Visa Explains Surcharges

0
credit card consumers surcharge fees

Source: web

By now, many know about the massive lawsuit settlement between retailers and merchants and the major credit card companies, including Visa and MasterCard. The card networks, along with several major banks, all agreed to pay retailers $6 billion – plus to settle an extraordinarily long lawsuit. The accusations run the gamut, but at the heart of the suit were allegations that the card issuers conspired to fix the fees that retailers and merchants must pay to accept credit cards. As part of the settlement, which was announced in December, thousands of of retailers and other merchants discovered they would be allowed to charge their customers more if they pay using a credit card. Some immediately released pressers saying they would not be passing on any kind of additional charges or fees to their customers. Many were left wondering how they could get past not charging their customers without losing their businesses in the process.

This was considered to be the largest antitrust settlement in American history (it’s been ongoing since 2005) and is now being considered a major victory for merchants that have long complained about the billions of dollars in so-called “swipe” or “interchange” fees that they pay banks. Here’s the thing, though: most of those merchants say it feels like anything but a victory.

The National Retail Federation estimates swipe fees costs stores about $30 billion per year.

When the suit was initially filed, retailers claimed credit card issuers had worked together to fix various fees that stores had to pay in order to accept credit and debit cards. The fees varied greatly and were determined on a number of factors, including the type of store and the type of credit card. Meanwhile, Visa and MasterCard were making impressive money on those fees paid by stores. It should be noted the fees are set by card processing networks but collected by, and split with, the banks that issue the cards. Still, credit card companies have defended their surcharges for as long as they’ve been in place, even as retailers around the country thought perhaps a charge in place for just credit card transactions could be the solution. The card networks said, “absolutely not” and those problems came together to present the massive lawsuit that took entirely too long to settle.

The lines were drawn early on in the lawsuit with the card companies vehemently defending their fee structures and insisting stores around the country should basically be happy that they are “allowed” to accept their credit cards. Plus, the card companies say customers who do use credit cards typically spend more with the retailers.

On the other hand, retailers insisted on charging those credit card customers and claimed they had to reduce the costs associated with accepting the credit cards.

Indeed, it’s resulted in millions in court and legal costs, untold hours spent in various courtrooms and basically, before it was said and done, little consideration given to the ones these fees ultimately affect: the American consumer.

The settlement reached less than one month ago included agreements from card companies to reduce their swipe fees for at least eight months. At stake is more than $1 billion in lose fees. Joseph W. Saunders, who is both chairman and chief executive for Visa told reporters this past week that he’s comfortable with the agreement and says he doesn’t believe it will affect the earnings outlook for the credit card giant.

Now, Visa explains what is and isn’t allowed.

The payment surcharges – sometimes known as check out fees – are basically taxes that retailers add to the total cost of a purchase when customers check out using their credit card. Beginning January 27, merchants in the United States and U.S. Territories will be permitted to impose those checkout fees on consumers.

Visa explains,

Historically, Visa has not permitted retailer surcharging, as we believe it penalizes consumers for using their preferred form of payment. However, allowing surcharging was a key provision required to settle long-standing litigation.

The credit giant then explains that now that the suit has been settled, consumers can expect to pay an additional fee when they use their credit card at retailers that decide to surcharge. There are limitations and it should be noted there remain a majority of retailers who continue to insist they’re not going to pass those charges down to their customers.

For those retailers that feel they have no other choice, there are rules that must be adhered to:

  • Retailers are permitted to apply a surcharge to only credit card purchases and may not impose a surcharge for purchases made using a debit or prepaid card.
  • Retailers are required to notify customers before customers make an actual purchase at the store entrance and at the point of sale
  • Retailers must disclose surcharge fees on every receipt – both in store and online.
  • Retailers May offer a discount for cash and check purchases
  • Retailers can encourage their customers to use other forms of payment, such as cash and checks, and they may discount for PIN debit and cash and checks.

Not only that, but there are states that have outlawed surcharges in their entirety. We have included those for our readers, along with the appropriate statutes that are applicable to these specific charges. They include:

California

No retailer…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means…

Statute: Cal. Civ. Code § 1748.1(a) (West)
Discounts for Cash Payments are allowed in California

A retailer may, however, offer discounts for the purpose of inducing payment by cash, check or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.

Statute: Cal. Civ. Code § 1748.1(a) (West)
Statutes cover: Credit Cards only
Statute: (Cal. Civ. Code § 1747.02(a) (West) (defining “credit card”))

Colorado

[N]o seller…may impose a surcharge on a holder who elects to use a credit or charge card in lieu of payment by cash check or similar means…

Statute: Colo. Rev. Stat. Ann. § 5-2-212(1) (West)
Discounts for Cash Payments are allowed in Colorado

Discounts offered to induce payment by cash, check or other means not involving credit card are not finance charges if offered to all prospective buyers and disclosed clearly and conspicuously in accordance with regulations.

