Will Consumers Pay Credit Card Surcharges?

Credit Card Surcharge FeesIn the past, credit card companies prohibited retailers from charging extra fees or publicizing separate prices for different payment types. But thanks to litigation brought by retailers, as of January 27th, merchants who accept Visa and MasterCard can now add a credit card surcharge of up to 4 percent on the price of their merchandise – equal to what it costs them to process each credit card transaction. While this may seem like a win for retailers, it could make credit card purchases more expensive for consumers.

Luckily, many major retailers and small business owners alike are pledging to forgo the fee. Merchants recognize the inevitable repercussions for being the first to venture into the new fee territory, with customers fleeing to businesses that don’t charge extra for credit card purchases. Consumer perception, real or imagined, of higher prices as a result of credit card surcharges is a risk that few retailers are willing to take. But as with most big changes, time may lessen the controversy and eventually we may see surcharges at the register.

State Ban on Credit Card Surcharge Fees

Legislatures of ten states have been proactive in protecting their citizens from what they deem as unreasonable charges by putting in place laws against them. Citizens of these states can purchases with a credit card without having to consider extra charges – California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Since the opportunity to impose the surcharge was instituted just a few weeks ago, other states have taken up the issue including New Jersey, Hawaii, Missouri, Illinois, Utah and Mississippi. Legislation is expected to be introduced in Pennsylvania and West Virginia, as well.

More Details About the New Credit Card Fee

The new rule only affects credit and charge card accounts and does not apply to debit card purchases. As a safeguard for consumers, retailers who opt to charge a fee are required to post signs announcing the charge and it must also be disclosed on all sales receipts. Retailers also have the option to advertise discounted prices for cash purchases as a way to avert charging a credit card fee. If a retailer chooses to include the fee, it must be included across the board for all credit card types; Visa, Mastercard, American Express and Discover.

If you’re looking for a way to avoid the fee, you’ll do well to use cash or a debit card to pay for your purchases, but keep in mind that by doing so you’ll lose the purchase protection and extended warranties that are part of most credit card agreements.

The bottom line: Public outcry about imposing more fees on consumers has caused most major retailers to shy away from credit card surcharges and many states are banning them altogether. If the purpose of the legislation was to give retailers a way to recoup transaction fees, they now have the flexibility to do so in many states, but it’s unlikely to become common practice. Most retailers account for credit card fees in their retail pricing and consumers are oblivious to the markup. Although separating the fees may be beneficial to our bottom lines, most consumers will see the fees as a price increase and will choose to shop elsewhere – especially when they use plastic.

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