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Credit Card Changes Looming: Merchants Will Be Allowed to Add Surcharges

Written by Nickel - 13 Comments

Credit Card Changes Looming

In case you missed it, Visa and MasterCard settled a major lawsuit last week and have agreed to pay various retailers a total of $6B, temporarily reduce interchange fees (to the tune of ca. $1.2B), and allow merchants to tack on credit card surcharges.

So what does this mean for you? Well, unless you live in a state where surcharges have been deemed illegal*, it could start costing you more to use your credit card. Then again, if you don’t use a credit card, you could see some savings as the costs to use a credit card are currently built into product prices.

As part of the agreement, merchants will only be allowed to assess a fee equal to what they pay to accept credit cards and they won’t be able to tack on the fee for debit card transactions. They will also have to disclose the fee at the point of entry, at the point of sale, and on the receipt.

For their part, American Express and Discover have never expressly forbidden such fees. Rather, they’ve specified that merchants can’t treat their cards any differently than those of other issuers. By extension, then, the Visa and MasterCard rules have applied to both Amex and Discover.

It’ll be interesting to see how this develops. Will merchants start competing on whether or not they have additional credit card checkout fees? Will more states act to ban credit card surcharges? Or will those that have banned them drop their objections? And will we see a shift away from credit card usage in favor of other forms of payments.

Only time will tell, but I’d be shocked if we see a wholesale movement away from credit cards. Sadly, many people are just too dependent on them to make a clean break. It will also be interesting to see what, if any, impact this has on credit card reward programs as these fees will effectively offset the points, miles, or cash back that you’re currently earning.

What do you think? Is this ruling good or bad news? If you’re a credit card user, will these fees change the way you pay? And do you foresee any unintended consequences?

Note: States that don’t allow credit card surcharges or checkout fees include: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.

Published on July 16th, 2012
Modified on July 27th, 2012 - 13 Comments
Filed under: Consumer, Credit Cards

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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13 Responses to “Credit Card Changes Looming: Merchants Will Be Allowed to Add Surcharges”

  1. 1
    Curtis Says:

    A very popular chain of liquor stores in Texas has discounted ‘Cash Prices’ if you pay with cash/debit.

    Even though you say in Texas it is illegal to charge CC surcharges I’m sure this is easy enough to get around if plenty of places already do it.

    Is a cash discount different from a CC surcharge? To me no, but it’s probably a way around these laws.

    I don’t see this changing anything..

  2. 2
    rzrshrp Says:

    I think this will actually be a good thing as long as the fee is limited to the actual transaction fee. Larger retailers will proably never charge CC fees and just absorb the cost into their prices as they’ve always done.

    Some of the smaller retailers that used to have minimum transaction amounts or just didn’t accept CC cards at all will probably start charging fees but nobody’s making people pay with credit cards. If I only have a CC to use, I’d rather pay a fee than to be denied outright or told I have to buy four more dollars of junk.

  3. 3
    Smart Military Money Says:

    I seldom use my credit cards at brick and mortar shops. This could change consumer behavior, such as being less likely to use a credit card just because they don’t want to ask a cashier what the store policy is.

    While I don’t think it’ll make people less likely to swipe their cards, I don’t think it’ll make them any more likely. We’ll have to wait to see!

    -Christian L.

  4. 4
    Lance@MoneyLife&More Says:

    Yay I live in Florida so no changes for me. I hope no one changes their policies but if they do I expect people will just change their payment method… what a hassle…

  5. 5
    Luis Says:

    I will select where I shop based upon the stores that do not surcharge. Then, by demand, this issue will go away.

    Funny how the opposite ruling occurred with Obamacare. The individual mandate passed the snuff based upon the idea that a discount and a surcharge pare out mathematically the same.

  6. 6
    Eric Says:

    Well yay for CA on something. Do not like surcharges.

  7. 7
    Squeezer @Personal Finance Success Says:

    I hope this actually ends up hurting merchants. I carry a credit card because I do not know how much the group of items I am purchasing costs, therefore I do not have to carry around hundreds of dollars in my wallet at all times.

    If merchants did not like credit card fees, they should have just stopped accepting credit cards.

  8. 8
    Kurt @ Money Counselor Says:

    To the extent merchant fees discourage credit card use, I pleased to see this development. Although a merchant fee would be trivial compared to the overall cost of using a credit card for those who don’t pay off the balance monthly, I think the fact that it’s front-loaded will make it clearer to the consumer that buying things with a credit card makes them cost more!

  9. 9
    William Says:

    My wife and I looked at each other. “Are you thinking what I’m thinking?”

    “Yep. Time to dust off the old envelopes!” A few decades ago we successfully used the envelope system to keep our spending within budget.

    Who’d think that in this day and age “the system” is pushing us to take a step back and go old school by paying cash…

  10. 10
    PTAMom Says:

    actually this sounds good to me if it means cash prices that are lower than the price if paid by a credit card.

    After paying our balances each month for years, the last 2-3 years we have carried a balance on our credit cards. We have found it so hard to get out of the hole once we found ourselves in it.

    We’re about done with credit cards … assuming we can clear all cards by the end of this year … I’m ready to go to cash just to be sure that we feel the “pain” every time we think we “really need” something.

    Given that we have way more stuff in our house than we actually need …. I’m ready to trade the stuff for a bigger savings account.

  11. 11
    Tyler Says:

    This is similar to a tax my local county has enforced – a “tourism” tax that hotels, restaurants, and similar businesses must pay an extra 10% on transactions. It is up to the business to eat the cost, or pass it along (on as a separate line item) to the customer. At the locations that I have been assessed the tax, I avoid returning to the location, if possible.

  12. 12
    Matt Says:

    I agree with #7 above… I use a card so that I don’t need to carry excessive amounts of cash around with me (and so I can rack up rewards). I also like how easily I can budget in Mint.com and track spending when using a card. I recognize that marketing studies show I’m more likely to spend more money when using a card vs cash — I realize that they’re correct with this observation. Merchants therefore should be careful prior to instituting fees since if those fees cause more people to use/carry cash, they may ultimately have customers with less on-the-spot flexibility for those last minute impulse items and hurt their own sales… basically “cutting off their noses to spite their faces.”

  13. 13
    Ben Says:

    I have a feeling prices will not go down, but fees will definitely be tacked on. The consumer gets shafted again.

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