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A recent commenter requested that someone start a new post to discuss the apparent increase in credit card usage fees. I wrote about this almost exactly a year ago, so I thought I’d get it started. In the year since I wrote about how my wife and I were encountering more cash discounts, or credit card usage fees, it seems to have become a bigger topic. One thing I’ve noticed is not every merchant follows the rules and makes the fees clear. I’ve had a few occasions where there was nothing posted about a CC fee, and the cashier didn’t say anything. Checking later I noticed a 3% fee. What’s your experience?
Here is an article that talks about the 3 percent standoff.
https://www.yahoo.com/news/why-paper-checks-refuse-die-113713138.html
Although I usually use a rewards card for 100% of my purchases, when possible, I have been asking for cash discounts for years. I also regularly ask merchants if they have hidden extra CC fees in their prices. I just call them out, since I can pay cash if necessary.
I recently bought some jewelry for my spouse. I asked if there as a cash discount and I received 3.5% off the purchase. Two months ago my wife had dental implant surgery due. Since I retired in January and no longer have dental insurance, I asked if I would get a cash discount for paying cash and received a 5% discount on $6,500, $325.00.
I am a gun collector and when I buy online, I only buy from dealers with 0% CC Fees. I also look for dealers offering “Free Shipping”. One online retailer actually lists two separate prices…one for cash or check and the other for CC or financing. If I buy from a local shop or at a gun show, the same thing applies.
The fees being added by sellers are simply the newest “rip off” customers are being subjected too, along with all the increases in prices while simultaneously providing smaller quantities (“shrinkflation”) as you see in grocery stores everyday. One of my most irritating examples is Bacon, which now comes in 12 oz vs. 16 oz packages. One that infuriates my wife is cake mixes. They no longer have the ounces required for the recipes in most cook books, so you have to buy extra, and thereby have more than you need.
Bottomline…if you don’t ask, you don’t get. And whoever said you have to pay retail? It never hurts to ask for “their best and final price.”
What gets me annoyed is that ice cream no longer comes in pints… they’re 14oz containers that cost the same as pints used to.
Outrageous, I know! I will accept a lot of pain, but don’t mess with my ice cream.
I have a few thoughts both as a customer and a proprietor. I have been encountering this at all sorts of businesses; restaurants, locksmith, epoxy floor contractor and more. If I perceive value I don’t mind the fee. For example, yesterday I had lunch with friends at my favorite watering hole. I had a fantastic cheese burger with chips and 3 Michelob Ultras. My tab was only $15 and I was happy to pay cash to save the owner (also my friend) the cost of the merchant fee. Most places are charging that much just for the sandwich, they can afford fee, so I’ll be carding it.
As a business owner, accepting credit cards got me business and I had no problem paying the merchant fees.
There is a lot of info about this online. For instance, apparently swipe fees, aka processing fees, cost US retailers $160.7 billion a year.
For instance, see: https://nrf.com/blog/10-things-know-about-swipe-fees
And: https://www.nerdwallet.com/article/small-business/passing-on-credit-card-fees-to-customers
Someone has to pay for all those rewards….
Yes, indeed, there’s no such thing as a free lunch. I know someone pays it, but what I think is happening is I’m paying for it twice.
Per my theory below, all vendors’ costs are built into the price. That’s how pricing has worked for time immemorial. I don’t believe that they are now just figuring out that they have this 3% cost. They’ve known about it. What they’re figuring out is that they may be able to keep building it into their price AND charging an additional 3%.
Also, I’m glad you raised the issue of rewards. Does anyone here get 3% back in rewards on your CC? If so, let us know the card. I know I don’t. Usually (after of course those very fun and generous, but temporary initial bonus phases), I get 1%. Sometimes there’s 5% on a category, but that’s usually not much money.
So, if I’m getting 1% back, but getting charged 3%, there’s 2% unaccounted for.
