Being charged to use your debit card

[tvguy]

I've always heard people say that it was not allowed/ illegal to charge a fee to use a credit/debit card.

I just looked up some information on this because I wasn't sure if that was actually true or not. From what I read, they started allowing surcharges in 2013. However, surcharges are illegal in several states and you are not allowed to add a surcharge to debit card purchases at all. So, it does seem that the OP is justified in believing that they were wrongfully charged.

Even if you were allowed to charge for debit card purchases, the surcharge cannot exceed the actual card processing cost. Debit card processing fees are significantly less than credit cards (usually under 1%), so the 3.5% surcharge the OP paid would also violate this rule.




Are you talking about a fee for cash back with a debit card or a fee to use a debit card for a purchase?

Also, businesses can impose a minimum purchase amount (up to $10) for credit cards, but are not allowed to do so for debit cards.

A fee to use. 35 cents is a common fee.

 

[tzolkin]

A fee to use. 35 cents is a common fee.

Are they charging the same for credit cards (and just slipping debit cards in as well)? They are not allowed to charge fees for debit card use.

 

[Mackenzie Click-Mickelson]

Are they charging the same for credit cards (and just slipping debit cards in as well)? They are not allowed to charge fees for debit card use.

Well my mom's financial institution charges $0.35 per transaction to use her card as a debit card (inputting the PIN number) vs a credit card (signature used). No fee if used as a credit card.

I've always heard people say that it was not allowed/ illegal to charge a fee to use a credit/debit card.

I just looked up some information on this because I wasn't sure if that was actually true or not. From what I read, they started allowing surcharges in 2013. However, surcharges are illegal in several states and you are not allowed to add a surcharge to debit card purchases at all. So, it does seem that the OP is justified in believing that they were wrongfully charged.

Even if you were allowed to charge for debit card purchases, the surcharge cannot exceed the actual card processing cost. Debit card processing fees are significantly less than credit cards (usually under 1%), so the 3.5% surcharge the OP paid would also violate this rule.

Maybe it's all where you live.

I wasn't saying they were or were not justified. It's commonplace for me to encounter fees associated with the method of payment used though often that's considered a convenience fee and seems to be more common online. I was curious if they thought because it was medication it was exempted. It sounds like maybe they've never encountered this before so that's a bit surprising to me. Even while not too common in my area I have seen gas stations with cash only price which is lower than if using a card.

Even my DMV for my vehicle renewal charges a convenience fee based on method of payment (varies if it's in person or online and then varies by method of payment).

Actual brick and mortar stores if they are too small or smaller vendors at craft places I've been to if they do it it's more of a minimum purchase thing (like $10.00 minimum to use card).

 

[tzolkin]

Well my mom's financial institution charges $0.35 per transaction to use her card as a debit card (inputting the PIN number) vs a credit card (signature used). No fee if used as a credit card.

Maybe it's all where you live.

I wasn't saying they were or were not justified. It's commonplace for me to encounter fees associated with the method of payment used though often that's considered a convenience fee and seems to be more common online. I was curious if they thought because it was medication it was exempted. It sounds like maybe they've never encountered this before so that's a bit surprising to me. Even while not too common in my area I have seen gas stations with cash only price which is lower than if using a card.

Even my DMV for my vehicle renewal charges a convenience fee based on method of payment (varies if it's in person or online and then varies by method of payment).

Actual brick and mortar stores if they are too small or smaller vendors at craft places I've been to if they do it it's more of a minimum purchase thing (like $10.00 minimum to use card).

To the bolded section: Yes, the bank can charge you a fee to use the card as a debit (PIN) vs credit (signature), but the store is not allowed to add a surcharge for using a debit card vs using cash. Retailers are allowed (in certain states) to add a surcharge fee for credit card use, but debit are excluded. So the OP should not have been charged for using a debit card regardless of where s/he lives.

There's a difference between a "convenience fee" and a "surcharge"/"checkout fee" so I think that's where some of the confusion about what's legally permitted and what's not comes in as well.

 

[verleniahall]

Is it cash only? I would think this might end up hurting a business in the long run, depending on what kind of business it is. I do understand about the fees but can't they include at least part of that in the price?

