America. So, part of your repsoisbility if you're trying to patronize local businesses is to deal with the fact that it's more difficult and sometimes costly to do so. You're tired and exasperated but the local pizza guy is more likely part of the solution to the problem not part of the ongoing battle you feel that you're waging and reporting him to the credit card company is unlikely to make your food and money landscape any better for you.
posted by jessamyn at 3:30 PM on January 2, 2009 [15 favorites]


I think rkent hit it on the head. Businesses do get charged for offering the use of credit cards and then the credit companies come back and say that the businesses have no right to try and recoup that fee. The reality though is that quite a few businesses do try and recoup this fee, which I think should be within their rights. Some businesses charge an outright fee and some hide the fee by upping their prices slightly to cover the costs. Would you have complained if the pizza place suddenly upped their pizza prices 10 cents per pizza and used THAT money to offset the costs? Likely not. Credit cards offer convenience, and that is precisely why people use them and desire businesses to accept them. Saying that your local pizza parlor could just refuse to accept credit cards is a pretty outlandish request. I think you'd likely find that if it came down to a vote, most patrons would rather pay the fee and still be able to use their cards than have to pay cash every time they wanted a pizza. You said yourself you hardly carry cash these days. I say, if you have that much of a problem with a practice that is common to just about every small business I can think of, then cut up your card and use cash.
posted by ISeemToBeAVerb at 3:32 PM on January 2, 2009


The Pizzeria incurs costs with cash as well as cards. How much does it cost to count cash, replenish registers, store cash securely, transport it securely and make deposits? It's probably not free. Should they charge a cash transaction fee to their customers to cover those costs? How about a cheese fee? A dough fee?
posted by reeddavid at 3:33 PM on January 2, 2009 [4 favorites]


I would have done the same thing. I try to carry a little cash on me at all times so that I don't have to charge really small amounts, but rules are rules. When I can, I use the debit option for my check card purchase--but there are times when I can't, and I shouldn't be penalised. If the business chooses to take credit cards, they have to abide by the agreement they signed. If that's too hard for them, they can revert to being a cash business. Even in the city of Chicago, where I live, many bars, restaurants, and shops are cash-only, some probably for this very reason.

I'd feel guilty, too, but these places have to be held accountable to the agreements they freely choose to sign.
posted by catwoman429 at 3:35 PM on January 2, 2009 [2 favorites]


You got a small business in (potential) trouble in hard economic times, for the sake of 50c.

Yeah, that's low.
posted by Solomon at 3:42 PM on January 2, 2009 [15 favorites]


Retail establishments do not offer credit cards for the convenience of their customers; they take credit cards because doing so significantly increases their annual turnover. They make more money if they take cards.

This is a choice on the part of the retailer. The 51 cent charge on one 14.95 pizza is more than offset by the several thousand extra pizzas the place will shift because they take cards.

Charging you a fee is against their merchant agreement, an agreement with a fee schedule they clearly understood when they signed up. If they do not want to suck up the fee, they have the option to not accept credit cards. The health of their bottom line is why few businesses opt for this.

They should not be screwing you for the 50 cents. Reporting them to MC protects other consumers. Many of whom, by the way, are already being charged for the convenience of having a credit card - in annual fees and interest fees from the credit card company.
posted by DarlingBri at 3:50 PM on January 2, 2009 [15 favorites]


A point is being missed by several here:

Credit cards offer convenience, and that is precisely why people use them and desire businesses to accept them. Saying that your local pizza parlor could just refuse to accept credit cards is a pretty outlandish request.

Credit cards are also a convenience to the business, in that they receive money they would otherwise not get if they were cash-only. "Let's get a pizza" "I don't have any cash" "OK, let's make mac n cheese."
posted by rhizome at 3:57 PM on January 2, 2009 [4 favorites]


I always feel like an idiot for charging amounts under $20. That's the threshold under which cash should be paid.
posted by paperzach at 3:59 PM on January 2, 2009 [1 favorite]


And it is generally a percentage of the sale, and so in many instances may amount to more than 50 cents, at which point they are in fact still losing margin on the sale, even with the fee?

And when they give away a free 2-liter soda with purchase of two medium pies, they lose the cost of the soda. But they choose to offer that deal because their increased profit makes up for the loss. If you assume that's the same reason they offer credit cards, why shouldn't eat the fees there too?
posted by smackfu at 4:07 PM on January 2, 2009 [2 favorites]


I'm in the "bitchy and petty" camp here.

A better way to go about it would have been to say to the owner, "Look, I'm a loyal customer, but this 50 cent fee is just really nickle and dimeing me to death here, and you and I both know it's against the credit card company's policy... so, I'm not going to do business with you anymore until I see that you've dropped this silly policy."

But I'm with you 100% as far as the pain in the ass factor. I went to a local pizza place a few times which had a "minimum $5.00 credit card charge," of course a slice of pizza, a can of soda, with tax came to exactly $4.70, and they refused to take my card unless I bought something else. I told the guy that it was a stupid policy to make someone buy another can of soda or more food because of their stupid arbitrary policy, and that I wouldn't be back.

