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Using your credit card at Restaurants

I own a restaurant. The number one reason for customer calls after a visit is credit card issues.

Restaurants these days are in a bind over credit cards.... by law we are not allowed to keep copies of credit card numbers or any other information beyond the last 4 digits of the credit card number and the amount of the charge along with the signature. If you don't want to pay two arms and two legs (we already pay an arm and a leg to the processors, around 3.3+ plus) you have to have your credit cards settled electronically. So we are dependent on our credit card processors.

In addition, these processors add an allowance for the tip to the authorization. Typically this amount is 20%. The reason for this is that the restaurant is only guaranteed the amount of payment that is actually authorized. Permission for your credit card company to do this is clearly stated in your credit card agreement, usually is 5 point type and page 73 after the limitations on warranties that applies in Outer Mongolia. Often it is printed in Latin.

Customers check their card statements online the next day and see a different amount on the bill than is on their charge slip. They then call the restaurant, upset that the restaurant, which in fact has not received any money at this point, has overcharged them. The pending charge will revert to the proper settlement amount in three business days, but the customer is left thinking the restaurant is pulling a fast one.

The other common issue is multiple authorizations to a credit card. From time to time, a server will make a mistake on the credit card authorization process. Then the authorization amount needs to be changed. Our credit card system sends your processor a message with the old authorization number and the new amount. Your processor is supposed to delete the old amount authorized and replace it with the new amount. I have no control over the process from my end. But sometimes both authorizations wind up on your card. Again these is nothing going on from our end that lets us know that this has happened. We can take the same exact steps to correct a mistake and 9 times it works perfectly and then on the tenth time is results in a double authorization. Since only a manager can do this, and I personally handle 60 to 70% of them, there is no rhyme or reason on our side to when this happens. There are a few cases where it is our fault, but that is because someone doesn't follow the proper steps. I am talking about when the proper steps are followed.

If you use a credit card, this temporary inconvenience can result is a future charge being turned down, but will not result in your being over your credit limit as nothing actually counts against your limit till the charge settles. In my almost 2 years of using our system which is Chase, the largest by far, it has never happened that the multiple authorizations have failed to drop off. In any case, having a charge turned down can be embarrassing and very inconvenient, but there is nothing the restaurant can do with regards to your credit card's company's speed in turning pending charges into settled ones. But if you use a debit card, the money is actually taken out of your account and you can be subject to overdraft charges. Never use a debit card!

So here is a summary of my credit card tips...

Don't use a debit card unless you have no other choice and then consider going to an ATM and getting cash. A mistake with a debit card is far worse than with a credit card.

Wait till the end of 3 business days after your dining experience before thinking a restaurant has mischarged you.

Recognize that accidents happen, I cannot tell you the number of times that I or my wait staff has been outright accused of dishonesty..... "That waitress, I guess she just decided to rip me off and add a bigger tip. What are you going to do about it?" Well, if thats how you approach it, I am going to ask you not to come back to my restaurant.

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  1. I always use my debit card and always will! I've never encountered any of the problems you've described, and I go out ALOT. However, in my neighborhood many places don't even bother accepting credit cards, which I now understand considering all the hassles you put up with!

    9 Replies
    1. re: bklyngrl

      Want to know why people use debit cards at restaurants instead of credit cards which afford a somewhat greater degree of protection? Appearances - pure and simple. When dining with a group, pulling out a debit card sends the message to other diners at your table that you've got the money to pay for the meal. Using a credit card - even when it's a business expense - tells people you're going into debt for a meal you couldn't otherwise afford. You may disagree, but it's been my experience that people notice this sort of thing.

      1. re: jim1126

        Just throwing something out there, no flame intended but am curious.

        In my age bracket 45-55, very few people use a debit card at dinner. In fact we rarely see anything other than gold or platinum amex cards, except for friends who work for banks and receive a credit card with no fees and low interest.

        Is what you describe something that you see in a younger crowd or are you in my age group. I have low-20's daughter who is just beginning to understand the meaning of pay as you go and am curious if this is an age thing.

        TIA

        1. re: jfood

          Amex is not really a debit card it is a charge card. Amex requires you to pay the balance off every month so it would be like showing you are not going into debt (that say amex has gotten much more flexable in the area of payment over time).

          In the past when people did not put thier entire life on their credit card (my mother still can't get over the idea of charging groceries), most people used cash for everything. The amex was the way the wealth said I can't be bother to carry cash like poor people so I will just carry this card instead. This is also why for so many years the amex was seen as better than having a MC or VISA.

