Credit card charges

'I have two questions about credit card charges: Is a merchant allowed to offer discounts on cash purchases but refuse to allow the discount if payment is made by credit card? Is it permissible for a merchant to deduct five per cent credit card charges when effecting a refund for goods returned?

'My quandary is because Bank of Valletta (the bank which issued my Visa credit card) said that these things were not permissible but the bank can do nothing about them. So, what should a consumer do?' (Josephine Farrugia)

I referred these questions to Geoffrey Bezzina, deputy director of the Consumer Complaints Unit, Malta Financial Services Authority.

He replied: 'I have contacted HSBC and BOV for their comments on the two questions. Regrettably I only received a reply from one bank and the other bank will probably reply on Monday. At this stage, therefore, my reply reflects the position of only one bank. As far as I am aware, card merchants are precluded from charging a different price if the customer opts to pay by card (rather than cash or by cheque). This is called surcharging. Hence, a merchant who gives a discount cannot retract from his decision if the customer offers to pay by card.

'Likewise, merchants cannot surcharge cardholders for using their card for purchases, or when refunds are effected. It is also understood that when a card transaction is reversed, a bank would reverse the entire transaction (and would also refund the merchant service charge in full to the retailer).

'This is the position of one of the two local banks which provide electronic point of sale services and processes card transactions on behalf of merchants (referred to as card acquiring). It is likely, however, that the other bank will reply on the same lines.