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Requiring Minimum Charges at Stores is Illegal
consumerist.com — If a store won't let you buy that pack of gum with a credit card, saying they need say $5 or more, it's a breach of contract. The language in the merchant agreements for Visa, Discover, Mastercard and American Express all prohibit this practice. So why do stores do it anyway and why don't the credit cards care?
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- JamesWilson, on 10/12/2007, -0/+3I heard they have to pay a percentage of the transaction to the credit card companies
- idiotlarry, on 10/12/2007, -1/+1It's also because they take a flat base rate of something like 2-3$ + percentage. Which cuts into margin quite a bit... I used to work at a comic store that sell video games, and they only made 5$ off each video game sale, not taking account theft. 2-3$ off that, and there's no reason to sell video games, for example.
- durrty, on 10/12/2007, -0/+1Yeah, a merchant must pay a fee for each credit card transaction, which is why some impose the extra charge.
That extra charge, in turn, might keep a consumer from using their credit card, therefore the credit card company gets no commision from the transaction, thus they write into the contract they can't add those on.
Credit card transaction percentages work a lot like resturants where if you agree to only sell Coke products, Coke will sell their product to you at a reduce cost, as oppossed to selling both Coke and Pepsi products. If a merchant agrees to only accept Visa, then Visa will give them a discounted transaction rate, and then Visa can make commercials about how they are the only ones accepted :)
- steger, on 10/12/2007, -0/+2It's not illegal, they are just not abiding by the contract that they agreed too. You can report them.
What i also hate is the $0.50 charge to use your debit or credit card. That is also against contract if the store doesn't give a cash discount.
i.e. if i bought a $1.00 pack of gum with my debit card and they charged me $1.50, that is against the contract. If it is $1.50 and they give it to cash customers for $1.00 that is not against the contract.- insanenewman, on 10/12/2007, -0/+0While I can't find the documentation for it right now, I believe that PIN-based debit transactions (even on cards with a Visa/MC/AmEx logo) can be assessed fees by retailers, as this is no different than an ATM that doesn't belong to your bank charging you a $2 transaction fee, or your grocery store charging you $1 fee to get cash back with debit.
- durrty, on 10/12/2007, -0/+1@insane
Thats an interesting point about the "non-home-bank" ATM fees, first I doubt they are under this type of contract (because retailers want to be able to accept credit cards as it is the majority of their revenue, therefore the credit card compies get the major say in the terms, where as a bank wants its costumers to be able to use foriegn ATMs, so those other banks have more weight in setting the terms of use.)
But thats just deductive reasoning, I currently don't have any hard evidence to back that
- popsumer, on 10/12/2007, -0/+2That's true, but according to the contract they signed, it's verboten to pass this charge onto the consumer by requring a minimum purchase.
Also, isn't a breach of contract illegal?- steger, on 10/12/2007, -0/+2well yeah i guess it is. It is a legal document. I wasn't really thinking about that part. :)
But it's not verboten to pass the charge to the consumer by raising the price and offering a cash customer a discount.
good info on it: http://www.creditinfocenter.com/cards/crcd_buy.shtml#Question6 - Hubris, on 10/12/2007, -0/+2The word 'illegal' usually means breaking a law, or a criminal matter. This would be solely a civil issue, where the merchant isn't complying with their business partner (the credit card provider). You can either refuse to do business, or report the business to the credit card company. Obviously the credit card company doesn't want to lose out on potential business (a small sale is still a small sale) however if they can force you to make a larger sale without losing the transaction - the credit card company stands to gain as well.
- steger, on 10/12/2007, -0/+2well yeah i guess it is. It is a legal document. I wasn't really thinking about that part. :)
- popsumer, on 10/12/2007, -0/+2that link is resolving very slowly for some reason, here's the google cache: http://72.14.203.104/search?q=cache:qyaZ7gxM_S4J:www.creditinfocenter.com/cards/crcd_buy.shtml+&hl=en&gl=us&ct=clnk&cd=1
- JerseyChris, on 10/12/2007, -0/+0NYC taxis charge $1 extra to use CC and I believe it's authorized by the NYC gov't - wonder how they get away with breaching the contract!
- gigarizil, on 10/12/2007, -0/+1maybe no one turns them in.
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