          I'm not sure any of this is as true as it used to be. Our culture has changed so much that I think most people expect you to use your credit card becuase you are accumulating miles or points or cashback.

          1. re: bonmann

            Thanks bonmann, sorry for my slightly confusing post. I understand that AMEX is a charge, not credit. They do have programs that allow certain types of charges to be placed on a T&L crdit type payment program. It's a real pain versus just paying the bill every month.

            Jfood, Member since 1979.

        2. re: jim1126

          However, almost all debit cards I know of look like credit cards, don't they? It might say "debit card" and have a bank insignia on it, but more likely the VISA or MCard logo will be more visible to anyone watching someone put a card into the billfold for the waiter to pick up. Most people I know don't leave the card on the table, visibly showing the words "DEBIT CARD".

          1. re: jim1126

            Yes, curious here too and no flame also intended. My age bracket is 30-40 and its actually the opposite. When they first got popular, people using debit cards were perceived as being unable to manage their finances and credit and got cut off from credit cards. While credit cards were for people who could control themselves and take advantage of the cards properly.

            Most people in my peer group use credit cards as float and getting points/rebates. I get to keep my money for another few weeks. Yes its only a couple of points in the checking account for that float but its enough to buy a meal or two at the end of the year with the interest income.

            An as an aside, do people really pay attention to whatever message is being sent these days as to what type of card is used to pay? I see someone whip out a card, I don't bother looking to see what type it is. Its just a means of payment and I either cough up cash to pay my share or someone gives me money if I use my card. Sometimes we have a joking argument as to who needs their points more. Either way, I continue with the dinner conversation.

            1. re: jim1126

              I completely disagree. Some of us actually pay our credit cards off every month and wouldn't dream of "going into debt for a meal" -- using a credit card doesn't mean you can't manage your money, in fact that's part of how you build a credit history. Besides, it isn't immediately obvious when a card is put down whether it's a credit or debit card, as someone said below. Sorry, I just don't buy that theory. I've never known anyone to comment on or even notice how someone pays.

              1. re: jim1126

                I'm afraid I have to disagree. First of all, I never even notice what kind of card others at my table are using, and whether it's debit/credit/gold/platinum/green/rainbow, etc. is neither important nor of interest to me. Do you mean to tell me that others in my dining party are judging my financial status by the card I choose to use? NO WAY! And, if they were, they'd be wrong. I generally prefer to use my AmEx credit card (the balance of which is paid in full every month) unless the restaurant doesn't accept AmEx. And my choice has nothing to do with how much is sitting in my debit account on any given day. I'll have to ask my young-adult kids about how they decide what card to use when dining out. Maybe this is an age-related phenomenon.

                1. re: jim1126

                  I've been out to dinner w/a group of friends where all 4 of us have each thrown our card into a pile, for the bill to be divided 4 ways. I happen to use a debit card, but I haven't got a clue whether the others are using debit or credit. How would you tell the difference, w/out scrutinizing the card?

              2. I use credit cards a lot because I can't keep track of cash. In many years of using cc's at restaurants I have never called the restaurant or any business to complain about a charge. If there's a discrepancy or dispute, I contact the bank which issues the card and file an official dispute. It's their job to sort it out. I'm sure the establishment in question hates this too - I believe it freezes payment until the dispute is resolved.

                Now I think about it, I have only once disputed a restaurant charge. The amount on my cc statement was about $15 higher than my signed slip so I disputed it, sending the bank a copy of the slip. Seems the waiter had added a nice bonus to his tip. The bank upheld my slip and charged me the correct amount.

                1. I really feel for you. The finanical education in this country (United States) is severly lacking and our technology has now surpassed our education. Before people could check thier credit card balances every day, most people did not know that authorizations exsisted. Now they can see them but since no one ever explained them make very poor assumptions. Somehow it has become the job of retailers to explain the process. I know this is a big problem for gas stations as well. The only way to fix it is better finanical education for our general population.

                  1. I thank you for this information, since most of this is not known to the general public. And, I have to say that I agree with you regarding NOT using debit cards.

                    Why would anyone want to have funds withdrawn from their bank account immediately, when using a credit card can easily give you a grace period of 3 weeks or so? And, since I only use credit cards that issue rebates to me, I actually collect a couple of hundred dollars per year in cash that I could not "earn" if I used a debit card. Additionally, since I pay the entire balance each month, I don't pay any finance charges. Also, under Federal law, in the event of fraudulent use of your credit card, you are only liable for a maximum of $50. of those fraudulent charges. No such legal protection exists for the holder of a debit card that is used fraudulently!

