Hit By Credit Card Surcharges?

Feb 11, 2013 by

credit cardsI’m doing a non-scientific survey: Has anyone been hit with a surcharge when using their VISA or MasterCard the past couple of weeks?

Here’s why I’m interested:

Credit Card Merchant Fees

If you’ve never had reason to be on the other side of a credit card transaction—the merchant instead of the consumer—you may not know that credit card companies charge merchants fees for the privilege of processing transactions with their card. (So don’t feel guilty if you’re a “deadbeat”—the industry term for those of us who pay no annual fee and always pay off their entire credit card balance each month—the card issuer is still making lots of money from your account, if you use your card.)

Typically merchant fees are a percentage of the transaction (1-3%) plus a fixed charge of anywhere from a few cents to 21 cents per transaction plus a fixed monthly fee. The fewer transactions the merchant does, the higher the per transaction merchant fees. These fees can really add up and are usually the reason some smaller merchants decline to accept credit cards.

U.S. Merchants Liberated by Settlement

Historically VISA and MasterCard have required that merchants charge the same price whether the consumer pays with cash or credit. So merchant fees have simply become another cost of doing business for the merchant—like labor—and as such are duly reflected in the prices you pay, even if you pay with cash.

A lawsuit and subsequent settlement last July changed all that, effective January 27 of this year. The settlement involved only VISA and MasterCard, but that accounts for 70% of all U.S. credit card transactions.

Now merchants may, if they choose, pass along to consumers a “swipe fee” surcharge of up to 4% of the transaction amount. For merchants who opt to charge more for purchases made with a VISA or MasterCard, you could pay a 4% surcharge!

Are Your For It or Against It?

As a person who almost always pays with cash, I’m happy to see this development—I think.

The cheap side of my brain says, ‘Hmmm, this should mean cash prices will be a bit less than they were before because merchant fee costs aren’t rolled into all pricing.’

Then the cynical side of my brain says ‘You’re nuts, the merchant won’t change prices and any swipe fee pass-through will just become an additional revenue source and boost the merchant’s profits.’

As with most of my cranial wrestling matches, the truth probably lies somewhere between these two extremes.

What Would You Do If You’re Confronted With a Swipe Fee Surcharge?

Say you’re at the cash register, and when you whip out your trusty VISA the cashier adds another 4% to your total. What would you do? I think I’d walk out in disgust after impugning the merchant’s heritage. But that would be a mistake if the same item is priced higher at a store that doesn’t pass through swipe fees such that the total of what I pay is the same or more, right?

Have you paid any swipe fee surcharges?

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