What's up with this "we charge you an extra 3% if you use a credit card" bit?

[motley]

I never ran into this until this year; anyone else? Twice now I encountered this. Did some credit card law change or something? I may need to dust off my old checks and start carrying them around again...

 

[finnski1]

Run in to it quite often. Local restaurants etc.

 

[Midpack]

It didn't just start this year, but it has become more and more common over the past few years. CC companies have increased the % amounts they're charging merchants***, and once a few merchants began passing the cost directly along to consumers, more followed as a way to reduce costs. Merchants do pay that %, so they are happy to take cash or check without the CC surcharge for consumers so inclined. They net the same either way, and consumers now pay directly for the convenience of using a CC. It's real money! [the average below suggests families used CCs for over $49K/year in charges - sound high to me]

*** A law was just passed to cap late fees at $8, where some CCs were charging $30-40 or more. So surprise, they just increase swipe fees which were not affected by the new law, nor were high interest rates. Isn't the lawmaking shell game fun!

In 2023, credit card companies in the U.S. earned $135.75 billion from processing fees charged to merchants. Families paid an average of $1,102 in swipe fees in 2023, according to the Merchants Payments Coalition.

The money made from these fees increased at a faster rate than the actual money spent on purchases, adding fuel to the already fierce debate between credit card companies and businesses that complain about so-called swipe fees.

The average credit card processing fee, sometimes referred to as a "swipe fee," is 2.24%, according to the Merchant Payments Coalition.

Credit card processing fees for merchants equal approximately 1.15% to 3.15% of each credit card transaction, per data compiled by The Motley Fool Ascent. The exact amount depends on the payment network (e.g., Visa, Mastercard, Discover, or American Express), the type of credit card, and the merchant category code (MCC) of the business.

Note that debit cards have a different pricing model, and they usually cost less for merchants. This is why you may only see a convenience fee for a credit card, and not a debit card purchase.

Average Credit Card Processing Fees and Costs in 2024 | The Motley Fool

Credit card processing fees can add up to a big expense for merchants. Here are the average fees and costs for many issuers and payment networks in 2024.

www.fool.com

 

[RE2Boys]

See this thread for a recent discussion on this topic.

Restaurant adding fee for use of credit card

More and more restaurants seem to be adding a fee if you use your credit card. I've seen this be upwards of 3%. I know that the CC companies charge a transaction fee, but it just seems wrong to be passing this on to the consumer. I don't like carrying extra cash. And it is much easier to track...

www.early-retirement.org

 

[RunningBum]

No change, businesses have always been charged a fee, usually 3%, when they take a charge card. It's only been recently that more businesses pass on the charge. Seems like Exxon gas stations have had a cash price lower than credit price for a long time. I've also seen this extra fee for using cards on property tax bills. Just two examples.

Will those businesses even take a check? You could carry cash. Or you could go to places that don't charge the fee. Many won't because it's more convenient to them to get payment on a card so they don't have to worry about bad checks, or being a target of a robbery by holding a lot of cash.

I get 2% back on my cards, so I'm really only paying 1% extra for the convenience of using a card. That softens the blow, but I don't like it either.

 

[ksr]

I've been surprised by this, too. Many years ago (maybe 25-30), I had a small business and got approved to take credit cards through a local bank. One of the terms of the agreement was that I could not charge extra for use of a credit card. I guess at least some of the credit card companies have removed that restriction.

 

[Major Tom]

I run into it in local mom n' pop cafés and restaurants. It saves me a bit of money if I pay cash. At a very local Ethiopian café, in a low traffic area just a few minutes walk from my house, the meal I usually order is $17. I give the owner $25 cash and tell her to keep the change. She's happy, and I'm happy because the food is amazing, and I have helped a small local business. I end up paying more than if I had done the transaction with a credit card, but it's worth it to me. I'm very frugal but I'm not cheap.

 

[OldShooter]

IIRC there was a big antitrust settlement a few years ago. One result was that merchants could upcharge credit card users The prior situation was that by contract with the card companies merchants could offer a discount for cash but the merchant's posted price had to be the same whether the customer used a card or not.