                    Since the prudent consumer can easily find credit cards that do not charge an annual fee and that pay rebates to the card holder, this is really a "no-brainer" as far as I am concerned. Of course, if one does not have the will-power to control how much is charged to that credit card, that advantage does not exist.

                    5 Replies
                    1. re: Ted in Central NJ

                      "Earn" a couple of hundred dollars in rebates- What you are "earning" is a kickback out of the 2 - 3 - 4 percent merchants pay on credit card transactions. Some of them may not mind, but believe me, some do.

                      I am a merchant (but not a restaurant). I envy merchants in a position to not take credit cards. Of course I would rather get paid by credit card than turn a customer away. The present rant is not one I am about to inflict on my customers, although if they present a debit card I do encourage them to enter their PIN which costs me about the same as accepting a check. Credit cards are perfect for phone and internet orders. But damn. Those fees add up to many thousands - the nice vacation or kitchen remodel I never get around to.

                      Imagine the uproar if we were to suddenly institute a 3% national sales tax, collected by all merchants and built into the cost of everything. Well ha ha - that is pretty much what we have now, only instead of reducing the deficit, or whatever collective good an actual tax might accomplish, the cash flows into astounding profits and executive bonuses at a small number of huge banks. As if they don't pull down enough in interest and fees.

                      So if you are wondering whether to spend old fashioned green cash money or charge it, think about this. Big stores, chains, gas stations, etc negotiate the lowest credit card processing fees. When they figure in costs of dealing with currency- armored trucks, employee theft, trusted, better paid supervisors on the clock, then they come out ahead taking plastic. On the other hand, mom and pop kinds of places almost always prefer cash. If you ask your favorite neighborhood restaurateur about this, he or she will tell you to please come back as often as possible and pay any way you wish. Ask a little harder and you may start to hear what I am telling you now.

                      1. re: atheorist

                        If you think about what is going on with rebate credit cards (which I use and love) it is really people who can't pay their bills subsidizing those who can. Restaurants and other establishments have already priced in the 3 or 4 percent fees they pay to their processor when, so for me as a consumer, if I don't use my reward card, I am just leaving the money on the table. In essence, I am just recouping the price difference back to the point it would have been had credit cards never been introduced. Because rewards cards charge the highest interest rates, they make absolutely no sense unless you pay your bill in full every month. As a result people who are in debt still have to pay the higher prices at stores (becuse they are baked in), but do not get to recoup the additional costs with rebates.

                        Oh well.

                      2. re: Ted in Central NJ

                        As I stated above, I use my debit card for just about everything (and earn my share of 'rewards' as a 'prudent' customer). And there is protection for fraud on debit cards! I had an experience several years ago with fraudulent charges on my debit card, over $700, and I was not liable for any of it.

                        atheorist, I hear you! Many of the bars and restaurants in my neighborhood only take cash specifically to avoid those nasty credit fees they have to pay!

                        1. re: bklyngrl

                          and they are probably not declaring all the cash income either to avoid taxes.

                        2. re: Ted in Central NJ

                          "Why would anyone want to have funds withdrawn from their bank account immediately, when using a credit card can easily give you a grace period of 3 weeks or so?"

                          Because when I use my debit card I consider it like using cash - I don't care if it's gone immed. It's linked to my checking acct (obviously) and I don't write down my purchases or use a purchase register, so I want to see the $$ disappear from my account immed, before I forgot I spent it.

                        3. Thank you for these observations and inputs. I appreciate them

                          I would like, however, to gently take issue with one of the items and that involves the mistaken double authorization of charges. While I understand that everyone is human and mistakes happen, I have found on many occasions that the restaurant is more than happy to ignore my pleas to contact their processor and bank and tell them of the double charge. Let me give an example from last summer.

                          A friend and I were meeting up with 15 others for a going away party for friends. When we arrived, most of the people ordered full meals from soup to nuts while my friend and I had two small salads, a couple of cocktails, and split a dessert. Our total was about $40.00. We asked the server if they could split the bill for us so we could pay and leave (others wanted to stay and party). We received our bill and I paid with my credit card.

                          The next day, I got a call from the credit card lender telling me that there was a charge of over $750.00 on my card that seemed suspicious. I checked my account and the charge for our $40.00 was there, but so was the entire bill for the rest of the group. I called the restaurant and the manager told me that the server forgot to close out my ticket so even though I only owed $40, my card got authorized for $750.00, plus the $40.00. He then graciously told me that it would drop off in "3 to 5 business days."

