Can Retailers Charge You For Using A Credit Card?

It’s a sight commonly seen at gas stations: two prices, with the lower one for cash transactions only. It’s often presented as a discount rather than a charge in an attempt to sidestep customer complaints and avoid the fact that charging a fee when accepting a credit card is illegal.

Credit card companies will permit merchants to charge a fee to customers who pay by credit card.

Or, at least, was illegal.

Although many consumers believe that credit card surcharges, also known as check-out fees or swipe fees, are paid for my retailers, a recent $7 billion settlement between Visa, MasterCard and merchants has seen the fees charged to merchants for accepting credit cards lowered, and the passing on of those fees to consumers made permissible for the first time.

Before the 2012 settlement, which followed a class action lawsuit brought by a collection or merchants and business organizations, the fees charged to businesses for the use of credit cards typically cost between 1.5% and 3% of a transaction. The cost to businesses with small profit margins – mom and pop stories especially – has led to more and more stores requiring a minimum transaction amount before accepting credit cards. A controversial move in itself, stores have been able to set a minimum requirement – capped at $10 – for credit card use since 2010. Now, credit card companies will permit merchants to charge a fee to customers who pay by credit card, effectively taking the fees retailers must pay and passing them on to the customers instead.

Although consumer groups are understandably worried, it’s thought to be unlikely that many stores will apply the charge, fearful of losing customers. It also remains illegal to add a surcharge for card use in ten states (Texas, Oklahoma, New York, California, Colorado, Florida, Connecticut, Kansas, Maine and Massachusetts). It also remains illegal to apply a charge to any debit card transaction.

Retailers have presented the change as a fairer system, meaning that those who pay in cash will no longer be subsidizing those who pay with credit card because of higher prices stores have set. The new rules also come with certain consumer protections, stipulating that merchants can only charge shoppers the same amount they are being charged by card companies (around 3%). Retailers also need to post the fee information at the store entrance, the point of sale, and on the receipt.

Different cards charge retailers different amounts per transaction, meaning customers will need to note the stores that charge fees as well as the cards they are using. The possibility of upsetting customers or driving them to competitors who elect not to charge fees will certainly make businesses wary of how they adopt the new regulations. It remains to be seen if this will be a positive development or not.