I usually get 1% back. If it’s someplace that has an explicit fee for CC use, I either pay cash or skip buying. Government has gotten aggressive in charging fees for DMV, taxes, etc…
I have an American Express Cash Rewards card with an annual fee of $95. We use it mostly for groceries because it gives us 6% cashback at US grocery stores. It’s 3% or 1% for other things, but we use it almost exclusively for groceries. Last year our cashback reward was $290, so we have been a little more consistent about using the card this year, and so far our 2024 cashback is up to $331. I plan to claim it at the end of December, when it will make a nice difference on our January CC bill (which we always pay in full, so there are no interest charges to interfere). Seems like a reasonably good deal to me. The initial bonus for signing up was really great, too, if I remember correctly.
I use the Wells Fargo Active Cash Card. It pays 2% on 100% of purchases. Period. No Tricks or gimmicks.
I detest Wells Fargo as an institution, and I am glad to take advantage of their rewards program, as I pay in full 100% of the time (usually before the card balance is even due,) and NEVER pay them interest.
Citibank double-cash back credit card provides 2%. 1% on your purchases and 1% on amounts paid. Always PIF, so no interest charges. No annual fee. Using Costco Visa more these days. 4% on gas no matter where purchased, 3% on restaurants.
I think it may previously have been illegal, it’s still illegal in some states. Apparently it is a significant expense for businesses with low profit margins. You could always ask for a discount for cash or check.
Search engines are your friend (I use duckduckgo, not google). According to Forbes there are plenty of 2% cash back cards. Or you can get 1.5% at Capital One. If you would rather get points or miles for travel visit https://thepointsguy.com/ I mostly use a Citibank card that gets me miles with American.
The additional 1% presumably covers the cost of running the networks plus profit. It doesn’t help that Visa and MasterCard have a near monopoly on processing.
In some states you can’t charge extra for CC use, but you CAN give a cash discount…
Thanks for the links Kathy.
Thanks Rick!! I’ll try to restate my other post here.
As far as I know out of the blue last week was the first I saw these 3% surcharges and it was on family vacation in Northern Michigan. I want to believe that it was because it was a vacation / resort area with a lot of tourists, but I was completely blindsided.
As I said before, my understanding of the unspoken arrangement between the vendor and customer was: the vendor is taking into account how much it costs them to sell the product or service taking CCs, so they will naturally increase the price of the product to offset those costs. That’s how all other pricing works. The price reflects the seller’s costs.
Then, if the seller wants to offer a cash discount, that’s cool. But now these 3% surcharges are coming on top of prices that I’m confident already have been increased to reflect the vendor’s costs. I’m not happy about that.
Had I known that was so en vogue in Michigan I would have brought a lot more cash. I’m comfortable with cash, but it’s just usually so much easier for all parties involved to take a card.
I hope this isn’t anything unique to Michigan; it’s my native state.
Just about every gas station has two prices: one for cash and the other for credit. Was at the doctor’s office yesterday and was hit with a fee for using a credit card.
I wonder how the merchants that charge this fee feel about it when they get the add-on when using a credit card? I overheard one merchant say it is fair because the card holder is going to get the bonus points.
I’ve seen this mostly with online charitable donations, where the charity asks me to cover the CC fee. Sometimes I do, sometimes I don’t. I have not seen this much at all where I live, but perhaps it is on the way.
I recently offered to pay someone by check instead of CC, and he gave me a discount for doing so. I may try doing that more often.
We recently committed to a hefty (for us) charitable donation. They wanted to add a 3% CC fee. But my gift was already maxed to our ability to donate. I presented them a choice of when they wanted the money. I could pay now, and they would have to bear the 3%, or pay in cash next month. This way they could make the decision based on their immediate needs.
Local government in my area is also charging fees for CC usage. I paid my property taxes by check because of that.
Great comment Jeff. Yes for charities that would be the exception to my comment where the product can’t build in the cost because there really is no “product” that’s “sold.” It’s just the charity doing their charitable work. I often opt to give more to cover their costs in that case.