We had a brush in with our own surcharging incident and wanted to lay it out for others to follow.
When heading to a conference in Las Vegas we jumped in a taxi.
Once we reached our destination we pulled out our card to pay.
At the end of checkout, on the terminal mounted to the back of the passenger’s seat, we noticed that the machine was adding a surcharge.
Zero notification upon entering the taxi.
We asked the driver about it, and it didn’t sound like it was something he knew much about, likely because his past customers didn’t know much about it and never bothered to ask.
Well, that’s a clear violation of the card network rules: the merchant must make the disclosures clearly at the point of entry and the point of sale.
So we had to take down a note to resolve this issue once the transaction was settled, or in about a week.
Ugh, a hassle.
Once we returned home, we called our bank who issued the credit card.
The bank asked if we contacted the merchant. I would imagine 99% of cardholders wouldn’t bother, but we looked for the merchant’s number and the only public number we could find went to a taxi driver hiring line, which further went to a voicemail.
Our bank then asked us how much we’d like to dispute.
At this point we also envision a lot of cardholders disputing the entire charge.
We received fair service, just not an expected rate.
So we ask for $2-something in return.
The bank immediately refunded the amount, and the merchant was probably caught unawares.
It does make one wonder how many people abuse the system given how easy it was to dispute the transaction.
It also makes you wonder what the merchant hopes to gain in this situation.
If you want to make more money, just increase your prices by 3% to cover the cost of taking card.
Or find a processor who isn’t out to make 250 bps of margin on your surcharge for doing nothing.
All of these seem like much better options than surcharging.
Eliminating card transactions hurts the merchant at least as much as it hurts the consumer.
The consumer doesn’t want to carry around a bunch of cash (sorry NCR, who’s long the loser business that is ATMs) and has options if you force cash payment.
The merchant is probably losing 3 cents of every dollar in cash due to theft. In restaurants we’ve seen estimates as high as 8 cents on the dollar.
Plastic is safer and more convenient, but it’s absurdly expensive.
The cost of moving money should be free.
Continued surcharging will just expedite Congress’ interest in legislating interchange downward like governments have done in Canada, Europe, and Australia. Not sure why this is so hard for payment bros to grasp.