Credit Card Surcharge

I received the below in an email from BLOOMBERG. If a merchant wanted to add this to my bill, I would walk away from the transaction. Let’s see how much they like to lose a sale.

BLOOMBERG

Howard Lipset from thecfo.wordpress.com shares news about retailers being able to charge customers a surcharge when using their credit card.Starting Sunday 1/27/2013, retailers may add a surcharge of up to 4 percent of your bill if you want to pay with a credit card.

The good news is that even though it’s legal, it’s not expected to become a widespread practice. And retailers have to disclose if they’re adding a fee.

What else you need to know about this change:

» This grew out of a 2005 class-action lawsuit filed by retailers challenging so-called interchange or swipe fees that merchants pay to your bank when you use your credit card. The fees total about $30 billion annually. Some retailers said the fees cut too deeply into profits, particularly for low-margin businesses like supermarkets and mom-and-pop stores. A U.S. District Court in November, in a preliminary $7.2 billion settlement, said merchants are allowed to pass along the cost to customers starting Jan. 27, 2013.

» The surcharge, or “checkout fee,” cannot exceed the amount that the merchant actually pays to accept credit cards, normally between 1.5 percent and 3 percent of the transaction amount.

» Retailers choosing to charge a fee are required to notify customers before they make a purchase at the store entrance and at the point of sale. The amount of the surcharge doesn’t have to be disclosed until the point of sale, or when you’re at the checkout. Online retailers must notify customers on the first page that references credit card brands — again, usually at the end of the checkout process. They also must show fees on every receipt.

» The fees can be avoided by using a debit card and, of course, cash and checks. And the fees aren’t allowed everywhere; these states also have laws limiting surcharges: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

» Retailers can offer a discount for using non credit card forms of payment.

» The National Retail Federation, which was not a party to the suit and opposes the deal, says there’s not wide support among merchants for credit card surcharges and the federation does not expect broad use of fees for competitive reasons.

» Consumer advocates urge shoppers to pay attention and be selective about where they spend money and what credit card they use, since different types of cards also can have their own fees. In the long run, consumers could start to see no- and low-surcharge promotions.

Sources: Visa, Consumer Action, Electronic Payments Coalition, New York Times

Howard Lipset, CPA
Progressive Management, Inc.
(516) 883-2962
lipset@progressivemanage.com

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