Buying Things with Credit Cards
Is it better to pay by check or by credit card, as a rule?
In general, it's better to use a credit card. When you pay by
credit card, the U.S. Fair Credit Billing Act gives you a lot of
protections (see section 5, "Billing errors and overcharges").
These safeguards don't apply if you pay by check or by debit card.
However, be aware that credit card debt is about the most expensive
legal kind there is. With banks paying as low as 3% on savings (as
of January 1992) but charging 19% or more on credit card balances,
it makes sense never to carry a balance past your grace period.
Household budgeting is beyond the scope of this FAQ list. But
always bear in mind that if you're paying by check because your
credit cards are maxed out, you may well be overextended and may
want to think about deferring major purchases. Even if your cards
aren't maxed out, if you're carrying a balance from month to month
you are paying dearly for the privilege. (return to Index)
When I make a purchase, can they ask for my address or phone number?
This is a complicated question. There are two possible sources of an answer: Federal and state law, and the policies of the card-issuing organization.
Law: There is no Federal law on the subject. According to Bankcard
Holders of America, the laws of CA, DE, GA, MD, MN, NJ, NV, and NY
prohibit recording personal information in connection with
credit card transactions. Note the word "recording." Strictly
interpreted, this means they can ask you to show a driver's license
but can't write anything down from it.
Policy: According to letters from
Director of Public Affairs and
Visa USA Inc.
P.O. Box 8999
San Francisco, CA 94128-8999
MasterCard International
888 Seventh Avenue
New York, NY 10106
Merchants are not allowed to refuse a sale made by Visa or
MasterCard solely because the customer refuses to provide additional
personal information. According to Bankcard Holders of America, the
same is true when you use your American Express card, but not when
you use Discover.
If merchants have "sufficient" reason to suspect you are not the
authorized card holder, they may ask for further ID. This exception
rarely comes up in real life, and even if it does they must not
write the information on the Amex, Visa, or MC charge slip.
There is a Legal Research FAQ published by Mark Eckenwiler, eck@panix.com it can also be found in misc.legal in usernews groups. (return to Index)
If it's against the rules, why do merchants insist on address or phone number?
Don't rule out ignorance. Many merchants don't know the rules.
They may think (wrongly) that getting extra information from you
will protect them in some way. The truth is that if they follow the
procedures of the credit card company, they will get paid. Period.
On the other hand, some merchants are deliberately flouting the
rules and depending on you to acquiesce. Why? Because they can
sell your address or phone number, or add you to their in-house list
of sales prospects.
Don't accept the old wheeze about "in case there's a problem." If
the merchant follows proper procedures at the time of sale, there
won't be. If you leave your card behind they can send it to the
card issuer, who will return it to you. (return to Index)
What should I do when asked for personal information I don't want to give?
See also "Is there any official document" and "Where should I report
merchants who break the rules?" later in this section.
If you don't see what all the fuss is about, please skip this Q.
Note the key words, "information that I don't want to give."
The most effective response is to ignore the request. When they
say, "I need your signature and phone," simply sign in the proper
place and hand them the charge slip without your phone number.
Don't comment on the request in any way. More often than not, they
won't follow up.
If they do notice that you didn't put down the personal information,
and ask you again, simply say, "I don't give that
out." Almost every time, the clerk writes down something like
"refused" and that's the end of it.
If they still insist, you have to decide how important it is to you
to make a point. If you don't much care, give them what they want
so you can get on your way.
If (like me) you're a privacy fanatic, you can do one of several
things. (1) Point out that Visa and MasterCard rules don't allow
them to require this information and wait to see what they do.
Typically the clerk calls the manager to "authorize" the sale, which
she does right away. (2) Or you can say "Fine. If you can't make
the sale without this information, give me a credit slip and keep
the merchandise." (Since the sale has already gone into the register
they probably won't call your bluff. They've never called mine. If
they do, get a written credit slip unless you're sure that the
transaction has not already been processed electronically.) (3) Or
you can make up a phone number. Please use one beginning with 555
so that some innocent person doesn't get sales calls. (4) Or, if
you happen to know the number of the store it's always a nice touch
to give them that.
Be firm but pleasant through it all. Don't raise your
voice. But if this is important to you, don't let yourself be
bullied either. After all, this is America and you can almost
always get equivalent merchandise from another store. (return to Index)
I tried to charge a $10 item but the merchant pointed to a sign "minimum charge $20." Is this valid?
