Quote:
Originally Posted by CptnRn
Credit card companies charge merchants 3-4% of the cost of each credit card transaction. I learned this recently when I decided to try using the online bill payment option for my County property taxes. They refuse to eat the credit card charge, so they wanted me to pay them $104 extra to cover it. I gladly canceled the transaction and sent them a paper check.
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You've hit the nail on the head. For small businesses, transaction rates are typically around 2% - 4% plus another $.25 - $.50 per transaction. So if you're making a $100 payment, the business will see somewhere between $95.50 and $97.75. Obviously a high-volume customer like Verizon pays a lot less, while a small pizza shop pays about these rates.
As for charging customers to use credit cards, that's actually a violation of Visa / Mastercard's Master Agreement. No merchant can nail you with a surcharge for paying by credit card unless they apply that same surcharge to every form of payment. No matter what the merchant says, they are wrong. Period. No two ways about it.
Checkout Fees | Personal | Visa USA | Personal | Visa USA (http://usa.visa.com/personal/using_visa/checkout_fees/index.html - broken link)
Mastercard is the same. American Express doesn't expressly prohibit charging a surcharge, but their terms state that AmEx customers must be treated exactly the same as V/MC customers -- and since THEY can't be charged a surcharge, neither can AmEx companies.
There are two ways around this.
The first is to reverse the idea. Rather than charge a fee for credit card payments, issue a discount for cash payments. It sounds ridiculous, but that's the agreement. There are some standards as to how it must be presented to the customer (the highest price must be advertised, with the discount revealed to the customer upon inquiry or purchase), but that's it. Pretty ridiculous, right?
The second is to call it something else. You're not paying a credit card fee, you're paying a "convenience surcharge". This means that you're paying for the "convenience" of paying online. This is perfectly in accordance with the terms of the Master Agreement, as long as you also apply the fee to people paying by check. And you can get around THAT by simply not accepting check payments over the website. But as long as you don't apply the fee to people paying in person, it stands.
This second practice sounds like what Verizon was trying to pull. Since they weren't charging customers who paid in the store or who made automatic payments, it probably didn't violate their card processing terms. They were arguing that customers would be charged for the "convenience" of making a one-time payment.
Sneaky and deceptive? You bet.
Illegal? Possibly. Ten states have laws banning payment surcharges. Connecticut has a very nice one, banning surcharges of any kind for all payment types. You pay the advertised price (plus tax), period, no matter what, when, where, or how. But for the remaining states (and probably most of those ten), definitely not.
The worst part about the credit card surcharge thing is that even if you catch a merchant doing it, the issue becomes a civil matter between the merchant and their card processor. You can't get your money back just because the merchant charged you an extra $2 for paying by credit card, since the merchant didn't violate any agreement with you -- only with their payment gateway. The merchant can get in some pretty hot water (especially smaller merchants like convenience stores and restaurants / bars), but you're still out your $2.
I knew this wouldn't stand. If it did, I would have gone into the local Verizon store and paid my bill $1 at a time by credit card. Verizon probably gets a pretty low rate thanks to their volume, so at 2% plus $.30 per transaction (I'm on a rewards card, the most expensive kind to process), they'd get about 68 cents for every dollar I paid. So for my $95 bill, they'd only get around $65.
If everyone did that, then the policy would have been reversed pretty quick.
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