Can Debit Card Purchases be Hit by the New Credit Card Checkout Fees?
You have probably heard in the news about the new credit card checkout fees that retailers are now allowed to charge in 40 states. This potential new fee is the result of a legal settlement that I first first reported on in July 2012. In summary, retailers are now allowed to add a surcharge when customers use their credit cards. You shouldn't see these new fees if you live in one of the ten states (including CA, TX, FL and NY) that have surcharge restrictions.
Many news reports have reported that this new checkout fee does not apply to purchases made using debit cards. However, not all have said this. A report on Fox News stated that consumers who use their debit card with the credit option (non-PIN) can also be hit with this surcharge. This seemed understandable since debit cards purchases go through the Visa or MasterCard network when you use the credit option. When you enter your PIN, they typically go through an ATM-type network. The interchange fees that stores pay for each debit card purchase are higher when they go through the Visa/MasterCard network and are more inline with credit card interchange fees. So it makes sense that stores may be allowed to add the surcharge fee when their customers use their debit cards without a PIN.
After a lot of searching, I found the answer to this question. Visa issued this Merchant Surcharging guide which provides all the requirements for merchants who want to add surcharge fees. In the Q&As for Merchants, a Q&A answers the question:
Q. Can I assess a surcharge on debit card transactions for which the cardholder using a debit card chooses “credit” on the point of sale terminal?
No. The ability to surcharge only applies to purchases made with a credit card, and only under certain conditions.
There you have it. Debit card users don't have to worry about using their PINs when they pay. I haven't found a similar Q&A from MasterCard, but it seems unlikely it would be different.
This is good news for all of us who participate in debit card reward programs. Reward checking is one big example. To qualify for high interest rates, you have to make a certain amount of debit card purchases per month. Some reward checking programs allow for both PIN and non-PIN debit card purchases to qualify, but there are a few that require non-PIN. And even if PIN debit card purchases qualify, many people prefer to make non-PIN purchases. In addition to not having to remember your PIN, non-PIN purchases can have extra protections. Another debit card reward program is the PerkStreet Financial checking account which provides cash back for non-PIN debit card purchases. Only non-PIN debit card purchases qualify for PerkStreet Financial cash back.
If you only use credit cards in the 40 states that don't have surcharge restrictions, you may not have to worry. As mentioned in this Plain Dealer article, "few if any merchants are expected to actually impose the charge, which likely would be 2 to 3 percent of a purchase." Just remember to keep an eye out for the surcharges. According to Visa's Merchant Surcharge Q&A, your store is suppose to "clearly alert consumers to the practice at the point of sale – both in store and online – and on every receipt." So this is suppose to prevent consumers from being surprised by the fees. However, I'm sure many consumers will miss these alerts. If you see a store that has started charging this fee, please leave a comment.