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Stores Can Now Charge Credit Card Transaction Fees, But Will They?

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By Summar Ghias, dealnews contributor

Typically when you make a purchase with your credit card, your bank charges the merchant an interchange fee for the transaction. However, after years of legal proceedings, last week retailers were given permission to pass this surcharge on to the customer instead. But will they? As it turns out, you shouldn't cut up your plastic just yet.

The new credit card surcharge stems from a 2005 anti-trust settlement in which a group of merchants claimed that Visa, MasterCard, and others were trying fix the fees that stores pay to accept credit card purchases. Now, retailers have the option to charge the consumer this fee, which could amount to as much as up to 4% of a total purchase.

MasterCard and Visa users thus may be charged a usage fee, but only if individual retailers decide to implement the surcharge. Under the settlement, the surcharge cannot top the amount that the merchant actually pays to accept credit cards, which typically falls within 1.5% and 3% of the transaction amount. Debit cards and prepaid cards do not fit into this category, and are therefore exempt from any surcharges. And, if you're in one of 10 states, including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas, you're off the hook because of state laws prohibiting checkout fees entirely.

Perhaps more of a relief: Big name stores don't seem to want to change their methods, despite the new option. The National Retail Federation claims that few, if any, retailers are expected to surcharge customers. Moreover, according to Bloomberg, Walmart, Target, Sears, and Macy's have already stated that they don't plan to place the burden of additional fees on consumers, possibly for fear of upsetting them, which would potentially put merchants at a competitive disadvantage.

For the stores that choose to implement the surcharge, their policies must be completely transparent from the get-go; signs disclosing the fee must be placed on the door, during the point of sale, and on the receipt. According to watchdog group Consumer Action, that also means that the receipt must list the amount of the checkout fee, the fact that the merchant is responsible for imposing the charge, and state the fact that the percent charge isn't greater than what it had cost the retailer in the past.

However, according to TIME, the implementation of this settlement may also result in more online retail surcharges; such merchants only have to disclose a fee when asked about a payment method at the end of a sale. Moreover, although big-name brands may look at the consumer surcharge as disadvantageous to sales, less competitive markets and smaller niche mom and pop shops may be able to get away with imposing the fee in the name of expanding their profit margins.

Overall, though, there is no need to hyperventilate yet. While the new law does allow for leeway on what retailers can and can't do, it doesn't mean a one-size-fits-all tax on all merchandise simply because you chose credit instead of cash. Consumers should be aware of whether or not these fees are charged at the stores of their choosing, and be mindful of the various fees particular to each credit card provider. That said, there doesn't seem to be a surge of surcharges on the horizon to get up in arms about just yet.

Top photo credit: NY Daily News



Summar Ghias is a freelance writer who attributes her love for big cities to the diverse cultural, artistic, and food-centric experiences that can be had in them. A former assistant editor at Budget Travel, Ghias has freelanced at several other titles including Girlfriend Getaways, Discover, People, In New York, Spinner.com, and AOL Travel, among others.

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6 comments
efithian
I am not sure that this policy applies to all purchases from Europe, but it did on one of my recent purchases. I had a choice of credit cards with different fees, paypal with another fee, and cash, although I am not sure how the cash would be transferred. This was Denmark.
Pilm
What is interesting about Florida is if you pay for any government service (property tax, license renewal, etc) with a credit card, they charge a 4% checkout fee! So it's only against the law for retail stores to charge this fee but perfectly ok for the government to charge it. Hmm!
einstein999
You are getting it all backwards!!!
For decades credit companies have been able to get away imposing a TAX on every(!) shopper.
By charging merchants a 2-5% surcharge, they added an additional cost to a credit card transaction, but forbade the merchants to add that to the price for that specific transaction. So merchants just reflected their additional (2-5%) cost in the general price for EVERYONE!
Instead of merchants charging extra for credit card transactions, they should be giving a DISCOUNT to people who pay cash or with a debit card!
-rudeboy@myway.com
gusgus
GREED, GREED, AND more GREED. THIS IS WHAT IS RUINING AMERICA! think about it- lots!
snaimpally
Credit card fees are part of the cost of doing business so they are passed on to consumers one way or another, implictly (e.g., higher prices) or explicitly (what the new law allows). What happens now is that customers paying cash are basically penalized because the price/markup takes into account the cost of credit card fees.

Many merchants already deal with credit card fees by either offering a cash discount or by tacking on a surcharge for credit card payments. This is a non-issue because these fees are already factored into the cost of doing business when a merchant marks up an item.
Greg the Gruesome
I live in New York and I see gas station pumps that have one price for cash and a higher price for credit, so I guess that's an exception.

A number of years ago, I saw a TV news story that said New York (State, not City, IIRC) law allows stores to require a minimum purchase to pay with a credit card as long as there's a sign declaring this at the register, but that Visa and MasterCard forbade it. I wonder if these are still true, especially the latter after the settlement.
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