If your business model requires you to split hairs and alienate paying customers over a few percentage points on credit card sales, you're doing it wrong.
posted by wfrgms at 4:08 PM on January 2, 2009 [5 favorites]


but rules are rules

I don't understand this thinking. I agree that you have little ground to stand on if you're complaining about being popped for violating a rule you willingly agreed to. However, the mere existence of a rule does not automatically make it ethically or morally justified for a third party to narc. And that's precisely what the OP has done, narced.

Let Mastercard police their own damn rules.

Retail establishments do not offer credit cards for the convenience of their customers; they take credit cards because doing so significantly increases their annual turnover.

Yes, it increases annual revenue by offering a convenience to the customer. People use credit cards, and the joint sells more pies, because people find it more convenient to use the card.

Many of whom, by the way, are already being charged for the convenience of having a credit card - in annual fees and interest fees from the credit card company.

What does that have to do with the pizza joint? The fact that I have a shitty agreement with Mastercard does not, in any way, affect the shittiness of the pizza joint's agreement with Mastercard.

Furthermore, if you're arguing that I don't have any responsibility to look out for local businesses I like, why the hell should the businesses be looking out for me?

Bigger business are often more convenient, they don't do silly service charges like this one

Frequently because a huge business (like Pizza Hut or WalMart) has the opportunity to negotiate substantially lower merchant rates than any local shop could ever hope to. I promise you that Pizza Hut isn't paying 2.95%... I'd be surprised if they were charged even 1%.
posted by Netzapper at 4:09 PM on January 2, 2009 [1 favorite]


I always feel like an idiot for charging amounts under $20. That's the threshold under which cash should be paid.

You shouldn't feel like an idiot, because the business is paying the same no matter what. $20 or $2, the credit card company still takes their cut.
posted by wfrgms at 4:10 PM on January 2, 2009


Horrible? No. Petty? Yes.

You're angry about 50 cents. You want them to drop the charge because you don't want to pay it, it's just 50 cents and it annoys you.

But at the same time, it's enough money that you don't want to pay it. So don't pay it. Tell them that. It's a small business, you probably could have spoke to the guy who owned the place face to face and lodged your complaint calmly. (Try doing that with Pizza Hut or whatever.)

Is it against the agreement? Sure. But then again, there's tons of things people are supposed to do and don't (or aren't allowed to do but do anyhow) to save a buck. Do you stick to the rules and when filling out your taxes and report all your internet purchases you didn't pay sales tax on? Do you think that another citizen in your state who plays by the rules is annoyed at you for failing to do so? They'd be just as right as you are in contacting your states department of revenue and taxation and reporting you as you are for reporting this merchant. After all, what you're failing to do is illegal. And you're trying to avoid probably anywhere from 4% to 9%. This merchant is trying to avoid 3% or so.

Would you leave a tip at a restaurant on a credit card and if so, do you leave a larger tip than you would if you left it cash?
posted by Brian Puccio at 4:20 PM on January 2, 2009


You're a regular ($30/wk = $1560/yr). I find that places I frequent will let me use a credit card without an extra fee for even the smallest transaction.

I'm more interested in knowing if reporting them to MC actually does anything. There are thousands, if not millions, of establishments with self-imposed minimum charge limits. Will MC actually bother to do anything about it? Isn't there some sort of credit crisis they should be thinking about?
posted by madh at 4:22 PM on January 2, 2009


You are not a horrible person. When a business says they accept a Mastercard that means they accept it with no strings attached. This business is trying to attach some strings. You are making sure that they stick to their agreement with Mastercard (and by extension you, the Mastercard user).

Of course as others have pointed out, this will probably end with everyone paying a slightly higher price to offset credit card users or the pizza place offering a cash discount (making the final price more opaque to those who can't do the math). People will still be paying to use their credit card, it just won't be so overt.
posted by any portmanteau in a storm at 4:36 PM on January 2, 2009 [1 favorite]


If they even bother doing anything, I suspect the first step is that Mastercard calls them and pretty much just asks "Hey, remember that contract you signed about not charging fees? We wanted to make sure you remembered that part."

Lots of businesses decide they want your business, accept credit cards, and play by the rules they agreed to.
posted by IvyMike at 4:45 PM on January 2, 2009 [1 favorite]


You shouldn't feel like an idiot, because the business is paying the same no matter what. $20 or $2, the credit card company still takes their cut.

Not true. Where I was working it was a flat rate (It could have been as high as a dollar) with a percentage on top of that.
posted by dunkadunc at 4:47 PM on January 2, 2009


Of course as others have pointed out, this will probably end with everyone paying a slightly higher price to offset credit card users or the pizza place offering a cash discount (making the final price more opaque to those who can't do the math).

