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Old 11-24-2007, 11:33 PM
 
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I hope this is the best subforum to post this:

Looking to book a hotel for 3 nights and on one smaller motel's website, they inform that there is a "5% c/card service fee."

Is this even legal? I'm going to call my credit card co. tomorrow and see what they think. I'm certainly not going to book this, but was very surprised to see it.
Has anyone else come across this before? Can't imagine it's very common.
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Old 11-25-2007, 12:16 AM
 
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When you pay by credit card you create a receivable. Usually what happens is the business in question (the one to whom you paid money) "factors", or sells, that receivable to the credit card company or it bypasses them immediately. As a "cost" of having such a luxurious service, CC companies then turn around and remit only partial payment to the hotel, less the "service charge".

The fee is probably an attempt to collect the amount withheld from the hotel by the credit card company.

And yes, it is legal.
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Old 11-25-2007, 03:24 AM
 
Location: Cary, NC
2,407 posts, read 10,097,590 times
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Visa and MasterCard prohibit surcharges, and American Express discourages them. Amex does prohibit "discrimination" against the Amex card, however, so if a merchant accepts Visa and MasterCard (and cannot impose a surcharge under those companies' rules), the merchant may not discriminate against Amex by imposing a surcharge.

The following states prohibit merchants from adding surcharges to credit card transactions: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

Source:
Financial Guide: MERCHANT CREDIT CARD ABUSES: What They Cannot Ask You To Do

Financial Guide: MERCHANT CREDIT CARD ABUSES: What They Cannot Ask You To Do

Merchant Account Information: Credit Card Usage, Surcharges, Number Truncation, Void, Decline and more

Quote:
Card Usage Surcharges
As you know, it is against the rules for merchants to charge cardholders a surcharge for using their credit card. The penalties for being reported by a cardholder escalate from a slap on the hand on the first offense to a $5,000 fine on the third. However, there are two exceptions. Merchants may impose a Convenience Fee if this fee meets the following criteria: 1) It is a flat fee and not a percent of the sale, for example, a flat $5 regardless of the dollar value of the sale, 2) It must be charged equally on all forms of payment including other card products, checks, and even cash payments, 3) It is charged only for non-standard acceptance methods, for example, an Internet business cannot charge for accepting payment over the Internet and a restaurant can't charge for accepting cards at the POS (these are the standard acceptance procedures for these industries, and 4) It must be fully disclosed prior to the sale. The second exception is the Tax Payment Pilot currently taking place. In this pilot, a Service Fee is allowed given the following: 1) The merchant must be enrolled in the pilot, and 2) The transaction and the Service Fee must be two separate transactions, for example, the tax payment transaction of $5,000 and the Service Fee transaction of $125.
So the short answer? If you are dealing with Visa or Mastercard, they cannot charge you a surcharge for accepting payment with Credit Card instead of cash. This is a rule that Visa and Mastercard have with the merchants that want to accept those types of credit cards. Credit card surcharges are also made illegal in certain states.
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Old 11-25-2007, 03:37 AM
 
Location: Chicago
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I used to work in the credit card industry, and based on my knowledge of the industry, here's my take: Percentage surcharges are not per se illegal, though they may be in certain jurisdictions (not many). However, at least here in the U.S., as jinxor above notes, the merchant account agreement that businesses are required to sign in order to process credit card transactions prohibits them from charging an extra fee for credit card transactions. Remember when gas stations used to charge 5 cents a gallon extra for paying by credit, and then one day that surcharge went away? That's why they went away; the day came when the market penetration of credit cards was so thorough that the credit card companies had the upper hand over retailers instead of the other way around. Ever since that day, retailer surcharges for credit card transactions have been verboten by contractual agreement. If the hotel in question is operating within the U.S., I'd call the major credit card companies and tell them about the extra charge the hotel is charging; they will set the hotel operator straight in a hurry.
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Old 11-25-2007, 05:15 AM
 
