More On Minimum Purchases, Surcharges, And Other Credit Card Merchant Agreement Violations, From The Companies Themselves
We've posted a lot of stories of businesses requiring customers who pay with a credit card to make minimum purchases, or pay a surcharge, or show ID. And as we've repeatedly said, the businesses' merchant agreements with the credit card companies forbids these practices. A reader wrote in to argue that this might not be true, as many businesses contract with third-party credit card processors, and are not bound by the merchant agreement. So we did some investigating.
There's a lot of information below, so here is an executive summary:
- Regardless of who the merchant uses to process credit card transactions, merchants that add a surcharge or require a minimum purchase to accept a Visa or MasterCard credit or debit card are violating their merchant agreement, and you should report them to the bank that issued your card.
- American Express does not forbid minimum purchase requirements, but they require parity with the other credit cards, so a minimum purchase requirement just for American Express, but not for Visa, is not allowed. American Express does not allow surcharges, unless they are assessed as a convenience fee...
- Convenience fees are allowable surcharges for specific types of payments, generally to schools and government entities (like taxes or fines).
- Asking for ID is not prohibited, but refusal to show ID cannot, by itself, be a reason for the merchant to halt the transaction.
We contacted Visa, MasterCard, and American Express about their merchant agreements and asked for clarification. We also spoke with a friend who owns a local bar that, like many other bars in the area, displays a sign requiring a minimum purchase for credit card use. He reviewed his merchant agreement to see if there were any loopholes or discrepancies with what the credit card companies post on their websites. And we asked the companies whether there were any exceptions for educational or government entities, as we've received reports from readers that their colleges were charging a "convenience fee" to students who paid with credit or debit cards.
Does this only apply to credit cards? What about when I use my [Visa, MasterCard, American Express]-branded debit card?
We've mentioned this before, but it's worth repeating: the merchant agreement applies to a consumer who uses a debit card with a major credit card company's logo on it, regardless of whether he signs it or uses a PIN. Note that this is for things like minimum purchases, surcharges, and requests for ID; a credit card often offers additional consumer protections for chargebacks, warranty extensions, and buyers assurance plans.
What's the deal with third-party processors?
After we posted about a McDonald's adding 25¢ to credit/debit card purchases, commenter Corporate Shill wrote in to tell us that many small businesses, like bars, use a third-party credit card processor to offset the expenses of purchasing credit card terminals and accepting different cards:
3rd Party CC Processing Companies offer Merchant Bank services to small businesses that cannot afford to offer CC services to their customers, or to businesses that have been denied CC processing by Merchant Bank.(In simple legal terms the 3rd Party Companies will act as a straw man between the Merchant Bank and the business that actually accepts the CC from the customer.)
In addition to offering Merchant Bank services the 3rd Party CC Processing Company will often provide the data terminals and supporting equipment at a very low cost or even free to their clients. The data terminals, because they are accessing the 3rd Party network rather than an actual Merchant Bank network, can be programmed to accept an even wider variety of CC's and perform other functions, such as check clearing.
We asked the credit card companies whether a merchant that contracts with a third-party processor still has to adhere to the merchant agreement: MasterCard simply said "Yes," and American Express said that these merchants still sign a contract with the credit card company regardless of how they sign up for card acceptance. Corporate Shill disputes this, saying that using a third-party processor does not require the merchant to sign an agreement with the credit card companies, but the companies, at least American Express, disagree.
Are government and educational entities exempt from these rules? What is the exception for convenience fees?
MasterCard says:
We allow a "convenience" to be charged by certain educational institutions and public sector merchants, including:In addition, a merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used. For example, a merchant that has a website that accepts MasterCard, Visa and direct debit to a checking account as its three forms of payment, may ask for a surcharge IF the fee is applied to all three methods of payment. The same applies to a merchant that has a physical store that accepts cash, checks, MasterCard and Visa. The store can charge a fee as long as the fee is applied to all four methods of payment.
- Elementary and secondary schools for tuition and related fees, and school-maintained room and board
- Colleges, universities, professional schools, and junior colleges for tuition and related fees, and school-maintained room and board
- Local, state, and federal courts of law that administer and process court fees, alimony, and child support payments
- Government entities that administer and process local, state, and federal fines
- Local, state, and federal entities that engage in financial administration and taxation
- Government Services; merchants that provide general support services for the government
American Express says such fees are only allowed "in very limited industries, for example, taxes."
Can a merchant ask for ID with I pay with a credit card? Can I refuse to show it?
We've addressed this before, too, and it also bears repeating, along with a little elaboration from MasterCard: "However, to be clear, the MasterCard rule does allow merchants to ask for ID. Our rule prohibits the merchant from refusing to perform the transaction solely on the basis of the cardholder refusing to provide the ID. (If the merchant asks for ID and the cardholder refuses, then the merchant can either perform the transaction or call their acquirer for direction.)"
