Visa and MasterCard
A settlement by Visa (V) and MasterCard (MA) with merchants last week should make you think twice about putting purchases on plastic. Now, it's going to be easier for companies to add surcharges for credit card purchases -- surcharges that will almost certainly make shopping more expensive for you.

Until now, merchants weren't allowed to charge those buying with credit cards a higher price, although they could offer discounts if you bought with cash. But last week, an antitrust settlement to pay retailers as much as $7.5 billion opened the door for surcharges, and could impact the way you shop.

Small Change Adds Up to Big Fees

Retailers have been between a rock and a hard place for years as consumers have shifted more of their purchases from cash to credit. With competition for consumer dollars so fierce, retailers had to keep margins low in order to keep bargain shoppers coming back. At the same time, credit card fees were eating into their already-slim margins.

The settlement could alleviate some of that pain, especially for small businesses.

While large companies have been able to negotiate rates and get the benefit of economies of scale, small businesses have had to play -- and pay -- by the rules set by someone else.

The price for accepting credit cards is nothing to sneeze at. Square, the popular mobile payment system, for example, charges 2.75% of each transaction as a fee for swiping a credit card. That adds up quickly, especially if you're a small retailer.

Slipping the Surcharge Onto Your Tab ... or Not

It'll probably start as a trickle, but during the next few months you'll see surcharges being tested here and there, particularly at places that have low dollar-amount sales (like fast-food joints, where it's costly to accept plastic for a $3 transaction).

Another place to watch for the added fee is at the supermarket. With their super-slim margins, grocery chains could greatly benefit from the ruling if they are able to add a few bucks to each transaction. Keep an eye on gas stations too. With gas between $3 and $4 per gallon, the additional fees could be significant.

It's not a slam dunk that every merchant will begin adding credit card surcharges. After all, angering consumers isn't a way to build a sustainable business. And there are good reasons for merchants to keep covering the cost of accepting credit cards.

Plastic has become an easy payment method that is preferred by millions of consumers and has shown to lead to larger purchases than cash.

Also, there are transaction costs associated with any payment method. For instance, checks come with the problems of bounced checks and clunky record-keeping. And while cash is nice, retailers with large amounts of it on hand need to keep it secure and physically deposit it at a bank on a regular basis, which takes time and effort.

Retailers won't want to lose sales over new fees, and Visa and MasterCard may have helped by lowering their fees for a short time, which may be enough to keep retailers from passing fees on to you in the near term.

Motley Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool. The Motley Fool owns shares of MasterCard. Motley Fool newsletter services have recommended buying shares of Visa.

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PHARMACY IS A WHOLE OTHER STORY. Pharmacists don't set prices, the PBM's do. They have cut back reimbursements and filling fees to it's almost lights out. A drug may cost us $100.00. Ins companies say they will pay us $101.28 and $1.00 for filling it.. Cost to process claim thru the internet $.24 and then you want to pay your $10.00 copay thru Visa? (cost for that is $1.25) then there is the receipt, electric , paper bag and the pharmacy ends up breaking even. Get card company has no overhead or inventory to keep...they just leach off the working class.

August 06 2012 at 12:34 PM Report abuse rate up rate down Reply

SLIM RETAIL MARGINS???!!??? You do know the average margin on products at big retail is 60%, right? On many products the margins are as high as 80% The retail margin on socks is at least 70%, which means if a pack of sock is $10 the retailer paid $3, in fact more like $2.75.

There is plentry of margin in retail. Where there is no margin is for producers who must constantly lower the quality of their product to satisfy the insane margin requirements of big retail.

The fact is big retail could stand to lose 30% marginand still make a huge profit.

July 19 2012 at 11:01 AM Report abuse rate up rate down Reply

when these stores have to handle a lot of cash and make a number of bank runs per week or pay a service to pick it up for them, they might stop the fees they intend to pose on their customers. if i get tagged with any fees for using my cards, the next time i shop there i will pay in change. see how the customers waiting in line feel about that. sorry in advance to the customers behind me.

July 18 2012 at 7:52 PM Report abuse +1 rate up rate down Reply

Will this effect those who pay the balance due?

July 18 2012 at 6:32 PM Report abuse rate up rate down Reply

Of course, these fees are all part of the "unintended consequences" resulting from Obama's Fair Banking Act which prevented banks from charging deadbeats higher, good people pay!!!!!

July 18 2012 at 5:47 PM Report abuse rate up rate down Reply

I invented the iCard - no fees. It works in concert with the new conductive ink barcode I invented.
You simply place your cart over the floor induction coil and the computer rings it all up at once.
No waving barcodes over a decades old technology laser, no crinkled barcodes that wont scan, no gum chewing cashier that needs a key, etc. You walk-up, it prints out your rceipt on a page printer (no dot matrix delays), you can go on your way.

July 18 2012 at 4:51 PM Report abuse -1 rate up rate down Reply

well I agree the death of credit cards ..If I have to pay a fee to buy ..I think it a start for me not to buy .!!
so I will be saving money and Bye bye credit card hello debit or prepaid..if no fee..

July 18 2012 at 3:55 PM Report abuse +1 rate up rate down Reply

Thats right sock it to the people so the rich bastards can rake more of your hard earned dollars.

July 18 2012 at 3:41 PM Report abuse +2 rate up rate down Reply

Oh please. Everyone knows stores have shoved their cost onto us since day one by raising their prices to cover. Now they're just going to try to s***w us over twice by keeping raised prices and charging more at check-out.

July 18 2012 at 3:38 PM Report abuse +3 rate up rate down Reply

I will walk out of any store that tries to charge a surcharge. It does not matter if I am leaving a cart full of frozen food on the belt.

July 18 2012 at 2:21 PM Report abuse +3 rate up rate down Reply