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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
Minimum Charge Requirements
Extra Charge For Using A Credit Card
ID When Paying By Check
Cards Other Than The "Big Three"
How To Complain
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
- 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.
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.
a store requires a minimum purchase for Visa or MasterCard, point
out to the store manager that the practice is prohibited by the card
Some merchants seek to impose a service fee for all credit card
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.
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.
merchant that accepts American Express cards and also accepts Visa
and/or MasterCard may not charge consumers a surcharge on Amex
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.
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
- 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.
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.
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
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
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.
who experience the practices discussed here should complain to store
managers and encourage the card company to change its policies.
When merchants violate the policies described here, report them to
Visa, MasterCard, and American Express. Address your letter
P.O. Box 8999
San Francisco, CA 94128
2000 Purchase Street
Purchase, NY 10577
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.
month by month suggestions and ideas to improve your financial
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
- C. Frederic Wiegold, Editor, The
Wall Street Journal Lifetime Guide to Money, (Hyperion,
1997), ISBN 0786861320.
Government And Non-Profit
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
Consumer & Community Affairs
Board of Governors of the Federal Reserve System
20th & C Sts., N.W.
Washington, D.C. 20551
Comptroller of the Currency
Mail Stop 7-5
Washington, D.C. 20219
National Credit Union Administration
1776 G St., N.W.
Washington, D.C. 20456
Office of Consumer Programs
Federal Deposit Insurance Corporation
550 Seventeenth St., N.W.
Washington, D.C. 20429
Consumer Affairs Program
Office of Thrift Supervision
1700 G St., N.W.
Washington, D.C. 20552
Division of Credit Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, D.C. 20580
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
Chief Postal Inspector
U.S. Postal Service, Room 3100
475 L'Enfant Plaza SW
Washington, D.C. 20260-6444
Tel. 800- 654-8896
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
Informal Complaints and Public Inquiries Branch
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
Telephone Preference Service
Direct Marketing Association
P.O. Box 9014
Farmingdale, NY 11735-9014
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
The following states prohibit merchants from recording certain personal
information in connection with credit card transactions:
- New Jersey
- New York
- Washington, DC
The following states prohibit merchants from adding surcharges to
credit card transactions
- New York
The following states prohibit merchants from recording your credit card
number on your check:
- New Hampshire
- New Jersey
- New York
- North Dakota
- Washington, DC