Credit Card Convenience Fees Are Growing in Popularity, But Are They Legal?
The term "convenience fee" is one of our most common oxymorons. How is something convenient if it costs you more money? Unfortunately, big companies and small merchants alike don't share this opinion: more and more 
of them are applying these fees to any credit card charges.
But, are they legal?
Where Fee Meets Law
On the federal level, they’re perfectly legal. If a merchant wants to charge you a fee to use a credit card, it's perfectly legal, according to government rules. When it comes to interstate commerce, the government tends to be careful; the Constitution has some very specific requirements concerning hindering trade between states. So, it's up to the state to step in and decide...
Only a few states actually ban such fees. Which states are they, and how strict are the bans?
That's a sticky question. For example, in California, a private business can't charge you a convenience fee, but a state agency or a public utility can. In others states, like New York or Colorado, it's a complete ban. Texas, Oklahoma, Connecticut, Florida, Kansas and Maine all also ban convenience fees to varying degrees. But, again, it depends on the state.
Credit Card Companies Speak Up
Another thing that will be problematic for merchants who want to charge a convenience fee is their actual credit card agreement. Unlike the governments, credit card companies are very concerned about "convenience fees" and act to prevent them. Usually, there's language in the agreement specifically banning the practice. In fact, if you see a sign in a store insisting on a convenience fee, you can probably get them to forgo it by pointing out that convenience fees are against their agreement.
Why do credit card companies care where the government doesn't? Money. If you pay with a credit card, the card company gets a cut of the revenue. So, obviously, they want people to use plastic as much as possible, and they hate anything that might discourage them from doing so. Needless to say, this has brought them into conflict with merchants more than once, especially if fees or other charges go up.
The Merchants’ Perspective
To be fair, many merchants only impose fees, or ask customers to pay cash, if the total is under a certain minimum: the card fees can wipe out any profit on something charged below that mark. If the card issuer lowers their prices, it can have a surprising effect on those minimums.
Most merchants, however, are allowed to give a discount if you pay with cash. You might have noticed some businesses in your area, like gas stations, offering lower prices to customers who pay with cash. This is perfectly legal: businesses are allowed to hand out discounts to anybody they wish for any reasons they wish.
In the end, the ultimate solution to convenience fees may very simply be the free market. Merchants have noted anecdotally that charging a minimum or a convenience fee can drive down their business, and competitors are picking up the slack. Just remember, if you don't like a convenience fee, you probably don't have to pay it. Ask the business charging you about the fee and why they're imposing it. And, of course, you can always take your business elsewhere. There's no vote for something like the vote you make with you money, and you can vote against convenience fees.
5-7-2012
by Chris Martin
|
4-6-2012
by Dan Seitz
|
12-5-2011
by Neil Hayashi
|
News & Reviews • Latest from our Blog
|
04-06-2012
You’re a vegetarian. Everyone knows this. Yet every Christmas, grandma sends you a gift card to the Wild West Steakhouse or Crispy Chicken Rotisserie. Well, instead of filling another drawer with unwanted presents, you can now turn those gift cards into rewards points. According to MarketWatch, U. S. Bank and Plastic Jungle (an online secured gift card exchange) have partnered to allow FlexPerks Travel Rewards Visa Signature cardholders to swap...
|
|
04-05-2012
The 2012 Election season is about to go high tech: the swarms of cheery interns and fervent volunteers canvassing every neighborhood from sea to shining sea this year will now be able to get your monetary support with the simple swipe of a credit card. Intuit, Inc. recently announced that their popular GoPayment mobile credit card payment system has been revamped to accommodate political fundraising, which means dumping money into the nearest super...
|
|
04-03-2012
Watch out identity theives…there’s a new dynamic duo in town, and they’re out to fight fraud like never before. MarketWatch recently reported that AllClear ID, an award winning tech company specializing in identity theft protection, has partnered with the National Cyber-Forensics and Training Alliance (NCFTA). The NCFTA includes all kinds of good guys fighting the good fight, pulling together everyone from law enforcement to security researchers....
|