NY attorney general cracks down on credit card surcharges

A growing, and largely misunderstood, practice of charging less for cash and more for credit cards has caught the attention of New York Attorney General Andrew Cuomo.

His office announced today that it's cracking down on 43 Long Island gas stations across Nassau and Suffolk counties, sending them "cease and desist" letters over charging surcharges for gas bought with credit cards.

About one-third of Long Island gas stations surveyed engaged in some sort of deceptive practice, Cuomo's office says, either through the surcharges or by advertising the lower price and failing to disclose the surcharge.

"With summer gas prices reaching an all-time high, the last thing Long Island drivers need are gas stations hitting them with exorbitant prices for paying with a credit card," Cuomo said in the announcement. "Our investigation revealed that Long Island is a hotbed for gas stations that engage in deceptive practices where they display one price as a way to lure customers -- and then charge them more at the pump."

New York has a law that prohibits retailers from charging a surcharge for credit cards, according to the announcement.

In most of the rest of the country, it's not state law, but merchant agreements between retailers and credit card processors, such as Visa and MasterCard, that prohibit the practice.

As part of the contract that your local gas station signs with, say, Visa, the station agrees not to charge a surcharge for card use. However, in a bit of semantical legerdemain, the merchant agreement lets the owner offer a cash discount. You still end up paying more with a credit card than with cash, but if you call it a "cash discount," it's OK.

According to Visa's merchant rules,  "... (Y)ou may not impose any surcharge on a Visa transaction. You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment."

In states where the surcharge rule isn't written into law, consumers who want to report violations by merchants can contact their issuing banks using the numbers listed on the back of their credit cards, or contact the card company -- Visa, MasterCard, American Express, Discover -- directly.

See related: Some merchants don't play by the credit card rules