Small Business Saturday: Buyer Beware

Last Updated Nov 23, 2010 1:08 PM EST

Heard about Small Business Saturday? It's the fastest-growing community on Facebook because the sponsor -- American Express -- has promised to give both consumers and businesses something for nothing. Consumers are supposed to get a $25 statement credit for spending $25 with a participating small business in their community. Businesses are supposed to get $100 in free advertising.

Here's the pitch for consumers: If you use a registered American Express Card at a participating small business on Saturday Nov. 27 -- the day after Black Friday -- American Express will give you a $25 statement credit -- even if what you bought only cost $25. Purchases at franchises, online merchants and big-box retailers don't qualify. Just your brick-and-mortar, Mom and Pop businesses.

Does that mean you could go to your local bakery or boutique and get your purchase for free? Theoretically, yes. But don't count on it. There's a lot of fine print with this deal.

The credit is limited
The biggest caveat is that American Express is only giving the $25 statement credit to the first 100,000 card holders. How will you know whether you got in under the wire? You don't.

You are supposed to register you card with the program between Nov. 8 and Nov. 27. Nothing on the form or the registration acknowledgement says whether you've registered early enough to get the credit. In fact, the acknowledgement just urges you to spend.

"Remember to use your registered Card to shop small on November 27, 2010, and support your favorite local stores and restaurants," the acknowledgement says.

The only time you'll see reference to the 100,000 card member limit is if you scoll through the "terms and conditions" when you're enrolling. Meanwhile, with some 863,000 "likes" on Facebook, it seems unlikely that if you're registering now, you got in early enough to get the credit.

There's no list of "qualifying" merchants
For argument's sake, though, let's say you did register early enough to qualify for the statement credit. Your second challenge is determining whether your Small Business Saturday purchases are made with qualifying small businesses.

There's no list of participating merchants. American Express says "any locally-owned independent small business that accepts American Express" qualifies. But how do you know whether they're locally owned? You can ask, of course. But you may not get a definitive answer.

American Express spokesman Sal Della Monica says "they know on the back end" which merchants qualify, but he acknowledges that the process is "a little opaque" to consumers.

Credits can be delayed
Now, about that $25 statement credit. Don't be expecting it to post to your account as quickly as your qualifying charges. According to the terms and conditions: "Statement credits are generally issued within 5 business days after your qualifying purchase, but may take up to 2 billing cycles to post to your account."
And: "The Statement Credit is not earned and owed to you until it has been processed and credited to your Registered Card account."
In other words, you've got to pay the bill you rang up on Small Business Saturday, possibly long before you get a credit for your purchase.

Is the credit refundable, if you got it after you paid the bill? Apparently not. According to the terms: "Your ability to earn rewards may be based on the amount of your purchase after the statement credit has been applied."

The terms and conditions also stipulate that you can't sue if you don't like how the process works. You'd have to arbitrate your claim, and arbitrate alone. Class actions of any type are prohibited, according to the terms.

Not to sound cynical (although, of course, I am) but Small Business Saturday may be a better deal for American Express than you. Every time you use your Amex card, the company gets an "interchange fee" that can add up to as much as 5% of the purchase price. The fee is paid by merchants and is largely invisible to you, but is likely factored into the price of the goods and services you buy.

In October, the Justice Department sued Visa, Mastercard and American Express over "anti-competitive practices" related to these fees because their merchant agreements barred retailers from giving you a discount if you chose a payment method that was cheaper for the store. Visa and MasterCard settled the suit, eliminating that clause from their contracts. American Express was also the only company that failed to settle. Some experts assumed that merchants would stop accepting American Express cards as a result. This may be the company's clever attempt to counteract that.

By the way, this column is not meant to diminish the attractive notion of directing at least some of your holiday spending to local small businesses.

Small businesses are arguably the backbone of the economy -- and may be owned by your families and friends. I'm all for shopping local -- and shopping local more often than just on Saturday. Just don't be fooled into thinking that Small Business Saturday is going to get you something for nothing.

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