                          Great, but that is a $750 hold on my credit. I asked him to contact the bank and have the second charge removed and he said he couldn't do that. When I asked for the bank system he used so I could call, he refused that as well. Seven days later and an authorization still pending, I called again and had to threaten legal action before the same manager said he would call the bank and have the authorization dropped. Ten minutes later, the authorization was gone.

                          I haven't been back to that establishment and never will go back either.

                          2 Replies
                          1. re: Seth Chadwick

                            I have talked to my processor about the issue and if the problem is on their syustem, they can reverse it. But often the problem is on the system of the card holder's bank over which I have no control. Before the last change to banking law, January 1 2006, I could get a report showing every tansaction sent out by my system to my processor. This report would clearly show that the authorization was cleared out by my processor, but the customer would still have two authorizations on their card. My processor would say there was nothing they could do and that the customer had to contact their own bank who had made the error.

                            There was no way for me to know if I was getting the run around or if this was the case. There are just too many layers to this particular onion.

                            1. re: deangold

                              dean,

                              I don't deny their are rules in place, by my story was to illustrate that there are often times when the restaurant owner/manager won't even lift a finger to help a customer. Had the manager let me talk to the processor or made a good faith effort to rectify the situation, then I would have given a pass, but in many instances it often seems as though the restaurant won't even try.

                              An attempt at customer service is better than nothing.

                          2. "Not allowed to keep" the full CC#?

                            The slip I sign and leave on the table for the server to pick up (or for any crook to pick up if they dare) always has the full card number and exp date printed on it - that worries me some.

                            4 Replies
                            1. re: wayne keyser

                              For the last year it has been illegal for vendors to print a receipt that shows any part of your credit card number other than the last four digits. If you are going to places that are still showing your entire credit card number on the slip they are in voliation of these regulations.

                              1. re: bonmann

                                Does this include gas stations? There is one station near me that, IIRC, still prints my entire CC #. I will have to check that.

                                1. re: LindaWhit

                                  Yes all retail locations. This is part of a set of privacy protection regulations that went into effect last year. There may be some exceptions for certian small businesses but there not many since this was a privacy issue. Most retailers switched before the reguations required if thier vendor was ready.

                                  I don't really know who monitors this or if there are any penalties for violating the regs.

                                  1. re: bonmann

                                    Thanks...will check next time I go there!

                            2. amen, deangold. i cannot tell you how many times i have been screamed at on the phone, and called a thief. yes, mistakes happen, but 99% of the time it's simply an honest error. sometimes a server may be processing several cards at once, and put the wrong amount on a card. yes, i know it's the server's bungle, but then a guest doesn't even look, and blithely signs away. then calls the next day yelling. maybe if that 8-top didn't give her 6 credit cards... "put 30% of the bill on this one, 15% on this one, 16.8% on this one..." it gets hairy when we're very busy. it then takes several days for the company that issues the card to fix the credit. i have no control over that.

                              banks and cc companies, make extra money by taking several days to process transactions. it's just business, and they are blood-suckers.

                              to seth chadwick, i know there are jerks out there. but most merchants are at the mercy of the banks, just like our customers.

                              1. Thanks to Chowhound I learned all of this last year in an interesting thread about starting a tab at a bar and moving to the table for dinner.

                                Couple of points:

                                - It is unfortunate that the resto (mainly mom and pops) have to absorb a 2-3% fee per charge. It's the cost of doing business, similar to not charging for water, but there is still a cost involved in serving and cleaning.
                                - Not everyone qualifies for every type of card. To the poster that thinks because he pays in full every month and therefore has no finance charges, there are several types of methods banks use to calculate. Some "pay in full" cards actually charge from the transaction date to the payment date. Check your bill to make sure your card is not one of these.
                                - If you do not want to play by the rules of the bank "hold" then pay cash. There is a cost to convenience on the customer side as well. Yes, mistakes happen and to sethchadwick who mentioned the resto would not call the processor, shame on the resto manager for that slip.
                                - Banks are a business as well. They are not "bloodsuckers" evilly conniving on how to make 1-2 days float on your $35 dinner. Do you have any idea how much they eat in fraudulent charges. How would everyone like to give up credit cards and pay in cash. Maybe we should shut all those ATM machines and you have to go to a branch to deposit and withdraw money. And they close at 3PM. Then you want to go to that resto that only accepts cash and your sitting on the floor of your bedroom taking quarters, dimes and nickels out of that shoe box to pay for the meal. Lighten up on the banks, please. Oh, and when there is a bad charge on your account, you want them to be your best friend.