Never for Visa and MasterCard; generally not for American Express.
Discover explicitly allows the merchant to set a minimum purchase
amount, according to email received by the previous editor.
MC and Visa rules provide that a merchant may not require any
minimum purchase amount. This is the merchant's agreement with Visa
or MasterCard; it is not a Federal law. (On the other hand, if you
insist on charging a 79-cent ball point pen, I hope you get four
flat tires on the way home.)
According to Bankcard Holders of America, if a merchant takes
American Express and also Visa or MC, Amex doesn't let the merchant
impose a minimum purchase on Amex users because that would
discriminate against them. Merchants who take Amex but neither Visa
nor MC may impose minimum charges but Amex officially discourages
the practice. (return to Index)
Can the merchant charge credit card users more than cash customers for the same item?
In a word, maybe. In a few more words-- probably, if the merchant
goes about it the right way.
The Federal Truth-in-Lending Act prohibited surcharges on credit card purchases until 1984; since then, there has been no Federal law
on that subject. (Other provisions of the law are still in force.)
The states of CA, CO, CT, FL, KS, MA, ME, NY, OK, and TX have laws
against surcharges, according to Bankcard Holders of America.
Discover allows surcharges on credit card purchases, except in the
above states. Visa and MasterCard prohibit them. American Express
discourages them in general, and specifically prohibits them by
merchants that also take MasterCard or Visa because Amex doesn't
allow merchants to discriminate against it.
There is a loophole: merchants are allowed to give cash discounts.
This means in practice that they can't charge you more than the
labeled price if you pay by credit card, but they can charge you
less if you pay cash. Some companies announce (usually in tiny
print in the catalog) that all prices "reflect cash discount" of x%
so credit card users must pay x% more than the stated price. This
may be legal but it certainly violates the spirit of the law or the
regulations. I don't know about the "service fee" charged credit
card users for things like ordering tickets over the phone, but
they're certainly not allowed to charge you a higher price in person
than if you pay cash.
There is another loophole according to Bankcard Holders of America (BHA). Certain government agencies are not allowed (by law) to pay
"discount fees" which are the processing fees the bank charges
merchants for handling credit card slips. Since the banks won't
handle these for free, you may well have to pay a surcharge for the privilege if your state lets you pay license fees by
credit card.
However, BHA says that there are no exceptions for retail merchants. (return to Index)
I made a hotel reservation and guaranteed it with my credit card. When I showed up, the hotel denied my reservation. Have I any recourse?
That depends. Most hotels and motels (but not all) subscribe to the
"Lodging Services Addendum" in their merchant agreement with Visa.
If the hotel is one that participates, and they have no room for you
when you arrive with a guaranteed reservation, their agreement with
Visa requires them to:
- Provide the cardholder with at least comparable accommodations for
one night at another establishment.
- Provide transportation for the cardholder to that establishment.
- If requested, allow the cardholder to make a 3-minute local or
long distance call.
- If requested, forward all messages and calls for the cardholder to
the alternate establishment.
(source: Lodging Services Addendum to Visa agreement of First Bank
System, as quoted in a Usenet posting)
However, your unsupported word is not exactly proof that you had a
reservation. Next time, write down the date and time you called,
the rate you were quoted, which credit card you used for the
guarantee, and the confirmation number. (You may have to ask for a
confirmation number.) You need that info if there's a problem with
your reservation, or if your plans change and you have to cancel.
Some state laws may protect you when you have a guaranteed reservation, whether you guaranteed it by a deposit or by credit card. (return to Index)
I paid by check and the merchant wrote my credit card number
on the back. If the check bounces, can the merchant charge my card?
The answer to this one boils down to, "There are two kinds of
prevention and an ounce of either is worth a pound of cure."
First, in CA, DE, FL, GA, IA, IL, KS, MD, MN, ND, NJ, NV, NY, OH, VA,
and WA it's illegal for merchants even to write your credit card
number on your check, so don't let them do it. (Note: In Illinois,
they can request a look at your card, but can't write the number on
your check. They CAN write the type of card and expiration date)
Source: Bankcard Holders of America. (I understand some banks are
linking check guarantees to their credit cards. I don't know whether
that's legal in the above states, but it seems like a bad idea. If my
bank did that, I would question them closely about the potential for
fraud in using the same number for my credit cards as for check
guarantees. Giving someone your credit card number with your name
and address -- possibly even your phone number -- on a printed check is
an open invitation to scam artists.)
