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Current Events & Hot Topics Current Events & Hot Topics

New Credit Card 'Checkout Fee' Arrives This Weekend

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By Matt Brownell

Posted 6:00AM 01/24/13 Posted under: Credit Cards, Shopping, Consumer Protection
Credit Card Checkout Fee SurchargeThis Sunday marks the first day that consumers could start paying an extra fee just for using their credit card to make purchases. But don't panic: It's unlikely to kick in right away, especially at the biggest retailers.

First, a bit of background. The fee in question is widely described as a "checkout fee," and starting on Jan. 27, retailers will have the option of charging it on any purchase made with a credit card. The fee came about as a result of a settlement reached in July 2012 between merchants and credit card networks, and is intended to help defray the costs of the swipe fees charged by those networks. As such, it can't be higher than what the merchant actually pays as a swipe fee -- usually between 1.5% and 3% of the transaction.

The settlement was actually merchants' second swipe-fee victory in recent years. The first came in the form of the Durbin Amendment, which capped swipe fees on debit card purchases at 21 cents per transaction. The July settlement didn't cap swipe fees on credit cards, but it did give retailers the right to pass them on to consumers -- if they choose to.

"I don't think we're going to see a mass amount of surcharges come the deadline," said Ruth Susswein of Consumer Action, which has led the charge in educating consumers about the impending fee. Retailers, she says, are more likely to introduce the fee gradually. "It might creep into costs of shopping over time."

Indeed, it's still unclear whether the nation's larger merchants actually plan to take advantage of their new right to add surcharges.

"I would be very surprised if Walmart or Costco or Target or any of the other mega-discount retailers did something like this," said John Ulzheimer, president of consumer education for SmartCredit.com. "Their pitch is, 'Hey we're cheaper than the competition.'" Ulzheimer added that if a big retailer was considering charging the checkout fees, they would start out by testing them in a few select markets to see how consumers responded.

So if you do see checkout fees, it's more likely to be at smaller retailers, which tend not to be winning on price anyway. In fact, Ulzheimer noted, you've probably already seen small merchants charge a form of credit card checkout fee in the past, by offering lower prices to customers paying with cash -- for instance, at a gas station. Now that they're allowed to call the credit card surcharge what it is, more small merchants will try out variable pricing.

Tens of millions of customers will never see checkout fees, though. That's because 10 states have formally banned the practice, a list that includes California, New York, Florida and Texas.

If you don't live in one of those 10 states, though, you could potentially see signs alerting you about checkout fees as early as this Sunday. If you do, you can avoid them by paying with cash or a debit card -- or by taking your business elsewhere.
by on Jan. 24, 2013 at 9:24 PM
Replies (41-50):
NWP
by guerrilla girl on Jan. 25, 2013 at 5:29 PM

Done all that. I switched to a CU years ago but still kept an account at a small bank. One of my small banks, which had been in business 86 years, was bought by HSBC. Most recently my favorite small bank was taken over by Capital One.

I promote EVERYONE to drop their bank and join a credit union.

There are less than 10 banking companies that control almost all of the finances in America, and around the world.

We need to break up the monopolies and provide better consumer protections.

Quoting daughteroftruth:

Each consumer has protection. Its called commonsense. If you do not like the product or service, do not use it or go else were. If people would practice it a bit more, then we would see more change. Stop using credit cards. Go with smaller banks or credit unions. Seek loans through smaller banks and credit unions.

Quoting NWP:

We REALLY need some consumer protections put in place for the banking industry.


North West Passage

Luv.My.Kidz
by on Jan. 25, 2013 at 5:33 PM

Really? Just keep the finance charges coming why don't you... ugh!

stacymomof2
by Ruby Member on Jan. 25, 2013 at 6:41 PM

What is happening here is that processors (visa, mastercard, amex, etc) charge a fee to the business for accepting credit cards.  These banks offer perks and such to customers for using credit cards, that 3% number is lower than actuality...if a customer uses a business card with perks, the business is charged 4+ % and higher.  There are interchange fees, processing fees, swipe fees.  I just looked, a business Visa with perks is going to cost the merchant 2.95% + .20  If it is a card not present transaction, there can be an additional charge. The processors also charge fees, they can be (depending on volume, what kind of card, and what kind of business it is) up to 3 or 4 % plus .25 to .45 cents.

For a person to charge $20 on a business perks card it could cost the merchant up to like $1.50 to accept your card.  When (like in my business ) the profit margin is only 2% to 5% those fees can put you in the red.

What this is doing is allowing business to forward some of the fees to the customers.  Before it was in the Visa contract that you were not allowed to pass along a fee to the customer.  The new deal says the retailer can pass the interchange fee to the customer.  The merchant will still be paying fees to the processor to accept the card, which averages around 3%.

This isn't that great of a deal for the merchants anyway, the customers will see the retailers as the bad guys about the whole deal, even though the money has to be paid to Visa.  It's not like an extra profit for the retailers.

A lot of those cash back bonus cards push people to use their cards, Visa collects double fees from the merchant, and gives the money they collect from the merchant back to the customer and act like Visa is the one giving you the deal, when in reality the merchant is paying for accepting bonus cards directly.
 

Ms.KitKat
by Platinum Member on Jan. 25, 2013 at 7:45 PM

 Lovely- we pay coming and going. I rarely pay by cc though- I typcially use debit. I never carry cash.

Euphoric
by Bazinga! on Jan. 25, 2013 at 9:00 PM

 bump

toomanypoodles
by Ruby Member on Jan. 26, 2013 at 6:57 AM

 

Quoting bozobean:

Glad i'm in California.

 lol, with all your other high taxes there you'd even notice? 

Carpy
by Ruby Member on Jan. 26, 2013 at 8:29 AM

I usually have 300 average in cc fees each month.

Carpy
by Ruby Member on Jan. 26, 2013 at 8:40 AM

Debit cards have fees as well.

Quoting turtle68:

 so in other words instead of the retailer paying the fee...the consumer should.

instead of the consumer paying fees on top of that to the credit card people..they will pay that AND the fee at the checkout.

That seems really nice that those two came to this conclusion...well done *insert eye roll*

People ...cut up the credit card and get a debit card.


Carpy
by Ruby Member on Jan. 26, 2013 at 8:43 AM

There is still a processing fee paid by the retailer.

Quoting TranquilMind:

 I have but don't use a credit card.  I was thinking more about debit cards, whether you would be penalized for using those that simply take cash right out of your own account.


Quoting frogbender:

Good thing I don't have a credit card. Those things creep me out with all their hidden fees. I'd rather earn credit other ways and not be in debt.




bozobean
by Bronze Member on Jan. 26, 2013 at 9:47 AM
Lol, well yeah, we do notice.

Quoting toomanypoodles:

 


Quoting bozobean:

Glad i'm in California.

 lol, with all your other high taxes there you'd even notice? 

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