                                It's not a perfect world from either side.

                                5 Replies
                                1. re: jfood

                                  Re: "To the poster that thinks because he pays in full every month and therefore has no finance charges, there are several types of methods banks use to calculate. Some "pay in full" cards actually charge from the transaction date to the payment date. Check your bill to make sure your card is not one of these."

                                  Trust me--I DON'T pay any finance charges. Perhaps other people don't look at their credit card bills carefully each month, but I carefully compare them with my receipts--as everyone should. I paid a finance charge once in my life, simply because of immaturity. After that one experience, I have paid every bill in full every month, and since that time, I have never paid a finance charge.

                                  If there is a discrepancy in billing, I immediately notify the bank that I am invoking my rights under Federal law to refuse to pay the part of the bill that I am contesting. Invariably, the charge is removed or corrected very promptly.

                                  Also, by knowing the closing dates of my various credit cards, I can put purchases on cards that have just closed their billing period, thereby getting even more time before I pay the bill in full. Between the rebates and the timing of which card to use for a purchase, I can work this situation to my advantage. The bank is betting that I will not pay my bill in full, thereby incurring a finance charge. However, I don't do what they expect, and this is to my advantage. All this takes is some self-control.

                                  1. re: jfood

                                    Banks "eat" fraudulent charges only if the thief withdraws cash from an bank owned atm (which is why you pay a higher rate for "cash advances") or if they are defrauded by a merchant! In fact most fraud losses are borne by merchants. Whoever accepted your stolen account information for payment saw that $700.00 yanked out of their account after you reported the incident. The bank lost a bit of time and hassle on the paperwork but they let on to you that they are some kind of hero looking out for you their dear little customer. If the merchant wants the $700.00 back he can go and find the thief.

                                    1. re: jfood

                                      Let's be blunt. The operator incurs expenses NO MATTER the form of payment.

                                      If you accept cash, you generally have to contract with an armored car service or take the risk of being robbed. If an employee gets shot or robbed carrying the deposit to the bank, there is the worker's comp and the like.

                                      If you accept checks, a decent portion of them will be rubber. That means you have to chase down the people and request payment. You will collect about 75% of the time, but is a royal PITA.

                                      And credit cards have fees. However, do realize that on average, customers paying with plastic generally spend 15-20% MORE than if they pay with cash. Customers tend to tip larger on plastic which results in a happier server population. There is NOT DOUBT that the reason why the fast food places accept credit cards is that it raises the average check.

                                      From my experience in the industry, I cannot help to think that many restaurants remain "cash only" to underreport the income on their business.

                                      1. re: jlawrence01

                                        Everything you say is true jlawrence.
                                        What I am trying to add is the fact that the status quo of people's credit card habits and the agreements that merchants are forced to accept is NOT some inevitable, natural, benign, best of all possible worlds arrangement provided by the all knowing Invisible Hand of the bountiful Free Market. The playing field is not level. It has been carefully created through years of influence buying in Congress and statehouses plus enormous advertising and public relations efforts. It is now so well established and customary that we fail to see it for what it is: The privatization of the essential transactional apparatus of our economy. In a proper capitalist system this apparatus would be "frictionless and transparent", inotherwords, much cheaper for not being a welter of fine-print-take-it-or-leave-it "agreements" and kickback schemes rigged so an oligopoly can rake in a defacto sales tax.
                                        Fight back. Whenever you can, use cash or debit card and PIN.

                                        And finally why post all this on chowhounds- because I know that at least some of your favorite little restaurants and markets will be very happy to see more cash and less plastic.

                                        1. re: atheorist

                                          As a consumer, I am tired of having substantial sums of cash with when i travel. I want ALL businesses to accept plastic. I avoid those places who refuse plastic.

                                    2. If McDonald's can float the 3% charge for my $5 meal, a "real restaurant" can do the same. If 3% is the difference between remaining open and closing down, there are other issues afoot.

                                      What we find is that a place where a family can't eat for under $50 should have credit cards as an option. I do not like the "$10 minimum" signs (and they are now against Visa and Mastercards rules I believe), especially if it is always a percentage of the order, not a flat fee plus a percentage. There are a few restaurants we frequent that have "cash only" policies, and it takes us extra time to run to the bank to get cash. Carrying more than $20 is just not a good idea these days.

                                      I sympathize with restaurant owners, they have too many people that they have to depend on. Many restaurants have closed in our area lately, and there are too many of the same genre.

