Author: Trudy Howard, September 3 2018
Earlier today I ran across a social media post that claimed it was illegal for a store to charge a “credit card fee of .75 cent” and a comment on the post read “only in the hood.” Now, while I’m the 1st person to acknowledge that “the hood” (being defined by me as low income communities heavily populated with minorities) are targeted by unscrupulous business people, I do believe in giving accurate information when making accusations. To start, it is important to note that are differences between debit cards, credit cards, prepaid cards, surcharges, convenience fees, discounts, and minimum transaction amounts.
Merchants are allowed to give discounts to customers that use alternate forms of payments such as cash, debit cards, or checks. For example, if have an item that normally retails for $525, you can discount the cost to $500 for those that choose with pay with cash. (Reasonable fees and rules for payment card transactions, 2010)
It is LEGAL for a retailer to charge a convenience fee for accepting a different form of payment not typically used by the merchant. Convenience fees must be a FLAT FEE (not a %), clearly disclosed, and charged when a customer is using an alternate payment channel. For example, if Dan’s lemonade stand usually takes payments in person, and he has a customer that wants to pay over the phone, or online, Dan can charge a convenience fee. For more information, please contact your Visa/Mastercard acquirer.
It is LEGAL to charge a minimum transaction amount of up to $10 for CREDIT CARDS ONLY. Debit card users cannot be subjected to a minimum transaction amount. Also, merchants must set the same minimum transaction amount for all processors (so you can’t charge $5 minimum for Visa, and $10 minimum for MasterCard). Merchants should have visible signage indicating that the minimum amount exist, but it is not mandatory.
It is ILLEGAL to charge a surcharges on a DEBIT OR PREPAID CARD; However, it is LEGAL to charge a surcharge on CREDIT CARDS. Credit card surcharges must be shown as a separate line item, and although there are varying rules & calculations, a credit card surcharge can never exceed 4%. At the time of this writing 10 states have a ban on credit card surcharges; those states are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas—and Puerto Rico. (Visa MasterCard Antitrust settlement)
MasterCard Surcharge rules: “Merchants are permitted to apply either a brand-level surcharge or a product-level surcharge to MasterCard credit cards. A brand level surcharge is one where the merchant charges the same percentage on all MasterCard credit cards. A product level surcharge is one where the merchant imposes a surcharge on a particular MasterCard credit product. In both circumstances, the level of the surcharge is subject to a cap.” For more information, please contact your MasterCard acquirer. (Mastercard merchant rules https://www.mastercard.us/en-us/merchants/get-support/merchant-surcharge-rules.html)
Visa Surcharge rules: In the US Region or a US Territory, an Acquirer must ensure that its Merchant notifies Visa and its Acquirer in writing at least 30 calendar days before assessing a US Credit Card Surcharge. The surcharge must be added to the Transaction amount and not collected separately. Surcharges must be clearly disclosed to the Cardholder before the completion of the Transaction, and the Cardholder must be given the opportunity to cancel without penalty after the Surcharge is disclosed. For more information, please contact your Visa acquirer. (Visa merchant rules https://usa.visa.com/support/consumer/visa-rules.html)
DIFFERENCE IN DEBIT CARD, PREPAID CARD, & CREDIT CARD
Although a debit, prepaid, and credit card can often be used like a credit card, and can have the MasterCard & Visa logo, there are distinct differences between the 3.
· Debit card: Linked to a bank account.
· Prepaid card: You’ve put your own money on the card and loaded it in advance.
· Credit Card: You are borrowing money to purchase an item.
Discounts & Reasonable fees and rules for payment card transactions 15 U.S. Code § 1693o–2 – Durbin Amendment https://www.law.cornell.edu/uscode/text/15/1693o-2
Minimum Transaction amount PUBLIC LAW 111–203—JULY 21, 2010 DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT https://www.congress.gov/111/plaws/publ203/PLAW-111publ203.pdf
MasterCard Minimum Maximum Transaction https://www.mastercard.us/content/dam/mccom/ens/documents/Min_Max%20Feb%202015.pdf
MasterCard surcharge rules https://www.mastercard.us/en-us/merchants/get-support/merchant-surcharge-rules.html
Visa Minimum Maximum Transaction https://usa.visa.com/dam/VCOM/download/merchants/minimum-transactions-credit-card.pdf
Visa convenience fee, surcharge, minimum maximum https://usa.visa.com/support/consumer/visa-rules.html
Difference between debit, credit, and prepaid cards https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-prepaid-card-a-credit-card-and-a-debit-card-en-433/