NEWBURYPORT — A new phrase has crept into the city’s restaurant industry – “noncash adjustment” — and it is presenting diners with a choice to use cash or pay an extra fee to use a credit card.

So far, at least two local restaurants have adopted noncash adjustments: Agave Mexican Bistro on State Street and Mama Dukes on Merrimac Street.

COVID-19 restrictions have closed both restaurants to diners but Agave still offers curbside pickup.

Noncash adjustments are increasingly becoming a lifeline for restaurant owners across the state who are watching every dollar and say they are threatened with extinction due to credit card processing fees.

But to some diners the term means nothing more than a surcharge or an added fee – a practice they believe might not be legal. Massachusetts is one of a handful of states that doesn't allow businesses to add credit card surcharges to final bills.

According to Massachusetts General Law, Chapter 140a, Section 28a(2), “no seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”

Joseph DiPietro, chief executive officer of First Class Processing, which processes credit card transactions for both restaurants and several others across the region, argued that the same law allows businesses to offer incentives to use cash over credit cards.

He pointed to Section 28a, Section B that states: “Any discount from the regular price offered by the seller for the purpose of inducing payment by cash, check or other means not involving the use of an open-end credit plan or a credit card shall not constitute a finance charge under section four if such discount is offered to all prospective buyers and its availability is disclosed clearly and conspicuously.”

DiPietro agreed customers may feel aggrieved by the practice but said non-cash adjustments are protecting local businesses which are often on the precipice between success and failure.

Calls to officials at the Attorney General’s Office and the Office of Consumer Affairs and Business Regulation for clarification on the law were not returned by deadline.

In recent days, the practice, which adds 4% to the final bill, has led to some hard feelings among Agave regulars who were surprised when they were alerted to the new fee.

“Never in life have I heard of this. My wife and I were blown away,” Newburyport resident Steve McConnell wrote in an email to The Daily News.

Others are taking the fee in stride, saying it was important to support local businesses.

“I didn’t care in the slightest. I also threw down a 50 percent tip,” Newburyport resident Sarah Ashley Pratt wrote in a tweet.

Both Pratt and McConnell said Agave staff announced the new policy at the beginning of each order and not afterwards.

Dawn McCandless, who owns Agave, called noncash adjustments the “wave of the future” and said the practice will continue once dine-in service returns as soon as next month.

McCandless said the new fee began May 1 when the restaurant reopened for take out after being closed for about six weeks. Most people, she said, understand the new fee and to her knowledge no one has cancelled an order because of it.

“We make sure we alert every customer,” she said, adding there was a script located next to the restaurant take-out order phone that every employee reads when a customer calls.

Non-cash adjustments have been discussed by local restaurant owners for a long time, McCandless said, but no one wanted to be the first to implement it for fear of bad publicity.

But considering her cash-poor situation and the amount of money she spends on processing credit card transactions, she called the fee necessary for her restaurant’s future.

Nancy Batista Caswell, who owns Ceia Kitchen & Bar, and Brine, both on State Street, said she wouldn’t charge the fee but acknowledged there were advantages to doing so.

“In the last couple weeks our diners have been incredibly gracious to tip staff on food they technically aren’t providing a service on. Some tips have been averaging 30 percent. And while these kinds of tips are gracious and amazing the owners do get hit with a large credit card fee on that money,” Caswell said. “Personally, my staff is coming in to work and I see the value in paying that credit card fee for them during this time. But many diners have grown to understand this tipping at the charge does affect the owner so cash tip is now more popular.”

Caswell said in lieu of a credit card fee, she would prefer charging something for takeout containers. The average takeout order costs her between $2 and $3.50 in paper goods alone.

“That’s incredibly expensive and limited. This is why some prices are rising on takeout — not only is product getting expensive and it’s inconsistent we now have to deal with costs for all containers and bags. It’s a loss business right now,” Caswell added.

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