That being said, this isn't going to help you when you're out of cash and the guy at the convenience store won't let you charge that can of Drank. But reporting these violations, to the credit card company, to your issuing bank, and to us (preferably with pictures), will draw enough attention to the merchant that it will, hopefully, change its way.
This is a test using rich text formatting and html links. It's the generic "company" ad that should appear on all posts with the Company category if they don't have an ad attached to a specific company.
Post a comment
Comments:
Heh, I know that sign! That's at Cooter Brown's, in the Riverbend, uptown NOLA.
Is it against the agreement to have a sign up, but not go through with it? Kind of like when you put up a fake camera or security sign. You're not going to do it, but people maybe won't charge small amounts to prevent the charge, even if you never charge it.
What would be interesting is learning what MC / Visa / Amex's penalties are for violations.
Their policies are pretty clear, but given the widespread violation of their policies, I would suspect enforcement is nill. Perhaps nothing is done or a meaningless warning letter?
If the account was immediately terminated and only provisionally reinstated for a fee, I bet the quantity of these flagrant violations would stop.
I file this in the same pile as those places that put up signs reading "We reserve the right to refuse service to anyone for any reason." (a ruling in the 90s made those signs technically illegal in my state - anti-discrimination statutes, etc.) Yet many small businesses still sport these, mainly so they have something to point to when a drunken patron is hassling them. If it's a small neighborhood store wanting a minimum on CC, i'll oblige to help them out, I know that even offering CC transactions can cost them money. But, yeah, 2$ surcharge on purchases? I'd report that. There's a reasonable limit - you can't just make up your won rules willy-nilly.
..er, "your *own* rules..."
I live in a college town (Isla Vista, CA) and every little store in town charges a fee and/or minimum and after reading the first post I now confront the owners of the stores but they all continue to add the fee.
Reporting sounds nice but I find it hard to believe it will help...
Any merchant can easily get around the rules by raising prices across the board and then offering the regular lower price as a "cash discount."
I just got into a discussion about this with a local merchant that was contemplating charging a minimum / fee, I let her know that fees/surcharges were against Texas law and her merchant agreement as well as a minimum purchase amount being against her merchant agreement, she came at me w/ the same argument some commenters on here say that I could have no idea what her merchant agreement said, to which I replied MasterCard it's self says otherwise, and your acquirer is bound by contract WITH mastercard to put that in YOUR contract otherwise your acquirer wouldn't be an acquirer. I also informed her that favoring another payment method over credit was also against the agreements, but that I wasn't going to report her for such as I can understand where she is coming from and she DID accept my card. Then right down the street I went to a convenient store to pick up some smokes and they tried to say there was a $3 minimum.. I just shook my head and walked out.. All these small business are whining about hard times in the economy -- tough, don't take credit if that's how you feel then.
Frankly, I really couldn't care less about minimums and asking for ID. I just don't like surcharges.
@octopede: I support businesses to discriminate however they wish. The market will punish them. But, it's their private property and their right.
I do have a problem with these cc violations, however, because the merchants have signed a contract with these companies. The contract should be upheld.
I think the problem is that while the contracts are being violated, the people who can do anything about it wont, because the only option they have is to lose money over it.
The Arco in the area charges a 45¢ fee for every transaction, it appears that this isn't allowed, but they've been doing it for years.
"
In addition, a merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used.
"
Another darn loophole. In the words of the old Cowboy and Indian Movies the CC providers speak with forked tongue. No CC surcharges allowed, but a convenience fee is allowed.
And then there is that ID crapola. Consumers are told "No ID". But then the CC language speaks with forked tongue and says "However, to be clear, the MasterCard rule does allow merchants to ask for ID. Our rule prohibits the merchant from refusing to perform the transaction solely on the basis of the cardholder refusing to provide the ID".
Well guess what, a merchant can legitimately refuse a suspicious transaction (ie somebody buying large quantities of TV's not wanting to wait till the next day when the models are going on 20% off sale), and to the punk clerk waiting on you... no ID is a suspicious transaction. So you are screwed. And the Merchant Agreement let's you be screwed.
I wanna nominate VISA/MC/AmEx as The Worst Companies in America.
I won't use my credit card if I know my transaction is really going to hurt the seller, like for buying a soda and bag of chips. I try my best to use cash when it's a local business I really care about, also. I don't buy the third-party contract stuff; I'm sure the "rules" paper got shredded or filed away the day the merchant signed it and never looked at.
@Lucky225: The sad reality is that less and less people carry around cash anymore. I know I don't.
I feel, though, that the CC companies do very little to combat this. It's in their best interest to allow them to do surcharges because to increases their bottom line.
Are there a ton of New Orleanians on the Consumerist?
