Restaurants Stage One-Day Credit Card Boycott -- With a Twist

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Credit card boycott at restaurauntsTwenty restaurants and cafes in the Boston and Washington, D.C., areas staged a one-day credit card boycott on Tuesday, refusing to accept credit or debit cards from customers.

The boycott was targeted at interchange fees charged by card issuers every time they swipe a customer's card. Those fees -- which are capped at 21 cents per transaction on debit cards and tend to be around 2 percent to 4 percent on credit cards -- have been a source of conflict between merchants and banks for years.

But this boycott wasn't an organic grassroots movement by a coalition of angry merchants. Rather, it was organized by mobile payment processor LevelUp, and customers had the choice of using either cash or the LevelUp app to pay for their meals.

The app lets consumers link a credit card or debit card with the free smartphone app, which displays a QR code that can be scanned at the point of sale. Merchants using it are charged a 2 percent transaction fee, which is on the low end of normal credit card fees.

But the real advantage is that merchants can get rid of the transaction fee altogether if they instead opt to pay for LevelUp's suite of advertising and loyalty programs, which make use of payment data gathered by the app. For instance, restaurants can offer discounts to customers using the app at their establishment for the first time, or give an automatic discount to customers who come in for a meal when it's raining out.

So it's not hard to see why merchants would want to use the system -- it allows them to take money they'd normally hand over to the bank, and instead put it toward customer retention and promotions.

But we're not sure about this credit card boycott, which the company framed as a "Credit Card Diet." We'd certainly be pretty miffed to discover that our usual lunch spot had suddenly made it harder to pay for a sandwich just so that it could engage in a publicity stunt for a mobile payment processor.

This boycott was just the latest instance of consumers getting caught in the swipe-fee crossfire. Merchants recently won a court ruling allowing them to pass along credit card fees to consumers, though most insist they won't take advantage of this right. And when the Durbin Amendment to the Dodd-Frank Wall Street reform law capped debit card fees back in 2011, many banks implemented new checking account fees to make up for the loss of income.

As for Tuesday's proceedings, LevelUp CEO Seth Priebatsch conceded that a small minority of customers walked out after being told that they couldn't use their credit card. But he explained that LevelUp took precautions to make sure that restaurants didn't completely alienate their customers.

"We had a street team member at all of the locations, with a little area set up with chips and candy to hold people over if they're starving to death," he explained. He added that customers also got the usual first-time discount, providing them with an additional incentive to customers to play along.

We're still not crazy about restaurants taking away a payment option that people are used to using, but we have to admit that getting a discounted meal and a free bag of chips would be enough to keep us from angrily storming out.

Priebatsch says that the company is considering subsequent "Diet" days in the near future. But next time, there might be more people already equipped with the app: The company announced Thursday that it just registered its millionth user.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

Photo Credit: Alamy

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docshearon

We should boycott all banks and mortgage / insurance companies as well as corporations that suck the word dry including the unalienable rights of all people . In addition censorship here on this commentary will continue....

March 04 2013 at 7:37 PM Report abuse rate up rate down Reply
docshearon

We should boycott all banks and mortgage / insurance companies as well as corporations that suck the word dry including the unalienable rights of all people .

March 04 2013 at 7:35 PM Report abuse rate up rate down Reply
adamyaz

As a retailer, I don't mind paying 21 cents per transaction. I have no problem paying someone for their service and a nominal fee per transaction is fair. I have a huge problem with the 2-4% fee that follows. In essence, the bank becomes my "partner". There is no reason the bank needs a percentage of my sale. I don't understand why it costs them more to process a $100 transaction than a $10 transaction - or why they feel entitled to a larger fee. If congress really wants to look out for small business people - here is a good place to start.

March 02 2013 at 1:36 AM Report abuse +1 rate up rate down Reply
LAWMANTOO

Anyone who attacks banks is my hero.

March 01 2013 at 10:49 PM Report abuse rate up rate down Reply
1 reply to LAWMANTOO's comment
neilross7700

I know what you mean. we should all attack banks. In fact, we should put them out of business. I feel so much safer keeping my tens of thousands of dollars stuffed in my mattress where the bad guys with guns can find it after they break into my house, rather than secure in the bank. Tool.

March 02 2013 at 12:07 PM Report abuse +1 rate up rate down Reply