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Should restaurants pass on swipe fees to guests?

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Question:

We went to a [neighborhood restaurant] tonight and were surprised to find a charge on our bill for “noncash adjustment,” which turned out to be a fee for using our credit card. Is that allowed?

– Guest

Answer:

Passing credit card fees onto guests is a complicated issue. There may be specific language in your merchant agreements as well as state and local regulations that prohibit this. From the restaurant’s perspective, there are really two questions:
1.    Can you pass credit card fees on to guests?
2.    Should you pass credit card fees on to guests?

You can determine the answer to the first question by reviewing your merchant agreements and checking with your attorney and local restaurant association. In general, at the federal level, passing on a fee of up to 4% is allowed if clearly posted. But my advice is to not bother, because the answer to the second question is no.

I understand that restaurants seem to be hit with costs from every direction. It is tempting to pass them on to guests, but, in my opinion, is the antithesis of hospitality, penalizing a guest for doing business with you in the way they prefer to do it. Psychologically, passing a merchant fee to a guest is a form of punishment—“If you insist on paying this way, I’m going to make you pay for it”—rather than the rewarding experience it should be: “Here is a delicious dinner and hospitality in exchange for your fair payment.” I am of the mindset that I’d rather pay 10% more for each menu item rather than 3% more being nickel and dimed for credit card fees, takeout container charges or other add-ons.

My advice for restaurants is to fold any fees that you are tempted to pass on to your guests into your pricing. If you find that that pricing does not make you competitive, then you need to re-examine your business model. If you really want to discourage credit card use, offer a discount for cash, thereby rewarding the guest, rather than punishing them for spending their money with you.

More on passing on credit card swipe fees here

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