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NO to credit card surcharge and minimum spending limit - CHOICE # 382

  • 2008.08.15

Credit cardholders are urged to say NO to merchants imposing a surcharge on their purchase.

They should also report any such incidents to their card issuers in an effort to put an end to this malpractice.

The issue of merchants surcharging credit cardholders has come under public scrutiny recently following media publicity on consumer complaints.

The Consumer Council has obtained the clear and unanimous assurance of three credit card associations, namely, Visa, MasterCard and American Express, that such a practice is prohibited by, and in breach of the operating regulations of the card associations.

According to the operating regulations of the card associations, merchants are NOT allowed to impose restrictions in any forms on the acceptance of credit cards for payment.

Specifically, merchants must NOT add any surcharges to the transaction amount. Some merchants have allegedly demanded a surcharge of 2% or more for credit card transactions.

Further, merchants must NOT set any minimum spending limit; they must honour all cards properly presented for payment, even for transactions of small amounts. Allegations of a minimum $200 or more limit have been raised against some merchants.

Most credit cardholders are, however, unaware of these prohibitions, let alone the redress available to them.

In a Consumer Council survey on 18 credit card issuing banks, all without exception responded that they would handle requests for surcharge refund - but on the condition that affected consumers could provide sufficient proof on the surcharge they actually paid.

This means that the amount of the surcharge must be specified separately on the receipt or invoice provided by the merchant, and not included in the transaction amount.

As some merchants seek to deliberately avoid listing the surcharge separately on the invoice, consumers are unlikely to obtain the sufficient proof necessary to claim refund from their card issuers.

Little wonder that only a few requests for refunds were received by less than half of the card issuers surveyed (8 out of 18), and the number of successful cases was even fewer.

The Council believes that an extensive programme of educational publicity by relevant stakeholders directed at consumers and merchants will go a long way to improve the situation.

First and foremost, card associations and/or card issuers - should undertake to issue a notice to all cardholders drawing their attention to such malpractices which are prohibited in the service contracts with the merchants, and listing out the application procedures for surcharge refund, as well as to communicate to their cardholders on their proper right on credit card usage.

Second, consumers can play a vital role - by refusing to accept any restrictions, including any surcharges, imposed by the merchants, and reporting such incidents to their card issuers.

Third, card associations or card acquirers should get their act together in strengthening communication and ensuring merchants' compliance with the rules and regulations in force. Card associations and card issuers should handle positively any complaints and irregularities reported by consumers against any non-complying merchants.

Only the collective efforts of card associations, issuers and acquirers, on the one hand, and cardholders, on the other, could such malpractice be effectively stopped and eliminated.

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