Is Merchant surcharging on credit cards allow?  If you are not working in credit card industry, you probably won’t know the answer.  I would like to share my knowledge and experience in this surcharging issue with you.

All credit card companies do not allow surcharging on credit cards. It is written in their franchising agreements with the franchisors that surcharging is not allowed on credit cards.

Surcharging is not a problem in most American and European countries. However in Asia, merchant surcharging on credit card transactions is quite rampant, although under the merchant agreement with the card companies, the merchant is prohibited to surcharge on credit card transactions.

In Asia, people are so used to bargain for the lowest price for products that they wish to purchase.  In most cases, merchants are willing to settle for a lower profit margin in order to close the sale.  Therefore because of this reason, merchants are not willingly to absorb the credit card commissions paid to the Card Companies.  Naturally, they would pass the cost to the cardholders.  Most cardholders will not be happy to take up this cost.

Surprisingly you don’t find surcharging activity in certain industries like restaurant, hotel, mail orders, insurance, etc, and in big merchants. Surcharging is known to occur in small to medium size merchants and in retail and travel industries. 

There have been many complaints from cardholders that they have been surcharged by merchants for using credit cards.  Card Companies have been put to immense pressure and dilemma on how to resolve such problems.  Many suggestions and alternatives were discussed and implemented to remedy the surcharging issue.

What the cardholder can do when merchant surcharges

Some of the alternatives that were put up by the Card Companies for the cardholders when they are being surcharged for using credit cards were:

1.  Not to buy from merchants that surcharge on credit card transactions.

2.  Report merchants that surcharge to the Card Company.

3.  Identify the surcharge cost separately from the bill and report the matter to the Card Company.

4.  Before starting the bargaining process, tell the merchant that you are paying by credit card.

What the Card Company does when tackling surcharging issue

Most Card Companies know that the above four alternatives cannot eliminate surcharging activities completely.  They can only help to solve the surcharging issues to some extend somewhat acceptable to the cardholder and merchant.

Card Company wants the sales transaction to conclude so that they can earn revenue. Merchant wants to maximize their profits . Cardholder wants the lowest price for the goods. 

Card Company would handle the surcharging issues on a case to case basis trying tactfully to get either the merchant or cardholder to give in. In most cases, the surcharging matter were resolved amicably.

However in some extreme cases, the Card Company would revoked their agreement with the merchants for surcharging activities. 

Surcharging is a serious set back to the future progress of credit card industry.