Credit Card Surcharges Could Begin Today

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Today, Sunday, Jan. 27, 2013, is a day that may live in infamy. Or it may not. Really, it all depends on how retailers decide to play things.

Last year, as you may recall, MasterCard (NYSE: MA  ) and Visa (NYSE: V  ) settled a long-running legal battle against a group of retailers who had been complaining about alleged "swipe-fee" price-fixing by the card giants. Along with the banks that issue their branded cards, the defendants agreed to pay merchants more than $7.2 billion to settle the dispute.

Warning: Some strings attached
More important to consumers, though, the card companies also agreed to something they'd previously forbidden. They agreed that beginning Jan. 27, 2013 -- again, that's today -- retailers would be free to add a "surcharge" to any transaction in which a customer pays with a credit card, and use that surcharge to recoup the swipe, or interchange, fee they pay the credit card companies for processing the transaction.

In a statement on its website, Visa explains that "allowing surcharging was a key provision required by merchants to settle long-standing litigation brought by a class of retailers in 2005." Henceforth, "retailers that decide to surcharge" will be allowed to do so, and customers patronizing such stores "will pay an additional fee when they use their credit card."

There are, however, restrictions. For one thing, the surcharge cannot exceed the amount of the swipe fee the retailer itself pays its credit card company. For another, in no event can the surcharge exceed 4% of the transaction's value. What's more, 10 states -- California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas -- have banned imposition of the surcharge. The settlement does not abrogate these legislative acts.

Warning: Multiple warnings required
And another thing: No fair playing "hide the surcharge." As Visa advises: "If retailers intend to impose a surcharge on credit card purchases, they are required to notify customers before customers make an actual purchase at the store entrance and at the point of sale – or in an online environment, on the first page that references credit card brands." [Emphasis added.] So two warnings, minimum.

Finally, and just a point of clarification here: The surcharges that may or may not go into effect today can only apply to credit cards. If a retailer tries to charge you extra for a debit or prepaid-card transaction -- make sure to call shenanigans on that one.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 27, 2013, at 8:18 PM, herky46q wrote:

    Another report said that businesses don't have any plans of charging the fee. They already have accounted for the extra cost in pricing.

  • Report this Comment On January 28, 2013, at 12:59 PM, marinabillguard wrote:

    Has anyone paid a checkout fee? Herky46g, interesting to see what businesses will end up doing... Our company offers a service that protects credit card holders

  • Report this Comment On January 28, 2013, at 1:58 PM, marinabillguard wrote:

    this is another #greycharge that shoppers are going to have to pay..billguard[dot]com

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