When is a credit-card surcharge not a surcharge?
People who live in Connecticut, one of 10 states that does not allow surcharges on credit-cards purchases, say they're still asked to pay extra when reaching for their plastic.
Surprisingly, the requests often come from the state's colleges and universities or town offices, even the state itself.
Maria Swift of Cromwell can't understand it:
"When I went to pay my town taxes, I asked if I could use my credit card. She said, 'Yes,' but it would be $80 extra. Was this the surcharge prohibited by the state of Connecticut? . . . If I use my credit card for tuition at Central Connecticut State University, there is also an extra charge. Is this allowed?"
Maurice Devin of Windsor discovered it can happen at an out-of-state private university, too:
"I was contemplating paying my grandson's first-term tuition at the Savannah [Ga.] College of Art and Design with a credit card but was told that a 3 percent surcharge would be applied. Does the non-applicability of a surcharge just apply to the entities operating within the 10 states or apply to the residents of the 10 states regardless of where the entity is located?"
If Devin actually used his credit card to pay the tuition, the surcharge would have been $338.91. He paid cash.
Amy Frederick, a Prospect resident and suspicious "surcharge" payer, has a theory:
"I just paid my car taxes to the town of Prospect online with my credit card and was charged a 'convenience fee' of $18.16. Do they circumvent the law by calling it a 'convenience fee' and not a surcharge?"
Frederick is close. There is, indeed, a distinction between a surcharge and a convenience fee. A surcharge, says the state Department of Consumer Protection, is related to the form of payment. When a consumer pays by credit card instead of cash, for instance, a retailer can add a surcharge — except in Connecticut and nine other states.
These surcharges, assessed at the retailers' option, have been allowed in the remaining states since Jan. 27 as part of a multibillion-dollar settlement between retailers and credit-card companies.
Merely designating an additional fee as a "convenience" does not satisfy the state's standards.
"Whether a charge is a surcharge requires a factual inquiry of its purpose, [such as] how it is implemented," says Claudette Carveth, the DCP spokeswoman. "The merchant's designation of the fee as either a 'surcharge,' a 'convenience fee' or something else is not dispositive."
That means it's difficult for a retailer to get away with it. Connecticut's cities and towns, state colleges and universities and even the state itself — with its Department of Revenue Services-issued tax-refund debit cards — are exempt because of a carefully worded state law that says "no seller" can apply a credit-card surcharge.
"Payment of taxes to a town are not a 'sale,'" says Carveth, "and neither are licensing or permit fees."
Specific statutes, says Carveth, also allow the state Department of Motor Vehicles, and the probate and superior courts to charge credit-card service fees.
"The almighty state (or city/town) has once again exempted itself from the laws the rest of us must follow," says an emailer from East Hartford who asked that The Bottom Line withhold his name. "Only the state can gamble [with a lottery], for example. Similarly, only the glorious state — the state that makes me take my trash back to the store to recover my own money and has the nerve to tax my (federal) Social Security check also assesses a surcharge every time I pay my car tax (or anything else) online using a credit card."
Get the idea that people aren't happy with the fine-line distinctions between a surcharge and convenience fee — and who benefits?
Next week: How do gas stations get away with credit vs. cash prices?