Dangerous New Practice: Hotel Adding 3% To Bill For Accepting Credit Cards

The Home2 Suites by Hilton at the Kansas City airport adds 3% to customer bills for ‘credit card processing’ though apparently when pushed they’ll remove the fee. (HT: The Gate) This is a common practice in Australia, where merchants have been allowed to do this for 10 years, though the government found businesses were passing on more than their actual cost here.

The truth is that it’s cheaper to accept credit cards than other payment methods, and it’s an underhanded tactic no different than a resort fee to impose a hidden add-on on customers. Why should a customer have to cover a business’s cost to accept their money, on top of the cost of the product they’re buying?

This hotel publishes this charge (emphasis mine):



6/17/20 – 6/18/20 108.12 USD
TOTAL ROOM PRICE (incl. tax): 130.54 USD



Credit: Home2 Suites Kansas City Airport

It’s a non-optional fee in many cases, too, as hotels increasingly will not accept cash. And where you can’t avoid the charge it should be included in the room rate. (Where a hotel won’t accept credit cards, or charges you less – effectively a discount – for other payment methods, those should be flagged clearly enough in advance to give customers time to make arrangements to go to an ATM or remember to bring a check.)

Accepting Credit Cards Is Cheaper For Businesses Than Cash Or Checks

Checks have to be taken to the bank for deposit, and checks can bounce. Then you have staff costs to collect on bad checks. You can insure against bounced checks, but then you’re paying a percentage of check volume there too.

Cash doesn’t just have to be taken to the bank, and carrying and holding cash has insurance implications for many businesses, but cash can get lost and can also ‘get lost’. It tempts employees into unethical behavior that can spill over to other elements of their job. It takes time to reconcile cash, which you nee to do between shifts. And you need to store cash, too. And keep cash on hand for making change. You may also be given counterfeit cash which winds up being worthless. And cash is a target for stick ups, too, putting employees and customers at risk.

On the other hand credit card processing is electronic, it’s easy to reconcile, and the funds are put straight into your account. Compared to the carrying costs, risks, and staff time managing other payment methods, credit card merchant fees actually represent a good deal.

Furthermore, when you accept cash or checks only you’re limited to how much money a customer has available at the moment (if you’re lucky!). Credit cards offer consumers a lending feature, and even when customers pay off their bill at the end of the month they aren’t limited to what’s in their account at the moment, they can pre-spend funds that are going to become available. Customers often spend more on credit cards than they would with cash. So the cost of accepting credit cards has revenue upside for businesses, too.

So Why Do Merchants Want To Pass Along The Cost Of Credit Cards?

There’s two things going on here. First, the cost of merchant fees is easily seen – rather than being dispersed among various costs and risks for other payments, because credit cards are so simple it’s a single expense line – and the cost of merchant fees is large. Since merchant fees are being charged in one, easily identifiable place, they’re easier to attack. There’s one (or a small number) of entities to bargain against.

Merchant fees represent a big, easily identifiable expense. They’re part of doing business, and a more efficient way of doing business, but since they’re easy to understand it’s easy to pass on the cost or seek regulation against. But going after consumers with a surcharge for accepting credit cards is no different than imposing resort fees or venue fees or COVID-19 fees on top of the advertised price of what you’re buying. It’s an unfair and deceptive practice.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I do not and will not patronize places that charge a CC fee that also do not allow some other payment method. I would not stay at a hotel that charges a 3% card fee that also wouldn’t accept a business check. Simple as that.

  2. I just sent them a message telling them I rethinking my visit there since they have this fee. No real plans to stay there but like you said a dangerous road to start letting them go down…

  3. These were banned in the Uk a few years ago, I had a shock that it was so prevalent in Australia when we went in Feb though

  4. There needs to be a law that hotels need to publish their rates including all taxes and fees. This way the consumer can make an informed decision. As better than 75% of consumers pay by credit card, this should be bundled into the hotel rate.