They are for City Bucks - so they can only be used at certain businesses in the community- they don't sell THAT often now that businesses have gift cards so its not something they want to invest money into

 

[Mackenzie Click-Mickelson]

To the bolded section: Yes, the bank can charge you a fee to use the card as a debit (PIN) vs credit (signature), but the store is not allowed to add a surcharge for using a debit card vs using cash. Retailers are allowed (in certain states) to add a surcharge fee for credit card use, but debit are excluded. So the OP should not have been charged for using a debit card regardless of where s/he lives.

There's a difference between a "convenience fee" and a "surcharge"/"checkout fee" so I think that's where some of the confusion about what's legally permitted and what's not comes in as well.

It would really be one in the same to me personally. If I'm charged 2.6% fee in the end I don't really care what it's called a convenience, processing or surcharge. I'm still charged it based on the method of payment lol.

The OP never disclosed, as of yet to my knowledge, if this was an issue where they wouldn't have been charged if they ran it through as Credit vs Debit. In the OP they just said they would use cash or check from now on. I think that's what people are coming from. Sounds like the OP was unfamilar with a charge to use a card period based on their responses to other people's comments vs another method of payment whereas most of us have encountered that before. Maybe some clarification from the OP is needed on if the retailer separated it out and charged no fee on the Credit Card but charged a fee to run through as Debit Card.

 

[tvguy]

Are they charging the same for credit cards (and just slipping debit cards in as well)? They are not allowed to charge fees for debit card use.

Most of these places don't take credit cards. Just debit cards and cash. But it is perfectly legal as long as it does not exceed what they are being charged by their bank.
I'm in California and the courts have thrown out our state law banning such fees.. https://www.creditcards.com/credit-card-news/gas-station-surcharge.php

 

[Pkltm]

I am in Canada and we are actually having more businesses not take cash. For us here debit cards are a way of life and business are charged next to nothing to take them. Credit cards have higher fees. I do accounting for a company as part of my job and debit is the prefered way to pay.

 

[Mackenzie Click-Mickelson]

I am in Canada and we are actually having more businesses not take cash. For us here debit cards are a way of life and business are charged next to nothing to take them. Credit cards have higher fees. I do accounting for a company as part of my job and debit is the prefered way to pay.

For us a Debit Card, at least most Debit Cards, can be run through as Credit. Running through as a Debit Card you would use your PIN. Running through as Credit would use a signature, subject to various rules as well as CHIP enabled devices. In recent years many have been advised, due to security, not to run our Debit Cards through as Debit but rather run it through as Credit.

Then you also have actual Credit Cards.

 

[tzolkin]

The OP never disclosed, as of yet to my knowledge, if this was an issue where they wouldn't have been charged if they ran it through as Credit vs Debit. In the OP they just said they would use cash or check from now on. I think that's what people are coming from. Sounds like the OP was unfamilar with a charge to use a card period based on their responses to other people's comments vs another method of payment whereas most of us have encountered that before. Maybe some clarification from the OP is needed on if the retailer separated it out and charged no fee on the Credit Card but charged a fee to run through as Debit Card.

It doesn't matter whether it is run as debit or credit, it is still a debit card. And, therefore, not allowed to be charged a surcharge either way.

Most of these places don't take credit cards. Just debit cards and cash. But it is perfectly legal as long as it does not exceed what they are being charged by their bank.
I'm in California and the courts have thrown out our state law banning such fees.. https://www.creditcards.com/credit-card-news/gas-station-surcharge.php

Interesting. So they're getting around being prohibited from adding a surcharge to debit card purchases by not accepting any credit cards and then calling it a "convenience fee" instead of a surcharge.

 

[tzolkin]

For us a Debit Card, at least most Debit Cards, can be run through as Credit. Running through as a Debit Card you would use your PIN. Running through as Credit would use a signature, subject to various rules as well as CHIP enabled devices. In recent years many have been advised, due to security, not to run our Debit Cards through as Debit but rather run it through as Credit.

Then you also have actual Credit Cards.

What that poster was referring to about the fees is that debit cards regardless of how they are run have lower fees for the retailer to pay.