Three options:

1) They raise the prices for everyone. Technically they don't have to raise them $0.50 now to cover the costs, so the questioner may come out a bit ahead.
2) They put in a $0.50 cash discount, raise all the prices, and manage to convince MC that isn't a credit card fee. (Good luck!) The questioner will pay the same they pay now.
3) They get rid of the surcharge. The questioner will pay $0.50 less.

Net it out, and there's really no downside to complaining.
posted by smackfu at 5:04 PM on January 2, 2009 [1 favorite]


Having read the answers above, I would like to add "passive-aggressive" to the last sentence in my above answer. If it is really that big of a deal for you, talking to the owner would have been a good start.
posted by qvtqht at 5:13 PM on January 2, 2009


You could go one step further. Whenever I'm charged such a fee I dispute the fee amount. It's had much more positive effect than reporting to Visa/Mastercard.
posted by floam at 5:34 PM on January 2, 2009 [1 favorite]


qvtqht:

Bullshit. Being a "small guy" doesn't give you the right to pull off unfair practices like credit card transaction fees. Even mom and pop can figure out how to set prices so that costs of doing business such as these are paid for without fining customers.
posted by floam at 5:37 PM on January 2, 2009 [4 favorites]


Welcome to modern customer service.

You come into my small business and I can take you the smallest screw, the most obscure plumbing piece, etc. I will speak to you as a person, you will see the same employees each time, and you can always expect to speak with a manager who's out of high school. I will also ask you to not make a charge under $5, and while I don't charge a fee for credit, I can see why many would. I'm old-school customer service. We're both grown ups, we engage freely and socially and you're welcome to take your business elsewhere if you don't like that the cashier might wander away from the register for 2 minutes to help a customer find a piece. If that's you, then get the hell out of my store anyway.

For whatever reason, modern customer service has degenerated into ME ME ME and NOW NOW NOW and MY MONEY AND TIME ARE THE MOST VALUABLE ALWAYS DEAL WITH ME THIS SECOND. More "You're in the service industry, stop eating your lunch and come carry this for me" and less "Hey Joe good to see you man, how's the wife and kids?"

Why are they charging a fee? Because they don't charge different amounts for cash and charge. Sure, they're selling a couple hundred pizzas extra a week taking charge. However, those pizzas aren't any cheaper to make and, in case you didn't know, markup at restaurants (especially local ones) isn't very much. Added into that that VISA AND MASTERCARD WILL NOT SECURE ANY TRANSACTION WHERE A CARD ISN'T PHYSICALLY SWIPED. So, sure, yours swiped, BUT all the over-the-phone folks are costing them more like 5-7%+ a per transaction fee, and ANY disputed transaction is an automatic lose for the company, resulting in higher fees and penalties.

Realistically, you could have said "Whoa when did you start adding the fee?" or called and asked to speak with a manager. But instead, you decided that you're pretty awesome and mister police man and decided to call MasterCard over 50 cents and some ridiculous perceived conscience breaking fee. I certainly hope you call the police when someone jaywalks, or you report individuals to their insurance companies for not wearing seatbelts. Once I saw someone smoke in a non-smoking hotel room too. Would you call the city of new york or the NYT because the subway ate your tokens?

Seriously, call the manager/owner, ask about it, and say that it really bothers you and you'd love to keep spending your $1600 a year there but you won't if it'll be $1626 this year.

at our store we also politely wait for customers to finish their cell phone calls (unless they're calling about a part or a size or a color, w/e), ask children if they're having fun, tease older gentlemen about the attractiveness of their wives, and have the audacity to call you by your name after your first 3 or 5 visits. Perish the thought.
posted by TomMelee at 5:37 PM on January 2, 2009 [12 favorites]


Everyone in here is acting like the pizza is price so that the retailer is making razor-thin profit margins on all of this food and this 50 cents is taking "money out of his pocket." This is patently false. There is usually between a 200 and 300 percent markup on food, sometimes more. The money was never "in his pocket" to begin with!
posted by proj at 5:49 PM on January 2, 2009


Further, nthing the point that taking credit cards greatly expands the amount of potential income.
posted by proj at 5:52 PM on January 2, 2009


Would you call the city of new york or the NYT because the subway ate your tokens?
If the city had a website they took the time to put up that solicited the public to report broken token-eaters in order to fix broken token-eaters, I'd be doing them a favor to take the time to give them information.

He didn't call Mastercard, he filled out this form.

Mastercard is a product that both me and the merchants fork over money to use. A merchant that's ruining my experience with this product by not following the guidelines is something I should help fix by reporting to the makers of said product.
posted by floam at 5:53 PM on January 2, 2009 [1 favorite]


Not horrible. It's 2009--most people use credit/debit cards. The business makes a profit. They aren't a charity. They pay that money to the credit card companies in order to provide a convenience that expands their customer base. I used to work for a small business that accepted credit cards and we didn't charge extra to credit card customers because 1) it's lame. 2) it discouraged spending. However, we didn't take a certain card (either Discover or Amex, I think) because their fees were way higher than the other cards.
posted by fructose at 5:55 PM on January 2, 2009


I think it's a grey area. I mean, yeah, letter of the law, you're right, they're violating their merchant agreement; you certainly can't argue with that. But ultimately, they probably don't want to raise prices for everyone (I'm not suggesting they're nice, I'm suggesting they're trying to compete with corporate chains who can sell at lower prices) when some customers' transactions cost them more to process than others. They should probably just build the costs and risks of credit cards into their prices, but I wouldn't have reported them over it if it were me.

