Using a credit card
can be expensive, especially if you don’t pay your bill on time, but now credit card use can cost even the most credit-worthy consumer a few extra dollars. As of Jan. 27, retailers can charge consumers a credit card checkout fee that is equal to the processing fee charged by Visa and MasterCard.
This new credit card checkout fee is the result of a multibillion dollar settlement between Visa, MasterCard and several financial institutions. Checkout fees could range from 1.5 percent to 3.0 percent, which means that a family that uses a credit card to purchase $100 of groceries a week would pay up to an additional $156 per year if their grocer charges the fee.
The fee doesn’t apply to debit card purchases, but for consumers who like to use credit, this fee could really cut into the budget. The grocery scenario I used is just a small sampling of how checkout fees can add up, especially if consumers are paying the 3.0 percent checkout fee:
- $50 in gas per week = $78 in checkout fees per year
- $1,500 flat-screen TV for the Super Bowl = $45 checkout fee
- $3,000 family vacation = $90 checkout fee
Thankfully it appears that for the most part, retailers aren’t going to pass on this fee to consumers. “The ridiculous concept that merchants will start surcharging on any widespread basis is propaganda being spread by the card industry in an attempt to divert attention from their skyrocketing swipe fees
,” said Mallory Duncan, senior vice president and general counsel at the National Retail Federation (NRF). “The lawsuit sought to bring down swipe fees and the prices paid by consumers, not to increase prices. The card companies’ new surcharging proposal runs 180 degrees counter to the intent of the lawsuit.” Source: NRF
I agree with Duncan. The card industry is really pushing the message as evidenced by the widespread media coverage — including this blog post. However, I’m writing about it because as it stands now, this is not going to be an issue for consumers. Major retailers like Target and Walmart have already come out against the settlement and have committed to absorbing the fees instead of passing the cost on to consumers.
Many other retailers and even smaller, locally owned businesses are likely to follow suit, but one interesting bit of information in the NRF’s statement about the fees may throw a wrench in things:
“The settlement requires merchants who surcharge Visa or MasterCard to also surcharge American Express. But American Express contracts bar merchants from surcharging that company’s cards, meaning a merchant who accepts American Express would not be allowed to surcharge any cards at all.”
So a retailer that accepts American Express is not allowed to charge checkout fees, and while Visa and MasterCard are more widely accepted, the mere fact that a company accepts AMEX means customers won’t have to worry about checkout fees at all.
Another snag in the plan is that checkout fees are illegal in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. According to the NRF, these 10 states account for 40 percent of all credit card transactions in the nation.
Despite the retailer backlash against the settlement and Visa and MasterCard’s increased swipe fees, there is always a chance that a business you frequent will pass the fee to consumers. In that case, the retailer will need to notify consumers that a checkout fee will apply, typically via signage. The fee will also show up as a separate line item on the receipt.