Here's an example:
2.85% fee for premium rewards cards
2.31% fee for "regular" rewards cards
2.12% fee for basic credit cards
0.84% for debit cards (regardless of whether they are used with a PIN or like a credit card)

So even if you use the debit card "as a credit card", the retailer is only paying the debit card rate (0.84% not 2.12%). So they would prefer that you use that to save them money.

 

[Mackenzie Click-Mickelson]

It doesn't matter whether it is run as debit or credit, it is still a debit card. And, therefore, not allowed to be charged a surcharge either way.

I understand a bit more of what you're saying. In my state an actual 'checkout fee' isn't allowed. Cash discounts in the states that don't allow checkout fees are legal however and therefore a cash discount is allowed. The 'glass half empty' person could view that as just the same as a surcharge because they pay a higher price for the product (which I feel gas is the most common) based on the method of payment. I haven't encountered many gas stations though in my immediate area that offer cash discounts often though. I have encountered it elsewhere though.

What was initially tripping me up is the subsequent responses from the OP because it made it sound like they hadn't experienced a fee to use their card at some point. Maybe that was just my reading from what other posters were saying as well.

I'm thinking confusion on the thread in general on the OP's situation would be at least helped with the OP providing some clarifying information on what occured. Did the merchant give an explanation for the fee? Did they call it something specific? Etc.

What that poster was referring to about the fees is that debit cards regardless of how they are run have lower fees for the retailer to pay.

Here's an example:
2.85% fee for premium rewards cards
2.31% fee for "regular" rewards cards
2.12% fee for basic credit cards
0.84% for debit cards (regardless of whether they are used with a PIN or like a credit card)

So even if you use the debit card "as a credit card", the retailer is only paying the debit card rate (0.84% not 2.12%). So they would prefer that you use that to save them money.

I understood they were talking about fees charged by the financial institutions.

I was clarifying how it is here in the event it's not the same there.

Saying "Debit Cards are a way of life" is just as accurate in Canada as it is in the U.S. It is however common enough in the U.S. to run our Debit Cards through as Credit (especially at gas stations it appears). I can see where it can get confusing since we use the descriptions interchangeably when we say Debit card but in that instance were really referring to running the card through as Credit but then also discuss an actual Credit Card.

 

[TDSAXX]

It’s been several years since I owned a retail establishment; but I was charged the same rate for all signature based card payments whether it was a credit card or a debit card.
Pin based debit card purchases were a flat fee.

 

[Anthony1971]

There is no longer such a thing as a Debit card as in the past it is processed the same as a credit card the only difference is the fee and sometimes the time it takes for the merchant to get funded is different.
The person above gives a very basic percentage where there is a lot more involved and it is all very dependent on the size of the business as a small business will pay more than a large... so you say square or charges a flat percentage... true but when you refund through square you get nothing back where as with a merchant account you get most of it back... Amex has 2 options these days ones is to use its direct network the other is thorough the same network that processes all the other cards which does somewhat lower the pricing(discover, JCB and a few others work the same)...
there are multiple fees involved in taking a credit card --for checks yes they process them as well at a fee no longer does one take that to a bank--
For the Visa MasterCard logo there is .25 fee period per transaction credit or debit not refundable when a refund is issued so refunds cost a merchant.
Then you will have a rate as stated above which will depend on if the card is a rewards card or not (also does apply to Amex rewards cards) this actually goes to the bank.
Next -- you have a processor charge (they actually fund your bank account) which is called a discount rate -- this is where pricing will vary by volume-- but in general it will be .? percent or lower as in .0? in this you will have a small part of that which goes to the person who monitors or sold you the account as you can not purchase direct from a processor (example is Chase as they offer credit card services as well)
Next you need a back end (this is billed separate from credit card fees) which charges a monthly fee and a per transaction fee very cheap of maybe 1 penny (can be more depends on volume) as your POS can not communicate direct with a processor you need an in between
There are sometimes more fees for certain cards as there is 1 or few more in between like with international cards.
you then have the cost of the POS system -- or credit card machine. The credit card machines in small business even if you purchase the machine has a monthly fee for the account. For bigger stores with a POS well a POS system is over a hundred thousand for a few locations and a lot more for big box stores.... plus a person - people to maintain it... those nice terminals you insert your card into are mostly rented for 30-50 a month each because they cost 700-1500 and as the technology changes they have to so better to rent as even if you buy you still pay a monthly fee for them to be upgraded and maintained as this is done direct by your back end...
I can say more... so if you wonder why you can charge a fee this is a bit of an understanding if you wonder why most except small stores do well a retail price is in faced based on what an item costs the business plus - all fees which can easily be put into an average percentage.....
The reason why credit cards allowed business to charge a fee is the credit cards were allowed to shift a lot of the fraud risk to the business which is whole other story.. also but not a reason chip costs business more than the old way for everything from processing to equipment to being PCI compliant. above is part of what I have learned in 20+ years and it is not the complete story....
If I could hang a sign that says cash only I gladly would... and we could lower prices....

