May vendors charge more for credit card payments than for cash?

2013-09-10 00:00

ARE retailers allowed to charge customers a higher price when paying by credit card?

So asked Kloof consumer Micayla Pedlar following a dispute with a hair salon about what she felt was an inflated price when she took her 12-year-old son for a haircut.

When she went to pay, the cashier at Panache salon in Kloof quoted the price as R60.

“I took money out of my purse but only had R50 so I said I would pay with my credit card,” Pedlar said. “She then checked something on the counter and said the price would be R75 now due to paying with a credit card. More than 20% extra! I was a bit taken aback, but I paid although it didn’t seem right to charge extra simply for paying by credit card,” Pedlar said.

She later called the salon to complain and owner Peter von Moos advised that the salon had two prices — one for cash customers and another for customers paying by credit card. He said the “normal price” was the price charged for credit card payments, while cash customers received a discount. However, Pedlar was unhappy with this explanation since she said she had not bought on credit terms and retailers usually accept credit cards as being as good as cash. She asked me to take up the matter.

Ombudsman for Banking Services Clive Pillay said banks charge retailers a fee of three to five percent for the card facility, but they are not allowed to pass the cost on to consumers. “All merchant agreements in SA say unequivocally that a merchant is prohibited from adding a fee or a surcharge and if he or she did so it could constitute a breach of the agreement and the bank could take back the [credit card] machine,” Pillay said.

He added that agreements stipulate that goods or services are supplied “at the merchant’s normal cash price and that the price includes no additional charges or elements of credit”.

“It becomes tricky when a retailer claims the surcharge is not a fee for processing the payment but a discount on a cash price,” Pillay added. “Often a service provider disguises or couches the surcharge in different language.”

When I contacted Von Moos to explain the position, he was adamant that he was not breaking any rules, saying he offered a cash discount off his “normal price” and had advised his staff never to quote the “cash price”.

“This is the normal price displayed on the door. I think I am quite entitled to offer a cash discount. I do not charge higher because you are paying with a credit card. If she is too thick to understand it’s not my problem,” he said. “You can twist the words around to suit yourself,” Von Moos said when I suggested that the “cash discount” was the same as a surcharge. He then added “ … of course it equates to the same thing”.

Pillay advised Pedlar to complain to the National Consumer Commission in terms of the Consumer Protection Act, which states in section 23 (6) (b) that “a supplier must not require a consumer to pay a price for any goods or services if more than one price is concurrently displayed, higher than the lower or lowest of the prices so displayed”.

Payment Association of South Africa CEO Walter Volker said the rules governing card payments were that no surcharges were allowed.

“This means that the cardholder may only be charged the advertised price or displayed price — nothing more.

“A merchant may, however, choose to offer a discount off the advertised/displayed amount for cash. This is not encouraged or supported, but the merchant can ‘get away’ with offering such a discount,” Volker said.

Speaking generally about the issue, Volker added that in Australia where surcharging is allowed, there is widespread misuse, known as “price gouging”. “Consumers paying by card are routinely charged a 10% to 15%surcharge, even though the bank might charge them less than 1,5 or two percent,” Volker said.

Volker advised consumers to report the practice. “If the merchant refuses to budge, they can inform the merchant that they will report them to their card-issuing bank. Should the merchant still not budge, they should contact their card-issuing bank and report the merchant, providing details of the incident, as well as the name of the acquiring bank usually indicated by the branding on the card-reading terminal.”

Stephen Higgins, spokesperson for FNB, which provides the card facility to the salon, confirmed that its agreements with retailers stipulated “the price of any goods or services must be the same for cash and cards”.

“FNB will take steps against merchants who act outside the agreement.”

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