(Plus what Jessamyn said about supporting local businesses!)
posted by SoftRain at 6:34 PM on January 2, 2009


These fees are the reason the Sam's Wholesale Club does not take Visa/Mastercard. I know because I asked. Sam's will take Discover cards because Discover agreed to a lower if non-existent fee schedule. Sam's will also accept debit cards since there is no fees.

The credit card companies make huge profits off of the small business owner. There is a fee for swiping the card even if it is declined, usually 10 cents per swipe. Then if the number is keyed in instead of swiped, the merchant is charged usually 6% of the sale. There is a minimum amount of charge sales required by the CC company, failure to reach this minimum in sales, you get hit with a flat fee, usually $25. Some CC processors go as far as charging a statement fee on top of the rest of the fees. The merchant has to buy the terminal ($300) and supply the phone line and paper for the machine. On average it will cost the merchant about $175 per month for $2500 worth of sales.

Remember too that you as the consumer are charging sales tax and tips on your credit card. The credit card processor charges their percentage on the gross sale.

But as sorry as I feel for the small business owner, they should not charge you a fee to use a credit card as per the agreement with the credit card processor.
posted by JujuB at 6:34 PM on January 2, 2009 [2 favorites]


NOT horrible, NOT bitchy, NOT petty. You were correct to do this.

YOU are Mastercard's customer. You pay them to give you credit. In return for that, they provide a network of vendors who accept Mastercard as payment and provide various standards, including the prohibition on credit fees.

You abide by Mastercard's agreements by paying interest and late fees and whatnot, right? Then the people you do business with should do so as well. Simple as that. If he thinks accepting credit cards is a hassle, then he should just not accept them.

(I'm not sure what the breakdown is, but way back when when I ran a retail store, the majority of the merchant fees we paid weren't to the credit card companies, but to our merchant bank. The company we rented the equipment from and who actually gave us the money at the end of the day.)

(And not for nothing, cash handling is a huge cost for businesses. Well, honest businesses anyway. Plenty of mom-and-pop stores use cash transactions as a way to hide income. But if they are being above board, their bank charges them plenty for nightly deposits and to purchase rolled coin for change. Not to mention insurance costs, employee time wasted counting nickels, transporting the money to the bank, etc. I'm not saying it breaks even on the face of it, but it certainly does when you account for the added business accepting credit cards brings.)

(Oh, and the alternative? Taking checks? Talk about a nightmare!)

Running a business has costs, and businesses who try to pawn their costs off on the consumer are the ones who are being petty.
posted by gjc at 6:36 PM on January 2, 2009 [5 favorites]


On average it will cost the merchant about $175 per month for $2500 worth of sales.

That's a bogus number. Where did you get it?
posted by gjc at 6:39 PM on January 2, 2009


They're breaking the rules and the direct effect is red ink on your bottom line and black ink on theirs. They knew the terms of taking credit cards when they signed up for it and I really don't understand why people will give small businesses a pass on stuff like this. Nobody's told me the total income threshold at which I'm supposed to start thinking that a business should follow the rules.
posted by 0xFCAF at 6:56 PM on January 2, 2009 [1 favorite]


That's a bogus number. Where did you get it?

That figure is approximate based on my business, bar & grill.
posted by JujuB at 7:04 PM on January 2, 2009 [1 favorite]


In Australia, the rules have been changed to allow the merchant to pass the transaction fee onto the customer if they want to. It's discretionary, and many, if not most, merchants decide to just absorb fee for fear of alienating the customer.

Personally, I wish more merchants would pass the fee onto the customer as it is fairer to all concerned - customers who want to use their credit cards can pay for the convenience to do so, and those who pay in cash - and the merchants, of course - don't have to subsidise those customers. In fact, I wish it were mandatory to pass it on, as it would allow for greater transparency and make the customer aware of the true cost of the transaction.

So, in terms of general ethics, I am in favour of you having been charged the 50c. However, if the merchant has broken the rules where you are, I suppose you are justified in making a complaint.
posted by hot soup girl at 7:12 PM on January 2, 2009 [2 favorites]


How could someone say that businesses that try to "pawn" their costs off on the customer are the ones being petty. Wow! How would a business stay in business if it did not make the consumer pay the costs? Perhaps that is the reason over 50 percent of new restaurants (food sales) are out of business in one year.

