Being a credit cardholder, we think we know the basics of having a card. You may know your interest rate and when your bill is due but what goes on behind the scenes? You may have noticed recently that some retailers are now charging a fee to use your credit card. In the past you may have only noticed this when paying your utility bill or property taxes. However more recently other business types have gotten in on this practice.
Why are more businesses choosing to pass a convenience fee along?
The answer is simple. It comes down to cost and saving money as a business. You may not realize but every time you swipe your card the business you swipe it at is being charged processing fees to accept your card. What’s even stranger is that the rewards cards we love so much as cardholders actually charges the business more to process those cards than a normal credit card. So, for our convenience of tallying up our rewards points the business is being penalized monetarily. It becomes harder and harder to absorb these fees so many businesses are now passing that fee along to the cardholder. They are instituting a cash discount program. This is remarkably similar to gas stations who list a cash price and a credit card price for fuel. They incent customers to pay with cash because this is the cheapest method of payment for a business.
Can a business charge a fee to use a credit card?
The answer is yes, they can. There are several ways a business can transition the fee along to the cardholder. The card brands have a surcharge program in states that it is legal. This allows the business to disclose the fee and pass it along at time of purchase. There is also a Cash Discount Program that is legal in most states that promotes cash usage. They institute a service fee or list cash price and credit card price for services and products.
Other Methods of passing the cost along
Ever since the implementation of credit card processing fees, businesses have been finding ways to offset the cost that they have to pay their processor.
- Very commonly, businesses have been raising their prices by the same percentage that they are billed to cover the cost.
- Ilegally passing the fee by not disclosing it by adding it to the total bill.
- Refuse to accept credit cards.
All these ways are in practice today to assist business owners in covering the cost of accepting credit cards. As a cardholder I prefer to have the fee disclosed upfront so that I can decide if I want to use cash or a credit card. This is the compliant way to pass a fee along and rightfully so. If you own a business or visit a business that is passing the fee along in a non-compliant manner let them know there are programs out there that will assist in implementing their cash discount program.