credit.jpgHow do credit card surcharges work? My local liquor store charges 50 cents if you use your card to make a purchase, but I’ve also been to places that charge a buck, etc. What’s the deal?

All credit card surcharges are illegal in the state of California, according to California Civil Code Section 1748.1, which states: “No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means.”

Interestingly, “A retailer may, however, offer discounts for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.”

But, of course, most retailers would prefer to charge more money than less, and most people don’t know surcharges are illegal. Did you? I didn’t, and neither did most of the people I spoke with while researching this – from friends to spokespeople for the DA’s and the City Attorney’s office.

So what do you do if you’re being illegally charged? Both Visa and Mastercard told me the best thing to do is file a report (Consumerist put together an extensive credit card contact information guide for this purpose; check it out here).

Then, according to The Merchant Account Blog, “The issuer passes the message down to the business’s processor, who then tells the business to stop. If more complaints are received, fines are assessed ($10,000 – $20,000 for the first offense), and then the business is shut down and placed on the TMF list by the issuer. They are then prohibited from accepting credit cards by just about every processor in the world until they get off the list.”

Since California is one of 10 states with laws against illegal surcharges, you can take also take a retailer to small claims court if they continue to charge you illegally:

Any retailer who willfully violates this section by imposing a surcharge on a cardholder who elects to use a credit card and who fails to pay that amount to the cardholder within 30 days of a written demand by the cardholder to the retailer by certified mail, shall be liable to the cardholder for three times the amount at which actual damages are assessed. The cardholder shall also be entitled to recover reasonable attorney’s fees and costs incurred in the action.

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  • James D

    The credit card companies keep squeezing merchants more and more, some of those cashback reward cards can take up to 5% off the top and that is paid by the liquor store, not the credit card company. Unless you want your corner store to become a 7-11 or close completely pay cash.

  • James D

    The credit card companies keep squeezing merchants more and more, some of those cashback reward cards can take up to 5% off the top and that is paid by the liquor store, not the credit card company. Unless you want your corner store to become a 7-11 or close completely pay cash.

  • Akit

    How about the “minimum charge” policy some vendors have when taking credit cards? I sometimes hate those at restaurants setting a $15 fee when most menu items for a single person is around half that.

  • Akit

    How about the “minimum charge” policy some vendors have when taking credit cards? I sometimes hate those at restaurants setting a $15 fee when most menu items for a single person is around half that.

  • phuong

    The minimum charge is also illegal.

    You guys have to keep in mind though that a lot of these places are mom&pop shops that pay the credit companies, so they’re just trying to recoup/cover their possible losses. I wouldn’t report (most of) these places, but i’d try to show up with cash.

  • phuong

    The minimum charge is also illegal.

    You guys have to keep in mind though that a lot of these places are mom&pop shops that pay the credit companies, so they’re just trying to recoup/cover their possible losses. I wouldn’t report (most of) these places, but i’d try to show up with cash.

  • Akit

    One extra item to mention:

    Gas stations like Olympian and some 76 stations have to be very clear on the credit card vs. cash policy. Cash gets the reduced price, but they have to say “cash discount” and needs to avoid words like “credit card surcharge.”

    If you want to save money, I use one of those credit cards with a high percentage rebate for gasoline (some are 3% and others 5%). If you do the math right, you’d likely get the better bargain on credit than paying cash.

  • Akit

    One extra item to mention:

    Gas stations like Olympian and some 76 stations have to be very clear on the credit card vs. cash policy. Cash gets the reduced price, but they have to say “cash discount” and needs to avoid words like “credit card surcharge.”

    If you want to save money, I use one of those credit cards with a high percentage rebate for gasoline (some are 3% and others 5%). If you do the math right, you’d likely get the better bargain on credit than paying cash.

  • sfboogie

    I haven’t noticed surcharges for credit cards, but I have for debit cards. Do the same rules apply to the debit cards?

  • sfboogie

    I haven’t noticed surcharges for credit cards, but I have for debit cards. Do the same rules apply to the debit cards?

  • Katie Baker

    Thanks for all of the great comments! I’ll do a followup in a few days re: debit cards, minimum charges

  • Katie Baker

    Thanks for all of the great comments! I’ll do a followup in a few days re: debit cards, minimum charges

  • dantsea

    Most stores in Chinatown seem to get by on cash only, so it’s certainly not a hardship.

  • dantsea

    Most stores in Chinatown seem to get by on cash only, so it’s certainly not a hardship.

  • Christine Borden

    That said, customers should not be dickwads and try to charge a $2 purchase to their cards.

