Last Friday MasterCard, Visa and some major banks announced an agreement with a group of retailers on the issue of interchange fees (also called swipe fees). In summary, retailers will be allowed to add a surcharge when customers use their credit cards. According to this Reuters article (hat tip Pearlbrown):
The settlement, if approved by a judge, would resolve dozens of lawsuits filed by retailers in 2005. The card companies and banks would also allow stores to start charging customers extra for using certain credit cards in an effort to steer them toward cheaper forms of payment.
For those who use credit cards for cash back benefits, the credit cards may become less profitable. It's too early to know how many stores will add surcharges. Hopefully, competition will encourage stores to avoid adding these new charges.
I reviewed several articles on this agreement, and I put together the following list of some important aspects of how and when this agreement will affect consumers:
- The rule changes on surcharging likely would be implemented in early 2013 (Visa's press release)
- In states where the law currently prohibits credit card surcharges, merchants will not be able to pass on the cost. These states include New York, California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas (Consumerist.com)
- Consumers can only be charged checkout fees for credit card usage. Merchants cannot charge customers for the use of their debit card (Electronic Payments Coalition)
- Retailers who add the surcharge must post a fee disclosure to the consumer at the point of entry, point of sale and on the receipt (Consumerist.com)
- Merchants are only allowed to assess a fee that is equivalent to what they pay to accept credit cards – which in the U.S. is typically between 1.5%-3%. (Electronic Payments Coalition)
It's nice to see that consumers in 10 states (including the 4 largest states) won't have to worry about these new surcharges due to their state laws. However, you have to wonder if this can hold up to lobbying efforts of the retailers.
Also, it's nice to see that these new surcharges won't apply to debit cards. That's important to reward checking accounts. The interchange fees help pay for the high interest rates of those accounts. These might not have directly affected the banks' ability to offer the rewards, but it could have made it less appealing for consumers to use debit cards.