What Impact Will Credit Card Surcharges Charged By Retail Stores Have On The Industry?

 

[February, 2014]: If you live in many of the states in America, if you pay for your purchases with your credit cards you may now be paying extra surcharges, which customers who pay by cash or with debit cards do not have to pay. In these states, retailers are now allowed the credit card acceptance fees they have to pay onto their customers, although a handful of states do not allow this practice.

In Which States Is This Practice Allowed?

The following states allow retailers to pass on the credit card acceptance fees on their customers, who will have to pay an extra surcharge fee with their credit card purchases:

Alaska Alabama Arkansas Arizona
Delaware Georgia Hawaii Idaho
Iowa Illinois Indiana Kentucky
Louisiana Maryland Michigan Minnesota
Mississippi Missouri Montana Nebraska
Nevada New Hampshire New Jersey New Mexico
North Carolina North Dakota Ohio Oregon
Pennsylvania Rhode Island South Carolina South Dakota
Tennessee Utah Vermont Virginia
Washington Wisconsin West Virginia Wyoming

 

Those states not listed here have made the practice illegal within their borders. Residents of those states will not be affected, unless they the buy items shipped from the listed states above.

History of The Surcharge

This surcharge fee is a direct result of a settlement of a multi-billion dollar suit between retailers and credit card companies. Some retailers accused nine banks along with MasterCard and Visa that they were illegally fixing processing fees which retailers were required to pay to the credit card companies. The banks and the credit card companies paid out $7.25 billion to the retailers to settle the case.

As part of the settlement, retailers now also have the option of passing on the credit card processing fees on their customers. These fees may range from 1.5% up to as high as 3% of the purchase price.

How Does This Practice Affect the Industry?

This practice may have profound effects in retailers, credit card companies, and consumers:

  • Retailers now have the option of charging this fee on their customers. Although on one hand by charging this fee they may be able to earn back some money, by law they are required to disclose this to their customers. This opens the very real possibility that their customers may choose to no longer shop in their stores in lieu of retailers and shops who have opted not to add an extra surcharge for their customers to pay.
  • Credit card companies may lose some business from their credit card offerings, as consumers may instead choose to pay cash or with debit cards in order to avoid paying these extra charges. However, credit card companies may attempt to offset these charges by offering more attractive perks such as higher cash back percentages.
  • Consumers should now check whether or not their favorite shops are charging them a surcharge when they use their credit cards, and consider switching to other retailers who do not add this fee. In addition, consumers should also review their credit card perks, to see whether the rewards such as the higher cash back rates are more than enough to compensate for the new charges. If not, then a switch to cash or debit cards should be seriously considered.