I think you should appreciate a "non-chain" pizza place to deal with. Their profit margin is much less than some imagine. They should just raise the price for everyone. They do need the money to stay in business.
posted by JayRwv at 7:22 PM on January 2, 2009


There's a significant cost to maintaining the whole credit card infrastructure. As credit card users, both customers and vendors benefit from this infrastructure. The vendors' benefit is actually the customers' benefit. So, the customer is the primary beneficiary for the service that Visa (for example) is providing. Why shouldn't the customer see that expense?

Vendors may save a little overhead, sure, but they (especially small ones) incur additional overhead and expense in keeping track of credit card charges, buying and maintaining credit card processing machines, training employees to process credit card charges, having to have computer software that handles credit card transactions (which makes the software a little more complex and expensive), and maintaining a merchant account with a bank to take credit card deposits.

All the overhead costs outlined above do not include individual transaction fees paid to Visa.

Currently, Visa hides the transaction costs from the customers who cause them to be generated. This makes it seem "free" to customers, encouraging widespread use of credit cards, which leads to more transaction costs. The vendor is caught in the middle. Sure, credit cards are convenient, but cost savings of this convenience, for the vendor, may only really manifest if, as others have noted, the vendor is large enough.

I personally do not want expenses to be "hidden" from me. It bothers me that, when I'm paying cash, I have to pay more because of a contract that my vendor has virtually no choice but to sign. What if I, or a bunch of people, want to economize by not using credit cards, not using the expensive credit infrastructure?

There's a flip side to this, of course. The fact that so many people are using, and indirectly subsidizing, the credit processing system can keep costs lower for everyone who does use it, and has lead to wider adoption of the credit card way of life, which is very convenient -- and convenience is truly no minor consideration. It also, of course, keeps profits way up for the credit card companies, but it's hard to separate these benefits.

But all in all, I really hate the idea of hiding things from people, as in hiding the actual cost of using credit cards from the people who are using them. This is the opposite of transparency, and takes a kind of power away from people. Whatever your feelings about capitalism, this seems like a way of subverting the supply and demand system in a way that makes it more subject to manipulation by a very few people -- who have this power who-knows-why. As I indicated above, there can be "good" in it, but this is not a system set up democratically.
posted by amtho at 7:46 PM on January 2, 2009 [2 favorites]


There is usually between a 200 and 300 percent markup on food, sometimes more.

If you just mean markup from the raw ingredients, okay, sure, but what does that have to do with the price of tea in China? But if you are confusing markup with profit, I think you're sorely mistaken.

While I might buy it for fine dining (and even then, meh), I seriously doubt that it's true for most restaurants, and certainly not for a pizza joint.

When I build a pizza myself, from scratch with (mostly) bulk-bought ingredients, it usually costs me somewhere around $7-10 (depending on toppings). Sure, the crust only costs me $0.80, but cheese and toppings are relatively expensive. Now, even if the shop gets everything for half the price I do (or buys ingredients of comparatively lower quality), they're still looking at around $5-6 for a large pie. And that's just the raw ingredients. Include, say, another $0.75 for 8 minutes of minimum wage labor; at least $0.10 in cooking heat (probably more, with an open wood-fired oven); $0.35 in rent (assuming $2k/mo in rent, 7 day a week operation, and 200 pizzas per day) . You're up to $7.20 for a pie that'll probably sell for $11. And that doesn't include any of the other zillion costs associated with running a restaurant. That's just the things I thought of in half a minute, never having even worked in a restaurant.
posted by Netzapper at 7:57 PM on January 2, 2009


Apparently I and ortho are the only people here who think that the merchant should honor the terms of their agreement. I'd do what you did and sleep easy.
posted by phearlez at 8:33 PM on January 2, 2009 [3 favorites]


Sure, the crust only costs me $0.80, but cheese and toppings are relatively expensive. Now, even if the shop gets everything for half the price I do (or buys ingredients of comparatively lower quality), they're still looking at around $5-6 for a large pie.

To continue this tangent, I think this is a bit overstating it. That crust is probably $0.10. It's flour and yeast. Heck, the only expensive ingredient is cheese, and $4 will buy you a pound in the grocery store. And toppings are an extra $2-3 each for a large pie, so I think they might just be covered there.
posted by smackfu at 8:51 PM on January 2, 2009


From MasterCard's FAQs:

"Can a merchant charge me a fee to use my MasterCard card?....

"... Merchants must follow certain acceptance rules in order to be granted the privilege of accepting MasterCard cards. One of these rules specifically prohibits the practice of surcharging, that is, charging a customer a fee for using a MasterCard card over and above the sale amount. Under very specific conditions, however, a merchant can charge customers - including those using a MasterCard card - a fee in addition to the transaction amount. As a general rule, such a fee doesn't violate the MasterCard rules provided the fee is charged to all customers engaging in the same transaction, regardless of the form of payment. Keep in mind, however, that it is not a violation of the MasterCard rules for a merchant to offer customers a price discount for payment in cash, provided payment by MasterCard card is on at least as favorable terms as payment by any other means."
posted by terranova at 9:11 PM on January 2, 2009


I agree that people, even merchants who sign agreements with credit card companies, should honor the terms of agreements - but then, we should all also honor the terms of service of all software we use.

