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February 2000 Vol. 26, No. 2   RSS Feed for Undercurrent Issues
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Credit Card Surcharges

don't let foreign businesses screw you

from the February, 2000 issue of Undercurrent   Subscribe Now

Imagine going to pay your whopping $2,000 resort bill and discovering that the hotel had added a couple hundred dollars for a credit card "surcharge." Yet such 5 - 10% add-ons are common, especially for foreign travelers. Reader Martin Farber of New York made note of our January 1999 story about some dive operators who tack surcharges on purchases made with credit cards. He particularly recalled the assurances we reported from officials at both Visa and MasterCard that charging extra to use a credit card is a clear violation of their agreements with merchants of all types, worldwide.

Still, Martin encountered the practice twice in the next year, first in Belize, and then in the Red Sea.

Last June, Martin incurred surcharges when paying by card for drinks, gear rentals, and various sundries at Turneffe Island Lodge. The management told him they were passing along the “discount” that merchants are charged for the convenience and security of electronic processing. We called the Lodge’s toll-free reservation and information number (800-874-0118) and confirmed that this practice is still in effect, although only purchases made on the island are surcharged.

At such a remote location, Martin had no opportunity to take his business elsewhere, and was unable to get the surcharges dropped. But he decided to check a little further when he got home. Unhappily, the run-around he got indicates that the credit card companies and banks which issue their cards can be somewhat lame in enforcing their own policies.

Following the suggestions in our earlier article, Martin first called the toll-free numbers on his cards. The customer service reps at the cardissuing banks professed to know nothing about surcharges, and referred him to Visa and MasterCard. However, no one at the credit card Goliaths seemed to understand what Martin was talking about, either, and referred him back to his issuing banks. Sounds like the Y2K version of the “Spastic Plastic Cha Cha Cha.”

Six months later, Martin was surprised to see a sign at Empire Divers in Sharm El Sheikh announcing that a small percentage would be added to any bills paid with a credit card. When he questioned the surcharge policy, the operator claimed that the practice was commonplace throughout the Sinai Peninsula.

So what’s the real deal? Are surcharges allowed, or what? Definitely not, according to the bank merchant agreements we’ve looked at. The most succinct specifically states: “Merchant shall not impose any surcharge on transactions.” Others read similarly, embellished with a little more legalese. However, these agreements do allow merchants to offer discounts to induce customers to pay by cash or check, rather than by credit card. It’s a thin line, “a matter of semantics,” as the clerk at Empire Divers put it, but worth being sure of before you open your wallet.

For a more complete picture of the Visa and MasterCard policies, we went to those ultimate authorities for the New Millennium: each company’s website. Not surprisingly, the subject was covered under Frequently Asked Questions. Here’s how Visa deals with the issue, at

“In general, [charging extra for using a Visa card is] not permitted under the Visa regulations that all merchants must follow. These regulations are enforced through Visa member financial institutions. If you’ve had a problem with a specific merchant, please contact the financial institution that issued your Visa card. Your financial institution knows the regulations, and they can file a complaint regarding the merchant. You’ll find their telephone number on your Visa statement.”

According to a spokesperson from Visa Corporate Relations, the only exceptions to this policy are a small number of government programs in a few countries that are allowed to charge a convenience fee. Those few exceptions do not include dive shops, hotels, travel agencies, or tour operators.

MasterCard’s approach is even more lawyerly, as shown at

“Merchants must follow certain acceptance rules in order to be granted the privilege of accepting MasterCard cards. One of these rules specifically prohibits the practice of surcharging, that is, charging a customer a fee for using a Master- Card card over and above the sale amount. Under very specific conditions, however, a merchant can charge customers — including those using a MasterCard card — a fee in addition to the transaction amount. As a general rule, such a fee doesn’t violate the MasterCard rules provided the fee is charged to all customers engaging in the same transaction, regardless of the form of payment.”

MasterCard goes a step further by including a link to a Customer Service page where it’s possible to report a merchant who may not be playing by the rules. Introductory copy on that page reads:

“A surcharge fee cannot be added to the price of goods or services that you purchase on your MasterCard card.

“Here are questions to help determine if the fee being charged is a surcharge:

“Is the fee added regardless of whether you pay by cash or credit card? If so, it is not considered a surcharge.

“Does the merchant offer a discount if you pay cash? If so, this is permitted.”

The page further advises: “If you need assistance in securing credit from the merchant (in instance of surcharge), contact your MasterCard issuing financial institution immediately. Their address typically appears on your credit card statement. In order to preserve your rights it is required that you submit your dispute in writing within 60 days of the date of transaction.”

Okay, fine, that’s the boilerplate. But it’s obvious these abuses won’t stop without some top-down enforcement. The credit card companies have to ensure that issuing banks make their merchants toe the line. If you bump up against a situation like this, try to get the surcharges dropped at the point of sale. If you have no choice, or if you don’t notice any surcharges until after your bill arrives, file a dispute according to the instructions in the fine print on your credit card statement. Feel free to quote each company’s own policy as stated above. Be prepared for a drawn-out, frustrating process, but don’t take no for an answer. And demand that enforcement actions be taken to bring the abusive merchant into compliance.

— D. L.

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