Companies charging a "fee" to accept credit cards - legal?

[IOBA]

There have been a lot of changes in the last few years regarding credit cards.

MOST retailers don't charge a "fee" to accept a credit card.  In the past few weeks, I have had several companies inform me that they will accept my credit card, but will charge me an additional 3% percent on the total.  

Both amounts to be charged were $5,000 or more.  Both companies advertise that they accept credit cards.  Both companies said the 3% fee is charged to everyone, regardless of the amount charged to the credit card.  Their rationale was their bank charges them a fee, so they are allowed to charge the consumer a fee.  *** The charges are NOT going through a third party.  The actual company is running the credit card through their own equipment to get the funds.

Is this legit?  In the old days, it was illegal for companies to charge a fee of any kind to the customer.  I distinctly remember that was part of my signed agreement with the bank to be allowed to accept credit cards.  And when I talked to VISA directly (years ago), they said anyone accepting a VISA credit card was prohibited from charging any additional fees to the consumer.  VISA said Mastercard had the same rules.

According to my CPA, the "fee" that the company is charged for accepting a credit card is 100% tax deductible as an operating expense.  I actually told that to one company.  After grumbling, they decided the MAX they would accept by credit card is $5,000, but they want the othe $5,000 in cash.  The other company said they didn't care.  They want more than $12,000 in CASH.  

So back to my question - do the rules allow companies set up to accept credit cards, to charge an additional fee to the consumer?

[wasCB14]

Last I heard, it was regulated on a state-by-state basis.

[K-in-Boston]

There was a class action lawsuit that overturned Visa and MasterCard's requirements on not allowing surcharges for paying with a credit card vs. other means.  It is still forbidden in (I believe) 10 states, including Massachusetts, by state laws.  However if you're doing interstate commerce, I think that bypasses the state laws.

I dislike businesses that do it; merchant fees are a cost of doing business.  Period.  Customers paying with a credit card also tend to spend a lot more than non-credit customers, so I think merchants are cutting into their own profits by taking the short-sighted approach of openly passing on fees to their customers.

Edit: Just to clarify, it was never "illegal" to charge the fee in states that did not prohibit the practice, but it was a violation of the terms of the merchant agreements to accept the card brands.

[jl4]

Yes. Retailers are allowed to offset the expense of accepting credit cards, up to 4% (not debit cards) with a couple of exceptions. In California, a retailer cannot impose a surcharge, but can offer a discount for not using a credit card. American Express forbids it, specifically.

And $10 says it's not the bank, it's their credit card processor. Everyone along the chain from the processor to your bank takes a cut of the transaction.  From the merchant's perspective, by swiping a card for $5,000, they're taking a $150 hit (3%) right off the top so you can use your credit card.  

https://www.creditcards.com/credit-card-news/can-doctors-office-add-credit_card_surcharge-1585.php

[wasCB14]

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@jl4 wrote:

Yes. Retailers are allowed to offset the expense of accepting credit cards, up to 4% (not debit cards) with a couple of exceptions. In California, a retailer cannot impose a surcharge, but can offer a discount for not using a credit card. American Express forbids it, specifically.

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In CA, I've seen some "50 cent fee for using CC under $10" signs, as well one "$1 added for all CC transactions" sign. The latter merchant was V/MC only.

[QuakerOatmeal]

I get so annoyed when I'm trying to pay a bill and they tack on a 2.5-3% fee to take my money. Like beyond annoyed. It's so obnoxious.

[pipeguy]

Here is a summary: https://www.valuepenguin.com/credit-card-surcharges-convenience-fees

[sarge12]

Many might disagree with my opinion on this, but I have no issue with a business tacking on an extra fee if the customer uses a credit card, as long as that is clearly stated beforehand. The merchant must pay a swipe fee for accepting a credit card, and in order to make a profit, the cost of the swipe fees are passed on to their customers. The ones who charge extra for use of a credit card are choosing to pass these costs on to the card user, rather than everybody, which in my opinion is fair. I have always thought it was somewhat unfair to the cash paying customers to have to pay more for their goods and services to benefit those who use credit cards. I will always use the credit card if it does not cost more to do so, and use cash if it does. Actually when you think about it, the very poor are usually the ones who have no credit cards, and are charged more for what they buy, so I can use a credit card.

[IOBA]

Edited - I read the replies and the article that was linked.  (Thank you for the link!)

With both of the companies, the transaction falls into a gray area.  They both advertise that they accept credit cards and neither place discloses the "fee" (3% for one, 3.5% for the other) in the marketing or social media.  There are no signs at the place of business that states they charge a "fee" for credit cards.  

One could argue that they can't pass along the fee, since they advertise that they accept credit cards, making it seem like it's an ok, daily thing to have customers use credit cards, and they don't disclose the fee with signage.

One could argue that it doesn't matter about the fee, since they VERBALLY told me there is a fee.  As an informed customer, I can make an informed decision about whether I use a credit card or not.

The big challenge is these are big ticket items and no financing is offered.  (One bill is 10k and the other is 13k.)  They want CASH.  One place will accept a check, but for only part of the amount.  

Ah well,  I don't feel like I have a choice.  I know now the current rules.  Sigh.

[CreditCuriosity]

To me it seems like a company is being "Penny wise and dollar foolish" especially high end companies was looking for blinds for my new place one place wouldn't take CC thus they lost out on probably 3-5k on a purchase where-as i went to another place same blinds for the same price and they took CC.. Who got the sale?  A place literally can put themselves out of business not taking CC in todays society or charging a "surcharge" to use one.  I know the cost is usually passed on to the consumer by higher prices in general but if two retailers sell same things for the same price and one adds a 3% surcharge and the other one doesn't then the above saying is very applicable here.  I truely believe in todays society it is part of the cost of doing business as k-n-boston stated