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		MERCHANT CREDIT CARD ABUSES: What They Cannot Ask You To Do
		Many merchants engraft their own rules to your use of a credit card, usually without the right to do so. What are you required to do and what can you rightfully refuse to do? The Financial Guide explains your rights.

TABLE OF CONTENTS

Personal Information
Minimum Charge Requirements
Extra Charge For Using A Credit Card
ID When Paying By Check
Cards Other Than The "Big Three"
How To Complain
INFOSOURCES

Do sales clerks ask you to write your phone number or address on a credit card slip? Have you been told that "store policy" requires a $25 minimum for credit card use? Have you been charged an extra 3% just for using a major credit card? When you pay by personal check, does the clerk ask for two forms of identification and then write your credit card number on your check?

These practices violate your privacy, expose you to potential credit fraud and may be illegal in some cases. We will tell you how to say "no" to a merchant who engages in these impermissible credit card practices:

• Writes your personal information on a bank credit card sales slip,
• Imposes a minimum sales amount for credit card purchases,
• Charges extra for payment by credit card, or
• Writes your credit card number on your personal check.

Merchants may ask you to provide a phone number, home address, or other personal information on credit card sales slips. This practice not only violates your privacy, but American Express, MasterCard, and Visa prohibit requiring it as a condition of sale.

There is no need for merchants to obtain phone numbers or other personal information from customers. Once they have correctly processed the bank card transaction (gotten an authorization number and made sure the signatures match), they are guaranteed to receive payment.

TIP: If you don’t want to provide personal information on a credit card sales slip, you can refuse to do so. The merchant has no right to refuse you the sale (although unknowledgeable clerks may have no authority to vary from store policy).

Further, if you refuse to present identification, such as a driver’s license, the merchant may not refuse to make a credit card sale under Visa, MasterCard, and Amex rules.

TIP: If you exceed your credit limit, the card-issuing bank absorbs the loss, so there is no need for the merchant to contact you. Thus, there’s no reason to provide your personal information.

MINIMUM CHARGE REQUIREMENTS

Some stores require consumers to spend at least $20 (or some other minimum) to pay for purchases by credit card. They engage in this practice because they and their banks do not want the expense of processing a credit card transaction involving a small amount of money.

This practice defeats one of the major purposes of credit cards—convenience—and may force credit card users to spend more than they want to. In addition, minimum charge requirements vary from merchant to merchant, and there are no regulations requiring disclosure of these minimum purchase levels.

Visa's and MasterCard's regulations prohibit minimum charge amounts. American Express's regulations do not explicitly prohibit minimum charges, but its policy is to discourage any merchant practices that create a "barrier to acceptance." Amex does prohibit "discrimination" against the Amex card, however, so if a merchant has no minimum charge for Visa and MasterCard, the merchant may not discriminate against Amex by imposing a minimum charge.

TIP: If a store requires a minimum purchase for Visa or MasterCard, point out to the store manager that the practice is prohibited by the card companies.

EXTRA CHARGE FOR USING A CREDIT CARD

Some merchants seek to impose a service fee for all credit card purchases.

When a merchant gives a credit card slip to the credit card company or bank for processing, a percentage of each purchase—usually 1.5% to 5% of the purchase amount—is deducted. This "merchant discount fee" helps pay for the bank's services and for the credit card system. By charging extra for credit card use, the merchant passes the discount fee on to customers.

MORE: Since 1984, when a Truth in Lending law ban on surcharges expired, some states have enacted laws prohibiting surcharges; see States That Prohibit Credit Card Surcharges.

Visa and MasterCard prohibit surcharges, and American Express discourages them. Amex does prohibit "discrimination" against the Amex card, however, so if a merchant accepts Visa and MasterCard (and cannot impose a surcharge under those companies' rules), the merchant may not discriminate against Amex by imposing a surcharge.

TIP: Any merchant that accepts American Express cards and also accepts Visa and/or MasterCard may not charge consumers a surcharge on Amex purchases.

Surcharges invite numerous abuses by retailers, including bait-and-switch tactics. There are no laws on how and when surcharges must be disclosed, making it difficult to figure out the total price of an item. Travelers often find it difficult to get out-of-state checks accepted, and should not be penalized for using credit cards. Further, credit card acceptance usually produces higher sales for merchants, offsetting the cost of processing credit card transactions.

