While I am sure that most of us, as consumers, have seen signs at a merchant location or on a website or been told that there is an up-charge for using a credit card to purchase goods or services, this issue is a very complex one.
First, most merchant processing contracts prohibit the use of a “surcharge” to offset a transaction fee.
An example of this is a merchant who, after ringing up an order and being presented with a credit card, assesses an additional amount to the consumer for the use of a card.
While surcharges are usually prohibited, the federal Truth in Lending Act specifically allows for cash discounts. It states in part, “the card issuer may not, by contract or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay by cash, check, or similar means rather than use a credit card.”
The act also requires that such a cash discount be “offered to all prospective buyers and its availability is disclosed clearly and conspicuously,” otherwise it may constitute a “finance” charge and then generate a whole host of other issues for a business to address.
If you are in certain non-face-to-face transaction environments and you are one of the eligible merchant classifications (typically government or other taxing bodies), you may be allowed to assess a “convenience fee.” If you elect to charge a convenience fee it has to be assessed on all types of payments collected via that mode of payment. In other words, if you charge a fee for a credit card transaction taken via mail, you must charge the same fee for a check also collected by mail. These fees can never be charged in a face-to-face environment and have to be equal regardless of the card type or payment type.
I understand that in today’s difficult economy there is strong interest in recouping as many costs of doing business as possible. But you should be aware that numerous studies have shown that the cost of taking cash or checks, although “hidden” within your bank statements and business structure, is similar to the cost of accepting cards. Whether it is a bounced check, the wrong change given or outright theft of cash, these are all costs of doing business that need to balance when comparing different payment channels.
[John Mayleben, Michigan Retailer’s Association’s vice president of technology and product development, writes a regular column on retail technology. Contact John at [email protected].] (Tire Review/Akron)