Statute: Colo. Rev. Stat. Ann. § 5-2-212(2) (West)
Statutes cover: Credit Cards only
Statute: (See Colo. Rev. Stat. Ann. § 5-1-301(16), (16.5), (24), (43) (West)).1

Connecticut

No seller may impose a surcharge on a buyer who elects to use any method of payment, including, but not limited to, cash, check, credit card or electronic means…

Statute: Conn. Gen. Stat. Ann. § 42-133ff(a) (West)
Statute: Id. at § 42-133ff(d).
Statute covers: Credit & Debit

No surcharges on travel agents

No provider of travel services may impose a surcharge on or reduce the commission paid to a travel agent who acts as an agent for such provider if the buyer uses a credit card to purchase such provider’s travel services.

Statute: Conn. Gen. Stat. Ann. § 42-133ff(e) (West)
Statute does not define credit card to include debit card

Florida

A seller…may not impose a surcharge on the buyer…for electing to use a credit card in lieu of payment by cash, check, or similar means, if the seller…accepts payment by credit card…

Statute: Fla. Stat. Ann. § 501.0117(1) (West)
Discounts for Cash Payments are allowed in Florida
Discounts offered to induce payment by cash, check or other means not involving a credit card allowed if offered to all prospective buyers.
Statute: Fla. Stat. Ann. § 501.0117(1) (West)
Statutes cover: Statute does not define credit card to include debit card
Statute: Fla. Stat. Ann. § 501.011(1) (West)

Kansas

No seller…or any credit card issuer may impose a surcharge on a card holder who elects to use a credit card in lieu of payment by cash, check or similar means.

Statute: Kan. Stat. Ann. § 16a-2-403
Discounts for Cash Payments are allowed in Kansas
Attorney General’s opinion interprets section 16a-2-403’s predecessor statute to not prohibit discounts for payments made by cash, check or similar means.
Statute: Kan. Op. Attorney Gen. 86-115, 1986 WL 238345 (1986)
Statutes cover: Statutes do not define credit card to include debit card
Statute: (See Kan. Stat. Ann. §§ 16a-1-301(18), (19))

Maine

No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.

Statute: Maine Rev. Stat. Ann. tit. 9-A, § 8-303(2) (See also id. § 8-103 (definitions and rules of construction))
Discounts for Cash Payments are allowed in Maine
Discount offered to induce payment by cash, check or other means not involving a credit card not considered a finance charge if offered to all prospective buyers and disclosed clearly and conspicuously.
Statute: See Maine Rev. Stat. Ann. tit. 9-A, § 8-303(3)
Statutes cover: Credit cards only
Statute: (See Maine Rev. Stat. Ann. tit. 9-A, § 1-301(15), (16)).1

Massachusetts

No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.

Statute: Mass. Gen. Laws Ann. ch. 140D, § 28A(a)(2) (West)
Discounts for Cash Payments are allowed in Massachusetts
Discount offered to induce payment by cash, check or other means not involving a credit card not considered a finance charge if offered to all prospective buyers and disclosed clearly and conspicuously.
Statute: Mass. Gen. Laws Ann. ch. 140D, § 28A(b) (West)
Statutes cover: Credit cards only
Statute: (Mass. Gen. Laws Ann. ch. 140D, § 1 (West))

New York

No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means…

Statute: N.Y. Gen. Bus. Law § 518 (McKinney)
Statute covers: Credit cards only
Statute: (N.Y. Gen. Bus. Law § 511(1))

Oklahoma

No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.

Statute: Okla. Stat. Ann. tit. 14A, § 2-211, -417 (West)
Discounts for Cash Payments are allowed in Oklahoma
Discount offered to induce payment by cash, check or similar means not involving an open-end credit card not considered a credit service charge if offered to all prospective buyers clearly and conspicuously in accordance with regulations.
Statutes cover: Credit cards only
Statute: (See Okla. Stat. Ann. tit. 14A, § 1-301(7), (9), (19)

Texas

[A] seller may not impose a surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check or a similar means of payment.

Statute: Tex. Fin. Code Ann. § 339.001(a) (Vernon)
Statute covers: Credit cards only
Statute: Tex. Fin. Code Ann. § 301.002(a)(2),(9)
Visa’s Operating Regulations also continue to prohibit surcharging outside the U.S. unless there is a local law or variance that requires merchants be permitted to engage in the practice.

Share.

About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


Few Credit Card offers from our Partners

0% Intro APR on Purchases and Balance Transfers for 12 months; after th...


More Info

Credit lines available from $200 to $5,000! Low fixed 13.99% interest r...


More Info

Advertiser Disclosure

CREDIT DAD is an independent, advertising-supported website. Many debit cards, credit cards and other financial offers that appear here are from companies from which CREDIT DAD Websites receive compensation. This compensation may impact how and where products appear on this website (including, for example, the order in which they appear). CREDIT DAD Websites do not include all card offers in the marketplace.

Advertiser Disclosure

CREDIT DAD is an independent, advertising-supported website. Many debit cards, credit cards and other financial offers that appear here are from companies from which CREDIT DAD Websites receive compensation. This compensation may impact how and where products appear on this website (including, for example, the order in which they appear). CREDIT DAD Websites do not include all card offers in the marketplace.