Note that a cash discount is legal and permitted under all credit card companies rules. A cash discount offers a lower price for cash than credit; for example, many gasoline stations offer cash discounts. While this may merely be a loophole, it is permitted. In addition, there are a few state governmental agencies, including state tax offices and motor vehicle departments, that are permitted to charge surcharges due to state laws that do not permit them to pay discount fees. However, retail merchants may not impose surcharges.

ID WHEN PAYING BY A CHECK

Merchants often ask for two forms of identification before accepting a personal check as payment for a purchase: a driver's license and a major credit card. Merchants also believe consumers with credit cards are less likely to bounce checks.  This is a misconception: nearly 90% of all bounced checks result from arithmetic error, not fraud.

When merchants write your credit card number on your personal check, they are subjecting you to possible fraud.

• Anyone who sees the check sees your name, address, telephone number, and credit card number.
• Further, several states use an individual's Social Security number as the only identifying number on a driver's license. Once a thief has your Social Security number, along with the other information on the check, he or she can get your credit report, and even apply for credit in your name.
• Someone can use your credit card number to order merchandise by phone or through the mail by requesting the merchandise be sent to a post office box or an address other than your own.
• Someone might use your personal information to apply for credit in your name, then run up bills on your account without paying them, of course. People who are victims of so-called application fraud do not find out until months or even years later, when they begin receiving letters from creditors, by which time the damage has been done to their credit histories.

Although Visa, MasterCard and American Express do not have the authority to prohibit the practice of writing credit card numbers on checks, the three card companies do prohibit merchants from charging a credit card account to cover a bounced check.

MORE: Several states prohibit merchants’ writing a credit card number when accepting a check as payment. Unless you live in one of the states where the practice is illegal, there is no way to stop the merchant from refusing you the sale; see States That Prohibit Recording A Credit Card Number On A Check.

	TIP: If a merchant asks for your credit card number, ask why he or she needs to record it, since, due to the above prohibition, nothing can be done with it.
	TIP: There is probably no harm in allowing a merchant to see that you carry a major credit card, and even to note on the check whether it is Visa, MasterCard, or American Express. For your own safety, this is the only credit card-related information you should allow to be recorded. You should not allow the merchant to record the credit card number.

If the sale is refused, ask to speak with the store manager. Explain the risks of fraud, and point out that the rules of the three major credit card companies prohibit charging a credit card to cover a bounced check. You might also point out that, if there is a problem, merchants usually have all the information they need to locate the customer written right on the check: name, address, phone number and driver's license number. Also, merchants will not be able to use the credit card number to locate the consumer.

Many store clerks are simply unaware of the potential crimes associated with the use of personal information written on checks.

Other cards may not provide cardholders with any of the protections described above. However, purchases made with other cards are covered in all states that have laws prohibiting the practices described here.

TIP: Cardholders who experience the practices discussed here should complain to store managers and encourage the card company to change its policies.

HOW TO COMPLAIN

When merchants violate the policies described here, report them to Visa, MasterCard, and  American Express.  Address your letter to:

Visa USA
Consumer Relations
P.O. Box 8999
San Francisco, CA 94128

MasterCard International
Public Relations
2000 Purchase Street
Purchase, NY 10577

American Express
Customer Service
PO Box 297812
Ft. Lauderdale, Fl 33329-7812
1-800-297-1234 (U.S.) 336-393-1111
(collect) 8:00 a.m. to 12:00 a.m., EST

In your letter, give the name and location of the merchant and a copy of a credit card sales slip. The sales slip is needed by Visa and MasterCard to track down the offending merchant. American Express provides card-members with a toll-free number to call if they have difficulty with a merchant. Make sure you have the complete details about the merchant and the problem before you call.

If a merchant is uncooperative, take your business elsewhere.

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Related FGs

• CREDIT REPORTS: What You Should Know—And Do—About Yours

• GETTING OUT OF FINANCIAL TROUBLE: Steps You Can Take

• CREDIT CARDS: How To Choose—And Use--Them Wisely

• YOUR CREDIT CARD RIGHTS: What To Do If You Have A Problem

Financial Calculators

• How long will it take to pay off my credit cards?
• How long will it take to save for a major purchase?
• Simple loan calculator.
• How much can I borrow?
• What interest rate would I need?
• How long would it take to pay off a loan?
• What would my payments be?