New Orleans Consumerist meetup, (to drink?)
once again, nothing on discover card.
disappointing...
I wish everyone asked for ID. I used to do it as a cashier whenever I got a card that wasn't signed. I can't even believe the people on here who make a huge fuss over it. Guess what - there's no such thing as anonymity anymore, unless you're living off the grid. Get over it. If you have a credit card, you've already put yourself/your identity at risk - refusing to show ID or to sign your card just means you're dumb. Puffing yourself up like a rooster talking about "rights" which mean nothing when dealing with a private company - ridiculous.
I dispute surcharges every single time I see one. I will never agree to them in person.
Minimums - well, I can't really blame the merchants, but I won't support them or shop at their stores either.
So this is my apartment company's billing page: [universityhouse.com] They clearly state "Credit Card Transaction Fee." Do I report them? Should I report them to Wells Fargo (my bank) or Visa?
I wonder how this works in foreign countries... Almost everywhere I tried to use my credit card, they wouldn't accept it unless I was buying a certain amount.
I just got back from Las Vegas and EVERY place required ID with credit cards. I don't think I was able to complete a single Credit Card transaction without showing my ID.
The CC merchant agreement has become like the speed limit law on the interstate :They can't police every little violation,so its becoming more and more irrelevant.Merchants are trying to shift the cost of the system from themselves to the card holders.This,even though the system is a direct,tangible benefit to their business (by allowing customers to spend more,more often than they would otherwise).I simply refuse to do business with merchants that impose a "convenience fee" for something that is a cost of their doing business. Call it a "fee" ,call it a "surcharge" , whatever,but it means a higher price for me.
If everyone would do this ,it would stop as soon as the next months sales numbers were available.
@hellinmyeyes: I'm the same way. These small mom and pop shops that state a minimum amount to use a CC I have no problem with at all. Even if some don't have a sign I will pay cash because I believe in supporting small local business. However, stores like WalMart, I wouldn't hesitate a second to charge a pack of gum.
@dako81: No, it's not their right. They voluntarily waived their right to charge a surcharge when they chose to take credit. If they don't like it, no one is forcing them to take credit.
@linus: But it IS in the interest of the credit card companies to discourage surcharges. If this practice were widespread, it would undermine the popularity of credit cards. That's why it's in the merchant agreement. I can see that it's in their interest to tolerate it if it's only a few local small businesses that are doing it, but I imagine they have it in there so they can squash the merchants for this practice if it got to be too popular a practice.
@Corporate-Shill: So, who eats the loss when a stolen card is used?
If a store runs the card and gets an electronic approval, then I suspect that they're not liable for the loss if the card's true owner later reports the card stolen. If this is true, then why in the world would a store refuse to sell that 'truckload of TVs'?
Am I missing something?
Here's the solution for the merchants... put up a sign that states:
"There is a $2 fee for all transactions. Cash discount $2."
What about Ticketmaster? I doubt they use a third party processor and whenever I use them there is a boatload of fees/convenience charges. This is most likely off topic but I just bought some tixs where the fees were close to 30% of the price and need to vent!
@RonDiaz:
Yea,
Same happened to me when I was in las vegas, I reported every merchant that I interacted with, upon return THOSE merchants weren't requiring ID, but others still were, so I reported them as well.. You just have to keep reporting :/
@RonDiaz: I used my credit card a couple times when I went to Vegas a few months ago and never once got asked for my ID except when I was buying beer. But then again that was over Memorial Day weekend and there were a crapload of people in town for the UFC event, so maybe everybody decided they weren't going to card just for the sake of speeding things up.
I agree regarding Arco - they've always charged that fee, at every single one of their stations... is there any way we can mobilize and kick their ass for that? I mean, Arco is a pretty big company, it's not some mom and pop store..... wouldn't it be worth it to make them the big deal in the media about charging illegal surcharges, scaring the other guys that do it into changing their practices?
@linus:
This is true, I happen to be one of those people. And because of that I would much rather the merchant just NOT accept credit cards instead of posting MC logos on their door only for me to find out I can't use my mastercard there because they have a minimum even though they're not allowed to. If they would just stop accepting credit cards and take their mastercard logo stickers off their window, I wouldn't have walked in in the first place. I realize that this will hurt the business, but the minimum it's self is going to hurt because I'm just gonna walk out and never shop there again anyways.
I rarely carry cash, and I've just gotten to the point of avoiding any shop that pulls this crap. It's against the rules, period. If I want to use my debit card for a .50 cent pack of gum, I'm allowed to, unless you want to be a whiney store owner and say "Not in my store."
Fine, then next week when I buy a keg for my house party, I'm not buying it here either.
"Oh the economy is so bad!" yet you're willingly turning away paying customers? Today I'm buying a 3 dollar sandwich, tomorrow I'll be back to buy a couple bottles of wine. I once had a guy tell me his 'minimum' was 7.00 when he rang me up for a six pack that came to 6.85 with the deposit. I left the thing on the counter and walked out.