But what if the terms of service of, say, the Windows and Mac operating systems included a clause that specified that you had to allow their respective makers (Microsoft or Apple) full access to all the files on your computer, with no encryption allowed? Or you, as a user, suddenly had to pay your Internet provider, or Microsoft, $0.25 every time you received an e-mail message? Sure, you'd have the freedom to say "no" and stop using e-mail, or stop using Windows or OSX, but would you really feel that you had a choice, especially if all the major providers had the same contract conditions?

The poster wasn't asking if he was legally right. He asked if he was a "horrible person". Of course he isn't; it shows compassion that he even asked the question. So what's the real question here? It seems to revolve around whether his actions were likely to lead to a better result for a greater number of people. And the answer is, for me, it's hard to tell. Reporting them or not reporting them, either could be constructive or destructive in the long run.
posted by amtho at 9:12 PM on January 2, 2009


UMDirector,

As a regular customer, you still didn't feel you could talk to the owner about your concern. Why do you think that was? The reason why I'm asking is that part of what I think shapes 'horrible behavior' is a combination of options and intent.
posted by anitanita at 9:22 PM on January 2, 2009


So, whenever I'm paying a bill under five dollars, I try to ask: "Is it okay if I use my credit card?"

If the answer's no, I return the card to my wallet and pony up the cash.


Same here; when they say "credit or debit" (my card does both) I always respond "whichever's cheaper for you."

Having said that: yeah, reporting it to MC will (at best) do nothing or (at worst) cause the pizzeria to raise their prices by 50 cents and offer a 50 cent cash discount. The better response next time is to either take your business elsewhere because you don't approve of their business methods, or just pay with cash/debit and let people who care more about convenience than total cost pay the 50 cents.
posted by davejay at 10:15 PM on January 2, 2009


How could someone say that businesses that try to "pawn" their costs off on the customer are the ones being petty. Wow! How would a business stay in business if it did not make the consumer pay the costs? Perhaps that is the reason over 50 percent of new restaurants (food sales) are out of business in one year.

I think you should appreciate a "non-chain" pizza place to deal with. Their profit margin is much less than some imagine. They should just raise the price for everyone. They do need the money to stay in business.


Wait, the business is there for my convenience?? We should *appreciate* a business who doesn't play by the rules they agreed to? I thought the business was there because the proprietor was trying to earn a living...

You're buying pizza with a credit card! [...] Why not buy food within your means and leave the small business owners alone?

Nice misdirect. That has nothing to do with the topic at hand.

anthro, hot soup girl- why shouldn't the customers see that expense? They do, every time they pay their bill. If you want them to expose their costs for paying credit, I want them to expose their costs for taking cash. Or, they could just charge what they advertise without hidden fees.


On average it will cost the merchant about $175 per month for $2500 worth of sales.

[...]

That figure is approximate based on my business, bar & grill.


Doen't really make an average, does it? Why take credit cards at all if it costs you 7% to do it?
posted by gjc at 10:20 PM on January 2, 2009


I think the characterization of "a horrible person" is overblown: your original self-description as "tool-like" seems about the mark. It is not worth worrying about any more. Stop reading the local morality squad in here's ridiculous high-horse ranting and forget about it.
posted by nanojath at 10:21 PM on January 2, 2009


Bah. I hardly ever carry cash anymore and if I were running a business I certainly wouldn't penalize people for using credit (or debit) cards.

I thought we were beyond this - I use cards for $2 purchases at 7-11 now and nobody bats an eyelid.

(It's DEBIT. Don't worry about me paying interest on my pizzas or Big Gulps. They're not beyond my means. Really.)

As for this particular situation, I wouldn't have gone so far as to report it. I'd take the $.50 out of the tip. (I usually tip small businesses even if it's take-out.)
posted by mmoncur at 10:32 PM on January 2, 2009 [1 favorite]


I think you're kind of a dick, but that's just my opinion. I'm not sure what the best morel lens to view this under looks like.

That said, though, if you want to put some numbers on the business, start here.

I don't know how big the pizzeria is, but if we eyeball some averages, we arrive at a cost of $200,000 to buy $400,000 in turnover at a 20% margin. I think (I personally have always been a corporate henchman, not a small businessman, and I welcome corrections) that figure is pre-tax, pre-owner's salary. We should deduct $20,000 (call it the opportunity cost of capital) so then the owner is pulling down $60,000 before tax. The 50 cent fee comes right out of that figure. Reckon he collects it 20x per day? That's more than 10% of his salary.
posted by Kwantsar at 11:12 PM on January 2, 2009


Wow. I really can't believe the back-asswards view of things that some people have on this thread.

Firms exist to serve customers – customers do not serve firms. Good firms make a profit and the bad ones fail. The idea that you should not only turn a blind eye to, but to support, petty fraud (what your pizzeria was doing), seems really to me.

