Beware of New Credit Card Surcharges as of January 27 2013

Credit Card Fees

Credit Card Fees

Starting today, January 27th 2013 merchants will be allowed to add a credit card surcharge of up to 4% to all credit card purchases. This stems from a settlement between Visa, Mastercard as well as nine major banks and major retailers.

The lawsuit which led to the settlement was an anti-trust lawsuit, in which retailers claimed that the “swipe” fees they were paying to process credit card transactions were manipulated. They claimed that the big banks, in collusion with Visa and Mastercard, worked together to inflate the rated they were paying.

One result of this settlement is that merchants would be charged lower “Swipe” fees. For a limited period of eight months. The settlement also gave retailers the ability to add on a credit card surcharge to purchases made with these credit cards. (the credit card surcharge does not apply to debit purchases). The surcharge can be as much as what?the?retailer is paying in “swipe” fees, which ranges from 1 to 3% and higher.

The consensus from financial analysts is that major retailers will not be adding the Starting today, January 27th 2013 merchants will be allowed to add a surcharge of up to 4% to all credit card purchases. There is widespread?belief?that the smaller retailer are more likely to add these surcharges to purchases made with Visa or?MasterCard?credit cards.

The good news for a few of us living in the U.S. is that there are ten states that ban any surcharges on credit card transactions. Here are the states where consumers won’t be affected by this:

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

Those of us living in states outside of these 10 need to be extra careful when making credit card purchases. By law Brick and Mortar, as well as internet retailers will be required to post notices that they will be adding a surcharge. Online merchants are required to post this on their homepage (I’m not sure if they have to post it on their checkout pages). But I’m sure that initially this won’t be followed to the letter of the law.

I don’t think that merchants will intentionally mislead consumers but there’s bound to be some confusion as to what the law requires when this kicks in (today!). So it behooves us, the consumer, to be vigilant when making purchases with a credit card. Don’t be afraid to ask when checking out if there’s a surcharge or not.

Please comment on this, let me know your opinion and if you have any tips on how to avoid these charges.

Related Posts:

Modest Money’s Credit Card Comparison

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  1. Joe says:

    To be clear, I love cards like my MasterCard SmartCash (well not anymore because TD bought MBNA and ruined it but let’s imagine they hadn’t for this comment). That card, even after the introductory period, paid out 3% on all gas and groceries with no annual fee. Now, I’d have to be a dupe to think that it was a free lunch. Of course the fees on retailers were super high. And, as such, they inevitably build it into their prices, so we ALL pay — cash and CC users. But the only way to “get yours” is to have a credit card and enjoy the bonuses. It’s the definition of a race to the bottom — damned if you don’t, so you might as well join in. I think this law, with its allowance for a surcharge will force credit card users to internalize the costs of their decisions. That said, if CA, NY, FL, and TX aren’t in, it’s really not going to have that massive of an impact.

    • John says:

      Joe, I love my cards too. One of my favorites (A USAA Card) is a points card. That’s a use and pay card (gas and sundries) so whatever I put on it gets paid at the end of the month. You have to use the points in their catalog. I did an analyses on what a point is worth and compared it to the point prices in their catalog and found that the relative cost was competitive to discounted retail so it’s a pretty good deal. I’ve used points to buy gifts and a nice pair of Oakley’s for myself si i can’t complain. -J-

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