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Retailers to charge credit card fees?

By Claes Bell ·
Monday, July 16, 2012
Posted: 3 pm ET

Retailers have long grumbled about the 1 percent to 5 percent out of every credit card purchase they have to pay banks to process the transaction, also known as "swipe fees." But soon they may have a powerful new weapon to encourage customers to pay with lower-cost methods such as debit cards or cash: a credit card surcharge.

Under an agreement announced Friday, MasterCard, Visa and 13 of the nation's largest banks will pay retailers $7.25 billion to settle a class-action lawsuit alleging they conspired to keep swipe fees for retailers high. That's big money, to be sure, but the biggest news for consumers is that the settlement requires Visa and MasterCard to modify several long-standing rules, including one prohibiting merchants from charging a surcharge to pay with a credit card.

From the press release issued by the retailers' law firm, Robins, Kaplan, Miller and Ciresi.

The modification of these network rules will provide additional value to merchants of many billions of dollars by enabling merchants to provide greater transparency to consumers regarding the cost of using various types of payment methods, and permitting merchants to negotiate collectively over interchange fees and other aspects of their relationships with Visa and MasterCard. It is expected that the reforms required by the settlement will enable merchants to put pressure on Visa and MasterCard to limit or reduce interchange fees, among other things.

"The reforms achieved by this case and in this settlement will help shift the competitive balance from one formerly dominated by the banks which controlled the card networks to the side of merchants and consumers," states K. Craig Wildfang, who led the case for the Class Plaintiffs as co-lead counsel and partner at Robins, Kaplan, Miller and Ciresi L.L.P. "Over time, the reforms induced by this case and in this settlement should help reduce card-acceptance costs to merchants, which in turn, will result in lower prices for all consumers."

Unfortunately for consumers, the "greater transparency" means a fee, noted on the receipt, up to a "maximum surcharge cap" that will be negotiated regularly between the merchants and the processing networks.

It's hard to imagine large national retailers such as Wal-Mart or Target will impose a credit card surcharge on cardholders. To my knowledge, none of them have taken advantage of previous revisions of the rules that allow things like minimum purchase amounts for card users and cash discounts.

But it's very possible that smaller businesses such as gas stations and convenience stores, some of whom have taken advantage of previous rule changes to encourage the use of cash, will start adding a surcharge.

And while Wildfang and retail industry trade groups predict the change will ultimately result in lower retail prices for consumers, that's far from clear. During the fight over the debit-card swipe-fee cap contained in Dodd-Frank, the retail industry made similar predictions. But nearly a year later, it's hard to get good data on what effect, if any, lower debit swipe fees have had on retail prices. Results of research on what direction prices have moved since then have tended to vary depending on who funded the study.

However, it's almost certain that if retailers end up paying less to process credit cards, credit card rewards programs will suffer. Banks use a portion of their swipe fee revenue to fund the programs, and if it declines in a big way, they'll likely become much less generous with rewards. After swipe-fee caps on debit cards were put in place, it became much harder to find debit card rewards programs, and most that remained offered limited benefits.

What do you think? Should credit card users pay a fee for the privilege?

Follow me on Twitter: @ClaesBell.

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Jeffrey J. Lepre
July 20, 2012 at 8:35 pm

I can't believe that we have to pay a "swipe fee," on top of all of the other fees associated with the credit cards that we use. I mean, come on, really??? Even the utility companies, for example, charge a "conveience fee," for using your credit card and it's bad enough that we are paying the taxes on the utility bill itself along with, the interest rate on the credit card(s) themselves. To me, this is just plain usury and unjust gain by the reatailers and compainies, who, by the way, charge taxes on the goods that they sell, along with the additional money that they make on their sales of their goods.
This is not fair or just, and our legislative people and law makers need to pass laws to give the consumers a break already.

July 20, 2012 at 8:31 pm

The result will be that finally people will realize that they DO NOT HAVE ENOUGH MONEY TO SPEND and will get creative with their purchases, getting only what they REALLY NEED, not everything under the sun and then crying because they don't have money to pay and expecting us, the responsible citizens to pay for their mistakes, some way, some how. I am for it! Bring it on!

July 20, 2012 at 8:31 pm

Another way Walmart can squeeze out the little guy. They make thier own deal with the CC companies and will be able to lower thier cost of accepting them. Notice that your rewards are LOWER when you shop at Walmart, that is because they pay lower merchant fees

Barbara Schulman
July 20, 2012 at 8:15 pm

We are already paying credit card fees in the form of the large interest rates they collect (9.9 % up to 29.9 % ) while the banks GIVE US 1,2 and 3 percent on our savings accounts and money market accounts. WE NEED TO TAKE BACK OUR COUNTRY !!!!

July 20, 2012 at 7:15 pm

I am a former retailer who honored credit cards. Yes, I paid a fee, but considered the fee part of my cost of doing business, such as advertising expenses. It was a convenience for my customers and I felt was an instrument for increasing sales. I do not feel that prices should be raised for the card usage any more than the customer should have to pay the advertising cost in addition to the price of the goods. Those costs are already figured into the price.

sue mantz
July 20, 2012 at 7:07 pm

glenn you sound ignorant

July 20, 2012 at 6:58 pm

Clueless shoppers using plastic on very small purchases likely have no idea that the retailer is being charged 40 cents on a $5 sale. Where do you think those "miles" and "points" rewards come from??? The outrageous fees the retailers pay!

July 20, 2012 at 6:29 pm

So what new they got you going and coming, they win we always lose the Comsumers
Now we have to pay to buy you items, not here I will pay cash before i give a thing or walk out of there store.
You are already paying the card peoples to use there cards now the people you buy for you have to pay them too for using the card WOW .

July 20, 2012 at 6:21 pm

A slightly different thought. Go back to the OLD way, write a check. To my knowledge, there are no fees for writing a check, flood the banks with paper transactions and see how they get bent out of shape. Financial institutions, lawyers and doctors, all (lots) crooks.

Glen Yates
July 20, 2012 at 6:10 pm

"I take exception to retailer Bill's comment that he's "tired of dealing with the cost" of CC transactions. If retailers dealt exclusively with cash it would cost them a lot more. The fact is that it's technology that has driven the use of CCs. If he or any other retailer wants to charge me to use a CC, I'll turn around and find a 21st century alternative to that outmoded way of thinking."

Just go to the bank and get Susan B Anthony dollars, Sacagawea dollars or even silver dollars and use them! I inherited a bagful of these from my father. When I tried to use them I had a number of merchants refuse because they didn't know what they were! And I even had one clerk call the manager, suspecting me of conterfeiting, when I handed him a 2 dollar bill! Even the manager had never seen one before!

Just think retailers, you will have to train your staff, re-outfit your registers if the "peons" start getting really creative! What is the cost of a law suit for refusing legal tender compared to the cost of accepting credit cards without a surcharge (which, if you are any type of sucessful business person, you have already added into your profit margin)?