Books And Other Publications

• Larry Burkett, The Complete Guide to Managing Your Money, (Budget Book Service, 1996), ISBN 0884861325.
• Jane Bryant Quinn, Making the Most of Your Money, (Simon & Schuster,1997), ISBN 0684811766.
• C. Frederic Wiegold, Editor, The Wall Street Journal Lifetime Guide to Money, (Hyperion, 1997), ISBN 0786861320.

Government And Non-Profit Agencies

The following agencies are responsible for enforcing federal laws that govern credit card transactions. Questions concerning a particular card issuer should be directed to the enforcement agency responsible for that issuer.

• State Member Banks of the Reserve System:

Consumer & Community Affairs
Board of Governors of the Federal Reserve System
20th & C Sts., N.W.
Washington, D.C. 20551

• National Banks:

Comptroller of the Currency
Compliance Management
Mail Stop 7-5
Washington, D.C. 20219

• Federal Credit Unions:

National Credit Union Administration
1776 G St., N.W.
Washington, D.C. 20456

• Non-Member Federally Insured Banks:

Office of Consumer Programs
Federal Deposit Insurance Corporation
550 Seventeenth St., N.W.
Washington, D.C. 20429

• Federally Insured Savings and Loans, and Federally Chartered State Banks:

Consumer Affairs Program
Office of Thrift Supervision
1700 G St., N.W.
Washington, D.C. 20552

• Other Credit Card Issuers (includes retail gasoline companies):

Division of Credit Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, D.C. 20580

• The U.S. Postal Inspection Service:

This office covers mail fraud, sexually offensive materials, solicitations that look like government materials but are not. If you suspect such violations, contact your local Postmaster or Postal Inspector or:

Chief Postal Inspector
U.S. Postal Service, Room 3100
475 L'Enfant Plaza SW
Washington, D.C. 20260-6444
Tel. 800- 654-8896

or

The Consumer Advocate
U.S. Postal Service
Washington, D.C. 20260-2200
Tel. (202) 268-2284

The Federal Trade Commission does not handle individual complaints, but reporting failure to deliver, late delivery, unordered merchandise, misrepresentation or fraud helps uncover widespread abuses that the FTC might take action to stop.

Division of Enforcement
Federal Trade Commission
Washington, DC 20580
Tel. (202) 326-3768

The Federal Communications Commission will handle requests for action on suspected violations of the Telephone Consumer Protection Act, such as persistent sales calls after the seller is told to stop.

Informal Complaints and Public Inquiries Branch
Enforcement Division
Common Carrier Bureau
FCC, Mail Stop 1600A2
Washington D.C. 20554

Mail and Telephone Preference Services should be contacted if you wish to have your name removed from mail or telephone lists of many companies. You may also contact the Direct Marketing Association.

Telephone Preference Service
Direct Marketing Association
P.O. Box 9014
Farmingdale, NY 11735-9014

and

Mail Preference Service
Direct Marketing Association
P.O. Box 9008
Farmingdale, NY 11735-9008

Low-Cost Credit Cards: Bankcard Holders of America lists banks charging no fees and low interest rates for their conventional credit cards. To obtain a copy of the list, write to:

Bankcard Holders of America
524 Branch Drive
Salem, VA 24153

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STATES THAT PROHIBIT RECORDING OF PERSONAL INFORMATION

The following states prohibit merchants from recording certain personal information in connection with credit card transactions:

• California
• Delaware
• Georgia
• Maryland
• Massachusetts
• Minnesota
• Nevada
• New Jersey
• New York
• Pennsylvania
• Washington, DC
• Wisconsin

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STATES THAT PROHIBIT CREDIT CARD SURCHARGES

The following states prohibit merchants from adding surcharges to credit card transactions

• California
• Colorado
• Connecticut
• Florida
• Kansas
• Maine
• Massachusetts
• New York
• Oklahoma

• Texas.

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STATES THAT PROHIBIT RECORDING A CREDIT CARD NUMBER ON A CHECK

The following states prohibit merchants from recording your credit card number on your check:

• California
• Delaware
• Florida
• Georgia
• Illinois
• Iowa
• Kansas
• Maryland
• Massachusetts
• Minnesota
• Nevada
• New Hampshire
• New Jersey
• New York
• North Dakota
• Ohio
• Pennsylvania
• Tennessee
• Virginia
• Washington, DC
• Washington
• Wisconsin
  

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