Living with credit

Cardholders have sympathy for surcharges

Fred Williams

The Delaware man was surprised by a 25-cent surcharge on his bill for a $9 lunch. The food truck added the premium because he paid with plastic.

But after managers of the mobile mex-asian eatery explained the surcharge, the consumer was mollified. The business told him that the amount helped cover the cost of using Square, the smartphone app that processes credit cards wirelessly. Also, managers said they’d post a warning.

“Sure enough, there was a notice (about the fee) added to the menu board in subsequent weeks,” the card user wrote.

The man, who did not want his name published, was not alone. Several people who responded to’s online survey about surcharges were sympathetic to the merchants who charged them extra for paying with plastic.

This was the surprise in our research for a story about surcharges — customers often weren’t mad about it, or got over their initial irritation.

As rewards cards become ubiquitous, many card users look for every opportunity to pay with plastic. Racking up points, miles or cash-back has become habitual, especially for people who pay annual fees in return for richer rewards.

That impulse collides head-on with surcharges at the cash register. What’s the advantage of generating reward points if it costs more to use the card than cash or debit? A fee of just 25 cents can wipe out rewards on small purchases, and then some.

For the merchant taking the card, however, the transaction costs on small purchases can put a dent in profits, or even wipe them out. The retailers’ lobby group says transactions cost on average 1.5 percent to 3 percent of the purchase amount, but smaller retailers say their costs often run higher. If you’re a big chain you can wrestle with the card companies and get an advantageous rate, as Costco famously did by dumping American Express. The corner store doesn’t have that leverage.

Sympathy was in shorter supply for utility companies that tacked a surcharge onto bills for power or water.

“My local water company charges a $0.35 fee to use a credit card to pay the bill, no matter the amount of the bill,” one Kentucky resident said, adding that there is a warning about the surcharge before the transaction goes through.

A West Virginia resident said his power company surcharged 3.95 on a $44 bill, a 9 percent premium. “There’s no explanation, but there are multiple warnings about the fee being charged,” he said, adding that you can avoid the fee by enrolling in auto-payments and switching to electronic billing.

Maybe the goodwill toward small retailers shouldn’t have been a surprise. According to consumers in our poll, many merchants who ring up surcharges — the hairstylist, food truck vendor, dry cleaner, the clerk at the corner store –are people we see regularly, face to face.

For a California consumer, anger about a surcharge at a convenience store turned into understanding. He avoided the fee by paying cash to the vendor, “who happens to be a nice guy.”

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