3% Credit Card SWIPE FEES to be paid by CONSUMER, not Retailer

http://www.mnn.com/money/personal-fi...-fees-are-here

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Retailers now have the option of passing Visa and MasterCard credit card processing fees along to consumers.
Thu, Jan 31 2013 at 12:01 PM


Using a credit card can be expensive, especially if you don’t pay your bill on time, but now credit card use can cost even the most credit-worthy consumer a few extra dollars. As of Jan. 27, retailers can charge consumers a credit card checkout fee that is equal to the processing fee charged by Visa and MasterCard.

This new credit card checkout fee is the result of a multibillion dollar settlement between Visa, MasterCard and several financial institutions. Checkout fees could range from 1.5 percent to 3.0 percent, which means that a family that uses a credit card to purchase $100 of groceries a week would pay up to an additional $156 per year if their grocer charges the fee.

The fee doesn’t apply to debit card purchases, but for consumers who like to use credit, this fee could really cut into the budget. The grocery scenario I used is just a small sampling of how checkout fees can add up, especially if consumers are paying the 3.0 percent checkout fee:

$50 in gas per week = $78 in checkout fees per year
$1,500 flat-screen TV for the Super Bowl = $45 checkout fee
$3,000 family vacation = $90 checkout fee

Thankfully it appears that for the most part, retailers aren’t going to pass on this fee to consumers. “The ridiculous concept that merchants will start surcharging on any widespread basis is propaganda being spread by the card industry in an attempt to divert attention from their skyrocketing swipe fees,” said Mallory Duncan, senior vice president and general counsel at the National Retail Federation (NRF). “The lawsuit sought to bring down swipe fees and the prices paid by consumers, not to increase prices. The card companies’ new surcharging proposal runs 180 degrees counter to the intent of the lawsuit.” Source: NRF

I agree with Duncan. The card industry is really pushing the message as evidenced by the widespread media coverage — including this blog post. However, I’m writing about it because as it stands now, this is not going to be an issue for consumers. Major retailers like Target and Walmart have already come out against the settlement and have committed to absorbing the fees instead of passing the cost on to consumers.

Many other retailers and even smaller, locally owned businesses are likely to follow suit, but one interesting bit of information in the NRF’s statement about the fees may throw a wrench in things:

“The settlement requires merchants who surcharge Visa or MasterCard to also surcharge American Express. But American Express contracts bar merchants from surcharging that company’s cards, meaning a merchant who accepts American Express would not be allowed to surcharge any cards at all.”

So a retailer that accepts American Express is not allowed to charge checkout fees, and while Visa and MasterCard are more widely accepted, the mere fact that a company accepts AMEX means customers won’t have to worry about checkout fees at all.

Another snag in the plan is that checkout fees are illegal in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. According to the NRF, these 10 states account for 40 percent of all credit card transactions in the nation.

Despite the retailer backlash against the settlement and Visa and MasterCard’s increased swipe fees, there is always a chance that a business you frequent will pass the fee to consumers. In that case, the retailer will need to notify consumers that a checkout fee will apply, typically via signage. The fee will also show up as a separate line item on the receipt.

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The post points out that 10 states are restricting economic liberty in a way that the other 40 states aren't. Shame on those states :)

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Another snag in the plan is that checkout fees are illegal in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. According to the NRF, these 10 states account for 40 percent of all credit card transactions in the nation.

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Visa and Mastercard also have had contractual prohibitions about passing their fees on to the consumer, as well as limiting the amounts that people can charge. But we've all seen signs that say "Minimum credit card purchase $x.xx," I assume.

Small retailers will pass this on, and big retailers won't. The media chatter is just an attempt to discourage small retailers from jumping on the "pass it on" bandwagon.

And the spin from the article is ridiculous! If people don't want to pay extra, then they won't use the card to pay.

I wonder about eBay and Paypal - this could be a huge deal there. Of course, eBay will say it doesn't apply because Paypal is a third party. We'll see....

Buddy of mine has an auto shop .When he first started he did not accept cards , just cash , checks , even post dated checks to payday for regular customers. He accepts cards now . He just bumped up the hourly labor charge slightly to cover the fee. Unless I am missing something, the consumer is always going to pay the fee in pricing.Look at e bay , most people just pad the shipping charge there by the looks of it .

Why now? 40 years, and now a front loaded fee...
Why not debit cards?

