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Checkout fee questions answered

By Janna Herron · Bankrate.com
Wednesday, January 30, 2013
Posted: 4 pm ET

I'm getting a lot of questions about a class-action lawsuit that has allowed retailers to charge people a checkout fee if they use a credit card.

The questions come after a provision in a preliminary settlement between retailers and Visa, MasterCard and major banks went into effect on Sunday. The provision allows merchants to recover the costs they are charged to accept credit cards.

Here are four common misconceptions or questions over the new credit card surcharge.

1. Are debit cards subject to the checkout fee?

The checkout fee only affects credit cards, not debit or prepaid cards under any circumstances. Even if the retailer runs a debit card as "credit," the credit card surcharge doesn't apply to you, according to Trish Wexler, a spokeswoman for the Electronic Payments Coalition. The EPC is a trade group that represents Visa, MasterCard and other card payment networks.

2. Who profits from the surcharge -- the banks or retailers?

Retailers who impose a credit card surcharge cannot profit from the fee under the settlement. The fee can only reimburse the cost the retailer is charged by Visa, MasterCard and the banks to run a credit card, called an interchange fee. Typically, stores pay between 1.5 percent and 4 percent of the total purchase each time a customer uses a credit card. Now, if retailers choose, customers will pay for their ability to use a credit card at the store. The extra fee goes to Visa, MasterCard and the banks. However, most retailers already have accounted for the interchange fee in the price of their goods and services and shouldn't need to surcharge to recoup costs, says John Ulzheimer, president of consumer education at SmartCredit.com.

3. My gas station has long charged more for credit card purchases. What has changed?

Retailers, including gas stations, have long been able to offer cash discounts to customers who pay by cash, check or PIN debit cards, Wexler says. Retailers offering cash discounts typically post two prices, one for cash and one for credit cards. Cash discounts are most commonly seen at gas stations and liquor stores.

"A cash discount would have been a fair way for retailers who wanted to steer their customers to other forms of payment," she says. "With surcharging, however, an argument can be made that retailers are double dipping. After all, these fees are already built into prices."

4. Who is charging this checkout fee?

You tell me. National retailers aren't saying what they'll do. I haven't seen any announcements about implementing this credit card surcharge. In fact, several major retailers such as Wal-Mart, Target and Home Depot are opposed to the settlement that provides the option to surcharge. There is some confusion over whether retailers that operate in states that ban surcharging can, at the same time, impose a surcharge in states that allow it. Read more about that in Tuesday's post. The EPC, MasterCard and the attorney for the retailers in the settlement case all say that retailers can impose surcharges in states that allow it, even if they operate in other states that don't. The National Retail Federation says they can't. Maybe that's one for the courts to decide.

Follow me on Twitter: @JannaHerron

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168 Comments
Jeff
February 19, 2013 at 4:41 pm

I have a GREAT idea! Let's ALL start writing checks again! When the Banks have to employ tens of thousands more people to process those checks they'll think twice about charging for electronic transactions that can happen at a rate of millions per minute! Cash would even cost them 50 times as much! It costs money to count money! "How quickly they think we forget"!

Pamela J
February 17, 2013 at 2:30 pm

I have no clear opinion opinion on this because I am very UNclear on the stipulations of just how this affects the consumer. Can someone tell me if this "potential" surcharge has actually been put into effect and if it is included when using your bank card, with a Mastercard or Visa symbol, as a credit vs a debit option (as opposed to a true Credit Card issued by such)? Feedback is greatly appreciated, thank you.

Jane
February 03, 2013 at 8:09 pm

I work for a Credit Union in card services. The bank does not place the hold, this happens at the merchant. The minute a card is swiped the funds are "held" for the merchant initiating the transaction. The hold does stay in place until the merchant settles with Visa/Mcard. If the hold was not placed, the funds might not be there when the merchant settled. Believe it or not most people DO NOT balance their checkbooks. The thing I have a problem with is merchants not mentioning that by accepting cards, their funds are guaranteed and they don't have to worry about collecting bad checks etc..Also, most of the time the financial institution is the one that loses in the case of fraud, not the merchant.

Fred Ferguson
February 03, 2013 at 4:12 pm

Who are they kidding. The cost to credit card merchants has been added into the price they charge for purchased item. Wonder if this includes on-line purchase. This will now make me consider which merchant I buy from. Also, what percent are they going to use? First they beg us to get credit cards and use them and once again comes a fee. What is next? Are they going to charge a fee for every ATM use at your own bank? Reminds me when banks pleaded for us to use ATM as they would save a lot cost operation of the Bank.
Just another way to sock it to the consumer. No I have to consider carring a couple of checks with me and make check out for anything over $5.00.

Cathy
February 03, 2013 at 2:47 pm

When a business attaching the credit card company sign in his window, advising that he accepts certain credit cards, he is doing this to let you know that he wants your business. Years ago, when there were not as many credit card companies, this really inflated many businesses, because people could charge in stores that they would never have walked into before. This is part of their advertising for business. The consumer/customer should not have to pay to use any credit card, in any establishment. If the establishment does start charging, just dont' go to that business and when they see that they are losing business, they will stop charging the fees.

judi
February 03, 2013 at 1:04 pm

I WORKED IN RETAIL FOR MANY YEARS AND DON'T FEEL SORRY FOR THE RETAILERS. THEY ORDER THE MERCHANDISE AND THEN SELL IT FOR AT LEAST 50 PERCENT OR MORE THAN WHAT THEY PAID FOR EACH ITEM. SO ADDING A SURCHARGE TO THE CUSTOMER JUST GIVES THEM A CHANCE TO MAKE EVEN MORE MONEY. THEY WILL USE THAT TO PAY THE CREDIT CARD COMPANIES THEIR MONEY AND THEN IT WON'T TAKE ANY MONEY OUT OF THEIR POCKETS LIKE THEY HAVE HAD TO PAY UNTIL NOW. THIS WAY THEY MAKE MORE MONEY IN THE END. THAT COMES AS USUAL.

Small Business
February 03, 2013 at 10:32 am

The amount of money we pay to the banks for using accepting credit cards can be quite significant.I do not ad this fee to my pricing due to the type of business I have. I am forced to accept this fee as a cost of doing business. However with all of my costs in taxes and fees constantly rising I may be forced to start charging this fee to help with the negative numbers. The issue I have is the power the banks have over merchants due to the consumers using credit cards for everything they purchase. The rule book created by the banks for the merchants is quite unbelievable! I hope the public understands that the day of cashless society will arrive and when it does lets see what the new rule book is then. At that time maybe the public will wish we all used cash. PS: I saw a post about walmart holding double the money. The banks are the ones who hold the money not the merchant..........do the math and the see who has the profits and power.

Hannes Alholm
February 01, 2013 at 9:31 pm

When I make a purchase with cash, I am aware that I pay jacked up prices so that others can enjoy the convenience of using credit cards, and this I don;t appreciate. So when I obtain a cash discount for using cash, it seems very appropriate. If I use my credit card, I wouldn't mind paying a little higher for the convenience since it is a service I am receiving. I have a real problem that banks and credit companies get to skim 1.5 to 4% off of the top of all purchases, and that retailers are almost forced to sign on or lose business. Credit card companies are a third party involved with many transactions who skim a few percent off of every sale. That's a tremendous sum. Reminds me of the mob and gambling. I wish it was different. No wonder banks are so powerful.