Second, In states other than those listed above, the merchant has
the legal right to refuse the sale if you refuse to give the
information. However, Visa, MasterCard, and American Express all
forbid merchants to charge a credit card account to cover a bounced
check or to use card numbers to locate a customer whose check
bounces. Since the merchant can't do anything legitimate with the
card number, and since providing it makes you a possible victim of
fraud, you should politely decline. One possible compromise, if
you're at an impasse, would be to show the card with your name on
it, but to cover up all or part of the card number and to insist
that no part of the number be written down. Source: Bankcard
Holders of America. (The situation may be different if your credit
card is also a check guarantee card; see the preceding paragraph for
cautions.)
Nearly 90% of bounced checks are due to consumers' math errors in
balancing their checkbooks. Despite this, the law in some states is
that if you bounce a check it is assumed to be deliberate unless you
can prove otherwise. And deliberately bouncing a check is a crime in
every state.
It's better never to get into this hassle than to deal with it after
the fact. If you've got credit cards, why pay by check at all?
(See "Is it better to pay by check?" earlier in this section.) If
you do pay by check, don't give a credit card number. And if you
bounce a check, don't make the merchant come to you but go to the
merchant immediately to make things right. Give the merchant a good
check (probably a cashier's check) or cash for the amount of the
purchase, and expect to pay a reasonable fee to the merchant in
addition to your bank's fee. (return to Index)
Can mail-order merchants charge my card before they ship?
According to Janet Hug of Visa USA, "a merchant is not permitted to
bill ahead of time" except in case of a deposit or down payment that
the customer agrees to. (phone call from Visa USA, 12 May 1992)
MasterCard said in a letter that a merchant can charge you before
shipment only if s/he tells you and you agree to "the terms and
conditions of the sale."
American Express said the merchant can charge your card as soon as
you give your account number; but if you receive the bill before the
merchandise, call Amex customer service and you don't have to pay
while they investigate. (phone call to Amex, 16 May 1992) (return to Index)
Is there any official document that I can take with me to show merchants who violate the rules?
Yes. The Bankcard Holders of America includes a wallet-sized
Consumer Action Card with its pamphlet #14, "Consumer Rights at the
Cash Register." For a copy, send $3 to BHA, 560 Herndon Parkway
suite 120, Herndon VA 22070, or call (703) 481-1110 (their 800 number
is no longer in service) and ask for a catalog. The card gives you
something to show the merchant who won't believe your unsupported word.
The card has no legal force, but at least you don't look like you're
making things up. (The pamphlet does the same thing, but an 11"x17"
piece of paper gets kind of bulky folded in your wallet!)
Also see the pamphlets mentioned at the beginning of this file,
which are issued by the Federal Reserve. That should be official
enough for any merchant. (return to Index)
Where should I report merchants who break the rules?
If merchants violate any of the above laws, you can report them to
your state's or city's consumer protection office or attorney
general. If they violate any rules of American Express, the company
would like to know about it. Report violations of Visa or
MasterCard rules to the bank that issued your card. If the sale was
completed, you can also send a letter with a copy of the charge
slip to the Visa or MC address given earlier in this section. (return to Index)
Does my payment have to reach the lender by the "due date" on the bill or is it enough if I just mail it by the due date?
That's a good question and the answer varies. The Uniform Commercial Code says that a bill is considered paid on the postmark date
of the payment, but many states have different laws. Even in states
where the bill is considered legally paid on the postmark date, you
may find that lenders will consider it paid on the date they process
it.
My personal practice is to avoid hassles by always mailing payment a
reasonable time before the due date. Even if I could push it
legally, I don't believe the couple extra days of "float" is worth
the aggravation of fighting with the lender over this point. (return to Index)
I have a checking or savings account at the same bank as my Visa or MasterCard. Can the bank freeze my account or take
money from it if I miss a payment on my credit card bill?
Probably yes. You should check your cardholder agreement. The
typical agreement gives the bank the right to take the money in any
of your accounts with them if you are delinquent on your bill. Even
if there's not such a provision in your cardholder agreement, it's
probably buried somewhere in the fine print that governs your
deposit account.
However, the Fair Credit Billing Act does not let them take any
collection action at all if you have properly notified them of a
dispute; see Billing errors and overcharges. (return to Index)
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Document last modified Monday, 02-Feb-2004 12:29:18 EST
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