                                      Regarding people screaming on the phone, most people are idiots and jump to conclusions before checking out facts. And about that $750 charge, we always make sure to bring cash to going away/welcome parties, especially if other commitments require us to leave early. Since this is only a few times per year, I make the trip to the bank for real money to avoid such an occurrence. Or, if I am not stuck for time, I'll pay by credit card and take the cash from my friends.

                                      I wonder what the OP thinks about making restaurants split the check (especially more than ten people) AND having individual people pay with individual CCs...

                                      9 Replies
                                      1. re: rakh

                                        i once had a party of 15 that wanted to pay with 18 credit cards. if i were empress of the universe they'd never be allowed to eat out. of course, we accomodated them, but they got very huffy and sniffy: "what's taking so long? we have a show..." ack.

                                        1. re: rakh

                                          Well from the perspective of a co, say they pay 2.89% + .30 per transaction, if they let people run $3 charges on their cc's then they've just lost about 13% of the sale. If its $6 bucks, its still 8%. And that's an easy way to get even with any company that accepts online cc payments. Say I have a cell bill of 100.00, I can run 100 separate $1.00 charges. Since online payments cost more say 3.50% + 30 cents per transaction, their losing about 38% of what im paying then. Sure it costs me time, but all I'm doing is reading something in one window and spamming refresh and pay in another.

                                          1. re: rakh

                                            Rakh, if you have been a victim of robbery more than once in your lifetime I'll withdraw this, but "Carrying more than $20 is just not a good idea these days"??? Consider: If you do get robbed, quickly handing over a satisfactory wad of cash will be a less miserable experience than a possible trip to the ATM at gunpoint.

                                            Eating out lately, I have not so jokingly declared that $50 is the new $20! I am perplexed at how people remain awestruck by $100 bills that can buy what $20s did when they were kids.

                                            On and on I rant about those banks but a big part of their success getting everyone to use plastic has been the fearmongering that convinces people who have never been robbed and do not even know anyone who has been robbed that carrying more than a few ones is dangerous folly.

                                            1. re: atheorist

                                              "a big part of their success getting everyone to use plastic has been the fearmongering that..."

                                              You have got to be kidding!! Atheorist is not a theorist on this one. Do you honestly think bankers sit in a room and devise plans to cast fear into their customers to use credit cards. All they have to do is watch the evening news with robberies, et. al.

                                              Please stop the banker bashing.

                                              1. re: jfood

                                                Yes I honestly think that part of the billions of dollars of advertising, press releases, product placements and PR trickery target peoples fear. What responsible marketing professionals would ignore such a proven strategy?

                                                Fearmongering is what the TV news is all about and next up is the Visa advertisement where someone's day is saved by...

                                                1. re: atheorist

                                                  I pity those whose fear guides the day.

                                                  I was the person in the visa commercial who received a call thatthere has been unusual activity on the card at 3AM

                                                  Hopefully paranoia will dwindle with age.

                                                  1. re: jfood

                                                    if you think banks aren't trying to get you to use credit cards by any means necessary, you're crazy.

                                                    1. re: nummanumma

                                                      Okeedokee, tie me up and put me in a rubber room.

                                                      I think that most people want to spend money. The banks and advertiser have the consumer's greed and the consumer's desire for more and greater going for them and have the news media firmly placing the fear-factor in the minds of the public. They get the fear installed for free, why pay for it.

                                                      I think the banks and AMEX do a great job in protecting the consumer from unwarranted charges. Yes they make money, last i checked they are a business, and using a credit card in a resto sure seems a whole lot better than carrying cash and worrying if i have the extra $20 because someone just ordered dessert.

                                                      1. re: jfood

                                                        I agree that my bank does a very thorough job protecting from fraud- no argument there.

                                          2. "It is unfortunate that the resto (mainly mom and pops) have to absorb a 2-3% fee per charge."

                                            Rent costs money, food costs money, and BTW in most cases BANKING CASH costs money (I've seen charges for rolled coins, charges for night drops, charges for counting large amounts of cash) - 3% to get out of the risks and detail work involved in banking cash (for any portion of their total take) is a bargain.

                                            "say they pay 2.89% + .30 per transaction, if they let people run $3 charges on their cc's then they've just lost about 13% of the sale."

                                            First, I'd like to see whether large-volume merchants pay quite so much. Second, I'm told that fast-food locations accepting charge cards experience a big surge in business, and I'd be surprised if that increase wasn't also experienced by many non-fast-food eateries - as for tablecloth restaurants, what do you think would happen to their volume if they didn't accept plastic? Cost of doing business, just like the manager's salary and the bill from the linen company.