Cashless society?
Credit problems coming...Argentina?

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Originally Posted by oyarde

Buddy of mine has an auto shop .When he first started he did not accept cards , just cash , checks , even post dated checks to payday for regular customers. He accepts cards now . He just bumped up the hourly labor charge slightly to cover the fee. Unless I am missing something, the consumer is always going to pay the fee in pricing.Look at e bay , most people just pad the shipping charge there by the looks of it .

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the business always pass on the cost of doing business. that is how it makes a profit. so any increase in the cost of doing business is an increase in the price of the consumer. thus, the consumer is the one picking up the tab.
It would be great if you had to options- cash/check for 3% less or card for 3% more, then people could see the increase and vote with their money appopriately.
But i have yet to see anyone do such a thing.
So the business charges the cash customers the premium also.

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Originally Posted by torchbearer

the business always pass on the cost of doing business. that is how it makes a profit. so any increase in the cost of doing business is an increase in the price of the consumer. thus, the consumer is the one picking up the tab.
It would be great if you had to options- cash/check for 3% less or card for 3% more, then people could see the increase and vote with their money appopriately.
But i have yet to see anyone do such a thing.
So the business charges the cash customers the premium also.

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My local gas station sells gas 4cents lessper gallon for cash.I pay cash.Probably saves me over $30 a year.I would rather spend it on something else even though it is not much.

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Originally Posted by presence

http://www.mnn.com/money/personal-fi...-fees-are-here

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Why do these idiots try to sabatoge their own business? If customer have to pay to use credit cards, they will just look for an option that doesnt charge them.

Need more bitcoin acceptance.

No biggie I will either pay cash at those stores or not shop there.

I always thought they were paid by the consumer.

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Originally Posted by american.swan

I always thought they were paid by the consumer.

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Good point...

I'm really sad to see the number of people who are rebelling against the thought of paying your own damned fees. Sounds like you think you're entitled to have someone else pick up your tab.

When credit cards first hit the market, the banks passed them out like candy. You didn't need to apply - you'd just come home and find a credit card in your mailbox. The retailers were the last people to get on board, and they tried to discourage the cards by passing on the extra fees to the people using the cards. The banks retaliated by getting FedGov to pass a law that prohibited retailers for charging extra for using credit cards.

Eventually, FedGov passed new laws. They said that if a bank sent you a card that you didn't apply for, you didn't have to pay for anything that was charged on it, and they repealed the law that prohibited retailers from passing on the charges. The Banksters tried to get the law through again, then failed, so they pursued it on the state level. They also added a clause that made it a breach of the contract for the retailers to pass the fees along.

Since that meant, in essence, that retailers couldn't simply jack up the cost of only the items being charged, they had to raise prices across the board to compensate. Hurrah - the economy is expanding!!!!!

BY this time, consumers demanded cards. I hate them, but I know darned well that a business that doesn't take CCs won't do as much business as one who does. But if you think that retailers have up till now absorbed the fees as a simple matter of good will, then you're badly mistaken.

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Originally Posted by oyarde

My local gas station sells gas 4cents lessper gallon for cash.I pay cash.Probably saves me over $30 a year.I would rather spend it on something else even though it is not much.

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The thing is, if you pay 4 cents less per gallon thats not a big deal. Many gas stations and credit cards have an option where you get points that are the equivalent of 5% off per gasoline purchase. So you buy a gallon of gas at $3.46 with cash that would have cost you $3.50 if you had used a credit card, you were really paying less with the credit card as you would have received 17.5 cents in return per gallon at 5% effectively making the price of your gallon $3.325 instead of the $3.460. Assuming you fill up 20 gallons twice a month after a year you would have saved $64.80 with the credit card rewards program versus the 4 cent discount with cash only. And as the price of gasoline increases the 5% instead of the 4 cents / gallon becomes even more lucrative.

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Originally Posted by MRK

The thing is, if you pay 4 cents less per gallon thats not a big deal. Many gas stations and credit cards have an option where you get points that are the equivalent of 5% off per gasoline purchase. So you buy a gallon of gas at $3.46 with cash that would have cost you $3.50 if you had used a credit card, you were really paying less with the credit card as you would have received 17.5 cents in return per gallon at 5% effectively making the price of your gallon $3.325 instead of the $3.460. Assuming you fill up 20 gallons twice a month after a year you would have saved $64.80 with the credit card rewards program versus the 4 cent discount with cash only. And as the price of gasoline increases the 5% instead of the 4 cents / gallon becomes even more lucrative.