Location: NE Florida
17,835 posts, read 30,870,834 times
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thanks for posting this jinxor
Rep points for you !!!
I was familiar with most of the points but was not aware of the "service fee"
I am going to be using this come Monday when I go to pay our property taxes.
I want to use my CC because I want the points. But they charge a "service fee" for doing this. It is only a small amount so this has become a "principle" thing.
I may even have to print the Vantage article out to bring along.
The biggest thing will be the fact that the employees/ salespeople won't be aware of this.
The other day I "shared" with a salesperson that they are not suppose to accept credit cards that were not signed or just had "see ID" written on the back.
I got the "yeah right" look.
Education is the key.

karla
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Old 11-25-2007, 07:30 AM
 
Location: NJ/SC
4,321 posts, read 13,872,121 times
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coldwine is correct. They can charge the fee and call it anything they like. It's just like when you go to a gas station and they charge less if you pay cash. The hotel is having their guests pay for their cc fees, which is a percentage of the charge that goes through their merchant account.
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Old 11-25-2007, 08:07 AM
 
Location: Chicago
38,704 posts, read 93,499,721 times
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Quote:
Originally Posted by Rapture View Post
coldwine is correct. They can charge the fee and call it anything they like. It's just like when you go to a gas station and they charge less if you pay cash. The hotel is having their guests pay for their cc fees, which is a percentage of the charge that goes through their merchant account.
That's not entirely correct. While there is usually no statutory prohibition against such surcharges (depending on the state/locality), there is typically a contractual prohibition against them as I noted from industry experience and as jinxtor noted by reference to primary and authoritative sources.
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Old 11-25-2007, 01:08 PM
 
11,375 posts, read 47,154,917 times
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As a Colorado business accepting credit cards, all of my "merchant agreements" with various CC processors required that I not discriminate against the customer paying with a CC by charging them more than I did a cash (check) customer, under penalty of losing my CC processor.

However, the specific language of the contracts was such that I couldn't add a surcharge for the CC customer. Some legal minds figured out that a way around this was to charge the normal price for all, but allow a percentage discount for cash.

So, it's very common for us to see this in practice in Colorado and Wyoming now. You will see many gas stations with a posted price for "cash" and for "credit". We go to a lot of auctions in the area, too, and the auction houses will accept credit cards with a surcharge fee or a discount for cash. It's published in the sale bill and ads for the auctions, so you are forewarned about the charge.

I've mentioned to a couple of vendors that they couldn't discriminate against my use of a CC for a purchase, and they just laugh it off. It's their "Policy". Don't want to pay a surcharge? your option is to not do business with them ... and I don't, but I let them know why.
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Old 11-25-2007, 01:49 PM
 
1,501 posts, read 5,356,561 times
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Thank you, all, for your great responses!

I called my MasterCard and she said "Ohhh noooooo, they should not!" To paraphrase, "that fee is the responsibility of the business owner, not that of the customer."

I remember a driving school instructor back in the early '90s tacking on some fee because I paid by CC; called the CC company, and they did tell me it was "illegal" back then (this was in Pa). They deducted the charge from my bill and said they'd contact the driving school company about it.
This has got to be the first time since then that I've come across this policy.
Good point about the gas stations, though! Didn't think of that :>)

Thanks again :>)

Oh, just the other day, we went out to lunch and they had a sign that they no longer accept Discover Card. The owner told us it was because of their (more unreasonable) fee for him to be able to accept them at his restaurant.
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Old 11-25-2007, 11:30 PM
 
Location: Chicago
38,704 posts, read 93,499,721 times
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Quote:
Originally Posted by Travel'r View Post
Oh, just the other day, we went out to lunch and they had a sign that they no longer accept Discover Card. The owner told us it was because of their (more unreasonable) fee for him to be able to accept them at his restaurant.
The reason why many places won't take AmEx, Discover or both is because you have to get separate merchant accounts for them, and those merchant accounts carry monthly flat fees. You only need one merchant account to process both Visa and Mastercard. You need a separate one each for AmEx and Discover. So to process all 4 cards, you need 3 merchant accounts with 3 sets of monthly flat fees. For high-volume retailers, that's not a big deal. But for mom-and-pop businesses, that adds up pretty quickly.
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