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Have you noticed extra charges on your restaurant bill recently? Many diners are discovering a convenience fee charge for using a credit card.
For years, businesses have been paying fees to process credit card payments — and now, amid high inflation, many restaurants are choosing to start passing those costs onto their customers.
For those looking to maximize rewards while dining out, these fees can undermine the benefits of paying with plastic. Here’s what you need to know about restaurant credit card fees and whether you should keep using your credit card.
What are credit card processing fees?
A business must pay a processing fee if they allow credit card payments. These fees cover the processing cost to transfer funds from the customer’s credit card to the merchant’s account.
Processing fees average between 1.5%-3.5% of each transaction, depending on the transaction type and card network used (like Visa or Mastercard) to handle the transaction.
Processing fees can add up over time, costing restaurants thousands of dollars each month. This impacts a business’s profitability and the convenience it offers customers.
Why are restaurants charging customers convenience fees?
While restaurants aren’t required to accept credit cards, it’s hard not to. Credit cards and debit cards (which also charge processing fees) make up over 70% of all restaurant spending, according to a recent survey.
It’s difficult for restaurants to absorb these processing costs. In recent years, high inflation has led to increased food prices. Also, with Visa and Mastercard controlling nearly 80% of the credit card market, restaurants have lost the ability to negotiate rates. This puts added strain on an industry already known for its slim profit margins.
Many owners feel they have little choice but to pass their processing costs on to their customers as “convenience fees.”
Are convenience fees the same as service fees?
Some restaurants may also charge a service fee on top of your bill. These fees go directly to the restaurant, and they can use that money however they see fit. Some restaurants charge a service fee for employee benefits like health insurance and retirement.
Service fees can range anywhere from 3% to over 20%. Keep in mind that a service fee is not the same as a tip, which is a discretionary gratuity for good service.
Should I keep paying with a credit card?
Not all restaurants charge these fees — you can check with your server about their policy before you eat. The easiest way to avoid a convenience fee is to pay in cash or another alternative payment method.
But sometimes, you should continue paying with a credit card, even if you get charged a convenience fee.
Paying with a credit card is convenient. Credit cards are also more secure than carrying around cash or using a debit card. Most offer liability protection, so you’re not responsible for any fraud charges on your card.
Many credit cards offer rewards, such as cashback, points, or airline miles. If you use a credit card strategically, the rewards earned can offset the convenience fee, says Matthew Goldman, the founder of Totavi, a consulting firm in the payments space.
Some of the best credit cards for dining out offer elevated cash back or points for restaurant purchases. For example, the Capital One SavorOne Cash Rewards Credit Card offers unlimited 3% cash back on dining.
If your card offers points or miles, you can calculate their value to see if it’s worth using your card at a restaurant charging these fees.
How to minimize your costs while using a card at a restaurant
Dining out is one of life’s pleasures, but it’s important to keep an eye on your budget to ensure you’re not overspending (especially on pesky fees). Here are some tips for minimizing costs when using your card at a restaurant:
- Check for fees: Before dining out, find out if the restaurant charges any extra fees for credit card payments. Look for places without convenience fees or service charges to avoid unnecessary costs.
- Use rewards credit cards: If you have a rewards credit card, use it for your dining expenses. This way, you can earn cashback, points, or other perks that can help offset the cost of dining out.
- Explore alternative payment methods: Consider using mobile payment apps or cash to avoid credit card fees. Some restaurants offer discounts for cash payments or incentives for using a specific payment method.
- Plan your budget: Set a dining budget and stick to it. By knowing how much you’re willing to spend in advance, you can avoid overspending. It also helps you select restaurants that fit your budget.
The bottom line
Restaurants face the double challenge of higher credit card processing fees and rising food costs. To cope, many restaurants pass these costs on to customers through convenience fees and service fees.
As a customer, you need to consider your own bottom line. While your card may offer valuable rewards or cash back, it’s crucial to review if the benefits outweigh the fees imposed by the restaurant.
Before dining out, take the time to research the fees and payment options of the place you plan to visit. By being aware of the potential costs, you can make a decision that balances your dining experience with your financial well-being.
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