A fellow parked in DC, paid at the P and D machine by a Credit Card issued by Bank of America. His parking Fee was $2. When he got his statement, they had charged him an additional $10 fee to process the $2 fee. When he complained, he was told that B of A was considering all charges made by a government agency a "cash advance" and was surcharging the $10. Read about it here.
I’m not sure if this is true or not, but it makes no sense. Unless there is something I don’t know, the government should look no differently to a credit card company than any other merchant, unless they have negotiated a lower discount rate — if that’s the case, its the problem of the bank, not the government. The bank wants all the money processed by the government agency, and in a large city, that’s a bunch. The city says — sure, we will accept your card, but since we are running millions through our city, we want a lower rate.
Anyone know anything about all this?
Hat Tip: Phil Oropesa over at Laz Parking.
JVH
UPDATE UPDATE UPDATE UPDATE UPDATE —
B of A gives us the straight information — it was a coding error and they do NOT repeat DO NOT consider parking fees to be cash advances. Read the entire story here.
Once again, PT Blog gets the facts first.
JVH
One Response
Quasi-cash has been around for a long time and is setup to avoid cash advance fees for certain types of cash exchange transactions such as when you use your credit card to purchase chips in a casino. The chips are the same as cash, or quasi-cash. There are fees associated with processing these types of transactions which are tpically not too onerous versus cash advance fees which are typically expensive for the cardholder to pay. In short the minimums apply and simply dont work with small dollar transactions.
In this case the bank (BOA) is claiming the transaction is a cash advance and therefore falls under the minimum transaction level rule of I think $20. Since it is lower than $20, they are applying the fee of $10 per transaction. This is clearly their interpretation of the rules of Visa/MC, and the definition of the transaction. Again, I am no longer inside the banking world but I think what is going on is that they consider the pay and display receipt a cash voucher, and are therefore applying the rules on the minimum amount to be allowed, and if lower the surcharge is applied. This is probably well disclosed in the cardholders rug of a disclosure if you could read the font size.
This is my best guess and is an example of how a powerful Visa board bank can drive transaction policy. This may be the economics behind it all – the banks who issue plastic simply dont make any money at all on $1 and $2 transactions because of all the fees associated with paying the merchant acquirer, the branding fee to Visa/MC, authorization and settlement fees to Visa/MC, and then of the course the costs to post the transaction and manage the back-end, and customer support for a $2 transaction. Charge back ratios may also be driving this decision which are as you now extremely onerous at $25 per case.
Without doing more research that is my best shot right now. I doubt it will hold up nationally but I also think it is a precursor of the future that may impact this industry in many ways.
JR