  • Christine Borden

    That said, customers should not be dickwads and try to charge a $2 purchase to their cards.

  • funkbomb

    Customers should be able to pay however they want if the store accepts that method. Stores have a contract with the credit card companies and should follow their policy or simply not accept the cards.

    I guess it’s your job to be outspoken and post highly polarizing comments, but someone who uses a certain method, permitted by the store, is certainly not a “dickwad.”

    For a “professional blogger” your comment really adds nothing to this conversation.

  • funkbomb

    Customers should be able to pay however they want if the store accepts that method. Stores have a contract with the credit card companies and should follow their policy or simply not accept the cards.

    I guess it’s your job to be outspoken and post highly polarizing comments, but someone who uses a certain method, permitted by the store, is certainly not a “dickwad.”

    For a “professional blogger” your comment really adds nothing to this conversation.

  • funkbomb

    It might also be interesting to look into the effect of a store having an ATM inside, possibly keeping some of the “legal” withdrawal surcharges from that, but not accepting debit/credit cards for purchases. They would also potentially get surcharges from people only there to use the machine, even if they didn’t plan on buying anything at the store.

  • funkbomb

    It might also be interesting to look into the effect of a store having an ATM inside, possibly keeping some of the “legal” withdrawal surcharges from that, but not accepting debit/credit cards for purchases. They would also potentially get surcharges from people only there to use the machine, even if they didn’t plan on buying anything at the store.

  • Katie Baker

    Good idea! Stay posted.

  • Katie Baker

    Good idea! Stay posted.

  • modelenoir

    You make a good point on the rewards and miles. My understanding is that merchants pay a lot if not all of that, so the better the rewards on your card, the worse it is for the merchant. AmEx is notoriously expensive for merchants and that’s why you can’t use AmEx many places.

    I think there are a lot of people that don’t know this. If people were more aware of it, I think – at the very least – there would be a little more outrage about it, but since it’s a silent issue, the credit companies can just squeeze a bunch out of the merchants that they otherwise couldn’t.

    I’d like to see debit cards lose the interchange fee. If that were the case I’d like to see debit cards replace cash, but until then, cash in necessary for me.

    As an aside, I’ve been thanked quite a few times for using cash at shops around my place in Northbeach. Once, in Boston, I got a free tequila airplane shot from a merchant when I bought 12 of them with cash.

  • modelenoir

    You make a good point on the rewards and miles. My understanding is that merchants pay a lot if not all of that, so the better the rewards on your card, the worse it is for the merchant. AmEx is notoriously expensive for merchants and that’s why you can’t use AmEx many places.

    I think there are a lot of people that don’t know this. If people were more aware of it, I think – at the very least – there would be a little more outrage about it, but since it’s a silent issue, the credit companies can just squeeze a bunch out of the merchants that they otherwise couldn’t.

    I’d like to see debit cards lose the interchange fee. If that were the case I’d like to see debit cards replace cash, but until then, cash in necessary for me.

    As an aside, I’ve been thanked quite a few times for using cash at shops around my place in Northbeach. Once, in Boston, I got a free tequila airplane shot from a merchant when I bought 12 of them with cash.

  • cv

    Funkbomb is correct. If merchants are going to offer the convenience of credit card transaction, they need to accept the fact that some people will use them for small payments.

    Unless you’re in Israel, where everyone uses credit cards and will put the absolutely smallest charge on their cards. If you call those people d!ckwads, they’re likely to give you a new body orifice, so be wise when you express that opinion.

    Hell, if I could, I’d use my credit card to pay for 75 cents worth of veggies at some stand at farmers market. I spend 40-50 dollars at the farmers market every week, it would be nice to get some points back. Also, Mint.com will shove everything in the proper categories.

    However the real way would be to wave an RFID-chipped cellphone over a sensor for an NFC contactless wireless payment. The Japanese have been using their cellphones as transit passes, loyalty cards, credit cards, etc. for five years. Think of it as Clipper Card in your cellphone, but it also works at Starbucks, Safeway, the gas station, at the airport, 7-11, parking meters, etc.

  • cv

    Funkbomb is correct. If merchants are going to offer the convenience of credit card transaction, they need to accept the fact that some people will use them for small payments.

    Unless you’re in Israel, where everyone uses credit cards and will put the absolutely smallest charge on their cards. If you call those people d!ckwads, they’re likely to give you a new body orifice, so be wise when you express that opinion.

