A Guide to the New Credit Card Surcharge Fee

Many consumers have heard thatcreditcardsample retailers in 40 states can now charge their credit card customers up to a 4% surcharge, or “swipe fee” for the privilege of using plastic instead of cash and wonder how that will affect them. The reality is merchants have already been charging customers for this privilege; it is built into the fee for the merchandise. But this fee is different because it will not be reflected on the price tag and will only show up at the register.

Who Is Charging the Fees?

Discover, Visa and MasterCard are the three companies that are now allowed to charge a fee to recover the cost of the transaction. American Express did not participate in the United States District Court lawsuit filed by the other companies and will not be adding the charges. Ten states have already passed laws prohibiting these surcharges from being added to customers’ bills: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Because these fees must be charged at all corporate locations or none at all, retailers with businesses located in the ten states outlawing the charges will not be able to charge them in their location in the other 40 states.

It is likely that small, mom-and-pop businesses and online companies that deal exclusively with credit card customers will be the ones most likely to implement the fees. An expert in the field of marketing, Bret Smith, Ph.D., acknowledges that customers’ tendency to spend more when using plastic and “the cost-benefit analysis may encourage retailers to opt out of the surcharge.”

Additionally, J. Craig Shearman, National Retail Federation VP calls these warnings “propaganda” and states that “(m)erchants have no desire to surcharge and no plans to surcharge.”

How to Dodge the Swipe Fees

The most obvious answer is to avoid paying with plastic. However, many times paying with cash is just not a practical option. There are benefits to whipping out your credit card for a purchase, and paying that way provides consumer protection in some instances. Since debit cards are excepted from the fee, you can always pay that way instead. Merchants imposing the fees must post a sign of their intentions on the door –but don’t have to disclose the fee amount until the transaction is initiated — so consumers can boycott these businesses if they choose.

Consumers can turn the tide of corporate policy against these new fees, as they did in 2011 when they took to the blogosphere and announced their plans to switch banks. JD Power & Associates Director of Banking Services Michael Beird states that two-thirds of people who say they will switch banks follow through. A recent study shows that 65% of Americans won’t pay a surcharge even if it is small. This could indicate a potential blacklist against merchants who decide to pass on this extra charge to customers, and could possibly cause them to rethink their position on these fees. Mitch Goldstone, a lead plaintiff in the antitrust case that spawned these fees now isn’t going to pass the costs on to his customers. Instead, he plans to use it as “leverage against the credit card companies.”

Pay to Play or Say Nay?

Ultimately, the power rests with the consumer. Each individual can decide for himself whether the convenience of using plastic online and at smaller merchants outweighs the imposition of paying a surcharge for the privilege. Retailers without customers won’t stay open long, so if you feel strongly about the issue, voice your concerns directly to the merchant to let him know why his customer is headed out the door.

Chase Sagum is a blogger covering Financial topics specifically Credit Repair, around the web.

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