  5. Common in Australia & New Z however 3% is excessive it’s typically half that abroad ‘
    I’d argue they are trying to profit off the fee after covering costs
    Free publicity the hotel would have to be incredible for me to ever consider paying the premium nuisance fee

  6. How is this dangerous ? I don’t see how a 3% increase in a hotel charge puts my life at risk.

  7. Businesses pass on costs all the time. It is built into the cost of a product or service.

    This reminds me of the unbundling one sees when booking with an airline such as Spirit.

    Generally, this cost is built into the room rate, but I have no problem with this approach so long as prospective patrons are clearly made aware of this up front and so long as alternate payment methods are allowed so as to avoid the 3% fee if so desired.

    At that point, I can choose to stay at the property or choose to stay elsewhere.

  8. Credit cards can charge up to 4% to a vendor, depending on the credit card and the arrangement between the credit card processor and the hotel. Most pay somewhere close to 2%.

    If I checked into a hotel for a week long vacation – I could be potentially be carrying thousands in cash, as most hotels will not carry the risk of accepting a check either. Carrying thousands in cash that could be confiscated at the airport, or stolen is a risk.

    My point is this. If the hotel were to raise the rate prior to booking by 3%, and give a 3% discount for cash…No one would know or complain. The problem would be that everyone would be able to make an informed decision.

  9. Gary, I can’t agree that CC’s are cheaper than accepting cash. Checks, maybe. Debit cards are definitely cheaper than cc’s.

    We own a business and the processing fees vary between credit/debit, and between each category of card (e.g. MC World, World Elite, etc. Averaged out, our all-in card processing fees run right around 3%. Rewards cards cost us the most to accept. Debit cards are substantially less, cash is king, and checks have worked out great for us as well.

    So in my limited anecdotal experience, taking cards is definitely not cheaper than cash, check, or debit. I end up going to the bank regularly for reasons aside from depositing cash, and we have an in-office check scanner.

    I think the best approach is not a CC fee to the customer, but to build the costs into the price of the service sold. I feel the same way about resort fees. Build it into the cost of the room. Overwhelming majority of customers pay by card anyhow.

  10. @Ryan, it is not dangerous in the life threatening sense. It is dangerous in that all bad ideas about cheating and deceiving people out of their money with junk fees that aren’t in the list price spread fast. Gary focuses mostly on why credit cards, even with the fee, are much better for the business than other forms of payment. He’s right. These junk fees should be illegal.

  11. Common in Australia. The banks ( among the most profitable in the world) blame the CC behemoths. Just another sinister ripoff of consumers.

  12. The laws actually changed in Australia and if a business decides to charge a credit card surcharge, it’s a 1:1 passthrough of their actual costs.

    Credit cards aren’t the only electronic payment method either. You could pay with a debit card which has far lower fees for the merchant

  13. Raise all rates by 3% and no-one would notice – hotel rates are so convoluted anyway. So what you are actually complaining about here is the transparency – not the fee.

    I don’t like carrying cash – so the ability to use a credit card is a benefit to me as well as to the hotel. Complaining over this is like the people that say a 10 cent per gallon rise in gas prices is going to stop them from taking a summer driving vacation….nonsense.

    Tempest in a teacup.

  14. I thought it was a violation of CC contracts to charge a surcharge for services. They can offer a discount for cash payment, but not a CC surcharge.

  15. This used to violate the credit card association rules. In some places that may still be true.

  16. What Terry said. From what I have always understood you CAN give cash discounts (like gas stations do) but you CAN’T impose extra fees. This is a violation of the vendor terms. At least it used to be and many places (liquor stores, convenience stores etc) had to stop doing it or lose their ability to accept the cards. It was quite common with mom and pop stores and restaurants like 10 years ago. Not any more.

  17. The fees were allowed in the US subject to limitations in an antitrust lawsuit settlement (naturally).
    Different countries may vary. Some states have outlawed such fees. NY lost a lawsuit challenging its ban in the Supreme Court on free speech grounds (for reals).

  18. Is it only me or in the example I see above, an “utility” fee seems inappropriate as well.

  19. @Terry, about 10 states ban credit card surcharges but permit a cash discount, including some big ones like California, Texas and Florida. The New York court ruling said it’s OK to do a surcharge but it must be clearly expressed in dollars and cents.

  20. For cash, on top of the handling and accounting costs, there is also the cost of the armored car service. I would be very surprised if all those costs didn’t come close to credit card bank fees.

