Credit Card Surcharge Fees: Why You Shouldn't Worry - NerdWallet
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Credit Card Surcharge Fees: Why You Shouldn’t Worry


As of Sunday, retailers can now levy a surcharge on consumers who use credit to make their purchases. The surcharge, up to 4% of the transaction, has consumers up in arms. But should we worry that this is another profit grab? Not necessarily.

How the surcharge works

Credit card networks – Visa, MasterCard, American Express and Discover – charge retailers a fee every time a customer uses a plastic card bearing their logo. Debit cards command the lowest fees, while high-end rewards credit cards command the highest.

Retailers can now pass this charge through to customers, with caveats:

  1. The pass-through cannot be more than what the networks charge the retailer
  2. The surcharge cannot exceed 4%, even if the retailer pays more than that
  3. Some states prohibit credit card surcharges, so the new charge is illegal there*

How the surcharge came about

The reason that you may now pay an additional fee is that retailers – from mom and pop shops up to Target and WalMart – sued Visa and MasterCard for collaborating to set these fees artificially high. The fees – known as interchange – are often a large burden for small merchants.

As part of the 2012 settlement, ending an antitrust case that began in 2005, retailers can now pass this cost onto the consumers who incur them.

Few stores will actually implement surcharge

However, very few stores are likely to take advantage of this new surcharge:

  1. The cost of interchange is already baked into prices. Merchants have lived with swipe fee costs for years, so they are already reflected in current prices.
  2. Consumers prefer higher prices and no fees. Just as LL Bean and others offer free shipping but charge higher prices, consumers think more favorably of stores that offer one comprehensive price than a lower, more a-la-carte pricing style.
  3. Risk of backlash is greater than in 2005. With the rise of social media, the first store to levy a surcharge is likely to see a public, vocal consumer backlash reminiscent of Bank of America’s ill-fated debit card surcharge.

Why surcharges are more equitable than high prices

Currently – and as long as retailers include swipe fees in their prices – cash and debit users subsidize credit card users. We all have higher prices, but credit card users earn rewards, benefits, and flexibility in payment. This system is highly regressive, as credit card users tend to have higher incomes. A surcharge would actually help end this subsidy – but it’s unlikely to happen on a large scale.

States that ban credit card surcharges

  • California
  • Colorado
  • Connecticut
  • Florida
  • Kansas
  • Maine
  • Massachusetts
  • New York
  • Oklahoma
  • Texas

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  • Patrick Tyrus

    most used to just not allow card purchases for under $10. The issue I have is when a merchant says “due to higher fees”. Sorry, but your fee’s have not gone up. They have or should have gone down. If not contact your processor and ask for lower rates, or switch. This whole lower rate thing is why we see less rewards at our banks. Remember the banks got part of the fee that the processor charged, and you got free checking accounts if you used your card at least 6 times a month. That went away, they charge us for low balance checking accounts, and now it looks like both ends are looking to charge for card usage. I may be going more cash based after all. Wasn’t this supposed to be a boon to retailers no runs to the bank, lower fees, easier to use for the consumer at your store, less actual robbery theft. (Of course merchants look at your card less than ever.)

  • Patrick Tyrus

    actually, I take that back. My merchant provider just told me that there is a new $2 monthly fee for being able to take Visa cards. That could be $75 or more per terminal if you have a lot of terminals. (sounds like a typo… what ever happened to the economy of scale. But hey, kinda nice for the small guy)