Paying cash? Why some Texas restaurants still charge credit fee.

Nothing unites Houston restaurant-goers faster than an additional line charge item on a receipt. Such was the case on the Houston Heights Foodies Facebook page, when someone recently asked that if you’re paying in cash, why are restaurants still charging a credit card transaction fee?

Restaurant operators and experts responded, saying not to blame them, but instead blame the credit card companies and the economy. On the other side, folks questioned why restaurant owners don’t just bake the cost in the menu and raise the prices.

As the restaurant experience gets more expensive for everyone involved, diners have become increasingly sensitive to anything that takes dollars from their pockets. That puts operators in a hard place: Do they keep the credit card fees on the receipt, or do they raise prices so everyone knows up front what they’re paying? Both approaches can have serious consequences.

In our digital world, credit cards have become the primary mode of transaction between customers and businesses. Credit card companies and banks charge a processing fee to merchants on every transaction, roughly two to four percent of the total purchase. Jonathan Horowitz, founder of Convive Hospitality Consulting and a longtime industry member and expert, said this practice is, ultimately, another hurdle for operators to jump over.

“That percent is a significant expense on top of all the other challenging costs we’ve talked about in the past,” Horowitz said—costs that include ingredients, rent and utilities. “And so, as any business owner would, they try to figure out how to reduce those costs and try to preserve some amount of profit margin.”

Many restaurants have added the credit card transaction fee as a line item on receipts. Others have raised menu prices to accommodate the percentage lost. While operators may encourage customers to pay in cash to possibly circumvent the fee, the majority of transactions today are still done via credit card. 

Cash also introduces problems of its own. It’s a liability and safety issue for operators to keep hard cash on the premises, plus it takes time to deposit paper money at a nearby bank. One only needs to look at the numerous break-ins at restaurants in the Houston area over the last few years to understand why operators may be hesitant about keeping cash around.

By and large, customers have viewed operations and transaction fees negatively. A common refrain on social media is that restaurants should be more transparent. Of course, a restaurant can put up a sign near the front door, but that’s not a guarantee a person walking in is going to internalize that information. Plus, an operator may feel that a warning label may be a deterrent for potential customers. They could also choose to increase the prices on the menu.

“The problem is you can only charge so much for the food before the customer says, ‘It’s too damn expensive. I won’t eat there anymore.’ That’s the Catch-22,” Horowitz said.

Nationally, trade groups have been lobbying politicians to find ways to curb these fees. The big banks and card companies, naturally, are fighting back. In June, a federal judge OK’d a $38 billion credit card swipe fee settlement, but restaurant groups told industry news website Restaurant Business that the order did nothing to fix the issue of alleged price-fixing.

Meanwhile the debate continued to play out on Facebook, with some users saying that they would modify the tip amount in response.

“It’s a monopoly and you know what happens with monopolies: You play along or you don’t have a business,” Horowitz said. “There are really no other practical solutions, quite frankly. They can try and shop around a little bit and try to find a lower processing fee, but it’s still there and does not make a difference.”