  21. The interesting thing is that AMEX is the most expensive card for fees, however Visa and MC if one is part of a chain is negotiated by the chain and the rate is actually fairly low. When I worked as an Assistant Comptroller for a large chain our Visa and MC rates each were in the 1% range due to volume of transactions. AMEX was 2.5%. So 3% that some chains such as in AU and NZ charge are too high and they ARE profiting based on my experience.

  22. Pretty sure this is illegal in Colorado:
    The Law states:
    Colo. Rev. Stat. §5-2-212
    “(1) Except as otherwise provided in §§24-19.5-103 (3) and 29-11.5-103 (3), C.R.S., no seller or lessor in any sales or lease transaction or any company issuing credit or charge cards may impose a surcharge on a holder who elects to use a credit or charge card in lieu of payment by cash, check, or similar means….”

  23. Side note: Kansas City airport is horrible. I’m not clear why anyone would elect to stay nearby.

  24. Jason,
    How do you know that to be true? And does that somehow offset the credit card surcharge?

  25. One thing you are forgetting Gary is that the costs of receiving check payments already exists in these businesses. Therefore there would be no (or minimal) incremental costs associated with them taking additional payments by check. A good portion of businesses that use the hotel for business functions most likely pay them by check.

  26. @Charlie – how do I know that to be true? I’ve been to Kansas City and I have 2 eyes. I also ask hot girls around the country where they are from, and Kansas City comes up more often than would be expected for a city of its size.

  27. @gleff

    I think the worst thing is that nobody is going to to notice. I find it amusing that of the $20 in taxes and fees that are tacked on to the total bill, you take issue with the 3% CC processing fee.

    I hate to say this, because I will argue things over principle from time to time, but for a one night stay, my time is worth more than the $3.60 I’d get “back” from arguing over this fee.

  28. This happens a lot in Asia , Australia, Thailand etc . Their argument is that the price quoted in a cash price , and if you want to pay by credit card , they have to pay the CC provider 3% , so they are just passing on the charge and getting the same price for the hotel room. I know that for smaller and cheaper hotels in Thailand this is true and I never argue because these poorer owners do need the cash……….too much competition .

  29. Between loyalty programs that are in a race towards the bottom and now hotels adding credit card fees (and that utility fee was pretty lame too), Booking through OTAs looks like a better and better option all the time. Hotels want loyalty and treat their customers like crap.

  30. It really good topic. But we have see one fact on this. Today all over world cash is not encourage how small the translation is. So literally we are force to move to cc,dc and ewallets. My question is when your business has fine up still why should cc or dc charge in % instead of dices value as the credit card or debut card company work semaine same for all translation. We expect the business man who run in margin of 10 % to accept 3% charges. This is really unfair. My point is for small vendors i stick to cash and big vendor i use credit card unless I am charged additional. All govt need to put chains of this card networks on charges. This will make things cheaper for consumer and profitable for business man. The resort owner was one way right as he did not want to hike price to all making it costly instead ask the person paying in Cc to bear its charges. As you see even if discount are offered taxes are levied on base price hence increasing cost by 3% and give discount again or charging the consumer will attract higher tax

  31. As much as I hate seeing the CC transaction fee, it would have saved a lot of headaches when full disclosure is made from the onset: “prices reflect a 3% cash discount”

    Credit cards allow a double dipping in frequent guest/point programs. We get points based on co-branded CC spending and at the same time, collecting hotel nights during your stay. I guess it’s time to take this issue to the issuing CC company.

  32. The rate can NOT be more then the actual rate they are actually charged by the CC service.
    The merchant can not charge the fee in certain states.
    The charge must be separately noted on the charge receipt , not just on the hotel bill.
    There must be a display of the charge at the time of purchase before the purchase.

    In the event the hotel does not do this. File a complaint with the Credit Card Issuer and have it back charged.

    ALWAYS comment on the social medial that this Merchant pork’s its customers over with these hidden fees.

  33. +1 Mike! WTH are the Service Fee & Utility Fee?!
    Also, I’m surprised that the bank fees are higher on rewards cards!

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