 

[MrsPete]

It's not illegal but most vendors are reluctant to charge a fee for fear it will deter customers.

Yeah, well, they're not wrong. I'm not about to pay a debit-card fee. Nope-nope-nopety-nope.

 

[tvguy]

I had lunch at a BBQ place today that I haven't been in in probably 15 years. Mom and pop. Big hand written sign at the cash register that debit or credit purchases will have $1 added to the bill. I have no idea the legality, but it is done.
However, reading their Yelp reviews, it is noted that the owner (who is the chef) can be cantankerous. He's 84. As one reviewer put it, it's "his way or the highway". But he must be doing something right since this location has been open 26 years.

 

[tvguy]

Just found this. Apparently the California Department of Motor Vehicles as of today is charging a fee if you use a debit or credit card. https://sacramento.cbslocal.com/vid...e-for-all-debit-and-credit-card-transactions/

 

[Mackenzie Click-Mickelson]

Just found this. Apparently the California Department of Motor Vehicles as of today is charging a fee if you use a debit or credit card. https://sacramento.cbslocal.com/vid...e-for-all-debit-and-credit-card-transactions/

Our DMV has been doing that for years (ETA: at least for vehicle tags)

 

[Lewisc]

I'd either pay cash or use a different pharmacy.
Different states have different regulations. It's probably legal from a banking viewpoint, some states might require saying something like, the price is 15.52 with a discount of .52 for cash payments.

I have no idea if the pharmacies contract with the company processing pharmacy claims allows for charging more then the copay if a credit or debit card is used. Maybe not but I wouldn't fight it. I'd pay the extra, pay cash or take my business elsewhere.

I'll speculate your insurance policy has a copay of $15 with no provision allowing a pharmacy to charge more for non-cash payments. I understand a Mom and Pop business may be looking to shave costs but the pharmacy will be in real trouble of CVS/Caremark (or whatever pharmacy manager your insurance uses) decides to drop your local pharmacy. Push customers to mail order or using a CVS retail pharmacy. I'll speculate your pharmacy should be absorbing the costs of debit and credit cards or going to cash only for prescriptions.

The theory is customers who pay with a credit card will spend more then customers paying with cash. The theory is credit card fees can be less then the expenses associated with a house account or with loses associated with bad checks.

The Target Red Card is designed to cut plastic processing expenses

edited to add: A state which charges a surcharge for online use of a credit card might be encouraging people to go to a local DMV office and pay with cash or a check. The cost to operate DMV offices to the level necessary if there is a significant reduction in the use of online renewals will probably exceed the costs to accept credit cards.

 

[lsg1]

Here in NYC starting this past January, a credit card surcharge is allowed to be added to purchases. We found out the hard way when getting our car serviced at the local dealership and they charged an additional 3.9% but gave us a $10 credit since this went into effect on Aug 1st. I then needed 4 new tires, and found they also charged the 3.9% even on debit cards. They had an ATM machine in the place, so I used that and only had to pay the $1 atm fee. Even the local bagel shop charges this fee. So I know for a fact that this is being done in NYC.

Here is a link about it:
https://www.digitaltransactions.net...hants-and-the-state-agree-to-dismiss-lawsuit/