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Insider’sreport

on payments

Paying for convenience

By Patti Murphy challenged in federal courts, and many legal experts have
ProScribes Inc. said it's only a matter of time before they get struck down.

e live in an age where conveniences count And while Visa, Mastercard and Discover no longer
for a lot in the lives of most. And increas- ban credit card surcharging, they still impose strict
ingly we've grown accustomed to paying requirements on surcharging programs. Merchants,
W for conveniences. Twenty-five years ago, for example, are required to register with the brands
when ATM surcharging began, I was aghast. No one, least through their acquirers, 30 days prior to implementing
of all me, would willingly pay 50 cents to $1 to access cash a surcharging scheme, and to make specific disclosure
they had in deposit accounts, I thought. Was I wrong! Just requirements in signage and on receipts. Plus permissible
the other day I paid $2.97 to withdraw cash from an ATM surcharges are capped by all three brands at 4 percent of
because the nearest surcharge-free ATM was 12 miles the ticket or the actual merchant fee, whichever is less.
away. Workarounds

Truth is, I've also grown accustomed over the years to For their part, merchants working with trailblazing
paying convenience fees. I readily pay for the convenience ISOs and merchant level salespeople have discovered a
of having food delivered, pre-selecting airline seats, and workaround: cash discounting. No one has a firm fix on
purchasing concert and theater tickets from my laptop or just how many merchants offer cash discounts, although
mobile device, among other things. And I know I'm not several experts have put the figure at 10 percent of card-
alone. accepting businesses outside of gas stations which long

Paying for convenience have offered discounts to cash-paying customers.
Now it's beginning to look like paying for the convenience The appeal to merchants is at least three-fold. There are
of using a credit card at the point of purchase will be no limits on the markups applied to goods and services
the next big thing. After all, a credit card surcharge (or a as long as the cash discount mirrors the markup. There
discount for cash) is about paying for convenience. are no card brand hoops to jump through, at least not yet.
Perhaps most importantly, it provides merchants a means
For years, merchants were prohibited by the card brands of recouping much of the cost of card acceptance, long a
from surcharging credit card purchases. Early on, the thorn in their sides
rationale was that surcharging would dissuade consumers Inevitable acceptance
from using fledgling card products. As consumer adoption
and merchant acceptance of cards grew, however, that While the emphasis is on discounting cash purchases, the
rationale began to fade. Confronted by this changing net effect of these programs is the same: customers who
market reality, and legal challenges to interchange and want the convenience of using their credit or debit cards
card brand rules, Mastercard and Visa dropped their for purchases are paying more. Call it a cash discount, or a
surcharge prohibitions in 2013. surcharge, or simply a convenience fee, eventually it may
make no difference at all. Most consumers understand
Legal limits businesses pay to accept card payments, and are willing
Today, merchants are still prohibited from surcharging to take on some of that cost. Those who aren't can always
credit card payments under the laws of 10 states, including shop around for surcharge-free ATMs, or write checks for
several of the most populous states, California, New York their purchases.
and Texas among them. (Debit card surcharging continues
to be banned by the card brands, as well as under federal Patti Murphy is senior editor at the Green Sheet and president of
law.) Several of the state prohibitions, however, are being ProScribes Inc. Follow her on Twitter @GS_PayMaven.

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