One little nibble at the card companies' oligopoly.

 

[yhoomajor]

It costs merchants around 3% when their customers pay with Credit Card.

 

[Lorenzo]

It has been common practice in some countries for merchants to elect to give a discount for paying in cash in lieu of passing on their credit card cost of 3% or whatever to customers, but it took a lawsuit a few years ago to invalidate the contractual terms that kept merchants in the US from doing the same.

 

[latexman]

This is ancient news for me! In 1991 when we lived in Dubai you could get a 3% discount at the Gold Souk when paying in cash.

 

[momoney]

Remember when Aldi didn't take credit cards?

 

[pb4uski]

Run in to it quite often. Local restaurants etc.

+1

 

[motley]

See this thread for a recent discussion on this topic.

Restaurant adding fee for use of credit card

More and more restaurants seem to be adding a fee if you use your credit card. I've seen this be upwards of 3%. I know that the CC companies charge a transaction fee, but it just seems wrong to be passing this on to the consumer. I don't like carrying extra cash. And it is much easier to track...

www.early-retirement.org

ah, thank you, my bad!

I'd rather they just up their prices 3% vs this extra fee bit (which maybe some places are). ugh, I really don't want to have to start writing checks or even carrying cash again, I don't miss that!

What's weird is in the last two places the first one I pulled out my debit card and they said they do it for debits too. The next place said I could use a debit card and not get the fee. So I guess it varies.

 

[bloom2708]

I had the windshield replaced on one of our cars. $400+tax.

They suggested I write a check as there was a 3.99% fee for putting it on a credit card. I wrote a check.

Margins are thin. I'm happy to save 3.99%. They are happy to accept my check.

I will not be surprised if this happens more and more. Credit card debt is at record levels. 32% interest rates. This means more charge offs and thus higher fees.

I'm happy to use my CCs to harvest rewards, but I'm also happy to write a check or pay cash if necessary. Rewards are not going to make or break anything.

 

[AudiDudi]

Less than a month ago I was purchasing something and the clerk asked cash or card, I replied card, unless you charge more - she said 3% for the card. I paid cash. I always ask if they charge for using a card - if they do, I'll pay cash.

 

[motley]

They should always inform you of that if they do it - I would think it'd be illegal not to.

 

[JoeWras]

I keep saying I'm going to pay for my $18 dinner with a $100 bill but haven't yet.

So you don't like the fee? See how you like large bills and a lot of cash in the till. You are asking for it.

 

[EarlyandLate]

One of the mom and pop establishments I go to has a discount for cash. Cash always brings a smile to their faces. I suspect some or all of it doesn't get recorded in the books for tax purposes because they don't use the cash register for cash purchases.

 

[brett]

Very common in other parts of the world and in some non NA web sites.

The flip side...we often get a discount for cash or a nice accommodation upgrade when travelling in Greece, Italy, etc.

We always ask.

 

[RetiredAt55.5]

It's real money! [the average below suggests families used CCs for over $49K/year in charges - sound high to me]

I pay over $26K using my cards just for my health and car insurance premiums.

 

[Lewis Clark]

Some of my doctor's offices charge extra for using cedit cards.

 

[foxcreek9]

It's just a way to increase revenue, the CC fee is already baked into the price. Cash has a cost, but it is hidden, primarily from accidental loss (wrong change) to outright theft, cash can easily cost 3% in the long run. If they accept checks then you have the bad check risk. CC has been proven to increase sales at minimal cost but unlike cash, it is not hidden.

 

[Koolau]

I keep saying I'm going to pay for my $18 dinner with a $100 bill but haven't yet.

So you don't like the fee? See how you like large bills and a lot of cash in the till. You are asking for it.

Heh, heh, I wonder how they'd like it if I paid them in dimes or quarters?

 

[Beldar]

Almost as bad as "Buyers Premium" that auctioneers now charge. I'm not going to pay up to 20% more just for the privilege of buying from you.

_B