Restaurant Law Blog

Thursday, January 9, 2014

Restaurant Owners Now Permitted to Charge Customers More for Credit Transactions vs. Cash

Restaurant owners will now be able to charge customers different rates depending on their method of payment. After years of legal battles, American Express, Visa, and MasterCard must now allow business owners to implement a “two-tier pricing system.” This two-tier system permits business owners to charge customers who pay with credit cards more than those who pay with cash or debit cards.

In August 2012, a group of business owners won a settlement from MasterCard and Visa after filing a class-action lawsuit against the two major credit card companies. In the settlement agreement, MasterCard and Visa agreed to pay $5.7 million in damages to business owners, lower “swipe fees”, and allow business owners to implement surcharges on credit transactions.

In his decision supporting the MasterCard and Visa settlement, Judge John Gleeson explained, “For the first time, merchants will be empowered to expose hidden bank fees to their customers, educate them about those fees and use that information to influence their customers’ choices of payment methods.”

Now, a recent American Express surcharge settlement will allow business owners to implement this same two-tier pricing system for American Express users.

These decisions present new challenges to business owners as some may be hesitant to begin implementing these surcharges for fear of customer backlash. However, in an area that previously had no room for negotiation, having the option should come as good news.


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