When merchants tack on card processing fees

Merchants can allow discounts for cash, but can't add a surcharge for plastic

Editor's note: The information in this article, while accurate when it was published in 2011, has since become outdated. Please see "Credit card surcharges now allowed."

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

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Question for the CreditCards.com expert

Dear Credit Guy,
We belong to a golf club in Michigan. We have just received notification that our dues for 2011 will be increased by approximately $50 if we choose to pay by credit card rather than cash or check. I always understood that a company that accepts credit cards could not pass that expense on to the consumer. Could you clarify this for me?  -- Alberta

Answer for the CreditCards.com expert

Dear Alberta,
You are correct when you state that merchants are not allowed by Visa, MasterCard, Discover and American Express to pass along their credit card processing fees to consumers. Merchant agreements with these companies prevent any surcharge or fee from being added to the purchase simply because the form of payment is a credit card. But (you knew there would be a "but"), merchants can offer a discount off the normal price of a good or service for paying with cash or check. How's that for a mulligan?

My guess is that the wording on the notice from your golf club is that members paying with cash or check will receive a $50 discount off dues. In this way, the club has avoided landing in the rough by violating any merchant agreements, while at the same time getting you to help foot the bill for credit card processing fees.  

Thankfully, consumers don't have to pay a fee for most of credit card purchases. For many companies, giving a discount for purchasing with cash or check doesn't work because the price that they advertise for their goods and services must be the price they would charge for someone using credit to purchase it. Due to competition, you are unlikely to see retailers charging 2 percent to 4 percent more for their items to cover their processing fees. Instead, the cost is typically absorbed by the company and taken out of their profit margin.

Generally speaking, companies are allowed to charge "convenience fees" for credit card payments if accepting credit cards is not a normal part of their business practice. An example of this would be a utility company that typically receives payments by check but allows customers to pay at the last minute with a credit card as a convenience.

The irony here is that as more payment systems move online, including making payments with your cellphone, and private entities and government agencies move to digital payments by direct deposit or debit card, it could be we are not far from being charged a fee for paying with cash or check!

My advice to you is to write a check for your club dues and save the $50 divot caused by paying with a credit card.

Take care of your credit!

See related: Will reducing merchant card fees help or hurt consumers?, Some merchants don't play by the credit card rules, More government agencies move to digital payments, Will reducing merchant card fees help or hurt consumers?, How credit card transactions work

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Updated: 03-26-2019