Forget the people who tell you you should have talked to the manager of the firm – you shouldn't have to waste your time because they were trying to defraud you. They were trying to rip you off and, fair play to you, you called them out on it.

If you're in this situation again, ask yourself: would I be as forgiving if this was Domino's? If a firm can only survive on the charity of its customers, it doesn't deserve to survive. If you want to do nice things with your money, give it to people who really needs it, not the owners of inefficient firms.
posted by SamuelBowman at 3:39 AM on January 3, 2009 [3 favorites]


*people who really need it
posted by SamuelBowman at 4:06 AM on January 3, 2009


There is a really misguided sense of right and wrong being displayed by the people who are insisting that one customer to the credit card companies, you, pay twice for the mutual convenience of using the credit card infrastructure, while the other customer to the credit card industry, the business owner, deserves to use and take advantage of their services at your doubled expense.

If your restaurant fails it's because you ran it poorly or shouldn't have gotten into the business in the first place, not because the world is an unfair place and you are a martyr to the cause little guy.
posted by Space Coyote at 4:53 AM on January 3, 2009 [3 favorites]


Why do MasterCard have this rule? Not through any "fairness" to the consumer, but just to increase their revenues at the expense of small businesses being forced to sell at a loss on small transactions.

I'm fine with this in a competitive market. But the market for credit card processing is not competitive - it's a natural monopoly currently run by four big firms (Visa, MC, Discover/Citibank, and Amex).

In a competitive market, the big 4 could not enforce this rule without losing business to new entrants. But a credit card is useful mostly when a large number of businesses accept it. This gives bigger providers an advantage, squeezing out small card providers and giving businesses a choice of four providers with the same terrible conditions for each.

It's a pretty classic market failure. The response shouldn't be to report the small business owner, but ask why he is being forced to choose between selling at a loss or not offering any credit card service at all, which is surely a bad outcome for consumers overall.
posted by dave99 at 4:58 AM on January 3, 2009 [1 favorite]


Why do MasterCard have this rule? Not through any "fairness" to the consumer, but just to increase their revenues at the expense of small businesses being forced to sell at a loss on small transactions.

No one is being forced to do anything. It's not about fairness, but it is certainly unfair of a business to ask me to double my cost of using a system that benefits us both.
posted by Space Coyote at 5:13 AM on January 3, 2009 [1 favorite]


You're not paying *more* than you would be otherwise; it's just that people who *don't* use credit cards are not paying *as much*. Imagine the same order for a pizza, for which:

Credit customer A pays: $12.95
Cash customer B pays: $12.45

You can present it as "Customer A is paying $0.50 more" or "Customer B is paying $0.50 less". Either way, in this scenario, Customer B is paying for the credit card service that's a convenience to him and that takes more resources to run.

The alternative that the credit card companies require is that BOTH customers pay the higher amount. In this case, it's customer B who's being treated unfairly. B is paying more but not getting the service that A is. It makes sense for A to pay the higher amount, but B is just having to pay to subsidize A's convenience.

This is why Space Coyote's comment that "it is certainly unfair of a business to ask me to double my cost of using a system that benefits us both" (I understand that "both" here means the credit card customer and the vendor) seems odd to me.

You're going to pay the same amount. The cost always has to be incorporated into your purchases, otherwise the vendor can't stay in business. The credit card company's contract terms are just designed to keep that cost hidden from you.
posted by amtho at 5:52 AM on January 3, 2009


By "you're going to pay the same amount" I meant that, as a credit card customer, you're going to have to fund the use of the credit card one way or another; the money ultimately has to come from credit card users.
posted by amtho at 5:53 AM on January 3, 2009


Merchants are just as much credit card users as consumers are. They don't deserve the charity of the consumer users just because.
posted by Space Coyote at 6:16 AM on January 3, 2009


Just to add a note at the end. Small merchants really get a raw deal on credit cards. I just renegotited a deal for one of my clients (I don't have any of the info with me here) with their merchant services company. There is a middle man between the Merchant and the credit card that processes the payments, and they gat a percentage as well. Also when a credit card is accepted the merchant has no idea what percentage he will pay for it. Credit cards that offer points or promotions (cash back) do not eat the cost of that - they send it on to the merchant. So if I remember correctly the cost can vary from 1.95% to up around 4%. Then the merchant services company charges a rate per transaction (one rate if the card is swiped another, higher rate, if a phone or internet order) and a rate per batch, typically daily.
THere is no way a merchant can do business without taking credit cards, but he has no recourse as to what he will pay besides shopping around for a better merchant services contract. Chains can negotiate better deals all around and also serve as their own merchant service.
This is also entirely unregulated Dick Durbin has drafted legislation to address this - good luck with that, Dick.
posted by readery at 7:23 AM on January 3, 2009


I'm surprised by the skewed allegiances evident in the majority's response here. You're not horrible and you're not a tool. You did the right thing, you potentially did a favor to other consumers, and everyone whining "think of the small businesses!!" --as if being a neighborhood mom & pop outfit means being entitled to commit fraud and rip-off your neighborhood customers--deserves to be ripped off. I’ll bet that some of you folks calling the original poster's actions dickish, bitchy, and worse in defense of mom & pop are the same people illegally downloading music; You'll steal money from artists and musicians as long as you can convince yourself that you're just screwing the big asshole corporate record companies.

