You Won’t Get a Charge Out of Me

By: Mr. Wilson on February 7, 2013
Our good buddy Fletch is hot and bothered over local businesses that charge a fee for using debit and/or credit cards. He thinks those businesses should be shamed for the practice, and perhaps many of you agree. His assertion as I understand it -- although I hope he'll correct me in the comments if I'm wrong -- is that credit card fees are simply a cost of doing business and that they should therefore be rolled into the cost of the goods or services being offered for sale. By adding a surcharge, the businesses risk presenting a dishonest picture of their prices. And besides, everybody (give or take a few) uses debit/credit cards these days. Get with the times, folks! I take a different perspective. I won't go so far as to say that I like the practice of adding a "plastic fee", but I do fully appreciate why businesses do it and I support their actions. Credit card fees are a substantial expense for many businesses, and in particular for small businesses and businesses that deal in low-price items. The cost of each transaction to the vendor varies, but it is typically comprised of a set fee plus a percentage of the total sale. Those costs add up. Some local businesses have opted out of the costs altogether. Ivanna Cone comes to mind as one example. They're a strict cash-only business in part because they don't want to pass on the extra costs to customers. (Their ice cream is pricey enough as it is!) As long as the practice of charging extra for credit card users is transparent, I don't see a problem. Plastic fees are merely an extension of the age-old practice popularized by gas stations of offering a separate cash price and credit price. Customers have a clear and informed choice. That sounds like a good thing to me. Retailers could certainly abuse the practice, of course. They could charge more than they're permitted for example, tacking on extra fees in a sort of punitive swipe at card users. That's not kosher and customers are right to turn away from those businesses that engage in the practice. It's also possible for businesses to make their fee structure opaque, hiding their fee notice on a sign hidden in some back corner of the store. Again, that's dirty. Credit and debit cards are great for consumers for a lot of reasons. Convenience is the primary reason I carry them. I'm ok with that convenience coming with a cost, particularly when that extra cost is openly presented to me. It kills me that the owner of Taj Mahal had to pay three extra transaction fees last night because I stupidly handed him an expired debit card instead of the correct one. (That's right, he was charged a fee even though the transaction was declined!) The extra transparency forces consumers to think about the true costs of our decisions. That's a good thing. Hopefully it leads to lower fees and/or better credit card services over time. In the end, I can't join Fletch (et alia) in his quest to shame local businesses for a practice that I find to be more good than evil. Perhaps I'll change my mind if big boys like Hy-Vee and McDonald's join in. For now I think it's a reasonable reaction by some small businesses to try to recoup their costs from those who create them. That sounds fair to me.


See what your neighbors have to say about this.

February 7, 2013 at 3:48PM

This is a cost of doing business that has been absorbed for years. Now they get the OK to add a surcharge to your receipt, let’s say for 3%, if you use a credit card. Are they now going to lower their prices by 3%, since they’ve been covering it as a cost of doing business forever?

(Note: Using a debit card will avoid the charges. At least it’s supposed to.)

The law says, I think, that they can tack on this fee up to 4%. So if you go into a store, and buy a $10 item, you are now paying .70 in tax, plus .40 in fees, so now your $10 item is $11.10. If it’s a food establishment, add your arena tax, too (which I support).

If the business is paying Visa or MC only 1.75%, or 2%, how would you know? They can just tack on 3-4% if they want.

If they are smart, they’ve already had that cost built into their retail price for years. So now they are just adding on to fat margins. (Ironically, gas stations were the only honest folks back in the day when they offered a discount for cash.) 

I’m a capitalist. I love to let the market decide. Let them post their signs and tack on their fees. Perhaps “shame” isn’t the word, but Twitter limits the characters. I don’t see a problem with calling them out publicly. Many retailers have already stood up to say they won’t add on the fee.

If a business owner is too cheap (or stupid) to pay an CC processing fees, they can simply not take plastic, much the same way many will not take checks. Some restaurants won’t let you use plastic for purchases under $5 or whatever. Each store can have their own policy.

Consumers deserve to be aware, which is why I threw it out there.

Put into another context - every business incurs costs just to be in business. Should we pay a rent surcharge to retail stores? If one store uses fancier fixtures than another, should we pay an upcharge? I don’t think so. To me, those things are factored into the cost of operating a business, and the prices passed along to consumers should take all of that into account, plus include a profit margin.

February 7, 2013 at 3:54PM

Just read about it again. It does seem to cap at 4% (I am not aware of processors that charge that much, unless AmEx does).

You can avoid the fee by using a debit card, for one thing.

And there are laws prohibiting these surcharges in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. I would suspect this list to grow.

Karin Dalziel
February 7, 2013 at 4:11PM

I was under the impression that Visa and MasterCard prohibit surcharges for vendors that use their cards, so they’re violating terms of service (I think) for tacking on surcharges.

(Nevermind, just looked it up - this was the case, but due to a lawsuit isn’t anymore: )

Anyway, I would rather businesses do this on an honor system. When I see signs like “Due to operating costs, please do not make credit card purchases under $10” or the like, I try to do it. And if a sign says “we prefer cash!” I will try to pay cash.

I don’t exactly begrudge a surcharge on credit card use, but it might make me pick another business that doesn’t do it if I only have a credit card with me. *shrug*

February 7, 2013 at 4:25PM

I’m with Fletch. It’s a cost of doing business, and just like other business expenses, it should be rolled into their prices.

For instance, I know of local businesses who use Square to process credit cards, and one Square-using coffee shop in particular that has a $3 minimum charge on all credit card transactions. Square only charges 2.75% for each transaction, so my $1.50 cup of coffee incurs 4

Mr. T
February 7, 2013 at 5:28PM

As a consumer and credit card user, I sympathize with Fletch’s reaction; and I personally think it would not be good practice to charge the fee. If they do. I generally agree with Karin’s approach. Businesses should definitely disclose the added fee (I assume its legally mandated to do so), and consumers will decide whether to shop there. I hate to say this, but, the invisible hand of the free market will work its “magic”.

February 7, 2013 at 5:58PM

Another vote of support for Fletch. It’s a poor business practice.  Borderline shady, and absolutely as bush league as charging for ice or straws.  In most cases, it tarnishes the customer experience and calls into question the business manager’s competence.

February 7, 2013 at 7:41PM

I accept is as a cost of doing business here, but man, when I get that end of the month list of credit card processing fees that stuff really adds up.

February 8, 2013 at 2:35PM

I’m with Fletch on this.  I run an online business that only takes credit card/PayPal/Debit card purchases.  Its the cost of doing business… and a tax deduction according to my accountant.

February 13, 2013 at 3:14PM

I agree!

So now I pay for the cost of my item/meal, add a 20% tip if it’s a restaurant, plus a surcharge for using a card.

Or is it just a “convenience charge?”

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