Call them “swipe fees,” “checkout fees,” or “surcharges,” consumers may have to deal with a new expense at the register if they pay with a credit card, thanks to a $7.25 billion settlement reached Friday.
MasterCard, Visa, and a few big banks reached a “memorandum of understanding” to resolve claims brought by a class of U.S. retailers in 2005 regarding the fees merchants have to pay to accept credit card transactions. (Read Visa’s statement here and MasterCard’s statement here.)
As the Electronic Payments Coalition pointed out, “As part of the settlement, retailers negotiated the ability to charge their customers a checkout fee (merchant surcharge) at the register.”
Visa and MasterCard agreed to temporarily reduce so-called swipe fees, which are paid by the merchant to the card association when credit cards are used. The settlement, which is pending court approval, gives merchants the right to recover the swipe fees from consumers.
There are some consumer safeguards to curb abuses, the Electronic Payments Coalition noted:
* “Merchants are only allowed to assess a fee that is equivalent to what they pay to accept credit cards – which in the U.S. is typically between 1.5 percent and 3 percent.
* Consumers can only be charged checkout fees for credit card usage. Merchants cannot charge customers for the use of their debit card.”
Retailers must disclose the fee on the receipt, at the point of sale and at the point of entry, according to The Consumerist.
While the settlement pertains to MasterCard and Visa, the Consumerist explained, there other card brands are open to surcharge treatment. “Now that Visa and MasterCard have opened the floodgates to credit card surcharges, merchants are free to tack on the surcharge for Amex and Discover purchases,” The Consumerist said.
Perhaps merchants may choose not to impose a surcharge for fear of scaring off price-sensitive customers. MasterCard’s general counsel Noah Hanft said as much.
“We know that merchants care about their customers and anticipate that they will not impose checkout fees, particularly because the value merchants derive from card acceptance far exceeds their costs,” Hanft said. “However, throughout the litigation and as a condition for resolution, the merchant plaintiffs sought a change to the current rule and we focused our efforts in settlement negotiations to ensure consumer safeguards were included.”
Keep in mind, surcharging is illegal in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
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