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Provided, of course, that you pay your balance off at the end of every month and never miss a payment - even by a single day....something that the large majority of card holders do not do. Most people try to play that game and lose. That's the whole reason it exists.

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Originally Posted by MRK

The thing is, if you pay 4 cents less per gallon thats not a big deal. Many gas stations and credit cards have an option where you get points that are the equivalent of 5% off per gasoline purchase. So you buy a gallon of gas at $3.46 with cash that would have cost you $3.50 if you had used a credit card, you were really paying less with the credit card as you would have received 17.5 cents in return per gallon at 5% effectively making the price of your gallon $3.325 instead of the $3.460. Assuming you fill up 20 gallons twice a month after a year you would have saved $64.80 with the credit card rewards program versus the 4 cent discount with cash only. And as the price of gasoline increases the 5% instead of the 4 cents / gallon becomes even more lucrative.

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The credit card rewards are not useful to me.

If you travel all week for work , I could see trying to play the reward thing for hotels and air fare, been there before .

When I was younger I had some friends that worked at the car wash.

It was in a better part of town. One of the things they said the rich people would do was try and negotiate a reduction in the price of things like they were bartering in Mexico. They said they would ask for a discount if they used cash. They would tell the place if they didn't get the discount they would put it on their credit card and they would be getting less money anyway.

And anyway, if I got it right, that was one on the games they would play to pinch a penny. It hardly seemed worth it to me. They told me about a bunch of other ways. I can't remember any but I suppose it could be why some of them had money. They hung on tight.

Most everyone in the auction industry has been charging people for purchases on cards for years now. Heck, the buyers premium started out as a credit card transaction fee.

they will be passed on in the average cost of the product. although in CA there are already gas stations with different prices for 'cash'

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Originally Posted by oyarde

If you travel all week for work , I could see trying to play the reward thing for hotels and air fare, been there before .

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Yeah, my mom started using hers for groceries when she found out she could get frequent flyer miles. She pays them off every month.

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Originally Posted by sailingaway

they will be passed on in the average cost of the product. although in CA there are already gas stations with different prices for 'cash'

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Yes, because while the vendor contrats with the CC's prohibited charging more for credit purchases, there was no prohibition for giving a discount for cash.

You can get all kinds of unadvertised deals from small businesses by paying cash, particularly for larger purchases. The discounts are often larger than a credit card fee would account for. I once had a transmission fixed and the bill went from $1,000 down to $900 by paying cash. I figured they weren't paying the sales tax. Car dealers will often give you a pretty big discount for paying cash, also.

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Originally Posted by oyarde

Buddy of mine has an auto shop .When he first started he did not accept cards , just cash , checks , even post dated checks to payday for regular customers. He accepts cards now . He just bumped up the hourly labor charge slightly to cover the fee. Unless I am missing something, the consumer is always going to pay the fee in pricing.Look at e bay , most people just pad the shipping charge there by the looks of it .

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Funny last three times I brought a vehicle to a shop I paid cash... and my bill was less than what was on the receipt.

3 different shops too.

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Originally Posted by presence

Funny last three times I brought a vehicle to a shop I paid cash... and my bill was less than what was on the receipt.

3 different shops too.

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I always get a bill lower too .

I have a couple, three, four of guys I occasinally do a very little bit of small business with.... everything involved , is cash, trade , silver , checks ...

Credit card fees are already paid by the consumer. Now they just won't be paid by cash customers.

Seen vs unseen. You are already paying for it. Just like you are already giving 12% of our paycheck to the feds for social security, even though 6% is paid by the employer.

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Originally Posted by angelatc

I'm really sad to see the number of people who are rebelling against the thought of paying your own damned fees. Sounds like you think you're entitled to have someone else pick up your tab.

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In New Zealand the banks pay the fees for the electronic transactions as a cost of doing business. Otherwise everyone goes to other banks. Almost nobody uses credit cards or cash.

Thus the banks have very low cash handling costs and almost never have to deal with bounced cheques or the like. Money moves precisely and immediately.

it doesn't really matter, nothing stopped merchants from hiding the passed on cost anyway.