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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
billy bob bigstuff
February 01, 2013 at 10:42 am

if you dont like what they are doing to you.....DUMP THEM ....then they cant charge you any kind of fee....and you keep more of your money..!!!!!!!

BRENDA
February 01, 2013 at 10:42 am

I would like to know who is looking out for the little guy? Once again the credit card company is double dipping. they charge over 20 percent interest and a thirty dollar late fee. where' the justice.

Alan Rubin
February 01, 2013 at 10:04 am

I have a problem with a retailer who is building the Credit Card fee into the price of what they are selling. If a person is paying with cash and not using a credit card, they are being penalized for using cash, if the credit card fee is built into the price of goods. Did the settlement address this?

Nan
February 01, 2013 at 9:40 am

Does this fee apply to Discover and other cards not mentioned in the article?

bikejon
February 01, 2013 at 9:03 am

Does this surcharge extend to Discover card users?

Jerry
February 01, 2013 at 8:42 am

The retailer should post on the card machine if they charge the these fees, this would give you the opportunity to stop dealing with this business.

Lebron Albritten
February 01, 2013 at 8:15 am

In Detroit, MI most gas stations have been charging the surcharge for years weather you use a credit or debit card to purchase gas. I woould always question it and they would say that debit and credit are both considered credit. Now I live in Texas and there is no such thing going on. Is that leagal?

Shell
February 01, 2013 at 8:04 am

Do I understand this correctly? Some stores can and will charge a 4% surcharge and if you do not pay your bill in full each month, you will be charged interest by the credit card company on the total sale that includes the 4% surcharge. And it is stated, Item 2., that credit card companies charge the retailer 1.5% to 4%. Yet, the consumer still receives a 4% surcharge. It also states the extra fee goes to Visa, Master Card and the banks. So does this mean they get reimbursed more than they charge the retailer? An answer please. Thank you.

Debbie
February 01, 2013 at 6:48 am

so dose that mean any retailer can charge you a fee?how much can the fee be?

jim
February 01, 2013 at 6:40 am

Here in chicago subs t-mobile charges a convience fee for paying cash....they get u comin and goin