Local businesses violate agreements

By Mary Georgevich

You're in The Hut, ordering drinks with your friends when you realize that you don't have any cash. You whip out a credit card, ready to pay $4 plus tip.

The bartender glances at the card and tells you, "It's a $10 minimum for credit cards."

Panicked, you look around, trying to stop your friends from paying for their drinks with cash so you can charge theirs on your card.

Too late -- they've already paid -- so you resign yourself to keeping a tab open until you can spend the $10 that's required of you.

This scenario -- which is actually a violation of some credit cards' terms of service -- is all-too-familiar for many Santa Clara students.

"It ends up being expensive to buy drinks at a bar, so I won't buy any," said senior Krystal Wu, saying she prefers to drink at a friend's house before going out.

In addition to The Hut, Cramer's Bagels, Yum-Yum Tree, Mission City Café, Wrap This, Santa Clara Liquors and City Lights Espresso all require minimum purchases on credit cards ranging from $3 to $10. These minimums violate the terms of service with MasterCard and Visa credit card companies.

"It is a violation of MasterCard rules to require a minimum or maximum transaction amount to accept a valid MasterCard card," said Tristan Jordan, a business leader with MasterCard U.S. Markets Communication.

A representative at Visa did not return phone calls requesting a comment, but their Web site states, "Visa merchants are not permitted to establish minimum transaction amounts, even on sale items. They also are not permitted to charge you a fee when you want to use your Visa card."

Credit card companies charge merchants a flat fee and a percentage for each transaction done with their credit card.

There are also monthly fees and other charges associated with accepting credit cards. Many merchants have a minimum to help them ensure that credit card transactions aren't too costly for them.

Dan Johnson, a manager at The Hut, said this is a big reason The Hut has their policy.

Jacob Cho, the owner of Yum Yum Tree, said this is the reason the family-owned eatery charges $.49 to customers using credit cards for purchases less than $5. "If they purchase like $4.70 or so, then usually we don't charge," he said.

Law student Andrew Holley called credit card minimums "an unfortunate reality." He said he sympathizes with small business owners because the fees can really cut into their profits.

"I'm sure stores are doing that knowing Visa can't police every store," he said.

Wu said she thinks minimums at bars can be dangerous because they force people to drink more than they might have planned.

"My friends and I will just share a tab and pay each other back with cash," she said. "But for most people, it's basically just encouraging them to drink."

Some of the bars have imposed minimums in order to make things simpler during busy periods.

"It gets a little obnoxious when people charge one drink then close, buy one drink then close," said Johnson. He said the minimum is meant to discourage that type of customer behavior, especially when it's busy at night.

A bartender at Da Silva's Broncos told The Santa Clara that the bar imposes a $15 minimum for credit card purchases.

The owner, Rick Da Silva, said this was a mistake, because he had abolished the minimum several months ago.

"We do not want to encourage people to drink in excess," he said. "If they want to have just one drink and want to give a credit card, that's fine."

Danielle Anderson, manager of Blinky's Bar in Franklin Square, said she understands why bars would want to encourage people to keep tabs open, but Blinky's doesn't impose a minimum. "We don't. It's not right," she said. "It's worth it because it protects the safety of everybody."

She said a hazard of keeping lots of tabs open is human error that could result in the wrong credit card getting charged, or a lost or forgotten card being left behind.

Johnson said he was not aware that this policy violated the terms of service for certain credit card companies.

Da Silva said they received some minor complaints under their previous policy.

Blinky's doesn't require a minimum because of the terms of service, said Anderson.

American Express does not prohibit merchants that accept their credit cards from imposing a minimum on charges, according to Sarah Meron, a spokesperson for the company.

"We're a little bit different than Visa and MasterCard," she said. "We certainly do not encourage minimums, but it's not specifically prohibited."

She said the minimums can be difficult for customers, which is why they are not encouraged. "It is something that we feel is up to the merchant to decide," she said.

If the merchant were to impose a minimum for American Express cardholders, then, under the terms of service with American Express, they would be required to treat other credit card companies the same, Meron said.

Contact Mary Georgevich at (408) 554-4546 or mgeorgevich@scu.edu.