Merchants May Win the Right to Charge Credit Card Users More

Visa and mastercard surcharges
The cost of paying with plastic may be about to rise, giving pause to those consumers who use credit cards to make small, everyday purchases.

That's according to The Wall Street Journal, which reports that a lengthy legal battle between a group of retailers and the world's two largest credit card networks, Visa (V) and MasterCard (MA), may be nearing an end. The merchants have long sought the right to charge customers more for paying with a credit card, which would help them defray the cost of accepting plastic. (Merchants have to pay each time a customer swipes his or her card at their business.) But the card companies have banned this practice in the standard agreements businesses must sign in order to accept credit and debit cards.

Now, according to the Journal, "That ban is expected to be eliminated or altered," as a part of a potential settlement that seems to be in reach, ahead of a September trial date. The litigation includes more than 50 lawsuits brought since 2005, by companies including Payless ShoeSource (PSS) and Safeway (SWY), which were recently consolidated in U.S. District Court in Brooklyn, New York.

The suits allege that Visa and MasterCard conspire to set the fees that merchants must pay each time a customer uses a credit card, thereby engaging in anti-competitive behavior. Swipe fees for debit cards were halved last year under a provision of the Dodd-Frank Financial Reform Act, but the charges associated with credit card use, known as interchange, were left untouched.

According to, "Visa and MasterCard usually charge a small portion of a total purchase price just for handling" credit card transactions, "usually about 3 percent -- and merchants say this costs even small businesses tens of thousands of dollars per year." This sizable expense explains merchants' eagerness to add surcharges to credit card purchases.

Visa and MasterCard have already had to make changes in how they deal with merchants. Last year, as part of a settlement with the Justice Department, the credit card colossuses consented to back away from a ban on merchants' offering discounts and other incentives to customers who use lower-cost cards or cash.

But lifting the ban on surcharges would be a much more dramatic change, potentially making it more difficult for the heaviest credit card users to pay down their debts. As Time's Moneyland blog notes, "Americans threw a collective fit last year when banks wanted to charge us to use our debit cards. How will we respond to the idea of paying more to use credit cards?"

In fact, 10 states already have laws prohibiting surcharges, New York and California among them. Whether merchants in those states would be able to introduce the extra fees, should Visa and MasterCard agree to them, is still unclear.

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So will those who pay with cash get a better price than those who use Credit Cards?

January 24 2013 at 10:34 PM Report abuse rate up rate down Reply

I feel the ones that are complaining are most likely not reporting all their income. Credit card transactions are hard to hide from the almighty IRS. Cash is much easier to hide.

July 16 2012 at 3:11 PM Report abuse rate up rate down Reply

Vote with your dollars. I'll go somewhere else if they pull this on me.

July 16 2012 at 3:09 PM Report abuse +1 rate up rate down Reply

Hold it. It's already being done with gasoline. Most stations charge more for credit card gas. They may say they are charging less for gas but more is more.

July 14 2012 at 6:46 PM Report abuse rate up rate down Reply
1 reply to chiefy1942's comment

So true. Same with everything. If I pay with cash I'm paying more because they built the cost into My purchases.

July 16 2012 at 3:04 PM Report abuse rate up rate down Reply
Dan Seabert

It seems to me there is a misconception that that "greedy" buisnesses have an unlimited amount of cash flowing out of their pockets. The buisnesses that are hurt most by these "fees" are the small buisnesses and the "Mom and Pop" stores. Not every buisness is a "Target" or "WalMart". That 3% IS A BIG DEAL to them. It can mean the difference of keeping the lights on or paying your "one or two" employees an extra 50 cents an hour.
The "privelege" of using the card is between the CARD USER and the BANK, not the buisness. Why then are the buisnesses being charged for YOUR convience? It's not convienient for the buisness owner, just one more bill to pay! The next time you use those "points" to buy your plane ticket to Hawaii, you can thank the buisness owners! You didn't think the Banks are just GIVING you those points, did you?
I know the "Liberal" diatribe right now is " BUISNESS BAAAD!!!! " "BUISNESS GREEEDY!!!!", and it sounds like alot of people on this thread have fallen for the dribble. Step back, take a deep breath, and look at both sides. Most SMALL buisness are just people like you. They get up in the morning, go to work and TRY to make a good life for their family.

July 14 2012 at 12:19 PM Report abuse rate up rate down Reply
1 reply to Dan Seabert's comment

Thanks for your understanding Dan - I personally would love to reduce my cost and pass it on to my customers. Either in the form of a cost reduction to them or employment of another person. Everyone's having a hard time in this economy and if the banks stopped charging for cards and each small business took on one more employee, America would be stronger almost overnight.

It's especially nice for you to recognize that those airmiles are actually paid for by the businesses, not Visa, Mastercard, Discover or AMEX. Thanks, sincerely, thanks.

July 14 2012 at 11:12 PM Report abuse rate up rate down Reply
Robert Cape

Any "merchant" trying to charge me more for using a credit card will lose my business forever.. period.

July 14 2012 at 12:05 PM Report abuse +2 rate up rate down Reply

Get the public used to paying with credit cards then charge them a fee to spend their hard earned money. Great business plan. I thought this process helped businesses get their money quicker and helped with accounting. Also many purchases wouldn't be able to be made without credit cards. These credit card companies make massive amts of money by charging outragous interest rates, Shouldn't that money be used to offset what these companies charge businesses. They want to make money from every angle they can think of. When does this stop? This legal thievery. If people revolt and start to pay cash more often then the banks will start to charge you more to take your hard earned money out of your bank. You can't win. They won't let you. None of this makes sense and the gov't as usual does nothing to protect us from these unscrupulous institutions. The banks and financial institutions are going to be the death of this country.

July 14 2012 at 11:18 AM Report abuse +3 rate up rate down Reply

to anniescafe1 , i hope you do well in your business. i for one would not patronize an establishment that charges me for my credit card. it is cost of doing buiness. if you succede in getting customers to pay for the "privelege" of using theri cards, will you pass the savings on to them? i doubt it, you will be the greedy whiner and rake in more profit. your battle is with the banks, credit card companies and congress. charging your customers is not good business.btw, a sign that says minimim credit card purchase of 10$ would solve your problem.

July 14 2012 at 10:44 AM Report abuse +1 rate up rate down Reply
1 reply to klclt's comment

You missed my point Kicit - I never said that I would charge - I simply asked you to attach blame to the banks for these costs. And yes - we do reduce our costs to our customers whenwe are lucky enough to get a deal. I know you probably won't believe me but my customers see reductions if my costs go down and have have old menu's to prove it. But tell me, when the banks got their bail outs did your interest rates drop on your cards or mortgage. Mine didn't. Im not planning on charging, but I'd love to reduce my costs.

July 14 2012 at 10:31 PM Report abuse rate up rate down Reply

1. If this passes, I will NOT use credit cards in stores. PERIOD. 2. Someone with more time should start a petition on to prevent this. 3. If stores are really hurting so bad, why not program their cash register computers to give a discount for cash customers? This way they can raise their prices 3% to cover the cost of credit cards, and give the same 3% as a discount to customers that do not cause them to pay any money for credit card processing.

July 14 2012 at 10:34 AM Report abuse +1 rate up rate down Reply

I have always asked the merchants if I could get it cheaper if I pay in cash, which their reply was always no.
Seems to me we have been over charged by 3% when paying with cash.

July 14 2012 at 10:32 AM Report abuse +2 rate up rate down Reply