    Hell, if I could, I’d use my credit card to pay for 75 cents worth of veggies at some stand at farmers market. I spend 40-50 dollars at the farmers market every week, it would be nice to get some points back. Also, Mint.com will shove everything in the proper categories.

    However the real way would be to wave an RFID-chipped cellphone over a sensor for an NFC contactless wireless payment. The Japanese have been using their cellphones as transit passes, loyalty cards, credit cards, etc. for five years. Think of it as Clipper Card in your cellphone, but it also works at Starbucks, Safeway, the gas station, at the airport, 7-11, parking meters, etc.

  • LostInTheFog

    Does it violate the Merchant Agreements with the credit card companies if they call this a “convenience fee”? The SF Tax collector accepts credit cards but tacks on a 2.5% fee. Check out the SF Treasurer website: http://sftreasurer.org/index.aspx?page=65
    I’d be awesome to get some airline miles or something from paying your taxes.

  • LostInTheFog

    Does it violate the Merchant Agreements with the credit card companies if they call this a “convenience fee”? The SF Tax collector accepts credit cards but tacks on a 2.5% fee. Check out the SF Treasurer website: http://sftreasurer.org/index.aspx?page=65
    I’d be awesome to get some airline miles or something from paying your taxes.

  • plumpy

    The minimum charge was not illegal, per-se, but was forbidden by contracts with the credit card vendors. However that changed in the consumer protection act. Merchants are allowed to refuse transactions under $10 now.

  • plumpy

    The minimum charge was not illegal, per-se, but was forbidden by contracts with the credit card vendors. However that changed in the consumer protection act. Merchants are allowed to refuse transactions under $10 now.

  • Belgand

    I would love it if my local corner store turned into a 7-11. Finally the hours would be better than the astoundingly inconvenient 8-10 and I’d be able to get slurpees and fountain sodas. Being a locally-owned store in this case adds nothing and contributes a host of problems.

  • Belgand

    I would love it if my local corner store turned into a 7-11. Finally the hours would be better than the astoundingly inconvenient 8-10 and I’d be able to get slurpees and fountain sodas. Being a locally-owned store in this case adds nothing and contributes a host of problems.

  • Belulah

    one may not be a “dickwad” but they are neither a conscientious consumer nor are they small business minded.

    credit cards take time–something that some places, like busy restaurants and bars don’t always have , hence the card limits–also, splitting bills on multiple cards adds up and hurts business as well.

    seems everybody wants life to be easy, but few want to do their part when it comes to what might be helpful for others. your corner store is not the bad guy–and while we all want was is most convenient for us, a lot of places are just trying to stay in business and limit the poaching done by the credit card companies.

  • Belulah

    one may not be a “dickwad” but they are neither a conscientious consumer nor are they small business minded.

    credit cards take time–something that some places, like busy restaurants and bars don’t always have , hence the card limits–also, splitting bills on multiple cards adds up and hurts business as well.

    seems everybody wants life to be easy, but few want to do their part when it comes to what might be helpful for others. your corner store is not the bad guy–and while we all want was is most convenient for us, a lot of places are just trying to stay in business and limit the poaching done by the credit card companies.

  • funkbomb

    So, basically, you’re saying that even if a business makes the decision to accept cards, consumers shouldn’t use them, because it is their responsibility to look out what is actually best for the business?

    It must be cool to go around knowing what is best for everyone, but personally, I’ll just look at the signs in the store.

    If they only take cash, I’ll pay cash, but if they make a choice to take cards, cards it is.

  • funkbomb

    So, basically, you’re saying that even if a business makes the decision to accept cards, consumers shouldn’t use them, because it is their responsibility to look out what is actually best for the business?

    It must be cool to go around knowing what is best for everyone, but personally, I’ll just look at the signs in the store.

    If they only take cash, I’ll pay cash, but if they make a choice to take cards, cards it is.

  • funkbomb

    So, basically, you’re saying that even if a business makes the decision to accept cards, consumers shouldn’t use them, because it is their responsibility to look out what is actually best for the business?

    It must be cool to go around knowing what is best for everyone, but personally, I’ll just look at the signs in the store.

    If they only take cash, I’ll pay cash, but if they make a choice to take cards, cards it is.

  • funkbomb

    So, basically, you’re saying that even if a business makes the decision to accept cards, consumers shouldn’t use them, because it is their responsibility to look out what is actually best for the business?

    It must be cool to go around knowing what is best for everyone, but personally, I’ll just look at the signs in the store.

    If they only take cash, I’ll pay cash, but if they make a choice to take cards, cards it is.