Credit Card Surcharges
Beginning Jan. 27, 2013, merchants such as Goldstone gained that right. Under a federal court case settlement, they can put surcharges of up to 4 percent on Visa and MasterCard transactions — which account for about 70 percent of credit card purchases — to cover the cost of card interchange fees, or “swipe fees.” But few merchants plan to use their newly won right — not even Goldstone.
“It’s going to be used as leverage against credit card companies,” the president of ScanMyPhotos.com explained. “Just knowing that merchants can (surcharge) will keep them from raising rates.”
Goldstone, whose company digitizes old photos, is a lead plaintiff in an antitrust lawsuit that pits retailers against Visa, MasterCard and major card-issuing banks. The swipe fee rule that took effect Jan. 27 is one part of a preliminary settlement; the other part, a $7.25 billion cash payout to retailers, faces final approval later this year.
Expect no surcharge surge
Although the surcharge represents a big change in the rules of retailing, the reality at most checkout lines — and at e-commerce companies such as Goldstone’s — will probably remain unchanged, at least for now, according to retail experts and card networks. Merchants can use the threat of surcharges as bargaining leverage, but most of them don’t want to irritate customers with an actual fee, industry representatives said.
There are other hurdles. Laws prohibit the surcharge in 11 states that represent about 40 percent of the population. In addition, the rules governing retailers who also take American Express, which is not covered by the settlement, make it more difficult for merchants to impose surcharges.
Eleven states—
California, Colorado, Connecticut, Florida, Kansas, Maine,Massachusetts, New York, Oklahoma and Texas—and Puerto Rico have laws that prohibit merchants from charging consumers with surcharges on credit card transactions.
Merchants who accept American Express have something else to think about, according to the federation. To add the surcharge to Visa and MasterCard transactions, merchants must also add it to those on American Express transactions. But American Express rules prevent the addition of a surcharge to any transaction. So merchants who want to add the surcharge cannot do so if they accept American Express cards.
There’s another issue to consider. Let’s say, hypothetically, you fit the criteria to add the surcharge. You still have to ask yourself whether the financial benefits of charging it will outweigh the disadvantages.
Visa, MasterCard ask surcharges to register
Retailers are supposed to register with the card networks in advance if they intend to charge the fee. However, representatives for Visa and MasterCard would not comment on the number of retailers that have signed up. Visa referred all questions to the Electronic Payments Coalition, an industry group that said it lacked surcharge registration data. At MasterCard, spokesman Jim Issokson said the company considered the information proprietary. Generally speaking, “We don’t expect a lot of merchants” to surcharge, he said.
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