                                            5 Replies
                                            1. re: wayne keyser

                                              Jfood had the compassionon the first quote. The margins are so slim in the business that 3% is a big number. When I was the Tresurer of our Congregation there was an uproar from the congregants for us to accept plastic. We had a $1MM buget and if we accepted plastic the budget balancer was firing three Sunday School teachers. When we put it in that context people gladly wrote the check for dues and fees.

                                              It's curious how many are not that concerned about the 3% the resto owner has to pay, but how emotional many get if we say let's reduce the tip from 18% to 15%.

                                              1. re: jfood

                                                I think a drop in the tip from 18% to 15% is actually a 17% reduction in the amout of tip that you are leaving, so it's not quite the sames

                                                1. re: Val55

                                                  As i was told once, "you can't eat yield."

                                                  Yes you have performed the math correctly and percentages work that way when the denominators are different. But on a $100 tab, the fee is ~$3 for the cc charge and if you reduce the tip from 18% to 15% the delta in the tip is also $3.

                                                  You could also argue that the tip was not 16.7% lower (using the $18 as the denominator) but should have been 20% higher (using the $15 as the denominator). Don't you love numbers?

                                                  Bottom line is $3 = $3 and that is called the associative property of math.

                                              2. re: wayne keyser

                                                I'm sure that large volume merchants negotiate a lower fee. I was referring to the "the "$10 minimum" signs" that you find at a lot of smaller take out places.

                                                Your point about the costs of businesses depositing cash brings up another interesting cost, the 2-3 days delay that occurs between the charge and your account getting credited. Cash that's deposited is immediately earning interest and available for bills.

                                                1. re: SomeRandomIdiot

                                                  The merchants with "$10 minimum" signs are in violation of their merchant agreement with Visa et al, which requires there be no minimum charge. Not that you will get any satisfaction from pointing that out to them, and Visa doesn't seem to spend much effort enforcing that part of the agreement. I once had a gas station cashier practically yelling at me for using a credit card on a $10 purchase because it was "killing all his profit". My only response to this jerk was that if he didn't like credit cards, don't put a Visa/Mastercard sign in the window.

                                              3. Interestingly, much of this thread has focused on the choice of cash or credit cards. If you go back and look at the history of credit cards, merchants first started accepting them because it was less risky and cheaper for the merchant. If you bounce a check the merchant has to pay for colletions; with credit cards the merchant got paid and collection was up to the bank. Now, with how common credit cards are most people have given up checks. But origianally, credit cards were actually the cheaper alternative for retailers because they did not have pay for collectioins.

                                                1. I neither think nor care much about these kind of "appearances" in the first place, but if I did, debit cards are much "lower rent" than credit cards. Anyone with a bank account gets a debit card. In theory, anyway, credit cards mean enough consistent income to get the card in the first place. To me, large amounts of "cash on hand" say "drug dealer" more than anything else. (lol)

                                                  As for "going into debt for a meal," I've never carried a balance on any credit card in my life, and I've been using CCs for going on 25 years. Even "low rate" cards are much higher than even personal loans - definitely just a step or two above going to the neighborhood loan shark when you're running short that month. For me, credit cards are about convenience, that's all..

                                                  And as the OP alludes to, debit cards are a complete and total nightmare where consumer-protection is concerned - I've never used mine and can't imagine doing so barring a life-threatening emergency.

                                                  1. I have a question regarding the transaction fees that restaurants charge for credit card use. My mother works as a waitress, and says that she is charged 3% of every credit card transaction she swipes, taken out of her tips. She says that its legal for restaurants to do, and they do it to cover the cost of doing business. Is she corrent, can this be legal? Can a business charge its EMPLOYEES for the cost of the RESTAURANT'S business costs? Furthermore, i believe that the restaurant is including the gross receipts of her sales in her W2, not the net after the 3% is taken out that she nevers receives. This certainly cannot be legal. Where can i get more info and what can be done?

                                                    8 Replies
                                                    1. re: absolutdonahue

                                                      I think either the labor board or better business bureau where you live would have more info. I wait tables and I've heard that they can get away with it but it's not legal. I've think it's illegal in CA.