I loathe mega-chains and buy local wherever possible. The local independent pizza places I patronize already charge considerably (and justifiably) higher prices than do the larger (and lesser quality) pizza chains, and hell's yes I would object to a bogus convenience charge just as the original poster did. I probably wouldn’t bother to report the joint over $.50, which is why I’m glad that the original poster did.
posted by applemeat at 7:31 AM on January 3, 2009 [1 favorite]


Surprise, the joke is on the consumer. Mastercard and Visa only pretend to care about violations. They will only take action when they get enough complaints about the same merchant. I've had my card refused because it wasn't issued in the USA (then it was a German card) and refused because it was issued in South Africa (at least that is a notable risk). I've had extra fees charged (common practice in Germany and Switzerland these days).

But of course, the small merchants are being screwed in this process, too, by having to pay higher fees than big merchants. Like so many things, those who can least afford it, have to pay the most (like buying groceries when you live in a poor neighborhood). But that doesn't give them a license to violate the rules.

I say, lets throw Mastercard and Visa into a big pot and render the fat off their stinking bones, and make some candles or soap. Blech. They are the real culprit, the real parasites.

Are you petty over this 50 cents? Maybe, a little. But then, so is the pizzeria. Get the fascists out of the US government and make some reasonable legislation to regulate the credit card companies. These cards have become a way of life more than a convenience, and for many of us, the 'credit' part is only until the next statement anyway.
posted by Goofyy at 7:56 AM on January 3, 2009


Chains can negotiate better deals all around and also serve as their own merchant service.

I think complaining about chains getting a better deal is missing the big picture. Chains aren't formed out of thin air. It was some guy with one store that realized that opening a second store would increase his sales by a greater percentage than his costs. And then a third store helped even more. The chains were the smart businessman, and the small guy is the small guy for a reason. The solution to being ripped off due to being a small fish in a big pond is to become a bigger fish, not to regulate the pond to be smaller.
posted by smackfu at 9:46 AM on January 3, 2009 [1 favorite]


I totally get the whole economies of scale thing, just as long as it's understood that the little upstart has an added expense for each transaction, but can't afford to ever turn down a sale. That fifty cent fee per credit card charge may make the difference that keeps the place afloat. Margins for small businesses are incredibly small.
And it's the little local guy that can innovate, know their customer and cater to their tastes instead of telling them what they should like (Chi Chi's and Best Buy for everyone!), and being something of a community touchstone.
And hire us local accountants and do business with other local distributers and other small businesses.
So the big picture is got, but since personally i have an aversion for working for big corporations, I have to put my money where my mouth is and support local businesses that will in turn support me.
posted by readery at 11:52 AM on January 3, 2009


Why take credit cards at all if it costs you 7% to do it?

Because he'd rather have the accompanying $2500 in sales that month than not have it? That's 30K a year; most businesses will comply with the rules and pay the $175 a month in fees and commission for exactly the reason I stated in my first answer: accepting credit cards increases sales, end of story.

Yes, this scenario means credit card companies have merchants over a barrel. Still, the choice to "just not take credit cards" is generally more expensive to the merchant than the choice to go ahead and take them. And, in accordance with the merchant agreement, the merchant should bear the cost of this choice that helps her make more money.
posted by DarlingBri at 11:53 AM on January 3, 2009


Sure, the crust only costs me $0.80, but cheese and toppings are relatively expensive. Now, even if the shop gets everything for half the price I do (or buys ingredients of comparatively lower quality), they're still looking at around $5-6 for a large pie.

To continue this tangent, I think this is a bit overstating it. That crust is probably $0.10. It's flour and yeast. Heck, the only expensive ingredient is cheese, and $4 will buy you a pound in the grocery store. And toppings are an extra $2-3 each for a large pie, so I think they might just be covered there.

posted by smackfu at 8:51 PM on January 2 [+] [!]

Smackfu, I used to work at a pizza place in high school. Our costs on a large pie averaged out to $6 in 1988. I can tell you the price of cheese hasn't gone anywhere but up since then. Then again, you're not just paying for the cheese, dough and ingredients, you're also paying for the floor space to make those in, the gas to cook that pizza, and the bipedal carbon units to take your order, assemble and cook that pizza a manager to ensure it's done right, plus the costs to deliver same if it's not being picked up (I got hourly, plus .50 per delivery to cover "costs"). Today's costing on a large I would estimate at $8 - $9, more if the pizza place is generous with the toppings and cheese (which my restaurant wasn't..)
posted by barc0001 at 12:55 PM on January 3, 2009


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