[slice_of_life]

I must say that I'm genuinely surprised by this phenomenon.

One would think that it is a business' business to figure out how much to charge a customer. A willing customer will pay, an unwilling one won't. How is it a question of legality?

[pyre]

It's a question of "do you charge 3% more for credit card payments to cover the charges from the credit card companies, but leave off that fee for non-credit card payments?"

Most credit card companies _don't_ want you to do that because charging more to pay with a credit card makes using your credit card a less enticing idea. IIRC, this stuff is usually handled in your contract with the credit card processor.

The last company that I worked for that used a credit card processor other than Stripe, the rules were something like:

* 2-3% of the transaction is the processor's keep

* You are allowed to charge a surcharge, but _only_ if it's a flat fee. You cannot add a 2-3% fee to cover the credit card charges, nor can you have some sort of "flat-fee schedule" where the flat-fee changes based on the amount being charged (e.g. charges of $1 - $100 get a $0.50 fee, but charges $100+ get a $5 fee). You can only do something like $0.50 fee to all charges.

* You cannot charge a different price for products when they are purchased via credit card.

[slice_of_life]

>Most credit card companies _don't_ want you to do that because charging more to pay with a credit card makes using your credit card a less enticing idea.

This is obviously good for the card companies and to a degree the digital payments landscape as a whole.

I do however see how it can be a problem for small merchants who can't negotiate for better rates with MAPs due to lack of volume. A 2 - 3% fee is quite significant seeing as though many retailers will have a 7-12% net margin. For a merchant not to be able to push the cost to a customer even if it is just part of it would be difficult for a business to sustain. There are other costs that merchants are dealing with such as cost of packaging and as such, a 2-3% fee is no mean feat.

[pyre]

Well, you're also missing things like the onerous process that some of the processors would have you go through to sign up. While I haven't been the person to actually setup a Stripe account, my impression is that it's pretty light-weight. From what I remember the business people having to go through to sign up for a merchant account with a processor (for a 100% online business) back in ~2010, it was practically like signing up for a mortgage. There was also back-and-forth between different "levels" of employees on the other side of things. At one point, IIRC the process even stalled because their end stopped responding to enquiries from our company. On top of that we were forced to use their Java middleware crap even though we weren't a Java shop. They made you feel like they couldn't care less about your business.

[slice_of_life]

Well, the onboarding process in the past you've described seems like hell. May be merchants should simply accept to bite the bullet on this one and accept it as part of the cost of doing business.

Now that you've mentioned stripe; I am in the process of setting up an Australian company with stripe; so far the docs are easy to digest and it seems waaay easier (and cleaner) than my previous experience with paypal.

[aptwebapps]

It's not actually illegal in the US to pass the processing fee to the customer, it's just against the contract you have to sign to get a merchant account. I don't know if the EU has a law or regulation prohibiting such contracts, but it seems possible.

[chimeracoder]

> It's not actually illegal in the US to pass the processing fee to the customer, it's just against the contract you have to sign to get a merchant account.

Depends on the state. It's no longer illegal federally, but many states, including the four largest states[0], still prohibit it. And if they pass the fees on, they have to pass it on for all credit cards, due to the specifics of a court settlement a few years back.

In addition, any merchant that accepts American Express is also prohibited from passing on fees for any credit card, because Amex prohibits passing on fees, and you can't pass fees for Visa/Mastercard and not Amex (see above).

So, very few merchants actually do.

[0] California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas

[aptwebapps]

> It's no longer illegal federally

Are you saying it _was_ actually illegal federally at some point or that no one had successfully brought a suit against the credit card companies' conditions until recently?

I didn't know about the state laws. That sure sounds like regulatory capture. It's hard to think of a legitimate reason for the state to do that.

[slice_of_life]

Correct me if I'm wrong; what you're saying is that merchant account providers have terms that dictate to merchants how they should price their products i.e. as a merchant you cannot pass the fee? (It seems incredibly stifling for the merchant to me but may be you can enlighten me on why it is in the interest of MAPs to have such a condition)

Do majority of MAPs in the US have this condition in their terms? And which MAPs don't have this condition?

[chimeracoder]

> Correct me if I'm wrong; what you're saying is that merchant account providers have terms that dictate to merchants how they should price their products i.e. as a merchant you cannot pass the fee?

They are not allowed to charge customers more for paying via credit card that for paying via cash. This is the law in some states, and in addition many merchant contracts stipulate it as well.

Sometimes you'll see merchants offer a "cash discount", which is technically prohibited too, but small merchants can sometimes fly under the radar if it's not too blatant.

[slice_of_life]

>They are not allowed to charge customers more for paying via credit card that for paying via cash.

Now I get it. I'm not for it but I get it.

[kileywm]

Legality aside, which other posters have covered:

I dealt with a local mechanic (small shop) earlier this year who, when it came time to settle the bill, said he will do debit/check for no fee, or a 2% fee for a credit card. In addition, some local gas stations advertise cash rates for fuel, which are slightly discounted vs credit cards.

It's an interesting practice that I don't mind. Ultimately it provides transparency and options to consumers who may be unaware of interchange rates and such that factor into day-to-day transactions.

[maxmcd]

I believe in the united states it is simply against the terms of service of the card provider. I imagine the law isn't "allowing" customers to pay processing fees, it's simply preventing the provider from setting those terms.

[toomuchtodo]

No longer true. Merchants can charge CC users in the US a surcharge.

[slice_of_life]

Is there a current book that you can recommend to understand this very arcane business of credit card processing?

[toomuchtodo]

Unfortunately not. Online resources, experience, and payment processing consultants are the options available.