A landmark settlement reached in July includes terms that could mean retailers will start charging customers a fee for using a credit card upon checkout. Pending final approval from a court, this new fee is the outcome of a long-running legal dispute between Visa, MasterCard, retailers, and banks. The dispute originated amongst claims that payment companies intentionally fixed the interchange fee rates that are billed to retailers when customers make credit card transactions.
The resolution counts as a hard-fought win for the retailers, as the credit card companies had previously prohibited swipe fees being passed on directly to customers. Under the same rules, however, merchants were allowed to offer incentives such as discounts for customers paying with cash, much like gas stations commonly do.
Other major retailers and outlets have gone as far as to publicly denounce the settlement. Retailing giant Target, one of many companies not pleased with the outcome, has said the settlement is “bad for both retailers and consumers”. Under the new rules, merchants that accept credit cards are also obligated to notify customers either on the home page of their websites or upon entry of the store, and are required to print the exact amount of the new surcharge on each receipt.
States with laws banning the fees from being passed on remain unaffected by the settlement; these states are:
- New York
Though it offers minimal relief, retailers aren’t given free reign upon the outcome of this settlement; merchants are only allowed to tack on the charge they commonly have paid for credit card processing. The amount usually ranges from between 1.5 percent and 3 percent of the transaction total. Fortunately, debit card processing remains unaffected by the settlement– only credit card transactions are subject to the new additional fee.
This is not to say debit cards have not seen their own share of the financial battlefield– the Dodd-Frank financial reform bill was passed in order to cap the fees that retailers are charged for debit card use. The bill was backed by Senator Dick Durbin, and the Electronic Payments Coalition is calling for Congress to repeal it. The resulting $8 billion savings from the capped fees, according to allegations from the Coalition, have been kept by the retailers instead of passing along the discount to consumers.