Keep Your Charges to a Minimum

I caught an episode of ‘Happy Days’ the other night on cable. Richie, Ralph Malph, Potsie and the Fonz were eating at Arnold’s Diner, the gang’s usual hangout.

Looking back at the happy days when I was in high school, Butch’s Pizza was our Arnold’s – we hung out there all the time and ate there after practically every football and basketball game.

A cheeseburger with ketchup and onions, with a side of mozzarella sticks and pizza sauce was my regular order (and is still, to this day). Sometimes when I was home alone, and before I could drive, I would order my favorite meal to be delivered. The only problem was, Butch’s had a $5 minimum for delivery orders (when I went to high school in the 1900s, that order was under $5). So, then I would throw in a milkshake because I was a problem-solver.

A couple of weeks ago I wrote about some businesses implementing a temporary surcharge to cover additional expenses incurred due to COVID-19. Businesses would pass along extra costs to customers for cleaning supplies and personal protective equipment for their employees.

Another surcharge that some businesses pass along to customers is for not meeting a minimum purchase requirement when using a credit card, kind of like Butch’s policy for minimum delivery orders. However, the minimum purchase amount is capped at $10. That limit was set by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which also gives the Federal Reserve the right to increase that amount.

There is no similar law governing the minimum purchase amount for debit cards, however.

In addition to minimum purchase amounts, businesses can also impose a surcharge to customers simply for using a credit card. In exchange for agreeing to accept a credit card, businesses must pay a percentage of each sale to the credit card company, which is usually between 2% and 5%.

In 2005, a group of merchants sued Visa and Mastercard over these charges, which are commonly known as “swipe fees.” The retailers argued that they have limited power to negotiate the amount of the fees, which, according to the National Retail Federation, come to about $30 billion a year. They also accused credit card companies of preventing them from encouraging shoppers to use cheaper forms of payment, such as with cash or a check.

The lawsuit was settled in 2013, and as part of the deal, the credit card companies agreed to pay $5.7 billion to the retailers to allow them to continue charging swipe fees. Retailers were also allowed to pass along a surcharge to customers paying with MasterCard or Visa. Under the settlement, however, this surcharge was limited to 4% of the purchase.

If a business sets a minimum credit card purchase at higher than $10, or imposes a surcharge of greater than 4% to customers paying with a credit card, this violates the business’s agreement with the credit card company. You could alert your credit card company to the business’ practices and it could potentially jeopardize the establishment’s ability to accept the card.

However, if that business sells something that you love, you also don’t want to jeopardize its ability to sell it to you. After all, an illegal 5% surcharge on your favorite pants is still better than saving 5% and not having any pants. Especially when someone says, “Sit on it, bucko.”

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Reg P. Wydeven

Elder Law and Estate Planning Attorney at McCarty Law LLP
Hoping to follow in his father’s footsteps from a young age, Reg’s practice primarily consists of advising individuals on estate planning, estate settlement and elder law matters. As Reg represents clients in matters like guardianship proceedings and long-term care admissions, he feels grateful to be able to offer families thorough legal help in their time of need.

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