Les Jones

E-commerce > FDIC Regulations on Cash vs. Credit Card Prices

UPDATE: In comments Chip notes that this legislation expired February 27, 1984. So unless it was renewed, never mind!

In the past 've heard several people say that credit card companies require merchants to agree not to charge more for credit cards. It came up in this discussion of stores that offer discounts for cash I discoved this on the relationship between credit card and cash prices. Someone linked these FDIC rules, which paint a more complex picture.

167. Use of cash discounts

(a)(1) With respect to credit card which may be used for extensions of credit in sales transactions in which the seller is a person other than the card issuer, the card issuer may not, by contract or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay by cash, check, or similar means rather than use a credit card.

So discounts for paying cash are perfectly legal, and what's more credit card companies seem to be enjoined prohibiting the practice. However, charging extra for the use of credit cards is illegal according to FDIC laws.

(2) No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means.

The above paragraph prohibits credit card surcharges, but doesn't prevent cash discounts. So it would seem that a store can state that their prices reflect a cash discount, and that credit card customers will be charged at the normal (higher) rate. At least that's my lay interpretation.

Any thoughts? Here's the rest of the section 167.

(b) With respect to any sales transaction, any discount from the regular price offered by the seller for the purpose of inducing payment by cash, checks, or other means not involving the use of an open-end credit plan or a credit card shall not constitute a finance charge as determined under section 106, if such discount is offered to all prospective buyers and its availability is disclosed clearly and conspicuously.