New Credit Card 'Checkout Fee' Arrives This Weekend

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Credit Card Checkout Fee SurchargeThis Sunday marks the first day that consumers could start paying an extra fee just for using their credit card to make purchases. But don't panic: It's unlikely to kick in right away, especially at the biggest retailers.

First, a bit of background. The fee in question is widely described as a "checkout fee," and starting on Jan. 27, retailers will have the option of charging it on any purchase made with a credit card. The fee came about as a result of a settlement reached in July 2012 between merchants and credit card networks, and is intended to help defray the costs of the swipe fees charged by those networks. As such, it can't be higher than what the merchant actually pays as a swipe fee -- usually between 1.5% and 3% of the transaction.

The settlement was actually merchants' second swipe-fee victory in recent years. The first came in the form of the Durbin Amendment, which capped swipe fees on debit card purchases at 21 cents per transaction. The July settlement didn't cap swipe fees on credit cards, but it did give retailers the right to pass them on to consumers -- if they choose to.

"I don't think we're going to see a mass amount of surcharges come the deadline," said Ruth Susswein of Consumer Action, which has led the charge in educating consumers about the impending fee. Retailers, she says, are more likely to introduce the fee gradually. "It might creep into costs of shopping over time."

Indeed, it's still unclear whether the nation's larger merchants actually plan to take advantage of their new right to add surcharges.

"I would be very surprised if Walmart or Costco or Target or any of the other mega-discount retailers did something like this," said John Ulzheimer, president of consumer education for SmartCredit.com. "Their pitch is, 'Hey we're cheaper than the competition.'" Ulzheimer added that if a big retailer was considering charging the checkout fees, they would start out by testing them in a few select markets to see how consumers responded.

So if you do see checkout fees, it's more likely to be at smaller retailers, which tend not to be winning on price anyway. In fact, Ulzheimer noted, you've probably already seen small merchants charge a form of credit card checkout fee in the past, by offering lower prices to customers paying with cash -- for instance, at a gas station. Now that they're allowed to call the credit card surcharge what it is, more small merchants will try out variable pricing.

Tens of millions of customers will never see checkout fees, though. That's because 10 states have formally banned the practice, a list that includes California, New York, Florida and Texas.

If you don't live in one of those 10 states, though, you could potentially see signs alerting you about checkout fees as early as this Sunday. If you do, you can avoid them by paying with cash or a debit card -- or by taking your business elsewhere.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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Sophia Anne Walker

Credit cards and the hidden fees, interest rates, and now a check out fee.

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June 06 2013 at 11:22 AM Report abuse rate up rate down Reply
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April 09 2013 at 5:20 AM Report abuse rate up rate down Reply
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January 30 2013 at 12:44 PM Report abuse rate up rate down Reply
silversmieth

How will the affect online shopping?

January 28 2013 at 7:45 AM Report abuse rate up rate down Reply
Steve

Many customers already use credit cards so retailers have already increased prices to cover these fees that already exist. When you pay cash, retailers get to keep the extra 1.5-3% if they don't offer cash discounts. Now they have the option of charging the extra 1.5-3% as a separate line item on at the register but will they go back and reduce the prices that already have the fees built into them?

January 27 2013 at 5:52 PM Report abuse rate up rate down Reply
ExtremelyDisgruntled

This all basically started nationally when Gas station owners felt the need this swipe fee themselves, that's where the cash-CREDIT gas prices differed. (Usually around 5¢ - 10¢/gallon, way back when gas was $1-$2/gallon or a net premium for credit of about 5-10%.) Those retailers were the first to get this thing rolling. I understand gasoline retailers would be the first, as they only make "points" on each sale, and they would be hit the hardest by credit card merchant fees, and really need to pass them on to their consumers. With the way everything is getting tighter today, I understand that the Mom & Pop businesses, and all other smaller businesses to have the need to do this, MAJOR/Larger Retailers should never need to. That's the "price" for being so large. They CAN afford to absorb that fee.

January 27 2013 at 2:53 PM Report abuse rate up rate down Reply
alrosa3

i will not pay a charge on useing a credit card ever

January 27 2013 at 12:03 PM Report abuse rate up rate down Reply
samuri.sansui

Way to go Durbin in the turbin.

January 27 2013 at 10:04 AM Report abuse rate up rate down Reply
samuri.sansui

Cash in my book, Squirm banks

January 27 2013 at 9:56 AM Report abuse rate up rate down Reply