                                                      1. re: absolutdonahue

                                                        The tips your mother receives are not part of the restaurant gross, they are money paid directly to your mother by the customer. The CC company is charging your mother 3% for the use of the credit card, not the restaurant. It is also charging the restaurant 3% of every dollar that is charged for food etc. Its the cost of using credit cards. It is legal. It is also legal to report the gross earnings before the 3% is taken out because the 3% is a service fee levied in order to use the credit card services, not a tax. The restaurant is not making money from this nor are they cheating your mother. The only way a restaurant, or your mother, can avoid paying the 3% or avoid being taxed on it, is to not accept credit cards.

                                                        1. re: Le Den

                                                          The CC company is charging your mother 3% for the use of the credit card, not the restaurant. It is also charging the restaurant 3% of every dollar that is charged for food etc. Its the cost of using credit cards. It is legal.
                                                          ~~~~~~~~~~~~~~~~~~
                                                          How is it legal for the CC company to be double-dipping on their fee? Their fee agreement is with the RESTAURANT, not the staff who works there! They'd have to set up fee agreements with every single staff person who might swipe a CC for a customer!

                                                          I have to believe this is illegal to have the restaurant charging their staff for any credit card fees, unless it's in an employment agreement (at which time I'd not take the job, as there are plenty of other jobs out there!). I know many wait staff, and I've never heard of them being charged the credit card fee that the restaurant/bar is charged.

                                                          As Miss Moo said above, the labor board or BBB or state government is the place to go for the legal answer.

                                                        2. re: absolutdonahue

                                                          The credit card company is charging the resturant based on the total on the credit card amount, not the just the resturant's protion.

                                                          Maybe the math will help. Let's say your bill is $100 and the tip is $20. If the entire amount is put on the credit card, i.e. $120, the credit card fee will be $3.60 or 3% of the total bill. But, let's say you put the $100 on your credit card and leave the $20 in cash. The credit card company fee will only be $3.00. By adding the tip to the credit card bill the resturants fee has increased that increase is directly attributable to the amount of monty that belongs to your mother. Therefore, the resturant is passing along the cost running that $20 charge through it's credit card system. That 3% is a cost to your mother of doing business just like it is to the resturant. The resturant's tax return shows the gross amount of thier sales as well they then deduct the cost of the credit card fees as an expense and I believe that your mother can do the same on her tax return as an employee business expense.

                                                          Many resturants just don't believe that they can afford to absorb the cost of the credit card fees on the money going to the servers. It may not seem fair but it is an accurate picture of what is happening when your mother's tip goes on the credit card of a cusotmer.

                                                          1. re: bonmann

                                                            Excellent diagnosis. The 3% charged that is part of a tip can add to several thousands of dollars a year in charges that you are asking the restaurant to absorb and that they can't deduct as that money was never paid to them in the first place, it was paid to your mother. The CC company is not double-dipping at all. It charges a flat 3%. Your mother agreed to this charge when she took the job. The only way to avoid it, is to work in a restaurant that doesn't accept credit cards. Your best way to avoid a server losing this 3% is to pay the tip in cash.

                                                            1. re: Le Den

                                                              The other way to avoid it is to not work for a restaurant that expects their waiters to pay it. I've never worked for a restaurant that would do something like that. The restaurant is the one that decides to accept the credit cards not the server.

                                                              1. re: Le Den

                                                                Another analysis:

                                                                Assume the entree costs $25, and the custo leaves 20% or $5. The 3% the CC charges is 15 cents. Your taking 15 cents out of your employees pocket, ouch, gotta uptick the compassion meter. Sounds a little unreasonable to make the staff pick up the convenience decided upon by the reso. It's just not fair for the employee to pick up the resto's business decision.

                                                                To your point of not deducting, I agree but since you did not receive it it is not in the revenue line so in essence it is a wash to your P/L. No deduction because no revenue associated with it.

                                                                1. re: jfood

                                                                  The 3% is something every new waiter is aware of the first day they train, it is not some arbitrary chaged levied on whim. When they take the job, they agree to pay it to the credit card company in exchange for the right to collect tips on credit card purchases. The potential hire can then decide to take the job or not. Most do because the majority of restaurants accept credit cards and there is a better chance of making a living working in one. The only way anyone can avoid this, is for the customer to pay the tip in cash.

                                                                  Another point that hasn't been brought up, this is a very NYC situation. Not sure how it relates to the rest of the country. It is very rare to find a NYC restuarant that doesn't take the 3 %.

                                                          2. After having some credit card fraud, it has really soured me on using them. Nobody uses cash anymore either! My friends are usually thrilled when I pay with cash because they then use their card and save a trip to the atm. I think everyone should use cash for a week. It would really make them think twice about impulse purchases or having dessert.