Here's a slightly different variation that seems to include multiple tactics. I was at a bar this weekend and they had signs stating that there was a $20 minimum charge for credit cards, but also an mandatory 20% tip added to the bill. Seems like the minimum is against the rules, but what about the automatic gratuity?
@dopplerd: Evil Ticketmaster charges their 'convenience'and 'processing' fees to ALL transactions, regardless of method of payment.
Therefore, it is not a surcharge for using a credit card. It is basically a tax on the stupid and weak who will continue to see shows that are exclusively pimped by Ticketmaster.
If that 50 cent pack of gum is going to cost the merchant 25 cents in fees, I'll oblige and pull out some cash (or go without gum). All this merchant agreement crap on the part of the consumer just sounds like petty whining to me.
Leave it to Alex to post a pic he took from the liquor store, or his "second home" as he calls it. lol. They must like you as a customer to let you take pics and post them.
@nicemarmot617: I agree that asking for ID is a good thing, but I'm not going to force it one people who don't think it is.
I'm very comfortable giving cashiers my ID, if requested. (I have "See ID" AND signature on the back.)
@sicknick: I don't defend what their doing, but at the same time, if the company LOSES 10 cents for selling you that piece of gum, then I'd be concerned too.
Then again, I'd probably question why you went to the store just to buy a pack of gum. The only place you can pull that off is 7-11.
@EarlNowak: Indeed. I love Cooter Brown's, but I hate these signs, and I hate even more that they don't count purchases in the total (although with all that beer, spending $20 has never been a problem).
@SkokieGuy: so, lets see - there is a show I want to go to. The tickets are on sale via ticketmaster. I, therefore, need to purchase via ticketmaster to go to the show. I, therefore, am stupid and weak.
Riiiiiight.
I go to the box-office when I can to buy sans fees, but that's not always feasible. It's a fairly unavoidable practice if you want to see something at a larger venue. It doesn't make you stupid and weak because you have to pay it to get the tickets online.
I'm glad to know this. I went to a Sushi place with no cash and only after I ordered a drink did I notice the sign that said "$10 minimum order for credit card payments". First and last trip there.
The last time I was confronted with a 50 cent fee for a $5 purchase I told the cashier it was illegal. She told me it was the owner's policy. I opened my cell phone and started to call a number. She asked me what I was doing. I said I was calling the state police to have her arrested for consumer fraud. She opened the cash drawer and handed me fifty cents. The minimum CC purchase sign was taken down by the next day. YMMV
@SkokieGuy: I'm pretty sure it's just a warning letter, but I was also told that a handful of complaints can quickly lead to more drastic action, like getting the merchant's ability to accept credit cards revoked.
That's also why I asked readers to keep sending us these stories. The more we write about this stuff, the more likely it is to get more widespread attention.
What I really hate is when the cashier has already ran my credit card, handed me the receipt and had me sign, and then asks to see my ID. I don't want to make a big fuss, and they are still holding the items that I have now already paid for. I would much rather have them tell me up front that I will need to show ID if I am using a credit card. That way I can tell them nevermind and walk out of the store.
@rtwigg: I think surcharges are ridiculous, but they're certainly not crimes. You took that way too far.
I'm sorry, but I work for a small business and I patronize small business as much as possible, and I feel that we have every right to require a minimum purchase amount for plastic, though i think the surcharging/fees is BS. We are NOT walmart people. In a store that maybe does a couple of hundred dollars a day in sales, if it's a good day, we can't afford to lose so much money in merchant processing fees. I had someone come up to me with 20 cents worth of merchandise and try and put it on a credit card. I looked at them like we were crazy. We'd LOSE money on a purchase that small. And hello, we have to pay the CC processing companies first, then we have to try and cover the cost of merchandise itself, never mind trying to pay rent, electricity,employees etc etc. A $5 or $10 minimum fee is not asking that much.
Get over it people and carry cash, for crying out loud. There was a time when plastic didn't exist, and people got on fine then. I almost never use my debit card and pay with cash, it curbs my spending to actually SEE what's in the wallet as opposed to racking up a balance on a credit card. No sir, you credit card companies are not going to ever make any interest off of me or get me into debt. I do take a special delight in using my debit card for super small transactions at wal mart. Might as well use all that small change leftover from bills in my account for something... and having worked there and knowing how they treat their employees, and how CHEAP they are.. yes, pay out the butt in merchant fees. Somehow though I figure they probably make it up in sheer volume alone.
Who's get the money for those surcharges?
If the companies don't allow them, do they still accept them?
As long as people are using their credit cards at the merchant locations, the credit card companies are making money, so they don't really care THAT much about it.
I don't see any change coming any time soon.