There is a real danger in reporting on consumer issues: angry corporate goons with torches. Wait, that’s not it. The danger is that you will tear into some topic so trifling that the only way you’re likely to help the consumer is by giving him a good laugh at how much of a dick you are.
Welcome to today’s post about credit card minimums!
The other day I wanted a Vietnamese sandwich. I went into the sandwich place and requested the grilled pork. I handed over my Mastercard, and the cashier gestured at a sign on the counter: $10 minimum for credit cards. I could have walked to the ATM, but I was on my way to pick up Iris. No sandwich for me.
How much would the sandwich place have paid their bank for accepting my card? Somewhere in the 22 to 29 cent range. Each swipe of a credit card incurs a flat fee–usually 20 or 25 cents–and a percentage charge (known, Orwellianly, as the “discount rate”) of 1 to 3 percent. The merchant also pays a monthly or yearly flat fee and may be paying for the terminal rental as well.
Now, I admit it: 29 cents on a $2.50 sandwich is a big chomp–maybe enough to zero out the profit margin on the sandwich. That’s one way to think about it. Another way is: how much more profit will the restaurant make by accepting credit cards rather than accepting cash only? Judging by the proportion of businesses in my neighborhood that accept cards (nearly all of them), this is a pretty good tradeoff.
That’s why I ratted out the sandwich place, by going to the Mastercard site and filling out the Merchant/Retailer Violation form. You see, Visa and Mastercard don’t allow merchants to set a minimum charge. If you have a Visa card, Visa prefers that you call, wait on hold, and answer a whole bunch of questions. Fun. The number is (800) 847-2911, but I’d recommend just filling out the Mastercard form, which doesn’t ask for your Mastercard number.
I did ask the Visa rep what would happen when I made a complaint, and he said they would start by sending a letter reminding the business that minimum charges are verboten, and if there were further complaints, it could escalate as far as having their contract yanked. It seems unlikely to me that it would actually get to that point. Also, the Visa guy didn’t actually use the word “verboten.”
It’s obvious that small businesses are getting squeezed by the banks–accepting credit cards is a fact of life, and the banks that handle their merchant accounts would like to get as much money out of the deal as possible. They’re also getting squeezed by cranky customers like me, who want low prices and the ultimate in convenience. No wonder businesses try to weasel out of the rules–although doing it in a way that annoys customers seems counterproductive.
Does credit card processing have to be a one-size-fits-all approach? Most coffeehouse sales are in the $2-$5 range. Does a business like that have to get the same processing rates as, say, a furniture store?
So I made a couple of phone calls, and the answer is “sort of.”
I called Washington Mutual, a popular local bank, and posed as a coffee shop proprietor. WAMU does offer a package with no per-transaction authorization fee. Unfortunately, the discount rate is 12.71 percent, which is 31 cents per sandwich. I don’t see this making anyone happy.
One of my favorite coffeehouses, Cafe Dharwin, has no minimum charge and no surcharge. I emailed owner Dharmi Siddaiah and asked how he manages this. He said:
I do pay a fee per transaction and it’s kind of on the lower end of most companies.
It is a bit difficult for a small business like us since our average ticket price are lower than restaurants, but I decided to eat that extra expense.
Awesome. Cafe Dharwin is at 10th Ave E and Miller.
You can’t talk about minimum charges without mentioning surcharges. Many coffee places with no minimum charge do levy a surcharge on credit card transactions below a certain amount–say, an extra 35 cents on transactions under $5. This is also against the rules, but I don’t get all bothered about it, because it’s only 35 cents and they’re not actually turning me away. It’s totally kosher to offer a 35-cent “cash discount,” anyway, so what’s the difference?
Here is my recommended policy, as your caped consumer crusader.
When you encounter a minimum charge, ask to speak to a manager about it and explain that their practice violates their merchant services agreement–or, back in the real world, (a) call them later, or (b) just rat them out to Visa or Mastercard as described above. You’re not going to get anyone in serious trouble unless they’re flagrant repeat offenders.
When using your credit card to pay a small bill, tip generously (by cash or credit)–at least $1 for anything under $5, enough to cover the transaction fee and then some.
Now, does anyone else have a burning consumer issue? Because you should get that looked at.